EAT/0364/06/RN MR P LEWIS v HSBC BANK PLC [2006] UKEAT 0364_06_1912

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2006] UKEAT 0364_06_1912Case No Appeal No. UKEAT/0364/06/RN & UKEAT/0412/06Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
EAT/0364/06/RN MR P LEWISAPPELLANTHSBC BANK PLCRESPONDENTEAT/0412/06/RN HSBC BANK PLCAPPELLANTMR P LEWISRESPONDENT
Before
His Honour Judge Peter Clark Mr P A L ParkerDate 19 December 2006
[1]APPEARANCES For Mr P Lewis Mr C Quinn (of Counsel) Instructed by: Messrs Bindman & Partners Solicitors 275 Grays Inn Road London WC1X 8QB For HSBC Bank PLC Mr A Hochhauser QC (One of Her Majesty's Counsel) and Mr T Linden QC (One of Her Majesty's Counsel) Instructed by: Messrs Allen & Overy LLP One Bishops Square London E1 6AO HIS HONOUR JUDGE PETER CLARK This case has been proceeding in the Stratford Employment Tribunal (ET). The parties are Mr Peter Lewis, Claimant, and HSBC Bank PLC, Respondent. We shall so describe them. We have before us an appeal by the Respondent and a cross-appeal by the Claimant against the Judgment of an ET chaired by Mr I S Lamb, promulgated with full Reasons extending to 68 pages on 5 May 2006. The claim is one of unlawful discrimination on the grounds of sexual orientation. Background[2]The Claimant's career in investment banking marked him out as a high-flyer. He was recruited by the Respondent as its Global Head of Equity Trading, commencing employment on 13 September 2004. He was dismissed on the grounds of gross misconduct on 9 December 2004.[3]He has made no secret of his sexual orientation. He is, to use his description, gay. He has been in a same sex partnership for some 10 years.[4]The alleged incident leading to his dismissal, strongly denied by the Claimant, occurred on the evening of 4 November 2004. A complaint was made by a fellow employee, referred to throughout as Mr A, that both were in the changing rooms at the Respondent's gym. Mr A alleged that the Claimant had stood in the cubicle next to him whilst he was showering. The Claimant did not turn on his shower, but could be seen to be masturbating. After completing his shower Mr A returned to the changing room to see the Claimant standing there with his penis fully erect. Mr A asked him his name, to which the Claimant replied "Paul Broadway". Later Mr A visited security, looked through CCTV footage with the Duty Security Manager, Mr Pat Ryan, and identified the Claimant as the person who had behaved as he alleged.[5]Mr Ryan reported the incident to Stuart McLeod (Senior HR Manager HSBC Securities) on 5 November. On 7 November Mr Ryan composed a written incident report in the form of an e-mail attachment and on 8 November Mr McLeod took a statement from Mr A. Mr A said that another man, Mr B, had also been in the changing room. Mr A said he had asked Mr B whether he had seen anything and Mr B had "confirmed that he had seen a man in the steam room who had removed his towel and appeared to be in an excited state."[6]On 9 November, Natalie Hattrell (Senior HR Manager) interviewed a number of people, including Mr Ryan. She prepared an initial investigation report which was signed by Allen & Overy, the Respondent's solicitors in typescript. She there concluded that there was sufficient substance in Mr A's complaint to merit a disciplinary investigation. On 10 November Louise Dilworth (Senior HR Manager for Global Investment Banking) suspended the Claimant and on the following day sent him a copy of Mrs Hattrell's report. On 11 November Ms Dilworth wrote to the Claimant requesting his attendance at an investigatory interview the next day. Two allegations were charged in that letter; the first related to Mr A; the second to Mr B.[7]On 12 November Mr Burnett (Chief Operating Office CIBM) together with Ms Dilworth met with the Claimant as part of their disciplinary investigation.[8]In a Disciplinary Investigation report dated 18 November Mr Burnett recommended that the matter proceed to a disciplinary hearing. That hearing took place on 29 November before Mr Bucknall (Co-Head of Global Investment Banking, Financing) and Jo Swaby (Global Head of HR Corporate, Institutional and Transactional Banking). On the same day they interviewed Mr A and on 2 December they interviewed Mr B. On 9 December Mr Bucknall dismissed the Claimant on grounds of gross misconduct.[9]Against that decision the Claimant appealed internally. An appeal hearing took place on 27 January 2005 before Mr Laughton-Scott (Global Head of Corporate and Institutional Banking) and Connal Rankin (Group General Manager HR). On 1 February they interviewed Mr B and on 2 February Mr A. On 4 February 2005 the appeal was dismissed. Reasons for that decision were given on 10 February. The ET decision[10]The Claimant's case was that he was less favourably treated than an appropriate hypothetical comparator on grounds of his sexual orientation in 16 separate respects. Those allegations of less favourable treatment are set out at paragraphs 6.1 – 6.16 of the Tribunal's reasons. The ET upheld four of those complaints and dismissed the remainder. The four successful grounds of complaint, using the Tribunal's numbering were:
"6.3 reaching the conclusions that it [the Respondent] did reach in the [Hattrell] initial investigation report prepared on or about 10 November 2004; 6.4 suspending the Claimant on 10 November 2004; 6.5 requesting the Claimant's attendance at a disciplinary hearing on 12 November 2004; 6.6 including each of the two allegations included in its letter to the Claimant dated 11 November 2004…"
In arriving at their conclusions, two threads run through the Tribunal's reasoning. The first is that they were unimpressed by Mrs Hattrell as a witness; there was both embellishment and exaggeration by her and, on significant points, her credibility was lacking (Reasons, paras 217 – 219). We are clear that these findings materially informed the Tribunal's conclusions on Issue 3 (Mrs Hattrell's report) (Reasons paras 211 -212); Issue 4, the Claimant's suspension based on what they found to be Mrs Hattrell's discriminatory report (Reasons paras 225 and 230); Issue 5, the requirement to attend the interview on 12 November, a necessary and inevitable outcome of the report of Mrs Hattrell (Reasons para 226) and Issue 6, the inclusion of the second allegation relating to Mr B, included in Ms Dilworth's charge letter to the Claimant of 11 November, a decision influenced by Mrs Hattrell, who was concerned to embellish and exaggerate the case against the Claimant (Reasons para 227).[11]The second thread, explaining why the Claimant failed on issues relating to subsequent disciplinary proceedings, was that in the view of the Tribunal, Mr Burnett, Mr Bucknall (the dismissing manager) and thereafter the two appeals managers, Mr Laughton-Scott and Mr Rankin, were not influenced by Mrs Hattrell's discriminatory views. Neither the dismissal by Mr Bucknall (Reasons para 252) nor the decision to reject the Claimant's appeal (Reasons para 254) were influenced by the Claimant's sexual orientation. The Issues[12]It is apparent that the role of Mrs Hattrell was central to the Tribunal's approach to the early stages of the disciplinary process undertaken by the Respondent. Put shortly, in this appeal the Respondent challenges that approach and its effect on the outcome of the case so far as it favoured the Claimant, and in the cross-appeal the Claimant argues that the Tribunal was wrong to conclude that the discriminatory influence, as found, of Mrs Hattrell ceased to have effect once Mr Burnett entered the process. On the contrary, it permeated the remainder of that process, including the dismissal and the rejection of the Claimant's appeal. Thus, having identified the battle lines, we must now enter the fray. The Appeal[13]In the Respondent's appeal, Mr Hochhauser QC, leading Mr Linden QC, puts the case on two bases, the Tribunal's duty to act fairly and perversity. It is not suggested that the Tribunal was biased, nor gave the appearance of bias.[14]We begin with the duty to act fairly by which is meant, in the present context, the obligation on the Tribunal to resolve the case on the basis advanced by the parties before them and, if minded to depart from the formulation by the parties, to give the parties an adequate opportunity to deal with the matter.[15]The principles of law to be applied are well-established. Allegations of dishonesty and/or deliberate misconduct must be squarely raised and put. See, in this jurisdiction: Hotson v Wisbech Conservative Club [1984] IRLR 422, para 19 (EAT. Waite P); Panama v Hackney London Borough Council [2003] IRLR 278 (CA), paras 55-56; per Hooper J; paras 72-73, per Peter Gibson LJ. As Elias P put the matter in Tarbuck v Sainsburys Supermarkets Ltd [2006] IRLR 184, para 62, in the context of a Tribunal's adjudication on a reasonable adjustment in a disability discrimination claim not identified in the claim form or in the list of issues produced after the evidence was complete:
"…it is a fundamental principle of natural justice that a party should have the right to make submissions on any issue which is the subject of the dispute and in relation to which adverse findings may be made. That did not occur here."
[16]With those principles in mind we turn to Mr Hochhauser's attack on the Tribunal's assessment of Mrs Hattrell and the evidence she gave, that being a material factor, directly or indirectly, in their upholding the claim of unlawful discrimination in the four respects mentioned.[17]First, the finding that she lacked credibility. Four instances are given at paragraph 218 of the Reasons. We must examine each in turn. (1) The authorship of her report of 9 November and her evidence about it[18]The report is not signed by Mrs Hattrell, but "Allen & Overy LLP" in typescript appears at the end. The report begins with an Introduction, referring to the investigation conducted by the HR Department of HSBC and Allen & Overy; the scope of the investigation section (para 2) begins:
"Allen & Overy together with Natalie Hattrell, Human Resources, interviewed individuals (including A)."
At paragraph 211 of their Reasons, the Tribunal say:
"On the facts we have set out, the conclusions in the initial investigation report were those of Mrs Hattrell, although the report was prepared and signed by Allen and Overy. We infer that Mrs Hattrell intended to enhance their plausibility by attributing them to the solicitors."
That inference, drawn by the Tribunal, went to Mrs Hattrell's credibility and in turn the Tribunal's finding that in setting out her conclusions in that report she unlawfully discriminated against the Claimant on the grounds of his sexual orientation. That also permeated the issues as to suspension; his being called to a disciplinary hearing on 12 November and the inclusion by Ms Dilworth of the second charge relating to Mr B in her letter to the Claimant of 11 November 2004.[19]It is of course open to a Tribunal to draw adverse inferences from the primary facts. However, before doing so natural justice requires(a) that an invitation to do so forms part of the other party's case or(b) if the Tribunal is minded to draw such an inference an opportunity must be given to the adversely affected party to deal with the point in evidence and by submissions.[20]As to the first consideration, Mr Quinn very fairly accepts that the inference drawn by the Tribunal as to the authorship of the Report formed no part of his case below. As he put it at paragraph 5.2. of the Claimant's Answer to this appeal:
"It is readily conceded that such an allegation was not put to Ms Hattrell in cross-examination on behalf of Mr Lewis and nor was it part of any submissions made on his behalf."
[21]Mr Quinn submits that such a finding was not perverse, nor was it a central finding by the Tribunal. We disagree that it was not a central finding. The issue of Mrs Hattrell's credibility proved central to the four complaints upheld by the Tribunal. It was a factor which the Tribunal say (para 217) they took into account in considering whether unlawful discrimination had been made out. The fact that this particular finding was not contended for by the Claimant - nor, is it suggested by reference to the daily transcript of the evidence in this case, raised by the Tribunal in Mrs Hattrell's evidence - persuades us that the legal principle of fairness and natural justice to which we have referred was breached in this respect. (2) Misleading the Claimant about the knowledge of Mr Goad of the allegations[22]Mr Goad was the Global Head of Corporate Communications for CIBM. On 8 November Mrs Hattrell met Mr Powell, the Claimant's line manager, Mr Gulliver, to whom Mr Powell reported, and Mr Goad. When Mrs Hattrell met the Claimant the next day she told him that Messrs Powell and Gulliver were aware of the allegations, but not of Mr Goad's knowledge. That, the Tribunal concluded (Reasons para 29) "was deliberately misleading on her part."[23]Again, by the Claimant's Answer (para 5.3), Mr Quinn accepts that he did not put this suggestion to Mrs Hattrell in cross-examination. Instead, it is said that the point was raised by the Tribunal. We have considered the exchange between the Chairman and Mrs Hattrell in evidence (bundle B 240). Her evidence was that she simply forgot to tell the Claimant that Mr Goad knew of the allegations. She was not pressed on the point.[24]Pausing there, in drawing that inference we accept, as Mr Hochhauser submits, that the Tribunal were imputing to Mrs Hattrell bad faith which formed no part of the Claimant's case. Mr Quinn, with characteristic fairness, tells us that it was no part of his case below that Mr Hattrell, or indeed any of the Respondent's witnesses, had conducted themselves dishonestly in the course of the disciplinary process. We take one example from Counsel's oral closing submissions to the Tribunal (bundle B 161). Mr Hochhauser referred to para 68 of Mr Quinn's written closing submissions, which begins with the sentence:
"It continues to seem strange why this Initial Investigation Report was sent out in the name of 'Allen & Overy' if, as Mrs Hattrell maintained to the Tribunal, it was her Report."
Mr Hochhauser specifically queried whether bad faith on the part of Mrs Hattrell was being suggested. Mr Quinn's response to the Tribunal was this:
"Of course I am not alleging dishonesty, bad faith or deliberate concealment. If I was, I would say so."
[25]Given such a clear indication on the Claimant's side and in the absence of any different indication from the Tribunal, we found ourselves in the position of accepting Mr Hochhauser's broad submission that the final outcome, materially dependent on the Tribunal's findings as to Mrs Hattrell's probity, was wholly unexpected on the Respondent's side. It was unfair as a matter of natural justice. (3) The omission from the investigation report of a crucial part of Mr A's evidence in interview which could have been considered favourable to the Claimant.[26]Mrs Hattrell received manuscript notes of Mr McLeod's interview with Mr A. It seems that when those notes were typed up the final section was not transcribed. The typed version was annexed as Appendix 1 to the Investigation Report on 9 November. The Tribunal's comment on this matter is at paragraph 49(1) of their Reasons. They considered it worthy of comment that Mrs Hattrell should have failed to notice the omissions from the transcript. They drew the inference that the omission was deliberate. Again, no such suggestion formed part of the Claimant's case, nor was it suggested to her by the Tribunal. Indeed, in cross-examination (B 217) Mr Quinn suggested to Mrs Hattrell that she was in such a rush to judgment (one of the cornerstones of the Claimant's case) that she failed to check the transcript of the interview with Mr A, not that she had deliberately omitted the missing passage. (4) Mrs Hattrell's knowledge of the Ryan report and her denial of that knowledge.[27]Mrs Hattrell did not include a copy of Mr Ryan's report with her Investigation Report. The Tribunal deal with this aspect at para 42 of the Reasons. She said she did not know of it; this was inconsistent with the contents of a letter from the Respondent's solicitors to those acting for the Claimant dated 5 November 2004, in which it was said that she recalled not only receiving the Ryan report, but passing it to Ms Dilworth and Mr Burnett. The Tribunal did not accept her evidence that she had not received it. This point was explored by Mr Quinn in cross-examination (B 216). She could not recall receiving the report.[28]We do not propose to embark on yet further analysis of the Tribunal's reasons for finding that Mrs Hattrell had embellished and exaggerated her evidence (Reasons, para 219). It is, in our judgment, no answer for Mr Quinn to say that the issue was not whether Mrs Hattrell acted dishonestly but whether she discriminated against the Claimant. That simply underscores the submission made on behalf of the Respondents. Although the Claimant's case was clear; as Mr Quinn summarised it to us, there was a rush to judgment, initially by Mrs Hattrell, based on the premise that because the Claimant was gay he was guilty as charged (stereotyping), and this mindset then permeated the whole disciplinary process; that is not the basis on which the Tribunal upheld the claim in part. A significant, if not the most powerful factor identified by the Tribunal in finding that Mrs Hattrell had discriminated against the Claimant in concluding as she did in her initial investigation report, was the view they formed as to her honesty and probity in conducting the investigation in the respects we have examined. Since that formed no part of the Claimant's case, and no adequate opportunity was given to the Respondent to deal with it, the Respondent's complaint of unfairness in the Tribunal process is made out.[29]However, Mr Hochhauser goes further. He submits that the Tribunal's conclusions on Issues 3 – 6 were perverse; that the case advanced by the Claimant was not accepted by the Tribunal. Consequently, the correct course is to allow his appeal and reverse the findings of the Tribunal adverse to the Respondents.[30]We reject that submission. In following the course which it did, the Tribunal not only dealt with a case which was not before it but failed, in our judgment, to deal with the case of subconscious discrimination which was advanced by Mr Quinn. In our view the only course which we can properly take is to allow the Respondent's appeal and remit Issues 3 – 6 to a fresh Employment Tribunal for rehearing. The Cross-appeal[31]In one sense the cross-appeal fails insofar as it is dependent on our upholding the Tribunal's findings adverse to the Respondent. We have not done so. However, that is not the end of the matter.[32]By amendment with the permission of a division presided over by HHJ McMullen QC at a preliminary hearing held on 11 October 2006, Mr Quinn raised a novel argument, that of discrimination by omission. The omission, his argument runs, is of salient information (including part of Mr A's interview and the Ryan report) from the Initial Investigation Report. That omission was not cured at any stage during the subsequent disciplinary process; accordingly the Tribunal was bound to conclude that the subsequent dismissal was discriminatory even though that omission did not operate on the minds of the subsequent decision-makers because they were unaware of it.[33]For completeness, we should indicate our firm view that this argument is wholly misconceived for the reasons powerfully advanced by Mr Hochhauser. First, we are not satisfied that this point was raised below; there are no exceptional circumstances to enable it to be taken for the first time on appeal. Glennie v Independent Magazines (UK) Ltd [1999] IRLR 719 . Secondly, we do not accept Mr Quinn's premise that discrimination involves one of three different mental processes; conscious, subconscious and unconscious discrimination. The higher authorities use the expressions subconscious and unconscious discrimination interchangeably. Thirdly, we agree with Mr Hochhauser that if Mr Quinn is correct he has succeeded in establishing strict liability for unlawful discrimination, holding the discriminator responsible for a state of affairs of which he has no knowledge. That is not the effect of the discrimination legislation. Fourthly, the submission in any event fails on the facts. The clear finding by the Tribunal (Reasons para 239) was that by the time the decision was made to commence the disciplinary process the effects of the earlier discriminatory acts had ceased to influence the course of events and there was a fresh appraisal of the situation by Mr Burnett. Mr Bucknall and the appeals panel members, Mr Laughton-Scott and Mr Rankin, were expressly exculpated from any unlawful discrimination by the Tribunal.[34]Accordingly, we shall dismiss the cross-appeal. Disposal[35]We shall allow the Respondent's appeal and remit the claim in respect of Issues 3–6 (inclusive) to a fresh Employment Tribunal for rehearing. The cross-appeal is dismissed. Consequently, the Lamb Tribunal findings in relation to Issues 1–2 and 7–16 stand. The claim fails in relation to those allegations of less favourable treatment on the prohibited ground.