Mruke v Khan [2018] EWCA Civ 280

[2018] EWCA Civ 280Case Nos: A2/2014/1299 & A2/2014/2789
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HHJ PETER CLARK and Lay Members
MR JUSTICE LANGSTAFF (P) and Lay Members
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 23/02/2018
Before
LORD JUSTICE PATTENLORD JUSTICE HICKINBOTTOMLORD JUSTICE SINGH
Between
Mwanahamisi MrukeAppellantSaeeda Kamal KhanRespondent
Ms Karon Monaghan QC (instructed by the Anti-trafficking and Labour Exploitation Unit) for Appellant for The Respondent did not appear and was not representedHearing Hearing date: 24 January 2018
Judgment ApprovedLord Justice Singh :Introduction
[1]There are two appeals before this Court. They arise out of the same proceedings before the Employment Tribunal at Watford (“ET”). In a decision sent to the parties on 28 February 2013 the ET allowed the Appellant’s claims for: unlawful deduction from wages arising out of the Respondent’s failure to pay her wages at the rate of the national minimum wage; outstanding holiday pay; and a failure to give the Appellant proper rest breaks to which she was entitled. The ET dismissed her claims for racial discrimination (both direct and indirect) and harassment; and unfair dismissal based on what she contended was her constructive dismissal.[2]The Appellant’s claim before the ET was issued on 6 May 2010 and relates to events which ended in February 2010, when she left the Respondent’s employment. Accordingly, the applicable law in relation to the complaint of racial discrimination is to be found in the Race Relations Act 1976 and not the Equality Act 2010 (the material provisions of which came into force on 1 October 2010). The claim for unfair dismissal was brought under the Employment Rights Act 1996, which has been in force at all material times.[3]One of the reasons why there has been considerable delay in this case is that the proceedings before the ET were stayed pending a criminal trial against the Respondent arising from the way in which she was alleged to have treated the Appellant. In fact there had to be two trials because her initial conviction was quashed by the Court of Appeal (Criminal Division). The Respondent was acquitted at her retrial.[4]The Appellant appealed to the Employment Appeal Tribunal (“EAT”) against the dismissal of those claims which had been decided against her by the ET. The Respondent for her part appealed against the decision which had been made in favour of the Appellant.[5]The EAT held a preliminary hearing on 27 March 2014. HHJ Peter Clark, sitting with two lay members, Mr T. M. Haywood and Professor K. C. Mohanty JP, dismissed the Appellant’s appeal against the dismissal of her claim for racial discrimination, and also dismissed the Respondent’s appeal. However, the EAT permitted the Appellant’s appeal against the dismissal of her claim for unfair dismissal to proceed to a full hearing.[6]The Appellant’s substantive appeal in the claim for unfair dismissal was dismissed after a hearing on 25 July 2014 before Langstaff J (the then President of the EAT), sitting with Mr D. J. Jenkins OBE and Mr B. M. Warman.[7]In between those two hearings, on 28 May 2014, the Respondent was debarred from taking further part in the appeal because she had failed to file an Answer to the Notice of Appeal in accordance with rule 6(2) of the Employment Appeal Tribunal Rules 1993and had failed to respond to an order of the EAT dated 13 May 2014.[8]The Appellant has appealed to this Court against both decisions by the EAT.[9]By an order dated 27 August 2014 Sir Stephen Sedley directed that the application for permission to appeal should be adjourned for renewal in open court on notice.[10]On 10 December 2015 Elias LJ granted permission to appeal against the dismissal of the claim for unfair dismissal; but adjourned the application for permission to appeal against the dismissal of the claim for racial discrimination on the basis that the hearing in the cases of Onu v Akwiwu and Taiwo v Olaigbe was shortly due to take place in the Supreme Court. Judgment was given by the Supreme Court in those cases on 22 June 2016: [2016] UKSC 31; [2016] 1 WLR 2653.[11]On 21 November 2016 Elias LJ granted permission to appeal against the decision of the EAT in relation to direct racial discrimination but dismissed the appeal in relation to indirect discrimination, noting that, in his view, it was “indistinguishable” from the case of Onu and Taiwo.[12]As I have mentioned, the Respondent was debarred from taking further part in the proceedings before the EAT on 28 May 2014. She was served with the papers for the hearing before this Court as a matter of courtesy but did not take part and was not represented. The Appellant was represented by Ms Karon Monaghan QC. We are grateful to her for the careful and fair way in which she presented her submissions, in which she sought to assist the Court, taking account of the fact that the Respondent was neither present nor represented.

Material Legislation

[13]Section 1(1) of the Race Relations Act 1976 (“the 1976 Act”) provided that:
“A person discriminates against another in any circumstances relevant for the purposes of any provision of this Act if – (a) on racial grounds he treats that other less favourably than he treats or would treat other persons.” (a) on racial grounds he treats that other less favourably than he treats or would treat other persons.”
[14]“Race” for these purposes includes “nationality” and “national origins”: section 3(1).[15]Section 3(4) of the 1976 Act provided that:
“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.”
[16]Part II of the 1976 Act prohibited discrimination on racial grounds in the employment field: see in particular section 4.[17]Section 54A(2) of the 1976 Act provided that: “Where, on the hearing of the complaint, the complainant proves facts from which the tribunal could, apart from this section, conclude in the absence of an adequate explanation that the respondent –(a) has committed such an act of discrimination … against the complainant,(b) … the tribunal shall uphold the complaint unless the respondent proves that he did not commit or, as the case may be, is not to be treated as having committed, that act.” (a) has committed such an act of discrimination … against the complainant, (b) …[18]The Appellant’s claim for unfair dismissal was brought under Part X of the Employment Rights Act 1996. Nothing in this case turns on the specific wording of that Act. However, it is important to note that the concept of “dismissal” includes what is usually known as “constructive dismissal”, i.e. where an employee resigns “in circumstances in which he is entitled to terminate [the contract] without notice by reason of the employer’s conduct”: section 95(1)(c).[19]It is well established that those circumstances are ones in which the employer commits a repudiatory breach of the contract: see Western Excavating (ECC) Ltd v Sharp [1978] ICR 221, at 227 (Lord Denning MR). It is also well established that, “for a constructive dismissal to arise, the employee must resign in response to a fundamental breach of contract”: see Nottinghamshire County Council v Meikle [2004] EWCA Civ 859; [2004] IRLR 703, at para. 30 (Keene LJ). However, it is not necessary, as a matter of law, that the employee should have told the employer “that he is leaving because of the employer’s repudiatory conduct”: see Weathersfield Ltd v Sargent [1999] ICR 425, at 431 (Pill LJ). As Pill LJ went on to say in that passage:
“Each case will turn on its own facts and, where no reason is communicated to the employer at the time, the fact-finding tribunal may more readily conclude that the repudiatory conduct was not the reason for the employee leaving. In each case it will, however, be for the fact-finding tribunal, considering all the evidence, to decide whether there has been an acceptance.”

Factual Background

[20]The ET set out its findings of fact from para. 16 of its judgment. A brief summary of the factual background can be gleaned from para. 18.[21]The Claimant was born on 12 October 1963 in Tanzania. She is black. She had no education of any kind and is illiterate.[22]The Respondent was born and brought up in Pakistan. She married Dr K. K. Khan in November 1964. He had been born and brought up in Tanzania. They moved to Tanzania after they were married. Dr Khan ran a hospital in Tanzania.[23]From 1987 the Respondent lived for most of the time in the United Kingdom with their two children, who had been born in 1971 and 1980 and who both had disabilities.[24]Dr Khan died in 1998. The Respondent then became responsible for the hospital which Dr Khan had run in Tanzania. The Claimant had previously worked at that hospital.[25]In 2006 arrangements were made in Tanzania for the Claimant to come to the UK to work assisting the Respondent in her home, in particular doing such work as cleaning and looking after her children.[26]The Claimant managed to leave the employment of the Respondent in February 2010.

The judgment of the ET

[27]After setting out the procedural history of the proceedings at paras. 1-13, the ET set out the long list of issues which it had to determine at para. 14 of its judgment. It then set out relevant matters of law at para. 15. In particular it noted the provisions of the 1976 Act at paras. 15.11-15.14. At para. 15.15 the ET referred in terms to section 54A of the 1976 Act and the decision of this Court in Igen Ltd v Wong [2005] EWCA Civ 142; [2005] ICR 931.[28]From para. 16 the ET set out its findings of fact. It should be noted that, at para. 16, it said that, having heard the Appellant and the Respondent give evidence at the hearing, it found that both were “to some extent, unreliable witnesses.” The ET then set out the factual background at para. 18, which I have sought to outline earlier. At para. 19 of its judgment the ET set out its findings on what it described as “controversial issues”.[29]The ET set out its conclusions from para. 20 of its judgment. Although the ET had a large number of issues which it had to determine, this Court is now concerned with only two topics: the claim for direct racial discrimination and the claim for unfair dismissal.[30]As to the claim for direct racial discrimination, the ET set out its conclusions at paras. 32-41 of its judgment: “Direct Discrimination32. We now turn to race discrimination and the direct race discrimination claims. There were eight matters set out at paragraph 6.1 at the List of Issues (paragraph 14.13 above). We accept that the first five of those are all proved. They relate to failure to pay a salary in accordance with the National Minimum Wage, failing to provide annual leave, failing to provide itemised pay statements, weekly rests and adequate living space. We do not accept that the last three matters were proved …33. In relation to the matters that are proved, the tribunal has to decide whether the claimant was treated less favourably than a hypothetical comparator would have been treated. For this purpose, it is necessary for us to determine the characteristics of the hypothetical comparator.34. Miss Banton submitted that the comparator should be of British national origin ...35. It seems to us that the comparator will be a person of a different race and national origin from the claimant, but would be someone who is illiterate, uneducated, who came from a place where wages were very low, who had experience only of domestic work but who had worked for the respondent and could not speak English. That is because the legislation requires us to make a comparison such that the relevant circumstances in one case are not materially different from the other. The purpose of the comparison is to identify whether race is the reason for the different treatment. We did not accept that the comparator must be of British origin.36. The claimant adduced no evidence to show that such a comparator would have been treated any better than the claimant was herself treated. Nor was this a matter we could infer from the evidence. Miss Banton submitted that: ‘… the only plausible explanation for why [the respondent] would treat the claimant in this appalling manner was on the ground of her racial, ethnic and/or national origins as a Tanzanian.’37. We do not agree with that submission. It seems to us that there is a range of possible explanations (see paragraphs 39-40 below). We have no information about the working conditions, pay or ethnicity of the respondent’s previous domestic workers. How they were treated might have provided a clue as to the reason for how the claimant was treated. …38. It is common to find, where a claimant relies on a hypothetical comparator, that there is little evidence to show how such a comparator would be treated, because of the very nature of the hypothetical situation. In our view, in those circumstances it is necessary to apply the reasoning of Lord Nicholls in Shamoon, Shamoon v Chief Constable of the Royal Ulster Constabulary [2003] UKHL 11; [2003] ICR 337. and look at the reason for the treatment, in order to determine how the comparator might be treated. 39. Here, it seems to us unlikely that the respondent would have employed anyone other than someone from Tanzania, and it therefore seems clear that the claimant was employed because she was from Tanzania. But that factor only explains the decision to appoint the claimant. It does not explain the reason for her treatment in relation to the matters at 14.13.1 to 14.13.5. We think that the reason why she was not paid the National Minimum Wage has something to do with the very low wages paid in Tanzania, about which we did hear. The rate of pay was probably suggested by the hospital administrator. This is to do with differences of economic prosperity in different countries, but is not to do with race. 40. As regards the other matters there was no material from which we could conclude that the claimant was less favourably treated than a hypothetical comparator such as we have described, would have been treated. The failure to grant annual leave seems to have been because the claimant could not use it, which in turn resulted from her low rate of pay. The failure to provide itemised pay statements was not explored in evidence with the respondent, and we have no evidence as to the reason for that failure. As regards weekly rests, the reason for that was most probably that the family depended on the claimant to do her work seven days each week. The failure to provide adequate living space was probably because there was not, initially at least, a spare bedroom for the claimant to occupy. Once Ayesha moved out, the reason for the respondent not allocating a room to the claimant was simply not explored with her. 41. For those reasons we do not consider that the burden of disproving discrimination passes to the respondent. Accordingly, the claimant’s direct race discrimination complaint must fail.” ‘… the only plausible explanation for why [the respondent] would treat the claimant in this appalling manner was on the ground of her racial, ethnic and/or national origins as a Tanzanian.’[31]As to the claim for unfair dismissal, the ET set out its conclusions at paras. 49-52:
“Unfair Dismissal 49. That leaves the question of constructive unfair dismissal. In this respect, Ms Banton for the claimant relies on her opening submissions in which she said that the claimant relied on three matters, the third of which was expressly withdrawn before us. That left, for the purposes of the issue at paragraph 14.1 above, a failure on the respondent’s part to pay the National Minimum Wage and the imposition of onerous working hours, as alleged fundamental breaches of the claimant’s contract. The tribunal finds that there was a breach of contract as regards the failure to pay National Minimum Wage because it is necessary to imply into the claimant’s contract an entitlement to that level of pay and the respondent failed to pay it. As regards the onerous working hours, the tribunal did not find that allegation proved. 50. The question arises, at issue 14.3, however, why did the claimant resign? The tribunal simply have no evidence as to why she resigned. The claimant did not know that she was entitled to the National Minimum Wage when representatives of Kalayaan [a relevant charity] and the police arrived at the respondent’s house on 11 February 2010. The claimant was asked if she wanted to leave and she replied that she did. She did not say why she wanted to leave and did not tell us why she, in effect, … terminated her employment. 51. It seems to us, however, that representatives of Kalayaan made a number of questionable assumptions. These included an assumption that the claimant slept on a thin mattress on a concrete floor, that she was provided with little food, that her passport was forcibly withheld, that there were severe restrictions of her movements, that she was on minimal pay and not allowed to visit Tanzania for funerals. Only one of those matters was in fact borne out in accordance with our findings of fact, but Kalayaan made those assumptions when they asked the claimant if she wanted to leave. It is assumed on their part that those would be the claimant’s reasons for leaving but that is not, it seems to us, the question we have to decide. We have to establish what was the reason the claimant had for terminating her employment? The claimant did not tell us and we simply do not know why she left. 52. Accordingly and dealing with the issues at paragraph 14.1-14.3 above, there was a fundamental breach of the claimant’s contract as to pay in relation to the National Minimum Wage. It was a breach that was sufficient to repudiate the contract, but we are not satisfied that the claimant resigned in response to that breach particularly as the claimant did not know that she was entitled to the National Minimum Wage. It follows that we are not required to deal with the issues at paragraphs 14.4 and 14.5.”

The judgments of the EAT

[32]The EAT (HHJ Peter Clark, sitting with lay members) dismissed the Appellant’s claim for direct racial discrimination on 27 March 2014: the material part of its reasoning can be found at para. 15(2) of the judgment. The EAT took the view that the ET had decided the claim in a way which was in accordance with the subsequent judgments of both the EAT and this Court in Onu and Taiwo. It said:
“we are bound by the Court of Appeal judgment in those cases as matters stand.”
Earlier, in the same sub-paragraph, the EAT said:
“We are not persuaded … that the difference in nationality between the Claimant and the Respondent is material on the facts of this case. The Claimant was recruited not because of her nationality but because she had previously worked for the Respondent in Tanzania.”
[33]Ms Monaghan submits that the last sentence in that passage is inconsistent with the finding of fact made by the ET at para. 39 of its judgment.[34]As I have mentioned, the substantive appeal in the claim for unfair dismissal was heard by the EAT (Langstaff J, sitting with lay members) on 25 July 2014. It dismissed that appeal. It is unnecessary at this juncture to set out its reasons. I will do so in so far as necessary when I consider the grounds of appeal in relation to that part of the case.

Grounds of Appeal

[35]As I have mentioned, there are two appeals before this Court: the first relates to the decision of the EAT which dismissed the claim for direct racial discrimination; the second relates to the decision of the EAT which dismissed the claim for unfair dismissal. In each of those appeals there are two grounds of appeal advanced. I hope it will be convenient if I address the four issues which arise as follows:(1) Was there direct discrimination on racial grounds?(2) Did the ET err in relation to the burden of proof?(3) Did the ET err in law in its approach to constructive dismissal?(4) Was the ET’s conclusion on constructive dismissal perverse?

Issue (1): Was there direct discrimination on racial grounds?

[36]On behalf of the Appellant Ms Monaghan submits that it is important to start with the fact that the ET found that the Respondent employed the Appellant because she was Tanzanian: see para. 39 of its judgment. She submits that the ET also found (by necessary implication) that the Appellant was treated unfavourably (failure to pay wages in accordance her legal entitlement; failure to provide annual leave). Notwithstanding these findings, complains Ms Monaghan, the ET dismissed the claims of direct racial discrimination.[37]As part of her complaint under this ground Ms Monaghan submits that the ET erred in law by reference to section 3(4) of the 1976 Act. That provision requires that there should be no material difference between the circumstances relating to the case of the claimant and that of the chosen comparator (who may be a hypothetical one and not an actual one). Ms Monaghan bases this submission on para. 35 of the judgment, which I have quoted earlier.[38]Ms Monaghan submits that the ET was wrong to attribute to the hypothetical comparator all the characteristics which it did in that passage, for example that she would also be illiterate, uneducated, unable to speak English etc. She submits that the only characteristic that the ET should have used for doing the comparison exercise was that the Appellant was a domestic worker. If another person who was also a domestic worker but not of Tanzanian nationality and/or national origins would have been treated more favourably than the Appellant, she submits that direct discrimination on racial grounds would have been made out.[39]Ms Monaghan also submits that the ET erred by confusing the motive for employing the Appellant with the issue of what characteristics should be attributed to the hypothetical comparator. She submits that the danger of that approach is that it cloaks the very discrimination in issue here: it was the Appellant’s Tanzanian origin that allowed her/caused her to be underpaid etc.[40]The EAT, submits Ms Monaghan, did not correct the errors in the ET’s reasoning and assumed that this Court’s decision in Onu and Taiwo was decisive of the point when it was not. She submits that that case decided only the question whether “vulnerable migrant status” is a protected characteristic. In due course the Supreme Court held that it is not. However, submits Ms Monaghan, that is immaterial to the legal issues which arise in the present appeal.[41]As I have mentioned, the EAT considered that the present case raised the same point of law as Onu and Taiwo. At that time those cases had been decided by this Court and the EAT considered itself to be bound by this Court’s decision. When those cases reached the Supreme Court the issue of law that had to be determined was formulated by Lady Hale DPSC in the following way, at para. 14:
“… Does discrimination on grounds of immigration status amount to discrimination on grounds of nationality under the 1976 and 2010 Acts?”
[42]The Supreme Court answered that question in the negative: see paras. 23-26. At para. 26, Lady Hale said:
“… The reason why these employees were treated so badly was their particular vulnerability arising, at least in part, from their particular immigration status. … It had nothing to do with the fact that they were Nigerians. The employers too were non-nationals, but they were not vulnerable in the same way.”
[43]At para. 22 Lady Hale said:
“Parliament could have chosen to include immigration status in the list of protected characteristics, but it did not do so. There may or may not be good reasons for this – certainly, Parliament would have had to provide specific defences to such claims, to cater for the fact that many people coming here with limited leave to remain, or entering or remaining here without any such leave at all, are not allowed to work and may be denied access to certain public services. So the only question is whether immigration status is so closely associated with nationality that they are indissociable for this purpose.”
[44]Ms Monaghan submits that the issue in that case was different from the issue which arises in the present case. Certainly, in one sense, that is true. So much is clear from the formulation of the issue of law in that case, which I have already quoted. However, it seems to me that some assistance as to the relevant principle can be found in the judgment of Lady Hale in that case. In particular the way in which she posed the question at the end of para. 22 is significant. With a slight variation to reflect the circumstances of the present case, the question could be reformulated in the present case as follows:
“Whether the socio-economic circumstances of the Appellant are so closely associated with her nationality and/or national origins that they are indissociable for this purpose.”
[45]When the question is formulated in that way, it seems to me that the answer is clear. The two are not indissociable. The fact is that the reason why the Respondent employed the Appellant was to do with the package of socio-economic characteristics which she had: in particular that she was uneducated, illiterate and very poor. It was that situation which compelled her no doubt to take up employment for a pittance and to put up with the working conditions which she did in the Respondent’s home. However, that does not lead to the conclusion that there was discrimination on any of the grounds which were proscribed by the 1976 Act, in particular the Appellant’s nationality and/or her national origins.[46]At the heart of Ms Monaghan’s submissions under the first ground is the argument that the ET in the present case fell into error because it took account of the Respondent’s “motive” for taking the decision that she did when it set out the definition of the hypothetical comparator which was necessary in this case. She submits that the ground for treating the Claimant in the way that she was by the Respondent was that she was from Tanzania, in other words her nationality and/or national origins, even if the motive for recruiting her from Tanzania was that she would have certain socio-economic characteristics which made it more likely that she would be willing to work for very little.[47]Ms Monaghan submits that this approach is contrary to fundamental principles of discrimination law: see e.g. R (E) v Governing Body of JFS [2009] UKSC 15; [2010] 2 AC 728, at paras. 13-23 (Lord Phillips PSC). In that judgment, which set out those principles by reference to well-known authorities, Lord Phillips made it clear that the word “grounds” in the 1976 Act is ambiguous:
“… It can mean the motive for taking the decision or the factual criteria applied by the discriminator in reaching his decision. In the context of the 1976 Act ‘grounds’ has the latter meaning. In deciding what were the grounds for discrimination it is necessary to address simply the question of the factual criteria that determined the decision made by the discriminator. …”
[48]One of the authorities on which he relied for that well-established principle was the decision of the House of Lords in R v Birmingham City Council, ex p. Equal Opportunities Commission [1989] AC 1155, which arose under the Sex Discrimination Act 1975. In that case, at 1194, Lord Goff of Chieveley said:
“There is discrimination under the statute if there is less favourable treatment on the ground of sex, in other words if the relevant girl or girls would have received the same treatment as the boys but for their sex. The intention or motive of the defendant to discriminate … is not a necessary condition of liability; it is perfectly possible to envisage cases where the defendant had no such motive, and yet did in fact discriminate on the ground of sex. …”
[49]At para. 20 of his judgment in the JFS case, Lord Phillips said:
“… Whether there has been discrimination on the ground of sex or race depends upon whether sex or race was the criterion applied as the basis for discrimination. The motive for discriminating according to that criterion is not relevant.”
[50]I do not accept this submission by Ms Monaghan. As the quotation from Lord Goff in the Birmingham case makes clear, the question of whether discrimination took place on a prohibited ground can often be answered by asking the “but for” question: but for the Appellant’s nationality and/or national origins would she have been treated more favourably? The answer, it seems to me, is clear. She might or might not have been but that would depend on her socio-economic circumstances.[51]Ms Monaghan focussed on the fact, which she submits the ET found in its judgment at para. 39, that the reason why the Appellant was recruited by the Respondent was because she was Tanzanian. It seems to me that one cannot read that one passage in the ET judgment in isolation; it needs to be read in the context of the judgment as a whole. It is clear that the circumstances in which the parties found themselves were such that the Appellant was recruited out of Tanzania. However, since the Respondent originally came from Pakistan, it is not inconceivable that she might have recruited a person with similar socio-economic characteristics to those of the Appellant from Pakistan. It is also not impossible that she might have done so in the UK, although I would accept that there are very few people who are as destitute as the Appellant would undoubtedly have been, but such a person may have found herself here having migrated from a country in a much poorer part of Europe.[52]For similar reasons, it seems to me that the contention which was originally made on behalf of the Appellant before the ET was bound to fail. At one time, in the claim form, it was pleaded that the ground of discrimination was to be a non-British national. Indeed, as is clear from para. 34 of the ET’s judgment, that is how counsel then appearing for the Appellant formulated the submission at the hearing before the ET. That argument clearly could not have succeeded. If, for example, the Appellant had been a Canadian or an Australian national, it is perfectly conceivable that the Respondent would not have employed her. However, it is likely that the reason for that would have been nothing to do with her nationality and everything to do with her socio-economic circumstances.[53]It was in part in an attempt to meet that kind of difficulty that Ms Monaghan relied on the decision of the Court of Appeal of Northern Ireland in Smyth v Croft Inns Ltd [1996] IRLR 84. In that case Mr Smyth was a Catholic, who was employed as a barman in a pub with Protestant customers in a loyalist area of Belfast. A message was delivered by a regular customer saying that Mr Smyth should be advised not to be in the bar in the following week. He believed that his life was at risk and expected his employers to take some action. However, the bar manager merely telephoned Mr Smyth and told him the he could either stay or go. Mr Smyth resigned and claimed that he had been discriminated against on grounds of religious belief in that he had been constructively dismissed by his employers. At that time discrimination on grounds of religious belief was prohibited in the law of Northern Ireland although not elsewhere in the UK. The Fair Employment Tribunal upheld his claim and awarded him compensation. The Court of Appeal dismissed the employer’s appeal. The judgment was given by Sir Brian Hutton LCJ.[54]On behalf of the employer the argument was made that there had been no discrimination on grounds of religious belief, because, if an employer owned a bar in a Protestant neighbourhood, patronised by Protestants in which he employed a Catholic barman; and a second bar in a Catholic neighbourhood, patronised by Catholics, in which he employed a Protestant barman, and the employer dismissed both barmen on the grounds that the customers in their bars did not like being served by a barman of a community which differed from their own, then the employer would not be guilty of religious discrimination because he did not treat either barman less favourably than the other. The Lord Chief

Justice considered that argument to be “fallacious.” He said, at para. 28:

“… In my opinion the employer would be guilty of religious discrimination against both barmen. If the employer owned only one bar in a Protestant neighbourhood, patronised by Protestants, in which he employed two barmen, one a Roman Catholic and the other a Protestant, and he dismissed the Roman Catholic barman, telling him that his customers did not like being served by a Roman Catholic and that in future both barmen would be Protestants, I consider it to be clear that the employer would be guilty of religious discrimination. His conduct cannot cease to be unlawful discrimination if, instead of owning the one bar patronised by Protestants, he also owns a second bar in a Roman Catholic neighbourhood, patronised by Roman Catholics, in which he dismisses a Protestant barman.”
[55]The reason why Ms Monaghan relies upon the Smyth case is that she submits that, if people of other national origins would also have been discriminated against by the present Respondent, that does not prevent there being discrimination against this Appellant. However, it seems to me that the suggested analogy with Smyth is not a good one. The argument in that case was indeed a fallacious one but it is not the same as the argument which has succeeded in the present case either before the ET or in the EAT. The fact is that it was the socio-economic circumstances of the Appellant, and not her nationality or national origins, which were the reason for the less favourable treatment in the present case.[56]I would therefore reject the first ground of appeal.

Issue (2): Did the ET err in relation to the burden of proof?

[57]Ms Monaghan submits that the ET failed properly to apply section 54A of the 1976 Act and accordingly erred in law and/or reached a decision that was perverse having regard to its own findings of fact.[58]She notes that, at para. 32 of its judgment, the ET had found five types of treatment to have been proved, including failure to pay the Appellant in accordance with the national minimum wage. Having found those matters to be proved and that the Appellant’s national origins/nationality had been material, she submits that the ET ought to have found that the Appellant had proved such facts as were necessary to shift the burden of proof to the Respondent under section 54A. She submits that it is inconceivable that the ET would have found the burden of proof discharged had it properly understood this issue.[59]Ms Monaghan correctly accepts that the ET did not misdirect itself as to the law in relation to the burden of proof. In particular, as I have mentioned, the ET expressly referred both to section 54A of the 1976 Act and to the decision of this Court in the leading case of Igen: see para. 15.l5 of the its judgment. Further, Ms Monaghan fairly accepted at the hearing before us that the ET had in mind the decision of the Supreme Court in Hewage v Grampian Health Board [2012] UKSC 37; [2012] ICR 1054, to which it referred at para. 15.17 of its judgment. In Hewage the Supreme Court approved the decision of this Court in Igen: see in particular para. 25 in the judgment of Lord Hope DPSC. It is also clear from para. 41 of the ET’s judgment that it had in mind the issue of whether the burden of proof should pass to the Respondent but concluded that it should not.[60]However, Ms Monaghan submits that the ET erred in the following way, which is set out in para. 13 of the substituted grounds of appeal:
“Having found the above five matters of less favourable treatment and the materiality of her Tanzanian ethnic and/or national origins … the ET erred in failing to conclude that the burden of proof had shifted so that in the absence of any or any proper non-discriminatory explanation for such treatment from the Respondent, direct discrimination was proved.”
[61]The reference to the five matters which had been proved is a reference to the issues which had been raised at para. 14.13 in the judgment of the ET. The ET found to have been proved that the Respondent:(1) failed to pay a salary in accordance with the national minimum wage;(2) failed to provide annual leave;(3) failed to provide itemised pay statements;(4) failed to provide weekly rests; and(5) failed to provide adequate living space.[62]As the ET said, in beginning its conclusions on the issue of direct race discrimination, at para. 32:
“… We accept that the first five of those are all proved. …”
However, it is clear when that passage is read in its full context, that the ET was not finding that it had been proved that there was less favourable treatment than an appropriate comparator. That is clear from para. 33, where the ET continued:
“In relation to the matters that are proved, the Tribunal has to decide whether the Claimant was treated less favourably than a hypothetical comparator would have been treated. …”
The conclusion which the ET eventually reached, at para. 40, was that:
“There was no material from which we could conclude that the Claimant was less favourably treated than a hypothetical comparator such as we have described, would have been treated.”
[63]The question of whether the provisions of section 54A of the 1976 Act (or its equivalent provisions in other legislation and now in the Equality Act 2010) are satisfied or not is a matter of fact and degree and, in the first place at least, for the judgement of the first instance tribunal. I can detect no error of law in the approach taken by the ET to that question. In so far as Ms Monaghan makes a submission based on perversity, in my view, it is unwarranted.[64]It is clear that the ET rejected the claim of direct racial discrimination because there was not less favourable treatment by reference to a hypothetical comparator. They may or may not have been right about that. If they were wrong about that, then the Appellant’s first ground of appeal would succeed. On the assumption, as one has to make in order to approach Issue (2), that the first ground has failed (as, in my view it should), the second ground must also fail.

Issue (3): Did the ET err in law in its approach to constructive dismissal?

[65]Ms Monaghan submits that the terms of section 17 of the National Minimum Wage Act 1998 have the effect that there is to be implied a term that wages are due at the rate of the national minimum wage into every contract of employment for relevant purposes. She submits that the failure to pay wages in accordance with that implied term constituted a fundamental breach of contract: see para. 49 of the ET judgment. She submits that that was a repudiatory breach as a matter of law. The ET correctly made those findings of fact but then erred in law in requiring knowledge on the part of the Appellant.[66]Ms Monaghan submits that it was not necessary for the Appellant to know that the payment of her wages fell well below what she was entitled to and she did not need to know that there had been a breach of contact. She submits that this was an error of law by the ET. The EAT appears to have agreed with that as a matter of law but concluded that on the facts the decision was one that was available to the ET.[67]As I have mentioned, the issue of constructive dismissal was dealt with by the ET at paras. 49-52 of its judgment, which I have already set out. It is worth setting out some material passages again.[68]At para. 50 the ET said that:
“The Claimant did not know that she was entitled to the National Minimum Wage … on 11 February 2010. …”
[69]In similar terms, at para. 52, in setting out its conclusion on this point, the ET said:
“… There was a fundamental breach of the Claimant’s contract as to pay in relation to the National Minimum Wage. It was a breach that was sufficient to repudiate the contract, but we are not satisfied that the Claimant resigned in response to that breach particularly as the Claimant did not know that she was entitled to the National Minimum Wage. …” (Emphasis added)
[70]In my view, it is clear that part of the ET’s reasoning in this regard was based on a requirement that a claimant should know that she is entitled to the national minimum wage before it can be said that she resigned in response to a repudiatory breach of the implied term in her contract that she will be paid that wage.[71]The EAT was rightly of the view that, if the ET did require knowledge on the part of the Appellant, that would amount to error of law. As Langstaff J said, at para. 25:
“… It would demand too much. The essence of the repudiatory contract is not so much the breach of statute (though that is what it is): it is the failure to pay sufficient. It would not therefore matter, as we see it, if the evidence had been to the effect that the Claimant complained that she should have been paid more (or, putting it the other way round, was paid too little). If she had done either, and the Tribunal had been satisfied, or if it should have been satisfied, that that was a reason for her departure, she would be entitled to regard herself as constructively dismissed and the Tribunal should have so found. We think, however, that the Tribunal here was making the evidential point … to the effect that there was no shortfall in the amount to which the Claimant should have been paid according to the terms of the contract. That is to look purely, we would emphasise, at the contractual terms as they had been reached in Tanzania. The contractual effect was as nothing in the light of UK statutes. But the point that was being made was that the Claimant, in the eyes of the Tribunal, did not appreciate that she was being paid less than she was entitled to be paid. She did not therefore leave her work for that reason. As such, we think that the point was one to which the Tribunal was entitled to pay regard. It was not an error of law to express it as it did.”
[72]I would respectfully disagree: the distinction which the EAT made in that passage is one which was not material. The fact is that the way in which the National Minimum Wage Act operates is to insert an implied term into a contract of employment that the national minimum wage will be paid. That is an implication of law, not fact. In so far as the ET’s reasoning was based on the point that the Claimant did not appreciate that she was being paid less than she was entitled to be paid, that was based, in my view, on an error of law. It was because she was ignorant of her legal rights under the legislation of this country.[73]Before I conclude on this issue I would make this observation as to the approach to interpretation that is appropriate in the context of social legislation such as the National Minimum Wage Act. It is important that the purpose of such legislation should be given full effect in order to protect workers in this country. That was the will of Parliament. Parliament was well aware that there can be individual employees who are susceptible to exploitation precisely because they may be illiterate or have received very little if any education, particularly if they have been recruited from overseas. In my view, to rely upon that person’s ignorance of her rights in accordance with the law of this country as meaning that she could not be considered to have resigned in response to what was otherwise found to be a fundamental and repudiatory breach of contract by her employer does amount to an error of law.

Issue (4): Was the ET’s conclusion in relation to constructive dismissal perverse?

[74]Under this ground of appeal, Ms Monaghan submits that there was ample evidence establishing that the reason for the Appellant’s leaving her employment was the aforesaid breaches of contract. She submits that the ET’s conclusion that there was “no evidence” to this effect was perverse.[75]In particular Ms Monaghan has drawn the attention of this Court to the witness statement of the Appellant, which (as is conventional in ET proceedings) stood as her evidence-in-chief. There was a section of that witness statement, from paras. 112 to 119, which set out her evidence in relation to “disclosure of treatment to the GP”. This described the Appellant’s visit to her GP on 1 February 2010. In particular, at para. 115, the Appellant said:
“The doctor started asking questions about how I came to be in the UK and my relationship with Mrs Khan. I explained that Mrs Khan was my employer although I had not received a salary for a very long time. The doctor seemed very surprised. This was the first time that I had been able to tell anyone about my situation, who wasn’t a friend or relative of Mrs Khan. I was upset and tired, I decided to tell the doctor and Rhodah [i.e. Rhoda Mwangwa, who was the interpreter] everything and they agreed to help me. I did not know what they could do but I just felt better that I had been able to tell someone about my situation.”
[76]At para. 119 of her witness statement the Appellant said:
“… I had never thought of leaving before, if I had run away I knew no-one, did not speak English and had no money. I thought that I had to stay with Mrs Khan because I had agreed to work for 4 years and she was the one who brought me to the UK.”
[77]That latter passage, as it seems to me, indicates (if anything) that lack of money was a reason for the Appellant not to leave her employment. It was not given by her as a reason for leaving that employment.[78]The former passage also does not in terms state that the reason (or one of the reasons) why the Appellant left her employment was because she had not received a salary for a very long time, as she had told the doctor. In that context I would note that in her witness statement in the following paragraphs, at paras. 116-118, the Appellant in fact described how she went back to Mrs Khan’s house to continue working there for some three days after she had spoken to the doctor. It was only when people from Kalayaan (a charitable organisation which works in this field) and someone from the Tanzanian Women’s Association came to the house that she decided to leave.[79]Ms Monaghan also referred this Court to the contemporaneous note by the Appellant’s GP, which recorded the conversation referred to in her witness statement. The terms of that note were recorded by the ET in its judgment, at para. 18.37:
“Lives with her employer. Comes from Tanzania. Has been with her employer for 20 years. Came to UK four years ago. Has not been allowed to go out on her own. On minimal pay, states it is £10 per month. Money goes to her account in Tanzania. Married and has children in Tanzania. Parents died and was not allowed to visit for the funeral. Her employer has two disabled children. Denies any violence and physical abuse. Patient does not want her employer to know about her medical conditions. Her employer keeps her passport.”
[80]The EAT said, at para. 36 of its judgment, that it would not have been surprised if the ET had come to the conclusion that the reason for the Appellant leaving her employment was because of the failure to pay her more. However, the EAT took the view that the ET had had the advantage of seeing the parties, in particular the Appellant, over a considerable length of hearing:
“It was in a position to evaluate her and her evidence. As we point out, it had already rejected a number of the contentions she made. The making of false or exaggerated contentions brings with it in itself a question why false allegations or exaggerated allegations should be made. It might suggest some reason which was not stated or obvious for the Claimant being dissatisfied with her employment.”
[81]In my respectful view, that was not a sufficient answer to this aspect of the Appellant’s case. In relation to the relevant matter, the ET did not make any findings that the Appellant had given false evidence or exaggerated her contentions. The fact that a witness does so in relation to other aspects of her evidence does not necessarily mean that she is lying or exaggerating in relation to the relevant matter.[82]Furthermore, I would bear in mind two passages in the judgment of the EAT. First, at para. 32, Langstaff J said:
“… There may be contracts which are so egregiously performed by the employer that it is obvious that the reasons for an employee’s leaving have everything to do with those conditions, which collectively amount to a fundamental breach of contract.”
Secondly, at para. 34, Langstaff J said:
“The Tribunal, dealing with the question of pay, said (apparently accurately) that the Claimant did not say why she wanted to leave, nor did she tell the Tribunal why she effectively terminated her employment by leaving. That is not necessarily an answer to the case. If the circumstances were such that the termination must have been because of a repudiatory breach, then the Tribunal should, notwithstanding the lack of express reasons, have inferred that the Claimant’s ending of her employment was in response to the breach.”
[83]In my view, the statements of principle which the EAT set out in those two paragraphs were accurate as a matter of law. However, in my respectful view, in applying those principles to the facts of this case, the EAT should have concluded that the answer was indeed obvious.[84]In my view, this is one of those rare cases where the conclusion of the ET was perverse on the evidence before it. As Ms Monaghan summarised the position to this Court, the reality was that the Appellant was being paid the equivalent of 33 pence an hour for the work that she was doing. That was not just slightly below the national minimum wage, it was shockingly so. This was a case in which there was an “egregious” breach and the circumstances were such that the termination of the contract by the Appellant must have been because of a repudiatory breach, notwithstanding the lack of express reasons. That was quite simply obvious.[85]In the circumstances of this case, it would not be appropriate, in my view, to remit the case for re-hearing by the ET. Many years have passed since the events complained about. There is no evidence which the ET found to suggest that there would have been any fairness in the dismissal if indeed there was constructive dismissal. In those circumstances I have come to the conclusion that this Court should substitute its own judgment for that of the ET and find that the Appellant was unfairly dismissed by the Respondent.

Conclusion

[86]For the reasons I have given I would dismiss the appeal against the decision of the EAT (HHJ Peter Clark, sitting with lay members) in relation to the claim for direct racial discrimination; but allow the appeal against the decision of the EAT (Langstaff J, sitting with lay members) in relation to the claim for unfair dismissal.

Lord Justice Hickinbottom :

[87]I agree.

Lord Justice Patten :

[88]I also agree.

Cited in 12 later judgments

and 3 more of the most senior