Azam v J H Walker Ltd [1995] UKEAT 405_94_1707

EAT
Azam v J H Walker Ltd
[1995] UKEAT 405_94_1707 · 1995-07-17
Section 57(3) of the Race Relations Act 1976 to the facts found by the Industrial Tribunal.The sub-section reads:
"As respects an unlawful act of discrimination falling within section 1(1)(b), no award of damages shall be made if the respondent proves that the requirement or condition in question was not applied with the intention of treating the claimant unfavourably on racial grounds."
There is a similar provision in Section 66(3) of the Sex Discrimination Act 1975 concerning unfavourable treatment on the ground of sex.In brief, no damages can be awarded to a complainant for unintentional indirect discrimination on grounds of race, sex or marital status.In this case the Industrial Tribunal held at Leeds over a period of 2 days in March 1993 and 3 days in October 1993 unanimously decided, in full reasons notified to the parties on 29 November 1993, that:(1) J H Walker Ltd (the company) discriminated against the 17 applicants contrary to the Race Relations Act 1976 ;(2) a declaration should be made that such discrimination took place when the applicants were forbidden from taking a day off for Eid on 11 June 1992 and were subsequently disciplined for doing so.There is no appeal by the company against that decision.The appeals and cross-appeals arise out of the remedies hearing which took place on 17 February 1994. In extended reasons notified to the parties on 14 March 1994 the Tribunal(1) ordered the company to pay each applicant compensation in the sum of £1,000 (one thousand pounds); and(2) made a recommendation that the company should forthwith amend its holiday rules so that any employee should be permitted to take one day of his holiday entitlement during any period when holidays are subject to restriction.The following appeals are before this Tribunal:(1) An appeal by Mr Mohamed Azam against what he contends is an unreasonably low award of £1,000 damages for injury to feelings.(2) An appeal by the company against the decision of the Industrial Tribunal that it was not entitled to the benefit of Section 57(3) of the 1976 Act. There is a cross appeal by the applicants on the ground that the Industrial Tribunal erred in law in failing to order a proper compensatory award for racial discrimination.(3) An appeal by the applicants on what they submit is an error of law on the part of the Tribunal in the quantification of the award of damages for racial discrimination.It is unnecessary to dwell on the procedural aspects of the various appeals since it is common ground that the following questions arise on the appeals and the cross-appeal(1) Whether the Industrial Tribunal erred in law in its construction of "intention" in Section 57(3) of the 1976 Act and in holding that the company had failed to prove that it did not intend to treat the applicants unfavourably on racial grounds.(2) Whether the quantum of damages awarded for injury to the feelings of the applicants was so low as to be erroneous in law on grounds of unreasonableness and perversity.

THE FACTS

The Industrial Tribunal found the following facts relevant to the issues on these appeals:-(1) The Applicants all originated from the Indian sub-continent (either from India or Pakistan), and are Muslims.(2) They were employed as production workers by the company and had an average length of service of about 10 years without any oral or written warning. In total they constituted about half of the shop floor workers employed by the company.(3) Two days in the Muslim calendar commonly known as Eid are considered to be as important to Muslims as Christmas day is to Christians. Eid is a day of celebration with family and friends following a period of prayer at the mosque. The exact day of Eid is not known until a few days in advance. It changes every year. Until the events which gave rise to this dispute the Muslim employees of the company had always been permitted to take a day off for Eid as part of their holiday entitlement or, if they had no holiday entitlement left, without pay.(4) The company is engaged in manufacturing knitted fabrics for supply to garment manufacturers, usually to order and subject to strict delivery dates.(5) In 1991 the company took steps to reduce overheads and to increase efficiency, as it had incurred considerable losses. Its bankers made it plain that they would not continue to support the company, unless the company started to show a profit.(6) One of the changes made was the reorganisation on 23 September 1991 of holiday arrangements for all employees, so that written permission had to be obtained before floating days could be taken and so that no floating day could be taken during the months of May, June or July, the busiest months for the company, with delivery dates for the supply of material for the winter garments market. The company did not realise at the time when this policy was introduced that the embargo on holidays in May, June or July would affect the Eid.(7) On 8 June 1992 the applicants informed the management that Eid would fall on 11 June 1992. Management were taken by surprise as they had totally forgotten to take account of Eid. They decided that they were not prepared to vary the conditions and limitations in the September 1991 notice relating to holidays. Each member of staff was warned of the repercussions, if they disobeyed the provisions in the holiday notice. They were told that they must be at work on 11 June.(8) The applicants were shocked, as they assumed that, in accordance with custom and practice, they would be allowed to take a day off. The notice referred only to floating days, not to days off without pay. The applicants were all willing to work additional hours in order to compensate for the day off.(9) The applicants took the day off for Eid. When they returned to work they were all disciplined and issued with a final written warning which, on the face of it, could justify dismissal in the following year. That was a departure from the normal company procedure which started with a verbal warning. The management treated this incident as they might treat a "mutiny". That was how it was described by Dr Sugars, the Managing Director of the company. The applicants' appeals against the final written warning failed.The Industrial Tribunal were able to find the above facts without doubting the "veracity of any of the witnesses or the substance of their testimony." Evidence was given on behalf of the company by the Managing Director, Dr Sugars, by Mr Tom Longshaw, the Production Manager and Mr Graham Cooper, the Commercial Director.

THE DECISION OF THE INDUSTRIAL TRIBUNAL

The Tribunal found in favour of the applicants, both on liability and remedies, for the following reasons:-(1) A case of direct discrimination contrary to Section 1(1)(a) had not been established. As the discrimination alleged was not on the grounds of colour, race, nationality or ethnic or national origins, as "the true nature of Islam is not within the Race Relation Act 1976." The 1976 Act does not mention religion. It was not possible to treat Muslims both as a religious grouping and as an ethnic grouping.(2) The claim for indirect discrimination under Section 1(1)(b) of the 1976 Act succeeded. The requirement in the notice of September 1991 that no holiday could be taken during May, June or July was addressed to all workers, though the company said that it was only intended to apply to the production workers. There were two distinct racial groups in the pool - the racial group originating from the Indian sub-continent and the remaining work force, consisting chiefly of Europeans. Almost half of the workers for whom the holiday embargo was intended consisted of non-Europeans, of whom almost all were Muslim. The number of people from the Asian group who could comply with the direction to work on Eid was considerably smaller than the proportion of Europeans who could comply with the direction to work on Eid.(3) The company was unable to establish an objective justification for the requirement. As the company was making a loss, it had to reform its business practices. The changes resulted in a small profit. Absence of half the work force for a day would delay production and cause some loss of profit, though it would have been minimal if the company had remembered the approach of Eid and made appropriate arrangements in advance. The Industrial Tribunal balanced the discriminatory fact of the requirement with the reasonable needs of the company and concluded that the inconvenience and loss of production for the company's business was not sufficient to out-weigh the needs of the Asian employees, especially bearing in mind the willingness of the applicants to work additional hours to compensate.(4) The applicants had suffered detriment. They had received a final written warning and been disciplined. They had no previous warning.(5) The Asians were " knowingly and intentionally treated unfavourably on racial grounds " when the embargo was applied to them in June 1992. That intention was confirmed when they received the disproportionate punishment of a final written warning which, on the face of it, could justify dismissal in the following year. There was a trial of strength between management and Asian workers. It was not merely a matter of keeping the factory fully staffed. The intention was to make the Muslims work on their "Christmas Day". In those circumstances the company did not have the benefit of Section 57(3) of the 1976 Act and damages could be awarded against it.(6) As to the quantum of damages, no direct financial loss could be quantified. It was unnecessary and "perhaps undesirable" to deal with each applicant separately in assessing distress and hurt feelings. £1000 was awarded for upset and distress. The applicants were threatened with dire consequences. Their enjoyment of Eid on 11 June was marred by the thought of what would happen to them on their return to work. They would be distressed and their pride would be hurt upon receipt of the final written warning and by the procedure of appealing and losing the appeal.

THE SECTION 57(3) POINT

Mr David Pannick QC, on behalf of the company, argued that the Tribunal erred in law in holding that the company could not rely on the protection of Section 57(3). He first made general preliminary observations on the facts and the law:-(1) The conclusion on compensation was reached without any additional evidence at the remedies hearing. The conclusions of the Tribunal could, therefore, only be properly based on facts found in the first decision on liability.(2) In the first decision the Industrial Tribunal expressly accepted the good faith of the company's witnesses. They had no reason to doubt the veracity of those witnesses or the substance of their testimony. Their evidence as to their good business reasons for acting as they did was not doubted ie the reason of business efficiency in prohibiting employees from taking time off during the busiest period of the year and in refusing to vary the holiday arrangements to allow the Muslims to take the day off for Eid.(3) As for the law, the House of Lords had considered the construction of Section 57(3) in Orphanos -v- Queen Mary College [1985] 1 AC 761. Lord Fraser gave the main speech with which the other four members of the Appellate Committee concurred. At p.775 Lord Fraser made two points:(a) The subsection applies only to cases of indirect discrimination. It does not apply to acts of direct discrimination which would "necessarily be done with the intention of treating the claimant unfairly on racial grounds" p.775C. It is assumed in subsection (3) of Section 57 that not all acts of indirect discrimination need be done with that intention.(b) Section 57(3) is looking at the "subjective intention" of the discriminator. It may not be possible to justify objectively the discrimination which has been inflicted, but the resulting unlawful act is "unintentional and accidental", if there is no intention to discriminate on racial grounds.As appears from the arguments of Counsel, the defendant College argued that "intention" in Section 57(3) should be read as "motive" requiring "a knowledge or intention to commit the forbidden act", elements lacking in that case, so that no compensation could be awarded.Against that the Plaintiff argued unsuccessfully for the following proposition set out in page 765F of Counsel's argument
"The imposition of the requirement need not have been animated by a hostile motive, but if the effect is nevertheless racial in its effect, indirect discrimination will have occurred. In s.57(3) the legislature clearly had the provisions of section 1(1)(b) in mind and the student is not precluded therefore by section 57(3) from an award of damages."
Mr Pannick submitted that decision showed that compensation was not awarded for indirect discrimination simply because a person knew that the application of the condition or requirement would result in adverse treatment of a particular racial group. In Section 57(3) "intention" meant more than simply knowledge of the consequences of applying the requirement or condition which resulted in indirect discrimination.

MAIN SUBMISSIONS OF THE COMPANY

These preliminary points formed the foundation of Mr Pannick's principal submission that the Industrial Tribunal made the following errors of law:-(1) The Industrial Tribunal focused on the consequences of the discrimination to the applicants and on the company's knowledge of those consequences, rather than on the company's subjective intention. The Industrial Tribunal had accepted as a fact that, before 8 June 1992, the company had not realised that Eid would be affected by the embargo on holidays in May, June and July and therefore had no intention of treating the Muslim employees of the company unfavourably on racial grounds. The company acted for what it genuinely believed was a good business reason. That intention was not altered by the fact that after 8 June 1992 the company knew the consequences of applying the holiday policy to Muslim employees. The Industrial Tribunal applied the wrong test in holding that the company's intention altered, because it knew that the consequence of applying the requirement was that there would be indirect discrimination on racial grounds.(2) Although it was accepted by the company that an intention to treat persons unfavourably on racial grounds could be inferred from all the circumstances, it was necessary that the Tribunal should ask itself with what intention the company acted ie whether it acted as it did because it was genuinely seeking to achieve an objective, distinct from the objective of treating Muslim employees unfavourably on racial grounds.(3) If the Industrial Tribunal had asked that question the answer would have been that the company did have another, different intention, distinct from the prohibited racial intention and that was the intention to promote its business efficiency. The Industrial Tribunal had accepted the company's evidence about the object or purpose of its actions in relation to holiday policy, even though the Tribunal had ultimately concluded that the company had not established objective justification of the resulting indirect discrimination. The defence of objective justification was rejected because, in the Tribunal's view, the business interests of the company were out-weighed by the religious needs of the applicants. That decision was based on the acceptance of the existence of intention of business efficiency and the company's good faith, but was inconsistent with the Industrial Tribunal's conclusion at the later remedies hearing, on no further evidence, that the company intended to treat the Muslim employees unfavourably on racial grounds. The company did not intend to treat the employees unfavourably because they were Muslims ie on a racial ground. The unfavourable treatment which the Muslim employees received was not the result of the company's intention to treat them unfavourably. It was the result of the company applying its holiday policy to promote business efficiency by a condition which applied to all employees.(4) Alternatively, the Industrial Tribunal's decision that the company had failed to bring itself within Section 57(3) was perverse. No reasonable Tribunal would have reached that conclusion, having regard to the findings of fact made in the first decision on liability. The Tribunal had accepted that the adoption of the requirement or condition of no holidays in May, June or July was not intended to treat the Muslim employees unfavourably on racial grounds. It was perverse of the Tribunal to conclude that the requirement or condition was applied with a racial intention. It was applied to all workers during those months. The reason why the Muslim employees were disciplined was because they were the only ones who breached the embargo on holidays in that period. The company's response to the defiance of the rule on holidays by a large proportion of the work force did not entail that the company intended to treat the Muslim employees unfavourably on racial grounds . The company's intention was to do what it believed was appropriate to promote the efficiency of its business. This was also the reason for reflecting the seriousness of the defiance of the rules about holidays in the punishment of a final written warning which the Tribunal regarded as "disproportionate".

CONCLUSION ON S.57(3) POINT

Although we have not found this an easy case, we have reached the clear conclusion that there was no legal error in the Tribunal's rejection of the company's reliance on Section 57(3). Our reasons for this conclusion are as follows:-(1) This was a case of indirect racial discrimination and there is no appeal from the company from that finding.(2) In general, cases of indirect discrimination do not involve an intention to treat persons unfavourably on racial grounds (cf cases of direct discrimination falling within Section 1(1)(a)). Nevertheless, the wording of 57(3) presupposes that there may be some cases in which the application of a condition or requirement is with the intention of treating the claimant unfavourably on racial grounds. In those cases the respondent will be liable to pay damages for applying a condition or requirement which, despite its neutral formulation, is disparate in impact.(3) The burden is on the respondent company to prove that it did not apply the requirement or condition in question with the intention of treating the claimant unfairly on racial grounds. The respondent has to show a state of non-intention to treat unfavourably on racial grounds. He will fail to show that if the Tribunal finds or infers a prohibited intention.(4) The condition or requirement in question was that there should be no holidays for any employees in May, June or July. That requirement or condition was applied to the applicants on and after 8 June 1992. The crucial question for the Industrial Tribunal was: did the company apply that requirement or condition at that time with the intention of treating the applicant unfavourably on racial grounds?(5) The answer to that question is part fact, part law. Whether or not the company had that intention as a matter of fact may be established, on the balance of probabilities, by direct evidence or by inference from all the circumstances. What is meant by "intention" in the subsection is, however, a matter of statutory construction and therefore a question of law.(6) Intention is a state of mind commonly required in law to accompany the performance of a specified act in order to establish liability for that act. The crucial question is what state of mind is relevant to a respondent in the particular context of Section 57(3)? In our view, as a matter of ordinary English, "intention" in this context signifies the state of mind of a person who, at the time when he does the relevant act (ie the application of the requirement or condition resulting in indirect discrimination),(a) wants to bring about the state of affairs which constitutes the prohibited result of unfavourable treatment on racial grounds; and(b) knows that that prohibited result will follow from his acts.In our view, Section 57(3) is not concerned with an inquiry into the motivation of a respondent ie the reason why he did what he did. It is concerned with the state of mind of the respondent in relation to the consequences of his acts. He intended those consequences to follow from his acts if he knew when he did them that those consequences would follow and if he wanted those consequences to follow.(7) Depending on the circumstances, a Tribunal may infer that a person wants to produce certain consequences from the fact that he acted knowing what those consequences would be. For example, if an employer continued to apply a condition or requirement after it had been declared by a tribunal that it resulted in unlawful indirect discrimination and thus knew of its prohibited disparate impact, it would not be difficult for an Industrial Tribunal to infer that he intended to treat an employee unfavourably on racial grounds, even though his reason or motive for persisting in the action was one of business efficiency.(8) In the circumstances of this case the Industrial Tribunal were entitled to conclude from their findings of fact that the company had failed to establish that it did not have the intention of treating the applicants unfavourably on racial grounds. The Tribunal was not specifically concerned with the intention of the company in initially adopting the policy of no holidays in May, June or July, although it was relevant to consider that aspect. The Tribunal was specifically concerned with the application of that policy to the employees in the period following 8 June 1992. The Tribunal came to the conclusion that the applicants were knowingly and intentionally treated less favourably on racial grounds. The Tribunal took account of the company's knowledge of the consequences of its acts and made an inference that it wanted to produce those consequences. The company knew that Eid was important to the Muslim employees, that they were the only employees affected by the application of the condition or requirement, and that they were required to work on that day. As part of the process of applying that condition or requirement, the Company inflicted upon them a disproportionate punishment. The fact that the company's reason or motive in adopting and applying the holiday policy was to promote its business efficiency does not, in our view, either displace the company's knowledge of the consequences, which follow from applying that condition or requirement, or prevent the Industrial Tribunal from inferring that the company wanted to produce a state of affairs in which the applicants were in fact treated unfavourably on racial grounds. The Tribunal were entitled to find that the Company did not have the benefit of S.57(3).

THE QUANTUM OF DAMAGES POINT

The following submissions were made on behalf of the applicants on their cross appeal(1) The Industrial Tribunal accepted that the day of Eid was a very important day to the Muslims, as important as Christmas day to Christians. The discrimination suffered by them impacted on their religious beliefs.(2) The Tribunal did not give sufficient weight to those facts in the award of £1000 damages for injured feelings. The Tribunal trivialised the detriment suffered by long-standing employees with impeccable work records. The award also trivialised respect for public policy, as manifested in the 1976 Act.In addition it was argued on behalf of Mr Azam that the Tribunal were not entitled to average out the injury to feelings in respect of the different applicants. His representative had not consented to that. They should have considered injury to feelings on an individual merits basis. Further, the amounts awarded were below the average of awards for injury to feelings.

CONCLUSION ON QUANTUM OF DAMAGES

In our judgment, there was no error of law in the quantum of damages for injury to feelings.The Tribunal took relevant factors into account: the nature of the detriment suffered by the applicants; their length of service; their good work records; the upset and distress caused by the company's actions; the threatened consequences; and the imposition of the final written warning. On those facts the Industrial Tribunal was entitled to conclude that £1000 was an appropriate sum to award for injury to feelings and that the same sum should be awarded to each applicant, in the absence of evidence that none of them had suffered an appreciably greater injury to feelings than any other.For all those reasons, the appeal by J H Walker Ltd is dismissed. The cross-appeal is dismissed. The appeals by Mr Mohamed Azam and the other applicants are also dismissed.