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United Kingdom Employment Appeal Tribunal |
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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Barclays Bank Plc v Kapur & Ors [1992] UKEAT 248_92_0312 (03 December 1992) URL: http://www.bailii.org/uk/cases/UKEAT/1992/248_92_0312.html Cite as: [1992] UKEAT 248_92_0312, [1991] ICR 208, [1991] 2 AC 355, [1992] UKEAT 248_92_312 |
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At the Tribunal
THE HONOURABLE MR JUSTICE TUCKER
MRS M L BOYLE
MRS M E SUNDERLAND JP
Transcript of Proceedings
JUDGMENT
Revised
APPEARANCES
For the Appellants MR N UNDERHILL QC
Messrs Lovell White Durrant
Solicitors
65 Holborn Viaduct
London EC1A 2DY
For the Respondents MR M SUPPERSTONE QC
and Ms J McNEIL
(of Counsel)
Messrs Lawford & Co
Solicitors
102-104 Sheen Road
Richmond
Surrey TW9 1UF
MR JUSTICE TUCKER: This is an employers' appeal from a decision of the Industrial Tribunal sitting at London (South) in September and October 1991 that the 5 Respondents had been discriminated against on the grounds of their race. The introduction to the case is fully set out in the Tribunal's Reasons and it is unnecessary to repeat it. The case has already been considered by this Appeal Tribunal, and also by the Court of Appeal and the House of Lords on the question whether the claims were time-barred. (See ICR (1991) 208).
The grounds of appeal are that the Industrial Tribunal erred in law first in that it misdirected itself as to the effect of the decision of the House of Lords in James v Eastleigh BC (1990) 2 AC 751, (1990) ICR 554, when considering the question whether there had been discrimination on racial grounds and second that it wrongly concluded that the applicants (the Respondents before us) were subjected to less favourable treatment.
The Respondents are all East African Asians. Three of them (De Souza, A.N.Patel and Dahele) were employed for about twenty years until 1970 by Barclays Bank DCO (DCO) in Kenya. They, and other members of the staff, enjoyed the advantage of a non-contributory Staff Pension fund as part of their employment. (The Kenya Fund).
In 1967 the Government of Kenya introduced by means of the Immigration Act 1967 what is called the policy of Africanisation. The effect of this was that all jobs had to be held by Kenyan nationals. The Respondents, together with many others, were unwilling to take Kenyan nationality. This meant that they could no longer work for DCO. But they were welcome to come to the U.K. and to work for Barclays Bank PLC (Appellants) and a number of them chose to do so. There was no obligation upon the DCO to find them alternative employment, or to make them any further payments, but the Respondents had been good and loyal employees, and DCO felt morally obliged to help them.
A serious aspect of the enforced termination of the first three Respondents' employment with DCO was its effect on their pension positions. Under the Rules of the Kenya Fund no employee acquired any pension entitlement until he had been employed by DCO for twenty years; there was no entitlement to a deferred pension, and retirement was permissible from the age of 50. Thus, those employees who had to leave who had been employed for twenty years or more, but who had not yet started to draw their pension, would be deprived of the opportunity to do so (i.e. they lost rights which had already accrued). Those who had been employed for less than twenty years lost a contingent rather than an accrued right.
In common with other British Banks in Kenya the DCO announced a financial compensation package for the expelled employees - they described their proposals in a document headed Immigration Act 1967 as "ex-gratia terminal payments". For staff with twenty or more years of service the compensation package contained two elements: (i) an ex-gratia annual retiring allowance calculated in the same manner as a pension (what the Appellants describe as a "Pension substitute"), and (ii) a lump sum based on twelve months salary. For those with less than twenty years service (i) a lump sum calculated by reference to years served and (ii) a lump sum based on nine months salary.
The Appellants submit, correctly in our view, that the whole package was only available to those who were, or who would have become, entitled to a pension. The heading to the document makes it clear that it refers to employees whose service had to terminate prematurely (that is before normal retirement age in accordance with the rules of the Pension Fund). And in the case of employees with more than twenty years service, the first element of the package is directly related to the lost pension.
The Appellants standard terms of employment included membership of their Pension Fund. One of the Rules by which that Fund was regulated provided that years of service with any bank incorporated under the title of Barclays Bank Ltd. or with any subsidiary or associated company thereof will for all purposes be computed as years of service with the Bank. (Referred to as the "Group Service Rule"). The admission in whole or in part of years in other employment will be within the discretion of the Directors. (This is relevant in the case of H.C. Patel).
The affect of this is that ex-Kenyan recruits would receive credit for their years of service with the DCO notwithstanding that they would already have received compensation for loss of those pensionable years under the compensation package. The Appellants' Counsel describes this as a double benefit.
After considerable discussions, it was decided that ex-Kenyan recruits should be required to sign a waiver of their rights under the Group Service Rule.
The first three Respondents were interviewed in Kenya and offered employment in the U.K., which they took up in 1970-1971. Each of them signed a waiver of his right to Group Service. The Tribunal rightly found that the contracts offered in the U.K. were to be regarded as new contracts of service with the Appellants and that previous service would not count towards pension. The circumstances in which Kapur and H.C. Patel came to be employed by the Appellants are different, but not materially so. Neither Counsel for the Appellants nor Counsel for the Respondents seeks to draw any distinction between any of the Respondents.
The first three Respondents and other ex-Kenyan recruits have since the late 1970s contended that they were worse off as a result of having received the compensation package, and in 1987 each of the Respondents wrote to the Appellants requesting that his East African service be credited for pension purposes.
The Tribunal found that in withholding group or credited service from the Respondents, the Appellants had on racial grounds treated them less favourably than they treated other persons, and that the Appellants were accordingly guilty of direct discrimination under Section 1(1)(a) of the Race Relations Act 1976. It is not disputed that if the Tribunal were right about that, then such discrimination would have been unlawful under Section 4(2) of the Act.
There is no doubt that the Respondents were treated differently from other recruits who were not required to waive their rights under the Group or Credited Service rules.
Therefore the issues for determination by the Tribunal were these. First, was the difference of treatment complained of made on racial grounds? Second, was the treatment less favourable?
On the first issue, the Appellants submit that the question which the Tribunal should have asked themselves was "what were the grounds for the Respondents being required to waive their rights?", and that the obvious answer is that it was because they had already been compensated for the loss. The Appellants submit that it could not possibly be said that it was because the Respondents were East African Asians.
At paragraph 12 of the Decision, the Tribunal say this:
"It would be wrong for us in the absence of any positive evidence that the decision was taken on overtly racial grounds to make a finding to this effect. Such a finding is so serious a finding against the respondents that it cannot be made unless there is overwhelming evidence to show that that was the reason and there is certainly nothing like sufficient evidence in this case to justify such a finding on our part. We are left therefore with the surmise that it was one of the other reasons which we have mentioned that is either adequate compensation in Kenya or the financial implications of transferring money into the Barclays fund or a simple reluctance on Barclays part to amend their rules bearing in mind that this could have implications for the future as it would be difficult to provide a rule which would simply be applicable to the displaced persons from Kenya."
In this passage the Tribunal clearly state that there was insufficient evidence before them to justify a finding that the Appellants discriminated against the Respondent on what they describe as "overtly racial grounds". How then did it come about that they eventually decided that the Respondent had been discriminated against on the grounds of their race? The reason submitted by Counsel for the Appellants, Mr. Underhill QC, is that the Tribunal misdirected themselves as to the effect of the decision of the House of Lords in James v Eastleigh BC, and omitted to ask themselves what were the grounds for the Respondents' treatment. Counsel for the Respondents, Mr. Supperstone QC, was conscious of the judgment of Slynn J as he then was in the case of Seide v Gillette Industries Ltd. (1980) IRLR 427 where he said at p.431:
"...the question which has to be asked is whether the activating cause of what happens is that the employer has treated a person less favourably than others on racial grounds."
Mr. Supperstone does not question the correctness of that decision, though he points out that it was before James. Mr. Supperstone submits that in the present case the fact that the Respondents were East African Asians was an activating cause of this treatment. He describes that factor as having a causative affect - in that it was, in his words, the activating, effective or operating cause of their different treatment.
The Questions which Mr. Supperstone poses for us are these:
1.Were the East African Asians treated differently to white comparators?
2.Was the fact that they were East African Asians an operative cause of the different treatment?
Before answering these questions we return to examine the reasons for the Tribunal reaching the decision they did after making the finding which we have referred to.
At paragraph 13 of their decision the Tribunal consider the law and in particular the case of James. They conclude, correctly, that the motive of the discriminator is immaterial. They confirm their opinion that they could not in the absence of cogent evidence to that effect come to any finding that the action on the part of the Appellants was deliberately and overtly racial. They say -
"The simple fact is that it was done and the question is was it done on racial grounds."
They go on to consider the facts in some detail.
At paragraph 17 the Tribunal say this:
"On the basis of these documents we therefore have no hesitation in saying that these five applicants have been treated less favourably in that the treatment afforded to them has been less favourable than the treatment afforded to a number of the people in bundle 5 who have been given the whole or part of their previous service with other employers as a credit for pension purposes."
Bundle 5 contained details of several other people said to be comparators. Pausing at that point there could be no objection to what the Tribunal is saying if all it is finding is that the Respondents were treated differently. It was not in issue before the Tribunal or before us that they were treated differently from other persons, namely other recruits who were not required to sign away their rights under Group or credited service rules. But the Tribunal go on to make this further crucial finding:
"We also find that this less favourable treatment has been given on racial grounds in that as motive is irrelevant and the five applicants are all of Asian origin and the number of staff given credited service are predominantly if not wholly of white European origin the decision has been taken and persisted in on racial grounds."
We find no warrant for this conclusion, and we think the Tribunal were mistaken in reaching it.
The cases of James and Regina v Birmingham City Council ex parte Equal Opportunities Commission (1989) AC 1155 were decisions under the Sex Discrimination Act 1975, but it is agreed by Counsel that similar principles apply in a Racial Discrimination case. What those cases decided was that where a "gender-based criterion" was applied it was no defence to a claim for sexual discrimination to say that the motive was benign. That is what seems to have influenced the Tribunal. But the present case is not in our opinion a case of a "race-based criterion". We agree with Mr. Underhill's submission that whether recruits to the Appellants got group or credited service depended not on whether they were East African Asians but on whether they had already received compensation under the Africanisation package and loss of their East African pension years. The fact that they were East African Asians was no more than a causa sine qua non - it was not the activating, effective or operating cause.
In cases of direct discrimination the test proposed by Lord Goff in James at p.576 was this:
"Would the complainant have received the same treatment from the defendant but for his or her sex?"
We doubt whether that test is appropriate in the present case. But even if it is, the question should be not would the Respondents have been treated differently but for the fact that they were East African Asians, but, would they have been treated differently but for the fact that they had received compensation under the Africanisation package.
We are confirmed in our views by the recent decision of the House of Lords in Webb v EMO Air Cargo (UK) Ltd., so far reported only in the Times on the 3rd December 1992, but of which we have a transcript. It is clear from Lord Keith's speech that what is important in each case is to identify the critical factor for the treatment, and that the "but for" test cannot be applied to the circumstances of every case. In the present case we are in no doubt that the critical factor for the treatment of these Respondents was that they had already received the compensation package.
In our opinion the Tribunal misunderstood the effect of James and misdirected themselves on the law as to their approach to the question of direct discrimination. There was no direct discrimination in the present case. The Respondents were not treated differently "on racial grounds" in the words of Section 1(1)(a) of the Act. The answers to the questions posed by Mr. Supperstone are as to the second question, that the fact that the Respondents were East African Asians was not in our opinion an operative cause. As to his first question, it is not disputed that the Respondents were treated differently, but we do not see that there are any white employees with whom a helpful comparison can be made.
The second ground of appeal relates to the finding by the Tribunal that the Respondents were treated less favourably than other persons. The Tribunal use the word "detriment" in this connection. This is the word used in Section 1(1)(b)(iii) and in Section 4(2)(c) of the Act. Section 1(1)(a) refers to "less favourable" treatment. We assume that the Tribunal regarded these words as synonymous, and Counsel take no point upon it.
Notwithstanding our conclusion on the first ground, it is necessary for us to consider this second ground as well, in case the matter should go further, and also because it has a bearing on the question of indirect discrimination, as will appear.
Mr. Underhill submits that the benefits which the Respondents obtained under the compensation package (or the equivalent in the case of Mr. Kapur) were as valuable as the pension rights which they were required to forego. The Tribunal heard evidence from actuaries on both sides. There were two issues between them i.e.
1.Should all or only part of the compensation package be taken into account?
2.What roll-up rate should be adopted to reflect the fact that the Respondents have had the benefit of the money for twenty years?
On the first point, it seems clear to us that if the Respondents had been credited by the Appellants with their years of service in Africa, then they would not have received any of the compensation package. It was unnecessary for the Tribunal to examine what the package comprised, and it was wrong of them to do so. It was in our view irrelevant. All that mattered was the fact that the package was as we find a substitute for the crediting of the African service. All the evidence points to this being so. There could have been no other reason for it. The reason was so obvious that it was unnecessary for DCO to spell it out expressly. The Respondents suffered no other legal losses save their loss of pension benefits. We do not need to look at the Tribunal's reasons for their decision on remedies for this conclusion. We are unable to follow the Tribunal's reasoning in paragraph 19 of their decision on liability. We regard it as misconceived.
On the second point, the Tribunal did not regard the way in which either of the actuaries approached the matter as being correct. They preferred to adopt what they described
"as a far more practical exercise and that the question which should be asked is would any reasonable person expect these applicants to invest the whole of this sum in order to provide for the diminution in pension which they knew or ought to have known because of the disclaimers which they had signed they would suffer at the time of their retirement."
The answer which Tribunal gave to the question was No. They decided the matter on the basis of what any of the Respondents could be expected to have put aside, and said that would only be that part of the compensation which those who had over 20 years of service received in compensation for loss of pension rights. On that basis the Tribunal found that the Respondents had suffered a loss of a financial nature.
In Para 22 of the Reasons the Tribunal went on to find that even if the Respondents had not suffered any financial loss, they had still suffered a detriment because of the feeling of dissatisfaction or sense of injustice that had been engendered in their minds.
In our opinion the Tribunal were wrong in their approach to the evidence given by the actuaries, and were wrong to decide the matter on the basis which they did. It was inappropriate to consider what the Respondents could have been expected to set aside, and wrong to conclude that that would only be part of the compensation package. What the Respondents did with the money was of course their own business - it turns out that in most cases part of it at least was invested in a house. By virtue of the nature of their employment, each of the Respondents had some experience in money matters and investment, and each of them knew or ought to have known the reasons for the award of the compensation package. It was up to them to make proper provision for the future. As to what the appropriate roll-up rate should be, we are in no doubt that it should be calculated on the basis of a long-term investment such as an endowment policy, rather that on a short-term deposit account. The receipt of a lump sum should not have been an obstacle to the taking out of such a policy. Accordingly, the appropriate role-up rate to adopt was, according to the Appellant's actuary, 4.5% above inflation, and this seems to us reasonable.
The Tribunal made no finding at the liabilities stage as to what the appropriate rate should be.
We were at one stage doubtful whether it was permissible for us to have regard to what the Tribunal found at the remedies stage of their decision. But on reflection we believe that we are entitled to do so, since it is all part of the same process of the resolution of the complaint.
Having done so it seems that the Tribunal accepted the contention advanced by the Respondents' actuary that the rate should be Barclays Bank deposit rate net of basis rate tax, but as we have said we would regard this as the wrong rate to adopt. This is because the Respondents should have approached the question of the investment of their awards on a long-term rather than a short-term basis.
As to the Tribunal's finding that there was, in any event, a non-financial element of detriment, it is of course correct that detriment or less favourable treatment can be established without proof of any financial disadvantage. (See eg. Gill v El Vino Co ltd (1983) QB425 and Birmingham City Council v Equal Opportunities Commission (1989) AC 1155). But in our opinion the Respondents had no justification for feeling dissatisfied or from suffering from a sense of injustice. In our judgment an unjustified sense of grievance cannot amount to detriment or less favourable treatment. A reasonable person would not have felt himself to be disadvantaged when comparing himself with persons of another racial group.
The final matter is the question of indirect discrimination under Section 1 (1)(b) of the Act.
The Tribunal made no finding about this but Counsel on both sides expressly requested us to do so. After some hesitation we agreed.
Counsel for the Respondents defines indirect discrimination in terms with which Counsel for the Appellant does not disagree:
"Indirect discrimination is, broadly speaking, applying a requirement or condition which on the face of it applies irrespective of race, but which in practice forms a greater obstacle to one racial group than another, unless the requirement or condition can be justified in the circumstances."
The nature of indirect discrimination alleged in this case is that the Appellants operated their pension funds in such a manner as to exclude East African Asians from group and credited service.
Under Section 1(1)(b)(iii) the Respondents have to show detriment. It is accepted on behalf of the Respondents that if there was no detriment there was no indirect discrimination. We have already found that there was no less favourable treatment, and it follows that we also find that there was no detriment either.
That is sufficient to dispose of this aspect of the case. But we will also make a finding on the question of whether the Appellants' conduct was in any event "justifiable" within the meaning of Section 1 (1)(b)(ii). The onus is on the Appellants to prove this on the balance of probabilities.
There is no doubt that the Appellants have been hampered by the time which has passed. Nevertheless, one important witness has survived and many of the documents are still available.
In our judgment it was clearly justifiable for the Appellants to take steps to deal with the risk of double recovery, and the only question is whether it was unjustifiable to have adopted the course which they did rather than one of the other two alternatives. There is sufficient evidence to enable us to make a finding (as we do) that the Appellants considered the alternative courses open to them and take the course which appeared to be the more appropriate. In our view the material time to be examined is the time when the decision was taken. It was then a justifiable decision to take, and it has remained justifiable since.
In reaching this conclusion we have applied the test formulated by Balcombe LJ. in Hampson v Department of Education and Science (1990) 2 AER 25:
"In my judgment `justifiable' requires an objective balance between the discriminatory effect of the condition and the reasonable needs of the party who applies the condition"
For these reasons the appeal succeeds. The finding of the Industrial Tribunal is reversed. There was no discrimination here. The order on the remedies decision is accordingly quashed.
