Appeal No.	 EAT/542/00

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 13 February 2001
                  Judgment delivered on 3 May 2001

Before
MR COMMISSIONER HOWELL QC
MR B V FITZGERALD
LORD GLADWIN OF CLEE CBE JP

1) SCHOOL OF FINANCE & MANAGEMENT (LONDON) LTD 
2) NORD ANGLIA EDUCATION PLC	APPELLANTS

MR SRIAN PERERA	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellants	PAUL ROSE 
(of Counsel)
Instructed by 
Hammond Suddards
Solicitors
Trinity Court
16 John Dalton Street
Manchester
M60 8HS	
For the Respondent	JACQUES ALGAZY
(of Counsel)
Instructed by 
Anthony Gold, Lerman and Muirhead
Solicitors
New London, Bridge House
25 London Bridge Street
London
SE1 9TW	

MR COMMISSIONER HOWELL QC:

1.	Mr Srian Perera, a British citizen of Asian ethnic origin who has lived and worked in this country for many years, was summarily dismissed from his employment as accountant and school manager of the first Appellant, The School of Finance & Management (London) Ltd, (“SFM”) on 28 November 1998. The reason given for his dismissal was his alleged gross misconduct.  In fact, according to the findings of the Tribunal which are not open to dispute before us, that was not the true reason for his dismissal at all but a pretext to get rid of him.  First there had been an attempt to suggest that his position was redundant when it was not. Then shortly afterwards a disciplinary investigation had been commenced against him, by an employee of the second Appellant (“Nord Anglia”, a separate company which took over SFM on 18 June 1998 and controlled it and its management at all material times) but that was a sham device conducted in bad faith. That had been followed by internal disciplinary and appeal proceedings conducted in the name of SFM, and Mr Perera’s dismissal by it for alleged gross misconduct. This the tribunal found to have been unreasonable and unfair, the whole process having been carried out by employees of the two companies to achieve a result the Appellants had preordained.

2.	Those facts, and the tribunal’s conclusion that Mr Perera’s dismissal by SFM was unfair and contrary to section 94 Employment Rights Act 1996, were not challenged before us.  The principal issue on the full hearing of this appeal by the two companies was on the tribunal’s further conclusion, set out in the 20-page statement of extended reasons for their decision issued to the parties on 15 March 2000, that the circumstances of Mr Perera’s dismissal amounted to unlawful discrimination against him on grounds of his race, as (in effect) part of a deliberate clearout of employees of Asian origin, instigated by the new management installed by Nord Anglia in an attempt to impose what was described as a “change of culture” on the institution. On that basis the tribunal held both companies liable to Mr Perera for unlawful conduct contrary to section 4(2)(c) Race Relations Act 1976: SFM as the employing company which dismissed him, and Nord Anglia on the footing that SFM had been acting “as agent for and with the expressed or implied authority of Nord Anglia” so that it too was liable under section 32(2).   In addition, they held him entitled to damages for wrongful dismissal, consisting of his loss of remuneration for his contractual notice period which they found to be one month.

3.	Following the earlier judgment of the Appeal Tribunal given at the preliminary hearing on 14 November 2000 there are four main questions on the appeal now before us, as set out in the companies’ amended notice of appeal dated 24 November 2000 and developed in written and oral argument on their behalf by Mr Rose. These are first whether the Tribunal misdirected themselves in failing to address the material issue of identifying a proper comparator on the racial discrimination complaint, second whether their recorded conclusion on that complaint was based on adequate findings and reasoning, third whether they erred in law in holding Nord Anglia liable for discrimination on the “agency” basis they found, and fourth whether they were  right to hold damages payable in lieu of contractual notice without making any findings of their own on whether there had in fact been misconduct justifying summary dismissal.

4.	On the first of these questions Mr Rose readily accepted that the Tribunal’s unusually strong findings of fact against the two companies (based on what they found to have been an inadequate and unsatisfactory approach to and understanding of equal opportunities matters, and a disciplinary process started and carried through in bad faith to get rid of Mr Perera) were unappealable and he did not seek to go behind them.  However, he submitted it was really the strength of those conclusions that had led the Tribunal into error: they had jumped straight from their finding that the dismissal process had been carried out in bad faith, and the fact that Mr Perera is of Asian ethnic origin, to a conclusion that his dismissal must have amounted to racial discrimination.  That, said Mr Rose, was an illegitimate approach since it wrongly omitted the statutory comparison required by sections 1(1)(a) and 3(4) Race Relations Act 1976 with another proper comparator of a different racial group, whose circumstances are not otherwise materially different; and it was significant that section 3(4) was omitted from the recital of the relevant law in paragraph 32 of the Tribunal’s extended reasons.  

5.	He drew our attention to what was said by Mummery LJ in Marks & Spencer Plc v Martins [1998] ICR 1005 at 1019 about the question that has to be asked under section 1(1) of the Race Relations Act 1976, the first part of which involves a compulsory comparison between the actual treatment of the complainant and that of another person of a different racial group in the same or relevantly similar circumstances.  In that case a finding of racial discrimination against a job applicant had been based simply on the Tribunal’s conclusion that there had been “bias” against her on the part of the interviewers, and that approach was held defective.  Mummery LJ said this: 
“In a complaint under the Act of 1976 the focus is not on whether the conduct of the employer or putative employer towards the complainant is biased or unreasonable or unfair: as Lord Browne-Wilkinson said in Glasgow City Council v Zafar the fact that an employer has acted unreasonably, for example, in the sense relevant to a claim for unfair dismissal, casts no light whatsoever on the question whether he has treated the employee “less favourably” for the purposes of the Act of 1976.  Adapting the words of Lord Morison in the Court of Session in Glasgow City Council v Zafar, 1977 SLT 281, 284 it cannot be inferred only from the fact that the interviewers acted in a biased way towards the Applicant, that the same interviewers would have acted in an unbiased way in dealing with another applicant in the same circumstances.  The Tribunal wholly failed to address itself to the issue, which the applicant had to establish in order to make out a claim for racial discrimination, whether she had been treated less favourably than the interviewers would have treated another applicant in the same circumstances.  The finding that [the] interviewers were guilty of “bias” against the applicant is not a relevant or meaningful finding for the purpose of the Act of 1976.”  

So, said Mr Rose, in this case the primary finding by the Tribunal was that of “bad faith”.  By exact analogy that was not relevant, meaningful or sufficient for the inference of less favourable treatment on racial grounds the Tribunal had apparently drawn. 

6.	Mr Rose’s second submission was separate, but related: infected as the tribunal’s thinking was with this mistaken approach, they had failed to analyse in their findings or reasoning what it was that the individuals whose actions were complained of had actually done, by themselves or together, that had amounted to less favourable treatment of Mr Perera or discriminatory conduct against him.  Moreover some of the material they appeared to have taken into account (for example a reference to “racial comments” made by Mr Lunt, the individual who had carried out the disciplinary investigation) was unsupported by findings of fact or adequate explanation in their stated reasons at all.

7.	We have concluded that on these two issues the submissions of Mr Algazy on behalf of Mr Perera are to be preferred, and that when the careful and comprehensive statement of extended reasons by the Tribunal is read as whole and in the context of the material before them, there was no failure on their part in addressing the relevant questions, or in the way their conclusions on racial discrimination were arrived at and expressed.

8.	In the first place we do not accept that a misdirection should be inferred merely because the Tribunal did not quote the words of section 3(4) of the 1976 Act as to the proper basis of comparison required under section 1(1).  In paragraphs 32 and 33 of their extended reasons they correctly identified the primary question they had to address, namely whether in terms of section 1(1)(a) the respondents to the application had on racial grounds treated Mr Perera less favourably than they treated or would have treated other persons; and correctly recorded that it was for him as applicant to show this.  Significantly in the present context, they also reminded themselves specifically that 
“We may not infer that racial discrimination has occurred merely because of any unreasonable actions on the part of the Respondents, nor are we bound to infer that the Respondents have discriminated on racial grounds if we find the Respondents’ explanation for the treatment of the Applicant to be unsatisfactory: Zafar v Glasgow City Council, [1988] IRLR 36 (House of Lords)”.
That, together with their reference earlier in the same paragraph to the guidance in King v Great Britain China Centre [1981] IRLR 513 (“…where there is less favourable treatment than of others accompanied by a difference in race…”), is sufficient in our judgment to show that they had well in mind the distinction enjoined on tribunals by Mummery LJ by reference to Zafar’s case in the passage quoted above.  

9.	Then when the Tribunal came to apply these principles to the evidence in the case, they again reminded themselves of the relevant distinction, after recording their finding of fact in paragraph 39 that the disciplinary investigations and charges against Mr Perera had not been brought in good faith but as a device to get rid of him, and before expressing their conclusion: 
“40. 	In the light of this finding, it is necessary to consider whether the Applicant has discharged the burden of showing that he was dismissed on racial grounds.  Why did Mr Lunt embark upon these disciplinary proceedings against the Applicant if it was not a genuine exercise of his personnel function carried out in good faith?  Was the Applicant, as he claims, disciplined and dismissed on racial grounds?  This is for the Applicant to prove and we may not infer that racial discrimination has occurred merely because we take the view that the Respondents acted unreasonably.  On the balance of probabilities we have concluded that the Applicant has discharged this burden.  We find that the Applicant’s race and/or the race of his colleagues at SFM was a sufficiently operative factor in (i) the Respondents’ decision to initiate disciplinary proceedings, and (ii) the manner in which they were conducted and determined, to find that he was dismissed on racial grounds.  In reaching this conclusion we regard the following facts as amongst the most significant: the racial and stereotypical remarks made by Mr McNeany in his evidence to the tribunal; the racial comments made by Mr Lunt; the considerable shift in the racial make-up of SFM’s staff following Nord Anglia’s take-over as revealed by the statistical evidence; the lack of any real equal opportunities policies within the Respondents’ organisations and the willingness by the Respondents’ senior staff to depart from good practice regarding equal opportunities when it was expedient to do so; the delay in responding to the CRE questionnaire and the numerous inaccuracies it contains.  We doubt whether it is even necessary to draw an inference of racial discrimination under the approach set out in the King case but we would, in the light of all the evidence before us, be prepared to do so.  In our view, the case before us is distinguishable from King in that here there is a considerable amount of evidence on which the Applicant relies as indicating the presence of unlawful discrimination.  That evidence, we think, demonstrates that on the balance of probabilities the Applicant was disciplined by Mr Lunt and dismissed by Mr Horner on racial grounds, with the encouragement and at the instigation of their superiors at Nord Anglia and, in particular, of Mr McNeany.”
We interpose that the “Mr Lunt” referred to was the Nord Anglia employee who took over as Finance and Administration Manager with responsibility for personnel within SFM on 24 September 1998, and carried out the “disciplinary investigation”; Mr Horner was the new Managing Director of SFM appointed following the Nord Anglia takeover and the most senior person in SFM dealing with Mr Perera’s dismissal; and Mr McNeany was the founder and executive chairman of Nord Anglia, whose direct involvement in both the takeover and the management changes and altered ethos within SFM that immediately followed it appears with unmistakable clarity from the recital of the facts in paragraphs 6-31 of the Tribunal’s extended reasons.

10.	In our judgment the factual material before the Tribunal, and in particular those aspects of it they identified in paragraph 40 above, make this case of a different character altogether from the one the Court of Appeal were considering in Marks and Spencer Plc v Martins. In that case “bias”, and thereby racial discrimination, had apparently been inferred from a low assessment mark at interview alone, with no real consideration of whether a comparable applicant of a different racial group would have fared any better.  In the present case it is implicit in the nature of the facts found (in effect a deliberate and otherwise unexplained clearout of Asian employees and their replacement by whites, instituted over a very short period by the new management imposed on SFM by Nord Anglia amid more than one indication of a racial element in what was happening) that in being disciplined and dismissed in bad faith and having his job taken over by a white person, Mr Perera was treated “less favourably” on any fair basis of comparison.  We do not think a Tribunal whose unpleasant duty it is to record such findings is required to spell out with any greater particularity an identified real or imaginary white “comparator” who has not suffered such treatment in order to make the point: that would be a quite unnecessary statement of the obvious.  We do not think it necessary to express a view on whether such cases really form part of a separate category of “race-specific conduct”  analogous with racial abuse or harassment, of the kind referred to in the judgment of Peter Gibson LJ in Sidhu v Aerospace Composite Technology Ltd [2000] IRLR 682, paragraph 31. The practical effect once findings such as those of the Tribunal in the present case are made is that the “less favourable treatment” is inherent in the nature of the findings and does not have to be spelt out any further.

11.	For similar reasons we do not accept Mr Rose’s second submission that the tribunal’s findings and reasons on the racial discrimination issue were inadequately stated.  Their conclusion that the dismissal of Mr Perera was an act of discrimination by SFM on racial grounds, encouraged and instigated by Nord Anglia through the new management it imposed, was a severe conclusion but one to which as a reasonable Tribunal they were entitled to come on the factual material and evidence before them; and we consider the findings and reasons on which that conclusion against the two companies was based are adequately recorded in their statement of extended reasons.  

12.	Specifically, we reject the submission that the findings of fact they recorded were inadequately detailed for this purpose, in for example not identifying with more particularity what were the actual actions on the part of Mr McNeany that linked him and thus Nord Anglia to the disciplinary proceedings pursued in bad faith against Mr Perera.  Their conclusions against Mr McNeany and Nord Anglia we regard as a matter of legitimate inference from the facts they did refer to and the Nord Anglia management’s direct involvement with SFM and what happened to Mr Perera at all stages from June 1998 onwards.  

13.	Similarly we reject the submission that the Tribunal’s observations about various aspects of the involvement of Mr Lunt (who had given a witness statement on behalf of the companies, but failed to appear at the hearing to give evidence despite a witness order granted on their application) were unjustified or inadequately explained. The material before the Tribunal included the evidence of other witnesses as well as Mr Lunt’s own unsigned statement, and we accept the submissions of Mr Algazy that it justified their reference to Mr Lunt as having made “racial comments”, and also what they said in paragraph 38 about the disingenuous way he dealt with the revival of certain old complaints against Mr Perera only after the disciplinary proceedings they were supposed to justify had already been started. 

14.	This aspect of the case appears to us to fall within the general principle that the findings of an experienced Employment Tribunal on such issues of fact are not to be subjected to over-elaborate scrutiny, and errors of law are not to be inferred or imagined merely from the fact that the Tribunal’s stated reasons do not contain an express mention of every single point or piece of evidence they may have considered material: see Retarded Children’s Aid Society Ltd v Day [1978] ICR 437, 444; Jones v Mid Glamorgan County Council [1997] IRLR 685, 690, cited in the judgment of Peter Gibson LJ in Sidhu’s case, paragraph 23.  In our judgment therefore, the two main grounds of appeal argued before us on the racial discrimination issue fail.

15.	We also reject the fourth ground argued by Mr Rose, on the Tribunal’s finding of wrongful dismissal.  His contention was that they had erred in failing to address the possibility that, whatever the defects in the process that led to his dismissal, Mr Perera might in fact have been guilty of misconduct justifying dismissal without notice, so that no award of damages in that respect was due to him.  Reliance was placed on the long established principle laid down in such cases as Boston Deep Sea Fishing and Ice Company v Ansell (1888) 39 Ch D 339 that an employer may defeat a contractual claim for damages for wrongful dismissal by showing that there were in fact alternative grounds for a summary dismissal present all the time, even though not himself aware of them until afterwards. 

16.	The starting point in the present case must in our view be that the circumstances of Mr Perera’s dismissal quite plainly made it wrongful, as well as unfair, as the Tribunal rightly found.  The only possible ground for not awarding him the contractual damages to which he was on that basis entitled would have been if it had been established as a matter of fact, to the Tribunal’s satisfaction on the balance of probabilities, that he was indeed guilty of misconduct such as to justify his summary dismissal all the time.  Only then could his actual dismissal be said not to have deprived him of anything of value to which he was entitled.  But that plainly was not established as a matter of fact to the satisfaction of the Tribunal by the evidence put before it by the Respondents, (including as it did for example some earlier allegations by former employees, already investigated and dealt with by the former managing director the year before the takeover without any question of Mr Perera’s dismissal having arisen, but then dug up again by Mr Lunt by way of “evidence” the Tribunal plainly found unsatisfactory).  

17.	Moreover as Mr Algazy’s own recollection and notes of the hearing (accepted for this purpose by Mr Rose) confirmed, the companies had not in the event sought to establish a positive case at the hearing that the various allegations made against Mr Perera had been true so as to warrant an express finding of misconduct against him by the Tribunal themselves. They had relied on the allegations of misconduct only as material justifying the sanction of dismissal in the circumstances appearing to the companies at the time.  In our judgment the Tribunal cannot be criticised, on the case as thus presented to them, for holding Mr Perera entitled to damages in respect of his contractual period of notice.

18.	That leaves the third main ground of appeal argued before us, concerned with the position of Nord Anglia.  For the reasons given above we do not think any ground has been demonstrated to us for successfully challenging the relevant factual conclusions of the Tribunal: in particular that the dismissal of Mr Perera by his employer SFM was an act of unlawful discrimination carried out by the management of that company, but with the encouragement and at the instigation of their superiors at Nord Anglia and thus of that company itself.  The question they then had to address was whether those facts gave rise to any liability on the part of Nord Anglia itself under the Race Relations Act 1976.  Their conclusion on this question was expressed in the following terms:
“41.	Does liability for unlawful racial discrimination therefore also attach to the second Respondent?  Mr Algazy conceded that this could not arise under section 31 of the 1976 Act, which applied only to contraventions of Parts II or III.  We also have reservations about finding that the second Respondent is liable for “knowingly aiding” SFM, which was the Applicant’s employer, to do an unlawful act.  This is because of the decision of a majority of the Court of Appeal in Anyanwu v South Bank Students’ Union [2000] IRLR 36, which the Tribunal drew to the parties’ attention.  The majority held that section [33(1)] applied only where the other party (here, Nord Anglia) is a secondary actor aiding the first party (SFM) which has set out as a free agent to do or achieve a given result.  Our findings in this case are that SFM was responding to encouragement from Nord Anglia, which if anything, was itself the prime mover, seemingly bringing this case squarely within the Court of Appeal’s ruling.  We find however, that the first Respondents’ unlawful action was carried out as agent for and with the express or implied authority of Nord Anglia.  We accordingly accept the Applicant’s submission that the second Respondent is, alternatively, liable for unlawful discrimination under section 32(2) of the 1976 Act.”

19.	In our judgment the Tribunal’s stated reasons there show that they have misdirected themselves on the proper construction of section 32(2) of the 1976 Act and liability for acts of an agent, and on that issue Nord Anglia’s appeal must succeed.  

20.	We accept of course the general force of the observations of high authority drawn to our attention by Mr Algazy, to the effect that the race relations legislation is of wide and general scope, with the objective of preventing discrimination wherever and however it may be manifested, so that a narrow limited approach to its construction is unlikely to accord with the intention of Parliament: see Applin v Race Relations Board [1975] AC 259, 277; Charter v Race Relations Board [1973] AC 868, 887. But that does not absolve a Tribunal considering a complaint of racial discrimination in the employment field from identifying what conduct it is, on the part of any particular respondent sought to be made liable in proceedings before them, that the Act actually makes unlawful and remediable in such proceedings. In particular, it is to be noted that acts which are made unlawful only by section 31 of the Act (inducing, or attempting to induce, another person to do any act which contravenes Parts II or III) are outside the jurisdiction of Employment Tribunals: not for the rather confused reason stated by the Tribunal, but because complaints about such conduct are outside those for which proceedings may be brought under section 54(1) ibid.

21.	Conduct consisting only of “encouragement” or “instigation” may not therefore give rise to a claim in an Employment Tribunal against the person responsible, even though done to induce an unlawful act against a person in employment or applying for it.  An unlawful act for which a claim may be brought againt the inducer has to be identified: either one unlawful by virtue of Part II of the Act itself, so that the tribunal has jurisdiction under section 54(1)(a), or one made unlawful under section 32 or 33, by treating  the inducer as having committed an act of discrimination contrary to Part II against the complainant, so that the tribunal has jurisdiction under section 54(1)(b). 

22.	The acts of discrimination made unlawful under Part II so as to give rise to a direct claim under section 54(1)(a) are so far as relevant to this case defined in section 4 of the 1976 Act (“Discrimination against applicants and employees”), in each case limited to acts by a person “in relation to employment by him”.  For a dismissal contrary to section 4(2)(c) the person directly liable, against whom a complaint to an Employment Tribunal may be presented under section 54(1)(a), is thus the employer himself.  A complaint under (a) may not be presented against any other person, even though the employer may have been acting at that other person’s suggestion or under his or its control.  Such a person may be made liable only under section 54(1)(b), if the conditions for that person to be treated by virtue of section 32 or 33 as having committed an act of discrimination unlawful by virtue of Part II of the Act are met.

23.	Although the tribunal referred to both sections, the whole argument before us focused on section 32 (Liability of employers and principals), and the Tribunal’s finding of “unlawful discrimination under 32(2)”.  This provides that: 
“(2)	 Anything done by a person as agent for another person with the authority (whether expressed or implied, and whether precedent or subsequent) of that other person shall be treated for the purposes of this act (except as regard offences thereunder) as done by the other person as well as by him.”  
The structure of section 32 (unlike that of section 31 which precedes it and section 33 which follows it) is simply to attribute the authorised acts of an agent to his principal for the purpose of other provisions of the Act.  It does not provide any separate way in which those acts are made or treated as unlawful, under Part II or section 32 itself. 

24.	In this case the act found by the Tribunal to have been done by SFM at Nord Anglia’s instigation was the dismissal of Mr Perera.  However that dismissal was from the employment of SFM, not Nord Anglia.  He had never been an employee of Nord Anglia; and there was no finding, nor could there have been, that Mr Perera (whose employment contract with SFM dated from well before Nord Anglia took control) had ever been employed by SFM as agent of Nord Anglia or in any other way than on its own behalf acting as principal. 

25.	It must in our judgment follow that Mr Perera’s dismissal from SFM’s employment, even though encouraged, instigated and authorised by the controlling company Nord Anglia, could not amount to an act of unlawful discrimination contrary to section 4(2)(c) on the part of Nord Anglia, since he was at no time a person employed by it: and nor could SFM’s action in dismissing him from its own employment amount to a dismissal as agent for Nord Anglia in any relevant sense.  The Tribunal’s conclusion appears to us in error both in assuming an “agency” in relation to the dismissal, and a separate head of liability for “unlawful discrimination under section 32(2)” in circumstances for which neither section 4 nor section 32 itself actually provide.  We are unable to accept Mr Algazy’s submission that a “purposive” approach to the construction of the two sections can overcome this fundamental difficulty in the Tribunal’s reasoning.  

26.	For those reasons we allow the appeal of Nord Anglia on the issue of its own liability, and accept Mr Rose’s submission that the Tribunal’s decision has to be set aside so far as it is concerned.  We accordingly set aside the decision that Nord Anglia unlawfully discriminated against Mr Perera by dismissing him contrary to section 4(2)(c) of the Race Relations Act 1976.  Having done so, we remit the case to the same Tribunal for reconsideration of the claim against Nord Anglia under section 54(1)(b) and its possible liability to Mr Perera under Part IV of the Act.  That we consider to be the just course in the circumstances rather than attempting to substitute our own decision on those issues: in particular because the scope of the reconsideration now needed will be broader, in the light of the recent decision of the House of Lords in Anyanwu v South Bank Student Union [2001] 1 WLR 638 reversing the Court of Appeal decision the Tribunal held conclusive against the alternative claim for “knowingly aiding” based on section 33.

27.	At the conclusion of the hearing before us Counsel for each side made a putative application for leave to appeal to the Court of Appeal against any aspect of our reserved decision that might be adverse to them.  The first, second and fourth points concern the application of well settled principle to the facts of this case, and we do not consider the third to raise a sufficiently arguable point of general principle to warrant sending it further: accordingly we do not grant either side leave to appeal.

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