Appeal No. EAT/160/90

	EMPLOYMENT APPEAL TRIBUNAL
	58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

		At the Tribunal
		On 14th October 1992

	Before

	THE HONOURABLE MR JUSTICE KNOX

	MR G H WRIGHT MBE

	MRS M M EXLEY

MS P HARRIS	APPELLANT

1) NATIONAL ASSOCIATION OF YOUNG PEOPLE IN CARE	RESPONDENTS
2) IN CARE CO. LIMITED

	Transcript of Proceedings

	JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR S AGUTU
(Representative)

For the 1st & 2nd Respondents	MR M KELLY
(Of Counsel)
Messrs Hornby & Levy
2 Acre Lane
London 
SW2

	MR JUSTICE KNOX:  This is an appeal by the Applicant before the Industrial Tribunal, Ms Harris, against a decision of the Industrial Tribunal at London (North) arrived at after four days of hearing before the Tribunal and one in Chambers in October and November 1989 and sent to the parties on 11th January 1990 in which, inter alia, they decided that Ms Harris' claim that she was discriminated against by her employers contrary to Section 4(2)(c) of the Race Relations Act 1976 by the Respondents, or one of them, failed.

	Her employers were found by the Industrial Tribunal to be first Respondent to that application.  This introduces the first of many acronyms that occur in this case.  Its full name is The National Association of Young People in Care but it has been throughout conveniently referred to under the acronym NAYPIC and I shall do the same.

	The second Respondent is In Care Company Limited ("ICC").  In light of the fact that the Industrial Tribunal found that Ms Harris was an employee of NAYPIC and was never an employee of ICC it will not be necessary, save in respect of one or two relatively unimportant matters, further to refer to ICC and I propose therefore, only to mention as the Respondent NAYPIC.

	That was described as an unincorporated association founded in 1979, whose aims were summarised by the Industrial Tribunal as:
 "the furthering of the interests of young people in or ex-care", as indeed its name suggests."

	Ms Harris was described in the following terms:
"The applicant is non-white.  She told us that she saw herself as a black woman.  She joined NAYPIC on 22 June 1987 as South Development Officer, based in London."

They then deal with the question of who really was her employer, in the way that I have already described.  They found that Ms Harris' work was paid for out of funds provided to NAYPIC under a grant from the Department of Health and Social Security (DHSS).  A monthly salary was paid direct into her bank account by, yet another acronym, NCVO, which stands for National Council of Voluntary Organisations, acting on behalf of NAYPIC, using the funds provided to NCVO by the DHSS and earmarked for NAYPIC.  The grant by the DHSS was made annually and released on a quarterly basis in four instalments and it is relevant at this stage to mention that the basis on which the grant was made is recorded in a letter of the 21st June 1988 from a Mr Hopper of the Community Services Division of the DHSS to the Chairman of a National Steering Group of NAYPIC, in which Mr Hopper said this:
"I am now pleased to be able to advise you that a grant of up to £64,000 in each of the financial years 1988/89 and 1989/90 has been approved under section 64 of the Health Services and Public Health Act 1968.  The period of the Department's grant will therefore end on 31 March 1990."

and a little later in the same letter he says:
"While recognising that NAYPIC must be responsible for the appointment of staff, this grant is given on the clear understanding that the existing staff, who have assisted in formulating the work programme for 1988/9, remain in post (subject of course to resignation or inefficiency procedures applying)."

There is no doubt therefore that the DHSS grant was intended to be available, amongst other things, and importantly available, for the payment of wages of the existing staff, of whom of course Ms Harris was one.

	Trouble loomed in that the DHSS became concerned with the internal administration of NAYPIC, and indeed, perhaps the only point on which everyone has throughout been agreed, is that the affairs of NAYPIC were in some considerable disorder.  The Industrial Tribunal so found, and we see absolutely no basis for criticising that conclusion, nor indeed was it suggested on either side before us that matters were otherwise than in a somewhat disorganised state in NAYPIC's organisation at the relevant time.

	That concern led to a letter dated 7th November 1988 (there is a small slip in the Industrial Tribunal's decision where they say it was dated 7th November 1989) that explained the situation which was, that there was a proposed reorganisation which would have involved ICC effectively replacing the part in the organisation that NCVO had theretofore played.  I need not go into the details of that aspect but, the letter did record the fact that at a meeting on the 28th October 1988, the author of the letter, Mr Hopper again, mentioned that, while a further payment of NAYPIC's grant covering the period October to December 1988 had just been released, all future payments would be suspended until such time as NAYPIC's administrative arrangements had been resolved, and he went on to explain why that should be and finally said, that he would therefore be pleased to receive confirmation no later than the 31st December 1988 that the new structure for the In Care Company was in place and in operation.  That in fact did not happen.  As the Industrial Tribunal said, such arrangement was not made before the end of December 1988 to enable the DHSS to lift its suspension.  That led to the central facts that give rise to this application, which are found as follows by the Industrial Tribunal:
"On 5 January 1989, Mr Ellis telephoned the applicant at her home to say that the DHSS money was not coming through and there was not sufficient money to pay the month's wages.  Mr Ellis told the applicant to `sign on'.  The applicant considered this to be a short-term arrangement, while waiting for funds to come through;  and that it was similar to the situation in May 1988, when having signed on as requested by NAYPIC, she continued to work."

and then they describe how, when that came through on that earlier occasion, Ms Harris had cancelled her claim for income support before receiving any payment.  In fact the January payment was made into Ms Harris' account, but that, the Industrial Tribunal said, appeared to have been a mistake and simply the product of a failure to give instructions to stop the wages to NCVO and the findings of the Industrial Tribunal are that, after inconclusive attempts to find out what was going on, at some time between the 20th and 28th February having become demoralised, Ms Harris left to look for other employment.  She gave evidence to the Industrial Tribunal that her reason for leaving was that her wages had been stopped.  She was not being told what was happening and was uncertain of the future and it is right to mention at this early stage that even Mr Ellis in giving his evidence to the Industrial Tribunal agreed that Ms Harris was not treated very well.  That seems to us to be an entirely accurate assessment of the situation.  It does seem to us that Ms Harris was not treated well, but of course what we have to find is whether or not the decision of the Industrial Tribunal, which is the subject of the appeal, is one which should be interfered with by us because the appeal raises an issue of law which warrants reversing the decision below.  That, it was accepted by Mr Agutu, who appeared for Ms Harris, is the only jurisdiction that we have under Section 136 of the Employment Protection (Consolidation) Act 1978 and we do not have any jurisdiction to come to different conclusions of fact from those that the Industrial Tribunal reached simply because we do not agree with the processes of reasoning or the findings of fact on the material that is before us and was before the Industrial Tribunal.  It is notorious of course, that the Industrial Tribunal sees the witnesses, and is therefore in a much better position to make conclusions of fact.  It must not therefore be assumed from our decision that had we been sitting in the shoes of the Industrial Tribunal we would have necessarily have reached the same conclusion.  It is not our function to sit in the Industrial Tribunal's shoes in that respect and we must not therefore be assumed to either agree or disagree with factual conclusions which they reached.

	To return to the sequence of events, Ms Harris having left, there was an interregnum before the finances of NAYPIC were released and restored.  That continued until July or August of 1989 and at that stage Ms Harris was not approached for her to be re-engaged. She was not invited to re-apply for her post.

	The actual decision to stop Ms Harris' pay was taken by Mr Ellis and the Industrial Tribunal having described the confusion which we need not repeat, said:
"the stoppage of the applicant's [Ms Harris] pay and such communication as there was with the applicant was carried out by ICC (in the person of Mr Ellis) on behalf of NAYPIC."

In law therefore, the stoppage of her pay was the responsibility of NAYPIC.

	The Industrial Tribunal then recorded a submission made on Ms Harris' behalf that she was dismissed and that the Industrial Tribunal rejected, finding that she resigned rather than was dismissed and they expressly decline to go into the question of constructive dismissal because they said:
"The meaning of dismissal in the Race Relations Act does not include the concept of constructive dismissal as contained in the Employment Protection (Consolidation) Act 1978 and it is not necessary for us to consider whether the applicant was justified in her resignation."

It will be convenient to dispose of that issue which does seem to us a side issue.  It was submitted to us that the expression "dismiss" and "dismissal" was one which not only in the Employment Protection (Consolidation) Act 1978 but also in the Race Relations Act 1976 should be treated as including what is commonly and conveniently called "constructive dismissal".  We do not think that that submission is technically correct but equally we do not think that it takes the matter very significantly further in the context of the relevant enactment, namely Section 4(2)(c) of the Race Relations Act.  Our reasons very briefly for rejecting the submission is that where Parliament does require the words "dismissal" and "dismiss" to include a constructive dismissal, it says so in terms, as indeed it does in Section 55(2)(c) of the 1978 Act where it says, so far as relevant:
"an employee shall be treated as dismissed by his employer if, but only if, -

. . . . . . .

(c)the employee terminates that contract, with or without notice, in circumstances such that he is entitled to terminate it without notice by reason of the employer's conduct."

and it is of course well settled that the proper test for assessing whether that has happened or not is stated in Western Excavating (ECC) Ltd v. Sharp [1978] ICR 221, where the leading judgment of Lord Denning, Master of the Rolls espouses what he describes as the contractual basis for deciding whether or not there has been a constructive dismissal, so that one applies the common law to see whether there has been a fundamental breach of contract constituting repudiation and warranting the acceptance of it by the employee.  In the Race Relations Act, there is no such expanded definition of the term "dismiss" or "dismissal".  The second point, perhaps the more important, is that it does not, in our view, in fact matter whether "dismiss" includes constructive dismissal.  That arises from the terms of Section 4(2)(c) of the Race Relations Act 1976, which reads:
"It is unlawful for a person, in the case of a person employed by him at an establishment in Great Britain, to discriminate against that employee -

. . . .

(c)by dismissing him, or subjecting him to any other detriment."

If there has been a constructive dismissal, it is in our view, inevitable that there will have been a subjection of the employee to a detriment, and it therefore, does not, in practical terms much matter whether the employee who is the subject of a constructive dismissal is able to establish that he has been dismissed, so as to bring himself within the first three words of subsection (2)(c) or whether he brings himself into the latter part of the subsection by showing that he has been subjected to another detriment.  In either case he is in a position to complain, if of course the other requirements, notably that it has been done on racial grounds, are satisfied, and his complaint can proceed against the racial discrimination involved.  The argument, therefore, is essentially a semantic one as we see it and it is not necessary to take more time with it.  That is because the Industrial Tribunal specifically held that Ms Harris was subjected to a detriment by reason of the order to NCVO to stop her wages after the January payment, and that they decided was the relevant act for limitation purposes and they found that the complaint that she brought was in time.  No issue arises on that.  They then turned to look and see if there had been discrimination, that is to say, putting it shortly, whether she had been treated less favourably than other workers of a different racial group.  Two comparators were put forward on her behalf, one Mary Moss, with regard to the way in which she was treated in January and February 1989, the other, two other white workers who were treated in the Spring of 1988 in the same way as Ms Harris and which it was suggested was a more favourable treatment than that given to Ms Harris but not to Miss Moss in December 1988/February 1989.  There again Ms Harris succeeded because the Industrial Tribunal found that in relation to a comparison with Mary Moss there was a discrimination and a difference of race such as to call on the employer to give an explanation, They did that in the light of the well known authorities North West Thames Regional Health Authority v. Noone [1988] ICR 813 and Barking and Dagenham Council v. Camara [1988] ICR 865.  Thus far, it will be seen, Ms Harris' case succeeded in front of the Industrial Tribunal and the issues before us arise from the Industrial Tribunal's acceptance of the explanation that was given, principally by Mr Ellis, on behalf of NAYPIC for that established differential treatment.  The Industrial Tribunal recorded the explanation in the following terms:
"whereas the work of the applicant was specifically financed by a DHSS grant which was suspended from 1 January 1989, the work of Mary Moss was specifically financed by a grant from the London Borough Grants Unit"

This is the next acronym, it is referred to throughout as the LBGU, and therefore the difference lay in the fact that the availability of finance for the work done by Mary Moss continued in January and February 1989 but the supply of money from the DHSS was suspended.

	The Industrial Tribunal recorded the fact that NAYPIC said they wanted to continue with Ms Harris as their employee but were not in a position to pay her for the time being and that the decision to stop her pay would have been the same if she had been white.  
	The submission by Mr German for Ms Harris was that NAYPIC could have used some of the LBGU funds to pay Ms Harris but Mr Ellis' evidence was recorded, and it would appear that it was accepted by the Industrial Tribunal, that he, Mr Ellis, did not know the terms or details of the LBGU funding before April 1989 except that it did cover two workers. It does appear from an earlier passage in the decision, that there were six workers in the field of whom the work of four was funded by the DHSS and the work of two was funded by the LBGU.  There is no specific finding in the decision as to the extent to which LBGU funds could be used to pay for the work which was primarily funded by the DHSS grant.  There is an implication that the converse was possible because it happened.  One of the facts that was established was that the LBGU funds were handled by Mary Moss and that undoubtedly was, on the facts found, a difference between her situation and that of Ms Harris in that Mary Moss dealt with the LBGU funding whereas there is nothing to suggest that Ms Harris had a hand in dealing with the DHSS funding.  That was dealt with on the evidence by Mr Ellis principally.

	The Industrial Tribunal also recorded a very substantial body of factual matters that were relied upon on behalf of Ms Harris tending to show that there had been grounds for supposing that Mr Ellis' action in stopping her pay was on racial grounds.  It is not necessary for us to do more than record the fact that the Industrial Tribunal found these submissions that were made to be proved as evidence of the matters referred to while they also accepted the qualifications that were adduced in evidence on behalf of NAYPIC which were clearly relied on to take the sting out of some, if not all, of the allegations.  This is only relevant for our purposes in that it was submitted by Mr Agutu that if, as he suggested, the primary reasons that the Industrial Tribunal gave for reaching the decision it did reach were knocked out as being flawed, the matters that were relied upon in seeking to persuade the Industrial Tribunal to make the inference of racial discrimination would assume a much greater importance than if the principal reasons which the Industrial Tribunal gave were good ones and stood. 

	The principal reasons are what we now turn to.  They are to be found, first of all, in the opening sentence in paragraph 18 of the Industrial Tribunal's decision that reads:
"Our decision with regard to discrimination based on a comparison with Mary Moss is that it has not been shown that it was on racial grounds that the applicant was treated less favourably."

They also found that they were unable to infer from the whole circumstances, including these matters that I have mentioned a moment ago, which they found to be factually established, subject to the qualifications that were relied upon by NAYPIC, that the stoppage of Ms Harris' pay was on racial grounds, either because of her own racial background or because of her concern on racial matters.  I come now to the second important finding by the Industrial Tribunal, which is this:
"We believe that NAYPIC was faced with a real financial problem in the suspension of funding, which was the root reason for the stoppage of the pay, albeit that the matter was handled in a disorganised manner."

As an additional reason they said that there was a difference between the funding arrangements for the Applicant and for Mary Moss which constituted a material difference for the purposes of Section 3(4) of the 1976 Act.  	It will be recalled that that provides:
"A comparison of the case of a person of a particular racial group with that of a person not of that group under section 1(1) must be such that the relevant circumstances in the one case are the same, or not materially different, in the other."

and the Industrial Tribunal found that they could discern such a material difference in those funding arrangements mentioned earlier, that is to say Mary Moss' work being funded by the LGBU funds, Ms Harris' work being funded by the DHSS.  There then comes a paragraph which deals with the other comparison, that is to say, the comparison between Ms Harris on the one hand and the group consisting of Ms Harris and two white workers in the Spring 1988 when there was a similar suspension of pay which was brought to an end while Ms Harris continued to be employed throughout, although she was then also told to sign on while waiting for the DHSS payments to come through.  In relation to that, presumably, the Industrial Tribunal said this:
"Mr German suggested that somehow in February 1989 there were DHSS funds available at NCVO which could have been used to pay the applicant (in the same way he claimed that such funds were used in the Spring of 1988 when white workers were also involved);  or the applicant could have been fitted into a vacant post which had previously been funded by the London Borough Grants Unit.  However, we do not find that it has sufficiently been proved that either of these possibilities was available or that if a white worker had also been funded by DHSS in 1989 the decision on stoppage of pay would have been different.  Even if they were, scil.if those two possibilities had been sufficiently proved] we do not consider that the circumstances were sufficiently similar to form a basis for a comparison under Section 1(1)(a) and Section 3(4).  Further, we would not be able to infer that any such discriminatory treatment was on racial grounds for the same reasons as those stated in paragraph 18 above."

That last sentence, in our view, refers back to what is said in paragraph 18 over and above the point that has just been made that the circumstances were sufficiently different for the requirements of Section 3(4) not to be fulfilled, otherwise the Industrial Tribunal would have been repeating itself, which is not, we conclude, their intention because they use the word "further".  The reasons that they are referring back to, are first our view, is the reason stated at the outset of paragraph 18, namely that their decision with regard to discrimination based on a comparison with Mary Moss was that it had not been shown that it was on racial grounds that Ms Harris was treated less favourably and secondly that NAYPIC was faced with a real financial problem in the suspension of funds which was the root reason for the stoppage of pay and that seems to us, quite clearly, to be the basic factual conclusion that the Industrial Tribunal reached having seen the principal protagonists before them giving evidence, notably Mr Ellis on the one hand and the Applicant on the other.

	The question therefore arises, whether there is any basis upon which this Tribunal has jurisdiction to interfere with that decision.  The case was argued most ably and moderately by Mr Agutu, who, went through the grounds that are stated in his Notice of Appeal, and it will be convenient to go through it in the same order in which they appear there. 

	The first point is one already dealt with, namely, the question whether constructive dismissal is included in the concept of "dismissal" in the 1976 Act and we need not consider that further.

	The second point is that it is submitted that the Tribunal erred in law in finding that the instruction to "sign on" did not constitute dismissal within the meaning of the Race Relations Act.  We are not concerned with the propriety or indeed, the legality, of an instruction to "sign on" to an employee at a time when the employee remains in employment and is required to make himself, or herself, available for work.  What we are concerned with, so far as this decision is concerned, is whether there is a significant error in law in the Industrial Tribunal's decision that Ms Harris was not dismissed but she resigned and that seems to us to turn on the evaluation of the factual material before the Industrial Tribunal and it does not seem to us possible to say in a case where it is specifically found that Ms Harris considered the request to "sign on" or the instruction to "sign on" was a short term arrangement and was one which justified her continuing to work, that it is impossible to find no dismissal.  There may or may not have been infringements of other legislation but as between NAYPIC on the one hand and Ms Harris on the other, there was material, in our view, upon which the Industrial Tribunal was entitled to find that Ms Harris was not dismissed but that she resigned and as already stated the fact that she was subjected to a detriment in having her wages stopped effectively takes the sting out of any question as to whether she was constructively dismissed or not, which refers back to the first ground.  The second ground, therefore, does not seem to us to be a matter upon which we could upset this Tribunal's decision.

	That brings us to the third ground which is sub-divided into four heads.  The first one is effectively as follows.  That there was before the Industrial Tribunal documentary material, which we have been shown as well as the Industrial Tribunal, which it is said showed the definitive position regarding DHSS funding and the use of funds available for the continued employment of the Appellant, with the result that the Tribunal below had no need to substitute its own findings on the financial situation, and in particular, the finding that there was a real financial problem in the suspension of funding.

	This seems to us to be slightly misdirected as a point because the issue between the parties here cannot be whether Mr Ellis was right or wrong in forming the view that there were not available funds to him.  Were it relevant we would be satisfied that there was evidence that there was, in fact, money available for Mr Ellis to use to pay some of Ms Harris' wages.  What is significant is the reason for Mr Ellis taking the step of stopping Ms Harris' pay and the grounds upon which he did that depends, not so much on the validity of the belief that he had no available funds, as the genuiness of that belief.  So the issue before the Industrial Tribunal was not, was Mr Ellis right or wrong in thinking that there was not money available but was Mr Ellis telling the truth to the Industrial Tribunal when he said that there was in his view a shortage of funds which was a proper reason for stopping Ms Harris' salary.  The fact that there was available to the Industrial Tribunal documentary evidence which might well lead to the conclusion that had Mr Ellis been an efficient and well organised manager, he would have realised that he had money that could be used for this purpose is not a ground upon which we could upset the decision below because it goes to a different point.

	Next there was an attack on the finding that there was a material difference in the funding arrangements between Ms Harris' and Mary Moss' work and that was suggested to be perverse in the light of Mr Ellis' evidence recorded by the Industrial Tribunal that Mr Ellis did not know the terms or the details of the LBGU funding.  This suffers from the same vice.  The question was not whether there was sufficient material for that view of Mr Ellis' that there was a material difference in the funding arrangements between the two ladies but what was Mr Ellis' frame of mind in relation to it.  it may well be said fairly that for a person to form the conclusion that there was a significant and important difference between Mary Moss' situation and Ms Harris' situation without taking the trouble to find out what exactly were the terms and the details of the LBGU situation was pretty careless conduct on his part, but as has been said on many occasions discriminatory conduct on racial grounds is not to be equated with careless conduct and what matters is how genuine Mr Ellis' grounds were, not how valid they were.  We take the point that was ably made by Mr Agutu that if one does not in fact have sound reasons for one's actions it is that much more easy for an Industrial Tribunal to draw the inference that, absent a sound reason, there is an unsound and racially discriminatory reason.  But that is a conclusion for the Industrial Tribunal to decide upon.

	We then come to the ground which seems to us to have the most force on behalf of Ms Harris.  How it is put in the Notice of Appeal is this:
"as the tribunal did not know the terms on which the LBGU grant was held the decision that they did not find it sufficiently proved that the appellant could have been slotted in to the vacant LGBU post is bad law since it was for the respondents not the appellant to show why the LGBU money for the vacant post could not be used.  The respondents failed to show this."

We have given careful consideration to this, not only because the case is obviously important to the parties, but also because, as mentioned at the outset, it is impossible not to feel sympathy for Ms Harris, who was admittedly not treated well but we are not persuaded that this appeal should succeed because the Industrial Tribunal did mis-state the way in which this particular issue should be addressed.  It will be recalled that what they said was:
"we do not find that it has sufficiently been proved that either of these possibilities was available"

The two possibilities were that DHSS funds were available at NCVO and that Ms Harris could have been fitted into a vacant post which had previously been funded by the London Borough Grant's Unit.  Mr Agutu ably made the point that it was unrealistic to expect Ms Harris to adduce evidence about, in particular, the possible availability of DHSS funds at NCVO and equally, the possibility of fitting Ms Harris into a post that had previously been funded by the LBGU and we see the force of that more especially when one bears in mind that it had specifically been held earlier, as already mentioned, that the difference of race and the discrimination that the Industrial Tribunal discerned in the treatment of Mary Moss on the one hand, and Ms Harris on the other, called on the employer to give an explanation.  So we accept that it is, in our view, not an appropriate way of putting the matter that the Industrial Tribunal had not had the other possibilities sufficiently proved to them.  The difficulty from Ms Harris' point of view is that this is not where the matter stops, because even if it is assumed that those possibilities were available, what is not thereby established is that Mr Ellis knew that they were available and, in our view, it is perfectly clear on the face of this decision that it had not been shown that it was on racial grounds that Ms Harris was treated less favourably than Miss Moss, that the Industrial Tribunal accepted Mr Ellis' oral evidence that, in fact, he did what he did because he thought there was a shortage of funds, and in particular he specifically denied that he had done it on racial grounds.

	Mr Kelly on behalf of NAYPIC drew our attention to passages in the Notes of Evidence which contain a denial by Mr Ellis in particular that the stoppage of Ms Harris' salary was something which was done on racial grounds.  That was not denied by Mr Agutu, it was scarcely possible for him to do so, so that he was driven to rely on the proposition that this was not a case where there was no evidence upon which the Industrial Tribunal could reach the conclusion that it did reach, but it was a case where one could conclude that no industrial tribunal, properly instructed, could reach the conclusion that it did reach.  That is a task of almost insuperable difficulty once it is accepted that there was some evidence upon which they could have reached their conclusion.  This is particularly so, when at the end of the day the real issue is whether or not the Industrial Tribunal believes a witness who says that what he did was explicable for this, that or the other reason and was not done on racial grounds.  That is essentially a question of whether one believes a witness when he says that and that is a classic point upon which it is not possible for this Tribunal, which does not see the witnesses, to interfere.   We have, reluctantly, come to the conclusion that, although there is material upon which the formulation of the decision can be criticised because it does not fit with what the Industrial Tribunal itself had said about the necessity for the employer to produce an explanation, nevertheless, because of the other findings of the Industrial Tribunal, which we find compelling, that does not constitute a basis upon which this Tribunal can

properly interfere.

	For those reasons this appeal must be dismissed.