Appeal No.EAT/837/01

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	Judgment delivered on 26 June 2002

Before
HIS HONOUR JUDGE PETER CLARK
MRS J M MATTHIAS
MR G H WRIGHT MBE

MS M NELSON	APPELLANT

CARILLION SERVICES LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MR P DRAYCOTT
(Employee)
Instructed by:
Messrs Whittles
Pearl Assurance House
23 Princess Square
Albert Square
Manchester
M2 4ER

	
For the Respondent	MR T LINDEN 
(of Counsel)
Instructed by:
Engineering Employers Federation
Broadway House
Tothill Street
London
SW1H 9NQ	

	
JUDGE CLARK:
1.	This is an appeal by Ms Nelson, the Applicant before an Employment Tribunal sitting at London (Central) under the chairmanship of Mr M F Haynes on 26 -27 March 2001, against that Tribunal’s decision, promulgated with extended reasons on 21 May 2001, dismissing her complaint brought under the Equal Pay Act 1970, against the Respondent, Carillion Services Ltd.

Facts
2.	On 1 April 1997 the Respondent took over a contract to provide services at the Chelsea and Westminster Hospital.  That contract had formerly been held by Initial Healthcare Services (Initial).  It was then accepted that a relevant transfer had taken place from Initial to the Respondent.  Accordingly some 300 employees formerly employed by Initial transferred to the Respondent on the same terms and conditions of employment as they had enjoyed with Initial in accordance with the provisions of the TUPE Regulations 1981.  

3.	Among the Initial employees transferred to the Respondent were 6 stewards and hostesses who served patients on the Chelsea wing of the hospital, which was devoted to private patients.  Those 6 employees comprised 4 men, including a Mr d’ Silva and 2 women.  All 6, who we shall refer to, like the Tribunal, as the “Initial employees,” continued to receive their Initial rates of pay which were more favourable than the rate paid by the Respondent to equivalent staff.

4.	The Appellant was first employed by the Respondent on 2 June 1998, that is after the transfer date.  Her initial rate of pay was £4.12 per hour, later raised to £5 per hour, which increased rate was then back – dated.  Mr d’ Silva, who was engaged in like work to the Appellant, received a rate of £6.1107p per hour.  In subsequent years the same percentage increase was applied to the rates paid to both the Appellant and Mr d’ Silva.  Thus, on 1 April 1999 a 2.4 percent increase took the Appellant to £5.12 per hour and Mr d’Silva to £6.26 per hour; and on 1 April 2000 a 2% increase took the Appellant to £5.22 per hour and Mr d’ Silva to £6.38 per hour.

5.	Additionally, the Initial employees received a food allowance of £2.50 per day, not paid to the Appellant and double time on bank holidays not paid to the Appellant if she was rostered for bank holiday working.  Those benefits carried over from the Initial Terms and Conditions of employment. 

6.	On 31 July 1998 a Mr Sinarda was first employed by the Respondent on like work to that done by the Appellant and Mr d’ Silva.  His terms and conditions were, in all material respects, identical to those of the Appellant.

Tribunal Decision 
7.	It was common ground that the Appellant was engaged on like work with Mr d’ Silva and that the latter enjoyed more favourable terms than did the Appellant.  The question was whether the Respondent had proved that the variation between the woman’s contract (that of the Appellant) and that of the man (Mr d ‘Silva) was genuinely due to a material factor which was not the difference of sex for the purposes of section 1(3) Eq PA.

The Tribunal found the material factor defence made out and dismissed the claim.  

The material factor defence
8.	We have been referred to a considerable body of authority, both in the domestic courts and in the European Court of Justice.

A useful starting point is the House of Lords decision in Strathclyde Regional Council v. Wallace (1998) IRLR 146, from which the following principles emerge:

(1)	The purpose of section 1 Eq PA is to eliminate sex discrimination in pay not to achieve fair wages.  Lord Browne-Wilkinson, paragraph 23.
(2)	Section 1(3) provides a defence if the variation between the man’s contract and the woman’s contract is genuinely due to a factor which is (a) material and (b) not due to the difference in sex.  To be genuine it must not be a sham or pretence.
(3)	To be a material factor it must be shown to be causally relevant to the difference in pay, that is, a significant factor.  That looks at the reason for the disparity in pay and not whether there is an excuse for such disparity.
(4)	The employer must show that the disparity is not due to a factor which is directly or indirectly sexually discriminatory.
(5)	Where the factor is tainted by prima-facie indirect sex discrimination, it is open to the employer to objectively justify such discrimination and thereby establish the section 1(3) defence. 

9.	The issue in the present case is whether the Tribunal was wrong in law to find that the difference in pay between the Appellant and her male comparator, Mr d’ Silva, was not prima facie indirectly sexually discriminatory.  They did not go on to decide whether, if it was, the Respondent had objectively justified the discrimination.

The Appeal 
10	By her amended grounds of appeal the Appellant, through Mr Draycott, takes 3 points:

(1)	the Tribunal erred in finding that by merely complying with their TUPE obligation to preserve the terms and conditions of the Initial employees the Respondent did not apply a requirement or condition with which the Appellant could not comply (reasons in paragraph 11).  Mr Linden does not seek to support that finding; thus the critical issue (subject to the third ground) is; 
(2)	whether the Tribunal erred in rejecting (reasons paragraphs 9 and 10) the Appellant’s statistical evidence as to adverse impact based on the pool of employees advanced by the Appellant.

11.	It was the Appellants case that the relevant pool consisted of the six Initial employees plus the Appellant and Mr Sinarda.  Based on that pool she contended that 80% of men (the 4 Initial male employees) could comply and 20% (Mr Sinarda) could not; whereas 66.66% of woman (the 2 female Initial employees) could comply and 33.33% (the Appellant) could not.  Hence the proportion of woman who could comply was considerably smaller than the proportion of men who could comply (66.66% compared with 80%), relying on the statistical difference upheld by the Court of Appeal in London Underground Ltd v. Edwards (No 2) (1998) IRLR 365, namely 4.8%.

12.	The Tribunal approached the question of adverse impact in two ways.  First, they were not confident that the Appellant had selected the correct pool; they posited that the appropriate pool might involve a wider slice of the Respondent’s employees, say those involved in catering or alternatively the whole of the Initial employees transferred to them and subsequently employed at the hospital.  Secondly, having referred to a passage in the ECJ judgment in Enderby v. Frenchay Health Authority and Secretary of State for Health (1993) IRLR 591, paragraph 17, in which the court said:

“It is for the national court to assess whether it may take into account those statistics, that is to say, whether they cover enough individuals, whether they illustrate purely fortuitous or short-term phenomena, and whether, in general they appear to be significant”

The Tribunal held that it was inappropriate to make such statistical comparisons based on only eight employees.

13.	We accept Mr Linden’s submission that here the Tribunal were finding that the statistical comparison, based on the pool selected by the Appellant, was purely fortuitous.  It so happened that the limited number of persons engaged on like work split as they did on gender lines and was not generally significant.  In our judgment that was a factual conclusion which the Tribunal was entitled to reach.  

(3)  Finally Mr Draycott, by amendment, takes a natural justice point.  He submits, correctly as it now turns out, that in the course of their deliberations following the oral hearing the Tribunal referred themselves to the ECJ decision in the Royal Copenhagen Case (1996) ICR 51, without giving the parties an opportunity to make submissions on the significance of that decision.  They specifically refer to that case in the course of their written reasons.  

14.	Mr Draycott submits, relying particularly on the recent judgment of HHJ Serota QC in this appeal Tribunal in Albion Hotel (Freshwater) Ltd v. Maia E Silva (2002) IRLR 200, that failure by the Tribunal to invite the parties’ submissions on the effect of the Royal Copenhagen case resulted in significant procedural unfairness which requires us to set aside the Tribunal decision.

15.	Judge Serota was not stating a new proposition of law when he said (paragraph 35);

“In our opinion, where a Tribunal considers that an authority is relevant, significant and material to its decision but has not been referred to by the parties, it should refer that authority to the parties and invite their submissions before concluding their submissions before concluding its decision.  This is more than mere good practice.  Failure to do so may amount to a breach of natural justice and to the right of an unfair hearing.”  (Our emphasis added)

It is clear, from their reasoning, that the Tribunal considered the Royal Copenhagen case to be relevant.  They cited it in their reasons.  The real question, it seems to us, is whether that case significantly added to the learning which had been cited by the parties.  

16.	On the critical finding on which we uphold the Tribunal’s decision, that the Tribunal found the statistics relied on by the Appellant to be purely fortuitous, the Royal Copenhagen case merely repeated that which the European Court had said in Enderby in the passage cited.  Enderby had been cited to the Tribunal in argument.  It is referred to at paragraph 12 of Mr Draycott’s closing written submissions below dated 25 March 2001.

17.	In these circumstances we are not persuaded that the Tribunal’s own recourse to that authority in fact caused any material injustice to the Appellant.  

Conclusion 
18.	It follows, for the reasons which we have given, that we uphold the Tribunal’s conclusion that the genuine material factor relied on by the Respondent, the TUPE factor, was untainted by sex discrimination.  The section 1(3) defence was made out by the Respondent.  This appeal fails and is dismissed.  

Costs
19.	Finally, we have before us cross-applications by the parties for costs arising out of the Appellant’s amendment to the grounds of appeal to add the third ground, which I allowed on an interlocutory appeal from an order of the Registrar refusing permission to amend.

20.	The background is set out in the interlocutory judgment which I gave on 1 May 2002.  The original Notice of Appeal, settled by Mr Draycott, is dated 29 June 2001.  By letter dated 4 March 2002 he applied to add the third ground.  That application was opposed by the Respondent on the basis, among other things, that the Tribunal had given the parties an opportunity to make submission on the Royal Copenhagen case at the hearing.  The Registrar refused the application.  I allowed it on appeal, reserving the costs in the interlocutory appeal to the full Tribunal at the substantive appeal hearing.  

21.	Having made that order I was informed by the Respondent’s solicitor that in fact they were wrong.  The case had not been referred to at the Tribunal hearing.  

In these circumstances Mr Draycott submits that the Respondent acted unreasonably in opposing the application to amend on a false basis, leading to the Appellant incurring unnecessary costs in the interlocutory appeal. 

22.	In response, Mr Linden points out, first that that point could have been taken in the original grounds of appeal.  As I accepted, the Albion case raised no new point of law and indeed the third ground of appeal, as formulated by Mr Draycott, refers not to that case, but to two earlier authorities decided before the original Notice of Appeal was lodged.  Secondly, in the event that the third ground of appeal was to fail, as it now has, it is the Respondent who should have the costs thrown away by the amendments.  

23.	We have considered those rival contentions and declare a dead heat.  The result is the there will be no order as to costs.