Appeal Nos. EAT/0448/02/TM & EAT/0449/02/TM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	                   At the Tribunal
	                 On 7 April 2003
Judgment delivered on 13 May 2003

Before
HIS HONOUR JUDGE PETER CLARK
MRS R CHAPMAN
MR G H WRIGHT MBE

EAT/0448/02/TM
MR K HANLY	APPELLANT

NORINCHUKIN INTERNATIONAL PLC	RESPONDENT

EAT/0449/02/TM
MR M DE BERGOLIS	             					        APPELLANT

NORINCHUKIN INTERNATIONAL PLC					       RESPONDENT

Transcript of Proceedings

JUDGMENT

Revised

	APPEARANCES

For the Appellant	MS T GILL
Representative
Commission for Racial Equality (Litigation Dept)
St Dunstan’s House
201-211 Borough High Street
London
SE1 1GZ	
For the Respondent	MR JAMES TAYLOR
(Of Counsel)
Instructed by:
Messrs Hammond Suddards Edge
Solicitors
7 Devonshire Square
Cutlers Gardens
London
EC2M 4YH	

JUDGE PETER CLARK

1.	This is an appeal by Mr Hanly and Mr De Bergolis, Applicants before the London (Central) Employment Tribunal sitting on 19-22 February 2002 (under the chairmanship of Miss A M Lewsey) against part of that Employment Tribunal’s decision, promulgated with Extended Reasons on 16 March 2002, which dismissed their complaints of both direct and indirect racial discrimination brought against the Respondent, Norinchukin International Plc.  A further complaint of unfair dismissal was, in both cases, upheld.

Background
2.	The Respondent is a wholly owned subsidiary of Norinchukin Bank in Japan (the Bank).  It is the principal dealer in the London market for the Bank.

3.	Both Applicants were employed by the Respondent in the trading department, itself staffed by 20 people.  The total of the Respondent’s workforce was 44 of whom 10 were employed by the Bank and seconded to the Respondent to work in the London operation (the secondees).  The secondees were all Japanese.

4.	In December 2000 the Respondent’s trading arm was operating at a loss.  The Bank decided to withdraw support for a number of loss making desks.  The result was that the head-count in the trading department was reduced.  In January 2001 both Applicants, together with other local employees, Mr Morch, Mr Driver, Mr Dinan and Ms Ogawa (herself of Japanese ethnic origin) were dismissed by reason of redundancy.  A secondee, Mr Furiya, was repatriated to Japan.  Later, in July 2001, another secondee, Mr Hayashi, was also repatriated and a Ms Devlia, originally at risk of redundancy, was redeployed.

The Employment Tribunal decision
5.	The Employment Tribunal found the dismissals of the Applicants to be unfair.  There had not been adequate consultation with them before their dismissals by reason of redundancy.

6.	As to the claims of racial discrimination, both Applicants, British males, compared themselves with male Japanese secondees for the purposes of their direct discrimination claims.  They contended that none of the comparators had been dismissed, or repatriated.  That was less favourable treatment shown to the Applicants; there was a difference in race; no adequate explanation for that treatment had been given.  By their Originating Applications they gave particulars of 7 matters which they said gave rise to an inference of unlawful discrimination.

7.	The first question for the Employment Tribunal was whether the actual comparators chosen by the Applicants were truly comparable within the meaning of s3(4) of the Race Relations Act 1976 (RRA).

S3(4) provides:

“A comparison of the case of a person of a particular racial group with that of a person not of that group under s1(1) must be such that the relevant circumstances in the one case are the same, or not materially different in the other.”

8.	The Employment Tribunal noted, at paragraph 35 of their reasons:

“35	In the present case, the ex-patriate employees of Norinchukin Bank were employed under different contracts.  They had different benefits, different salaries, some benefits being paid from Japan.  Their salary was reimbursed by Norinchukin Bank, Japan, although paid by the Respondent and they were secondees from the Japanese bank.  A non-Japanese could be an ex-patriate and some local employees were Japanese although not ex-patriate.  The ex-patriate employees could not be dismissed but could only be repatriated.”

9.	They considered the 7 matters relied on by the Applicants to draw an inference of less favourable treatment on racial grounds and rejected that case on the facts.

10.	In considering the claim of indirect discrimination, they found, reasons paragraph 44, that the secondees were not true comparators and that the Applicants had not established the necessary requirement or condition for the purposes of s1(1)(b) of the Act.

The Appeals
Direct Discrimination
11.	We begin with the statutory question, equally applicable to direct race and sex discrimination, most recently formulated, at House of Lords level, by Lord Nicholls in Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11.  That was a case of alleged sex discrimination.  We adapt Lord Nicholls analysis, at paragraph 4, to apply to a case of race discrimination.

“Thus, where the act complained of consists of dismissal from employment, the statutory definition calls for the way the employer treated the claimant (dismissal) and the way he treated or would have treated a person of a different racial group.  It stands to reason that in making this comparison, with a view to deciding whether a person who was dismissed received less favourable treatment than a person of a different racial group, it is necessary to compare like with like.  This self-evident proposition is spelled out in s3(4) the RRA 1976: see Dillon LJ in Bain v Bowles (1991) IRLR 356, 357.  As originally enacted … s3(4) provides: (set out earlier).

This provision applies regardless of whether the comparator is an actual person or a hypothetical person.  It is equally applicable to both types of comparator.”

12.	It is for the Applicant to establish the relevant actual or hypothetical comparator for the purposes of the act complained of.  We must therefore turn next to the way in which the Applicant’s case was put below.

13.	The particulars of complaint, settled by solicitors, were the same in each Applicant’s forms IT1.  At paragraphs 11-13 of their grounds of complaint it is made clear that the unlawful act complained of is dismissal (RRA s4(2)(c)).  As to direct discrimination, it is said:

“12	Direct Discrimination.  The Applicant was less favourably treated than each of the expatriate employees in the Respondent’s trading department, none of whom were dismissed (or had the arrangement under which they worked for the Respondent in the United Kingdom terminated).  The Applicant is a British man.  Those employees are Japanese men.  The Respondent has failed to provide a satisfactory reason for this difference in treatment.  In the circumstances the Applicant will ask the tribunal to infer that he would not have been dismissed had he been a Japanese man.”

In a footnote to the words in brackets the Applicant said this:

“The Respondent has indicated in its response to the Applicant’s RRA questionnaire that the expatriate employees are employed by the Respondent’s Japanese parent company and therefore that the Applicant is prevented from drawing a comparison with them.  Pending disclosure of documentation relating to the employment arrangements of the expatriate employees the Applicant is unaware of the precise arrangements under which the expatriate employees are engaged, save that it is understood they were paid by the Respondent.  Irrespective of the precise arrangements, the expatriate employees are clearly employed to work for the Respondent in its trading department and are, therefore, in circumstances which are not materially different to that of the Applicant.”

14.	At paragraphs 13 of the grounds of complaint the 7 evidential matters relied upon as supporting an inference of unlawful direct discrimination are set out.

15.	By their Notice of Appearance, paragraph 6(f), the Respondent resisted the claims of direct discrimination on the ground (among others) that:

“The Applicant’s chosen comparators are all expatriate staff employed by the Respondent’s parent Company, Norinchukin Bank, in Japan.  Consequently …. The relevant circumstances of those individuals are neither the same nor materially so far the purposes of s3(4) Race Relations Act;”

16.	Thus an issue for the Tribunal to determine was whether the Japanese secondees were actual comparators, under s3(4), for the purposes of the direct discrimination claim.

17.	Ms Gill submits that the Employment Tribunal failed to make a finding on the Applicant’s complaint in relation to dismissal.  It is correct to say that the Employment Tribunal’s formulation of the direct discrimination issue, at paragraph 2.2 of their reasons is curiously framed as follows:

“Whether the Respondent treated the Applicants less favourably on account of their race contrary to s1(1)(a) and s4(2)(c) of the RRA 1976, the detriments being those set out in paragraph 13 of the Originating Applications.”

18.	In fact, the unlawful act complained of was dismissal, as appears from paragraph 12 of the grounds of complaint not ‘some other detriment’ under s4(2)(c) and the matters set out at paragraph 13 were not the subject-matter of the complaints, but evidence on which an inference of unlawful discrimination might be drawn if a finding of less favourable treatment, making a like for like comparison and a difference in race, without adequate explanation, was made out.

19.	In these circumstances we see the force of Ms Gill’s submission, provided that she can demonstrate on appeal either that the Employment Tribunal failed to address the comparator question, or that in doing so they were wrong to find that the Japanese secondees were not like for like actual comparators or that even if they were not, then the Employment Tribunal ought to have gone on to consider the question of hypothetical comparators.  We shall consider each of those propositions in turn.  If the claims failed on the comparator question then the precise question under s4(2)(c) becomes moot.

(i)	Did the Employment Tribunal consider the comparator question?

At paragraph 35 the Employment Tribunal made certain findings of fact as to the differences between the Applicants, employed by the Respondent and the Japanese secondees.  We have earlier set out those findings.  At paragraph 36 they considered the first matter raised in paragraph 13(i) of the grounds of complaint, that the secondees worked under different contracts with the Bank, receiving higher salaries than the Applicants; that the Bank was a different corporate entity from the Respondent.  They were satisfied that there was no comparison of like with like under section s3(4).

20.	Further, when considering the claim of indirect discrimination, the Employment Tribunal found, in terms, at paragraph 44 of their reasons:

“The ex-patriates [secondees] were not employees of the Respondent and therefore are not true comparators.”

21.	In these circumstances we are satisfied that the Employment Tribunal clearly found that the secondees were not true actual comparators for the purposes of s3(4) RRA.  

(ii)	Was the Employment Tribunal entitled to find that the secondees were not actual comparators?

In our judgment they were.  We return to Ms Gill’s point that the discriminatory act here complained of was dismissal of the Applicants by the Respondents on grounds of redundancy.  In order to make a true like for like comparison the comparators must, at the very least, also be employees of the Respondent who were not dismissed.  The secondees were not employees of the Respondent.  Accordingly they could not be dismissed.  Like the Employment Tribunal we do not accept that secondees who might be repatriated to Japan were comparable with employees of the Respondent who might be dismissed by reason of redundancy for the purposes of the specific complaint in these cases.

(iii)	Ought the Employment Tribunal to have considered the question of hypothetical comparators?

We accept, of course, that where a Tribunal is required to consider hypothetical comparators the treatment of actual people, although not true comparators, may inform their decision as to how a hypothetical comparator would be treated - Chief Constable of West Yorkshire v Vento [2001] IRLR 124 (EAT. Lindsay P).  In Wakeman v Quick Corporation [1999] IRLR 424, a case concerning the difference in pay between locally recruited English staff and Japanese secondees, Chadwick LJ (paragraph 62) identified the following factual questions for the Employment Tribunal:  First were there any Japanese employees in relation to whom the circumstances relevant to remuneration were otherwise the same as, or not materially different from the circumstances of the complainants.  That question was answered in the negative.  Accordingly the second question, were the complainants less favourably treated than those actual comparators, there being none, did not arise.  Thirdly, how would the Respondent have treated like for like hypothetical comparators, that is, Japanese employees in like circumstances to the Complainants.  Fourth, was the Complainant’s treatment less favourable than that afforded to those hypothetical comparators?  The Employment Tribunal in that case considered those latter 2 questions and found no useful inference as to how locally recruited Japanese and similar management positions would have been treated in comparison to the Complainants.

22.	Ms Gill relies on that approach in the present case.  She submits, correctly, that no hypothetical comparison was attempted by the Tribunal in this case.  Further, she relies on the Court of Appeal approach in Balamoody v United Kingdom Central Council for Nursing Midwifery and Health Visiting [2002] ICR 646.  In that case the Applicant’s complaint of direct racial discrimination was struck out by a chairman of Employment Tribunals under the then rule 13(2)(d) of the Employment Tribunal Rules of Procedure 1993 on the grounds that it was frivolous and an abuse of process.  The basis for decision was that none of the actual comparators put forward by the Applicant were in like circumstances to himself.  That decision was upheld by the Employment Appeal Tribunal but reversed on further appeal to the Court of Appeal.  In giving the principal judgment of the court Ward LJ (paragraphs 59-61) opined that on the facts of that particular case it was incumbent on the chairman, having correctly rejected the actual comparators advanced, to construct a hypothetical comparator and test the case against that benchmark.  Those facts included the chairman’s observation, in her reasons, that a comparison could be made with either an actual or hypothetical comparator.  (Judgment, paragraph 27).  Having approved the approach of Lindsay P in Vento Ward LJ concluded (paragraph 61):

“I am far from saying that in each and every case the tribunal has to be robustly interventionist and do the task which the applicant is not doing for himself or herself.  Every case is different.  But in this case, in my judgment, the chairman should have given in to her first instinct, which was; “that whether or not [Mr Balamoody] had been treated differently on the grounds of race was largely a question to be decided on the evidence and that a striking out order would be unusual …”

23.	In our view the principle to be derived from Balamoody must be approached with some caution.  First, it was a strike out case; the Applicant’s claim was dismissed without hearing any evidence; secondly, the chairman recognised that a comparator may be actual or hypothetical; having done so, she considered the first but not the second.  Thirdly, as Ward LJ made clear, he was not saying that in every case the chairman must do the task which the Applicant is not doing for himself.
 
24.	It is the last comment which particularly concerns us in the light of a well-established line of Court of Appeal authority, apparently not referred to either in argument or in the judgments of the court.  The proposition is encapsulated in the judgment of Mummery P in Qureshi v Victoria University of Manchester (now reported. [2001] ICR 863. Note), cited with approval by Sedley LJ in Anya v University of Oxford [2001] ICR 847, 852 D-E:

“(1)	  The complaint.  The Industrial [Employment] Tribunal only has jurisdiction to consider and rule upon the act or acts of which complaint is made to it.  If the Applicant fails to prove that the act of which complaint is made occurred, that is the end of the case.  The Industrial Tribunal has no jurisdiction to consider and rule upon other acts of racial discrimination not included in the complaints in the Originating Application: See Chapman v Simon [1994] IRLR 124, 128, Paragraph 33(2) (per Balcombe LJ) and 129, paragraph 42 (Per Peter Gibson LJ).”

25.	That principle also ties in with those cases in which the Court of Appeal has made clear that, save in exceptional circumstances, a party will not be permitted to raise a new point on appeal, see Jones v Governing Body of Burdett Coutts School [1999] ICR 38; Glennie v Independent Magazines (UK) Ltd [1999] IRLR 719.  That will be true even where a point was taken in the Originating Application, but not then pursued before the Employment Tribunal.  Mensah v East Herts NHS Trust [1998] IRLR 531.  We note that a reference to a hypothetical Japanese comparator was made by the Applicant’s solicitor in pre-trial correspondence by a letter dated 15 March 2001.

26.	Further, the inexperience or incompetence of a party or his representative will not amount to an exceptional circumstance allowing a new point to be taken on appeal.  Kumchyk v Derby City Council [1978] ICR 1116 (EAT), cited without disapproval by Robert Walker LJ in Jones v Burdett Coutts School, 44 B-C.  In the present case the Applicants were represented by solicitors and Counsel, not Ms Gill, below.

27.	Against that background we return to the present case.  It is quite clear and Ms Gill does not suggest otherwise, that at the full hearing below the Employment Tribunal was never asked to consider a hypothetical comparator as an alternative to the actual comparators, 4 secondees, relied on by the Applicants.  In our judgment a finding as to an actual or hypothetical comparator complying with s3(4) is an essential part of any successful complaint of direct unlawful racial discrimination.  It will always be open to an Applicant to rely on one or the other, or both in the alternative.  In any event the Respondent must know the nature of the case that he is to meet.

28.	In these circumstances we cannot accept Ms Gill’s submission that, having rejected the actual comparators advanced by the Applicants, it was then incumbent on the Employment Tribunal in this case to go on, without giving the parties an opportunity to lead evidence and present argument on the point, to construct a hypothetical comparator or comparators for the purpose of deciding whether, in dismissing these Applicants by reason of redundancy, the Respondent had treated them less favourably than such hypothetical comparators on grounds of their race.

29.	Not least of the problems on appeal, if we were to accede to Ms Gill’s submissions, would be to identify the hypothetical comparator.  We had thought initially that Ms Gill was putting forward a hypothetical Japanese male local employee; it could not be a female Japanese local employee because an actual comparator on this basis, Ms Ogawa, had also been made redundant.  However, in her reply, she appeared to be suggesting that the hypothetical comparator might be a Japanese secondee who could be dismissed in the sense that he might be repatriated to Japan.  Even now, uncertainty remains.  That is no basis upon which to entertain a new argument on appeal.

30.	We accept Mr Tayler’s submission that some support for our approach is to be found in the speech of Lord Hutton in Shamoon where, at paragraph 80, he points out that a complainant may request the tribunal to consider a hypothetical comparator.  That is what happened in both Vento and Wakeman.

31.	For these reasons we have concluded that this Employment Tribunal was entitled to reject the Applicant’s claims of direct racial discrimination on the basis that they had failed to make out a like for like comparison with the actual named comparators relied upon by the Applicants, in the absence of any alternative case being advanced on the basis of some hypothetical comparator.
 
32.	In so concluding we have not overlooked Ms Gill’s further submission; first, that the secondees were employees within the extended meaning of s78 RRA.  That point was not argued below; we see no compelling reason to allow the point to be taken now for the first time.  See Jones v Burdett Coutts School.  The Employment Tribunal’s formulation of the unlawful act becomes immaterial, as we indicated earlier.  The ‘Vento’ question does not arise, in our judgment, in circumstances where no case based on a hypothetical comparator was argued below.  The question of the adequacy or otherwise of the Employment Tribunal’s findings of fact on the question of promotion also does not arise, the complaint being, as Counsel agree one relating to dismissal and not some other detriment for the purposes of s4(2)(c) RRA.

Indirect Discrimination
33.	The nature of the Applicant’s complaint (Grounds of Complaint, paragraph 14) was that the Respondent imposed a condition of being a Japanese secondee to being excluded from risk of dismissal.  That condition had a disproportionate impact on each Applicant, who could not comply because he was British.

34.	In rejecting that part of the claim the Employment Tribunal found that the secondees were not true comparators and further that no requirement or condition had been applied.

35.	By her amended Grounds of Appeal Ms Gill contended that the Employment Tribunal was wrong to apply s3(4) to a complaint of indirect discrimination.  A complaint of indirect discrimination under s1(1)(b) relates to the same treatment with differential impact.  As such s3(4) has no application.

36.	We accept that s3(4) is concerned with direct discrimination.  It is directed to the comparison between persons of different racial groups.  That can only apply to the s1(1)(a) comparison.  We do not fully understand the reference to s5(3) SDA (s3(4) RRA) at paragraph 7 of the judgment of Ralph Gibson LJ in the indirect sex discrimination case of Jones v University of Manchester [1993] IRLR 218, to which Mr Tayler referred us.

37.	Under s(1)(b) it is necessary to select a pool; the comparison is then made between those in the pool who can comply with the relevant requirement or condition and those who cannot.

38.	The difficulty faced by these Applicants was that in advancing the condition relied on it was necessary to redefine the word dismissal to include repatriation.  The Japanese secondees could not be dismissed by the respondent, a necessary ingredient for membership of the pool.  It is on this part of indirect discrimination case that the Employment Tribunal found the Applicants fell down.  In our view they were entitled so to find.

39.	Accordingly we shall dismiss these appeals.