|For the Appellant
||MR PETER WARD
Messrs Bates Wells & Braithwaite Solicitors
29 Lower Brook Street
|For the Respondents
||MR RICHARD O'DAIR &
MS EMILIE POTTLE
Messrs Ross Coates Solicitors
Unit 15, IP City Centre
1 Bath Street
PRACTICE AND PROCEDURE Bias, misconduct and procedural irregularity
MATERNITY RIGHTS AND PARENTAL LEAVE Pregnancy
UNFAIR DISMISSAL Contributory fault
The Employment Tribunal which found in favour of the Claimant in part did not show apparent bias on five grounds, although it made errors of fact on two of them. Observations disapproving the Respondent's showing the Judge an offer of settlement before judgment.
The Claimant's case was that gossip about her pregnancy following her conduct after the solicitors' Christmas party was spread by the HR manager, which the Respondent failed to control. It constituted sex discrimination and pregnancy related discrimination. The Employment Tribunal's judgment to the contrary was set aside.
The judgment in her favour on constructive unfair dismissal was correct but the Employment Tribunal was wrong to reduce compensation by 90%. Post-dismissal conduct is not relevant to Employment Rights Act 1996 ss 122 and 123.
The appeal was allowed in part, the cross appeal dismissed. Remitted to the same Employment Tribunal to determine remedies for detriment by sex discrimination, and for unfair dismissal.
HIS HONOUR JUDGE McMULLEN QC
- This case is about injudicious behaviour by young professionals at the Christmas party of a solicitor's firm and its consequences for employment relations: constructive unfair dismissal, discrimination on the grounds of sex and pregnancy, and harassment on the grounds of both. It also reflects criticisms of the Employment Tribunal for not being impartial.
- It is the judgment of the court to which all members appointed by statute for their diverse specialist experience have contributed at the express invitation of counsel, who have asked us to consider the realities of workplace life. We will refer to the parties as the Claimant and the Respondents, who are Mr Ross Coates MBE and his firm, Ross Coates Solicitors.
- It is an appeal by the Claimant and a cross appeal by the Respondents in those proceedings against the judgment of an Employment Tribunal chaired by Employment Judge Cole, sitting over 10 days at Bury St Edmunds registered with reasons on 8 December 2009. The Claimant was represented by Mr Peter Ward, the Respondents by Mr Richard O'Dair and Miss Emilie Pottle. We will correct the record to show that. All of counsel.
- The Claimant claimed unfair dismissal, sex discrimination and discrimination on the grounds of pregnancy and harassment. The Respondents contended that there was no discrimination in their treatment of her and that the Claimant's employment came to an end by resignation and not by dismissal.
- The issues were defined following several CMDs and consist of the following now live on appeal:
"Miss Nixon's colleagues and in particular HR Manager Debbie O'Hara gossiping that a colleague was the alleged father before the Claimant even wished them to know that she was expecting. In consequence, the Claimant told the Respondent that she would be unable to work in the same office as Ms O'Hara in particular.
(iii) During this period the Claimant was off work pending a resolution in which she suggested working at the Respondent's Kesgrave office away from Ms O'Hara. However, the Respondent's initial optimism that such a move could take place proved to be unfounded.
(iv) During this period Ms Nixon was not paid her usual wages and later discovered that her desk was taken by a newly-recruited sales and promotion manager."
- In addition it is contended that the Claimant's employment terminated by constructive dismissal and she resigned as a result of the treatment she received. She did so promptly for that reason.
- The Tribunal found in favour of the Claimant on constructive dismissal. It ordered (what we think must be) the firm to pay compensation but reduced the basic and compensatory awards by 90 per cent to reflect her contributory conduct. The Tribunal found that there had been an unlawful deduction from the Claimant's wages. It dismissed her claims of sex discrimination and discrimination on the ground of pregnancy, and harassment.
- Neither side is satisfied with the judgment of this Tribunal. They both attack it. At stages in this case the position was that the Claimant wished the whole of the judgment to be set aside on the ground of bias and the Respondents wished the judgment to be set aside on the ground of error of law, the difference between the parties being that the Claimant wished to engage in a further 10 day hearing to prove her rights before a fresh Tribunal and the Respondents contended decisions should be made by us except for the passages where the judgment was in favour of the Respondents. Directions sending this appeal to a full hearing were given by HHJ Serota QC who made considerable efforts to engage the parties in a marshalled approach to the issues and evidence in the case. Agreement has broken out as to the material to be put before us. It has to be said that the heat has been turned up very high. The issues and the facts stimulated a good deal of strong feeling. The Tribunal was infected by some of this because it made very serious criticisms of the Claimant for her conduct of the proceedings in the press. The issue is whether there were errors of law in the judgment.
- The legislation in this case is not in dispute. The Tribunal set it out following extensive written and oral submissions by all counsel. It appears in paragraph 55 of the judgment. In so far as sex discrimination and pregnancy are concerned, the relevant provisions of the Sex Discrimination Act 1975 are as follows:
"3A - Discrimination on the ground of pregnancy or maternity leave
(1) In any circumstances relevant for the purposes of a provision to which this subsection applies, a person discriminates against a woman if -
(a) at a time in a protected period, and on the ground of the woman's pregnancy, the person treats her less favourably; or.
(b) on the ground that the woman is exercising or seeking to exercise, or has exercised or sought to exercise, a statutory right to maternity leave, the person treats her less favourably [...]
4A - Harassment, including sexual harassment
(1) For the purposes of this Act, a person subjects a woman to harassment if -
(a) [he engages in unwanted conduct that is related to her sex or that of another person and] has the purpose or effect -
(ii) of creating an intimidating, hostile, degrading, humiliating or offensive environment for her.
(2) Conduct shall be regarded as having the effect mentioned in sub-paragraph (i) or (ii) of subsection (1)(a) or (b) only if, having regard to all the circumstances, including in particular the perception of the woman, it should reasonably be considered as having that effect."
- Liability of employers and principles is provided by section 41 and is not in issue. The burden of proof is provided for by section 63A and is this:
"(2) 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 an act of discrimination or harassment against the complainant which is unlawful by virtue of Part 2 or section 35A of 35B, or
(b) is by virtue of section 41 or 42 to be treated as having committed such an act of discrimination or harassment against the complainant,
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."
- Section 95(1)(c) of the Employment Rights Act deals with constructive dismissal in the following way:
"(c) the employee terminates the contract under which he is employed (with or without notice) in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct."
- Remedies for unfair dismissal are provided in section 122 and 123 as follow, first, in respect of basic award:
"122(2) Where the tribunal considers that any conduct of the complainant before the dismissal (or, where the dismissal was with notice, before the notice was given) was such that it would be just and equitable to reduce or further reduce the amount of the basic award to any extent, the tribunal shall reduce or further reduce that amount accordingly.
"123(1) ... the amount of the compensatory award shall be such amount as the tribunal considers just and equitable in all the circumstances having regard to the loss sustained by the complainant in consequence of the dismissal in so far as that loss is attributable to action taken by the employer...
(6) Where the tribunal finds that the dismissal was to any extent caused or contributed to by any action of the complainant, it shall reduce the amount of the compensatory award by such proportion as it considers just and equitable having regard to that finding."
- Mr Coates is a larger than life figure in a medium size firm which operates out of Kesgrave and Ipswich, Suffolk. He is a popular and gregarious figure; no doubt life in his firm is fun. He organised a Christmas party on 22 December 2007 for all his staff and partners. At the time he was married to Annette Coates. That has dissolved and he is involved and was at the time in a long-term relationship with the office manager, Ms Van Rooyen. The Claimant is an equally gregarious figure, capable, popular with clients and customers. She was employed in an outgoing role, bringing in the business, wining and dining the clients. In early December she was 33 and in a relationship with Mr Perrin, a solicitor at the firm. She was pregnant by him, leading to the birth of their son on 7 September 2008. By the time of the Christmas party she did not know.
- On that night a good deal was drunk by everybody. At the end of the party a group decided to repair to a room booked in Mr Coates' name and to be occupied by him that night. Rooms had been pre-booked for people who could not get home. Drinks flowed there. Mr Coates was asleep on the bed and would not have a strong appreciation of what was going on. Most people noticed that the Claimant had been involved flirtatiously kissing the IT manager, Mr Ben Wright. Those watching could see that it would not stop there. It did not. Mr Wright secured a room. He got the authority of Ms Van Rooyen, for the room to be charged to the firm's account. It was for the purpose of sharing it with the Claimant. They left together. The Claimant said she was so drunk she did not know what was happening and did not know that sexual intercourse had taken place between herself and Mr Wright. The Tribunal disbelieved her. Mr Wright, in evidence given indirectly, said he had sex with her. The irresistible inference is he was right.
- After that the Claimant had holiday booked and was due to return on 7 January 2008. She was ill, it is said for pregnancy related reasons, and unable to return to the Ipswich office until 29 January 2008. By this time, partly as a result of disclosure by her, members of staff knew she was pregnant. The way she presented it formally was that she went to Mr Coates and told him. She was by this stage 8 weeks pregnant and for understandable reasons did not want it disclosed, except by her, until she had crossed the 12 week threshold. The Claimant said that within an hour of her telling Mr Coates, Debbie O'Hara, the HR manager of the firm, had found out and had made a suggestion about the paternity of the baby. That caused considerable upset. The Claimant contended that Debbie O'Hara had been gossiping and spreading rumours about her pregnancy and about the father of the child. Ms Louise Brain, a solicitor, said that Ms O'Hara had approached her saying: "You know that Sarah [the Claimant] is pregnant." She went on to say: "Ben Wright was really worried because Sarah had been in contact with him and he is worried he could be the father."
- Mr Wright was indeed worried. Another employee Debbie Grant had been told by the Claimant, some time before Christmas that she was to have a scan and Debbie Grant suspected that she might be pregnant. This came in a text. Debbie Grant showed the text to Ben Wright and he was horrified.
- The Claimant then left work at Ipswich and went to Mr Broughton, who is the senior partner of the firm and is located at Kesgrave. She asked to work there. On that occasion she was assured that something might work out. The sequence of events is relatively clear up to that stage. The Claimant has recorded her events in contemporaneous correspondence. The Tribunal said this:
"44. It is perfectly plain to us that Ms Nixon was very upset and very embarrassed. Perhaps that was predictable. The level of individual staff knowledge of the Claimant's behaviour is hard to perceive from the evidence we have heard. What is common ground is that the firm's IT manager (named Ben) had come to learn of the Claimant's pregnancy. We accept he sent a series of telephone text messages to Ms O'Hara, expressing his great concern that, after what he described as 'unprotected sex' in the hotel room after the Christmas party, Ms Nixon may be pregnant by him. Perhaps Ms O'Hara was less than discreet. She has left the Respondent's employ in unfortunate circumstances and has been unable to give evidence to us. But we have no doubt it was wholly predictable that news of the Claimant's behaviour after the Christmas party, which had been witnessed by many staff, her subsequent sick absence from work and her then confirmed pregnancy, would generate speculation. It may be Ms O'Hara failed in her duty to quell that, although we have no doubt Mr Coates, perceptive of the position, cautioned her appropriately."
- The arrangement with Mr Broughton was that there was a possibility that she would stay at Kesgrave. That would mean she would have no contact with Debbie O'Hara. On 31 January there was a further discussion between the Claimant and Mr Coates and they arranged to meet on 5 February. Issues were discussed including the Claimant's salary and different roles that Mr Coates may envisage for her. She was not prepared to work at Ipswich while Ms O'Hara was still there and she should stay at Kesgrave in the meantime. She entered a formal grievance and the grievance, so far as is now live consists of the following:
"(1) The fact that rumours have been spread about me by Debbie O'Hara which you have allowed to circulate without any form of reprimand or disciplinary action and making it impossible for me to undertake my duties...
(4) The fact that you have indicated to me that there is 'no room' at the Kesgrave office for me to carry out my duties from there and yet you intend to offer employment to another person at that office."
As to this Mr Coates contemporaneously, for the letters may have crossed, noted:
"I carefully noted all that you have said with regard to Debbie O'Hara. I have discussed the matter with the partners at this firm.
The outcome of my deliberations is that you must return to work immediately at Ip-City. You have a clearly defined role to fulfil and that same job needs to be performed in exactly the same way as you have in the past. If you wish to make a formal complaint about Debbie O'Hara you are at liberty to do so and if you put your complaint forward it will be handled in accordance with this firm's formal complaint's procedures."
She was not paid for the whole of February. From 5 February the matter of her conduct was in the hands of solicitors for both sides.
- On 15 March the Claimant resigned by letter. She said this:
"I am disappointed that, after over 10 years of loyal service, you have seen fit to pass the matter of my grievance to a newly appointed junior partner who has no experience of employment related matters.
As I have consistently explained to you, I am not prepared to return to work at Ip City Centre whilst your HR Manager Debbie O'Hara is still working at that office. I will not be subjected to further harassment, intimidation and victimisation by her. You will recall that I already have one outstanding grievance that you have refused to deal with.
I have been more than reasonable in my attempts to resolve this issue. I have even offered to work from the Kesgrave office during the period whilst my grievance is under review. In return you have done nothing but demand that I return to work at Ip City Centre. As far as I am concerned you have made it impossible for me to return to work there by your failure to address these issues."
She was dissatisfied that she had not been paid for February. On 16 April 2008 solicitors on behalf of her indicated that there had been a complete breakdown of trust and confidence and the grievance would be proceeded through the modified grievance procedure should the firm agree.
- The Tribunal made findings in relation to the discrimination and it concluded that the issues raised by the Claimant did not fall within either the pregnancy or the gender provisions of the Sex Discrimination Act 1975. The Tribunal said this:
"65. ... we do not support in any way the Claimant's assertions which purport to touch the behaviour of Ms O'Hara. It might have been she was indiscreet in a minor way but certainly we perceive of her nothing (by her conduct following the announcement of the Claimant's pregnancy) which could possibly be regarded as intimidating, hostile, degrading or humiliating.
66. It is said also that the Claimant's rejection for work at Kesgrave was an act of sex discrimination. We do not support that assertion. We accept the evidence of Mr Coates (albeit the position is different where constructive dismissal is asserted) that it was not felt appropriate for the Claimant to work at Kesgrave because of the nature of her job, her need to be in the larger office and to handle her telephone responsibilities...We may not agree but we see no taint of sex discrimination thereby."
- The Tribunal addressed the law on constructive unfair dismissal by reference to the decision of the EAT HHJ Peter Clark and Members in Bournemouth University Higher Education Corporation v Buckland  IRLR 606, the principles of which in so far as they are relevant in this case were explicitly endorsed by the Court of Appeal (see  ICR 908 per Sedley LJ).
- The Tribunal found that there was a breach of the fundamental term. It said this:
"73 Without doubt, the Respondent has a duty of care to its staff. It seems to us it could hardly exercise that duty by accepting a complaint of one of its staff (Debbie O'Hara) encouraging investigation of it by a formal grievance and simultaneously to insist on the Claimant's return to work notwithstanding her explained claimed inability to do so at the Ipswich office.
74 Investigation of the Claimant's grievance was expected and awaited. What if there was (after enquiry) overwhelming evidence of the Claimant's mistreatment in the hands of Debbie O'Hara? What if rumours had been spread by her or 'Kaylee' had taken over the Claimant's job in reality on a permanent basis?
75 We perceive that there was no real reason why the Kesgrave office might not accommodate the Claimant in the interim. The process of investigation might have been expedited. It might have been brief in any event. If Ms Nixon was to work on an outside role, her location at Kesgrave would, presumably, be no impediment. Certainly in the interim it seems to us that there was no real reason why temporary telephone diversion to Kesgrave could not have been effected.
76 There was, we see, thereby a clear failure by Mr Coates and the First Respondent by its duty of care (before investigation had been completed) to its employee. Mr O'Dair says we should not be tempted to judge whether the Respondents' conduct was reasonable. We accept the Bournemouth -v- Buckland analysis and that what we must see is a clear and focused breach of the implied term of trust and confidence, or, put another way, what the Claimant might properly be entitled to expect in the given circumstances before us."
There was also a reflection on the bad blood that existed hitherto between the Claimant and Ms O'Hara (see paragraph 77) from which the Tribunal concluded that Mr Coates should have been more alert to the complaint.
- The Tribunal upheld the claim of constructive unfair dismissal. It said this:
"80 As we have already observed, we can well understand his frustration. We can well understand him taking the view his Christmas generosity had not been appreciated and had come to be turned against him. But, at the appropriate point, he did not have the material to judge fairly. Instead, he said that, if the Claimant did not return, she would not be paid. He demanded her immediate return. That was, of course, a view which might have ultimately been proper had the grievance been allowed to take its course. Simply, Mr Coates denied the Claimant that opportunity and terminated her pay.
81 For these reasons, we find the Claimant to have been constructively and unfairly dismissed."
As to the discrimination claims, it said this:
"(i) Sexual harassment by Debbie O'Hara (see paragraph 66 above). We do not regard the burden of proof as having transferred to the Respondent. For our given reasons, we have been unable to support, in any way at all, the Claimant's assertions which concern Ms O'Hara. We regard the Claimant's evidence as unreliable and thus, it follows, we easily reach the view there cannot be discrimination by harassment. That claim is dismissed.
(iii) Work at Kesgrave. There is little doubt that the Claimant's request to work at Kesgrave emanated only because of her embarrassment at her behaviour after the Christmas party. It was unrelated to treatment because of her sex or because of her pregnancy. Simply, the Claimant wished to cure her embarrassment by remaining at Kesgrave until her demand (perhaps a hopeless demand) that Debbie O'Hara be dismissed had been met. We do not regard the burden of explanation as passed to the Respondent. If we are wrong, and for our given reasons, we are entirely satisfied with the explanation for the Respondent's refusal to allow her to remain there or at least in so far as the absence of any ingredient of sex discrimination was concerned. Of course, our view as to the Respondent's refusal informs a different view in so far as its duty of care was concerned in the face of an employee who, albeit largely by her own making, felt unable to return to the Ipswich office in the presence of Debbie O'Hara or at least until her grievance had come to be investigated.
(iv) The failure to pay wages. We accept the Respondent has an obligation to explain why it required the Claimant to return to work. It did not regard her absence as genuine or appropriate and it visited her refusal to return by withholding her pay. As the Respondent pointed out and by its contemporaneous correspondence confirmed, it took the view (on advice from its own solicitors) that the Claimant's refusal to return to work was a breach of contract by the Claimant and thus it felt justified to withhold pay. Whether that be right or not in any wider context is another matter. But, in the context of sex discrimination, albeit the termination of pay may have been, in our judgment, misguided, it was conduct related to the circumstances of the Claimant's refusal to return but wholly unrelated in any way to her gender or her pregnancy. As we have already observed, she was not paid because she was not at work."
- When it came to assess compensation for unfair dismissal, the Tribunal said this:
"82. The remedy which may arise from our finding of constructive dismissal will be listed before us on a date to be fixed, with a one-day time estimate. We look forward to interesting argument so the parties may come prepared. Yet we indicate our decision that, irrespective of the future duration of the employment relationship (we suspect it would not have lasted long, albeit we await argument), there should be 90% reduction of both the basic and compensatory award in this case because of the Claimant's contributory conduct.
83 In so deciding, we take the view that she was almost exclusively the author of her own misfortune by the events which unfolded by her foolhardy behaviour at the end of the office party. It is not for us to judge her moral perception and we do not do so. Yet, the reduction we apply derives because of her contribution to what happened by acting so publicly, so foolishly and so irresponsibly, in the gaze of both First and Second Respondents.
84 Where we come to contemplate the compensatory award, we may also make (and we do) a similar reduction for contributory fault, but we are constrained to consider also compensation such as we may regard as just and equitable for the Claimant to receive. In that analysis, we have taken into account the Claimant's conduct before, and possibly even during and after, these proceedings in what we regard to be a wholly inappropriate attempt to force or attempt to force (we have no doubt that is what it was) a compromise of the claim."
- It remained open for the parties to return to the Tribunal in the light of those findings. Between the end of the oral hearing and the judgment a number of steps were taken to which we will return under the heading "Apparent Bias".
The Claimant's case
- Mr Ward on behalf of the Claimant submits the claim was undoubtedly based upon pregnancy. The complaint about Debbie O'Hara was that she had spread gossip and it had not been stopped by Mr Coates and it related to the Claimant's pregnancy. It was unwanted. It created an atmosphere which was difficult for her to work in and was detrimental to her. The Tribunal had not applied correctly the provisions relating to pregnancy for this is pregnancy related.
- As to unfair dismissal, the Tribunal had correctly made the decision that the material matched the steps in Buckland or indeed was the culmination of a sequence of events leading to a last straw on the lines of their judgment in Omilaju v Waltham Forest London Borough  ICR 481 at 487, per Dyson LJ.
- On compensation, the Employment Tribunal had wrongly immersed itself in its condemnation of the Claimant for her behaviour at the Christmas party and had considered matters after the date of dismissal contrary to the express provisions of Employment Rights Act 1996 sections 123 and 122.
- Mr Ward contended that a logical application of the reason for the dismissal was that there should be no contribution for she had neither caused nor contributed to the way in which Mr Coates responded.
The Respondents' case
- Mr O'Dair contends that the Tribunal was correct in its approach to discrimination and pregnancy. The claim was entirely focused upon the conduct of Ms O'Hara and there was no evidence that Miss O'Hara was herself causing the gossip. As to the individual ingredients, mainly the move to Kesgrave, the Employment Tribunal had reached the wrong conclusion, this by way of the cross appeal launched by Mr O'Dair. Applying the test in Buckland, there was no breach of an implied term in the failure to allocate the Claimant to Kesgrave and in the failure to deal with her grievance. An offer had been made that she could make a formal complaint about Ms O'Hara. It was entirely in accordance with the business decisions being in the forefront of Mr Coates' mind that she should return at once to Ipswich.
The legal principles
- The legal principles are not in dispute. We have drawn attention to the three stage test in Buckland. Sedley LJ said the following:
"19. Modern employment law is a hybrid of contract and status. The way Parliament has done this is to graft statutory protections on to the stem of the common law contract. Thus by s.94 of the Employment Rights Act 1996, every employee is given the right not to be unfairly dismissed. By s.95 dismissal is exhaustively defined for the purposes of the statutory right as in short termination by the employer with or without notice, termination by effluxion of time, or termination by the employee "in circumstances in which he is entitled to terminate it without notice by reason of the employer's conduct". The last of these, in legal terms, is constructive dismissal that is to say an act which is not an explicit dismissal but which in law has the same effect.
20. What circumstances can bring about a constructive dismissal is determined not by the Act, which is silent on the subject, but by the common law. The common law holds that they must be circumstances amounting to a fundamental or repudiatory breach of contract by the employer. The first question, raised by the cross-appeal, is whether to have that character the employer's conduct must fall outside the range of reasonable responses to whatever situation has arisen. Jason Galbraith-Marten for the University submits to us, as he submitted to EAT, that it must do so if it is to constitute a repudiatory breach. Antony White QC for Dr Buckland contends that there is no such test: the question is an objective and unitary one.
21. The fundamental term of Professor Buckland's contract of employment which the tribunal held to have been breached was the requirement of mutual trust and confidence. The University does not contend that this finding was not open to the tribunal, but by its cross-appeal it contends that it was a response to the wrong question: the tribunal should have asked whether what the University had done was within the range of reasonable responses open to it in the situation confronting it in and after July 2006.
22. The EAT considered this issue in great detail. The need for such consideration arose from the proliferation of recent authority and dicta on the subject, not all of it consistent. With both gratitude and relief this court can refer the reader to the detailed description and thoughtful analysis of these in the judgment of the EAT  ICR 1042, §24-46. For my part I would respectfully endorse both EAT's reasoning and its conclusion at §47:
"In summary, we commend a return to settled authority, based on the following propositions: "
(1) In determining whether or not the employer is in fundamental breach of the implied term of trust and confidence the unvarnished Mahmud test should be applied.
(2) If, applying the Sharp principles, acceptance of that breach entitled the employee to leave, he has been constructively dismissed.
(3) It is open to the employer to show that such dismissal was for a potentially fair reason.
(4) If he does so, it will then be for the Employment Tribunal to decide whether dismissal for that reason, both substantively and procedurally (see Sainsbury v Hitt  IRLR 23), fell within the range of reasonable responses and was fair.
23. To the EAT's reasons one can now add the remark of Underhill P in Amnesty International v Ahmed  ICR 1450, §70, in relation to the EAT's decision in this case, that he was "sympathetic to the contention that it is unhelpful to introduce into the concept of constructive dismissal a conceptual tool devised for an entirely different purpose".
24. For their part, both counsel before us accept the EAT's formulation. But and it is perhaps as well that it has occurred at this point of time Mr Galbraith-Marten contends that the "range of reasonable responses" test forms part of the Mahmud exercise at stage (1), as well as of the fairness issue at stage (4), if that is reached.
25. I would unhesitatingly reject this submission. It ignores what the EAT clearly, and correctly, meant when it spoke of "the unvarnished Mahmud test". In Mahmud v BCCI  AC 20, 35, Lord Nicholls reiterated that the test of breach of a fundamental term of a contract of employment was objective: "A breach occurs when the proscribed conduct takes place". Lord Steyn (at 47) said much the same.
26. Mr Galbraith-Marten accepts this without demur. But he says the conduct of an employer which is said to have objectively broken the contract of employment is often (as here) conduct which the claimant alleges was in fundamental breach because it was unreasonable. This must entitle the employer to show that it was not in other words to argue that it lay within the band of reasonable responses. He accepts that this has the effect of replicating the same issue at stages (1) and (4), but that simply means that by the time stage (4) is reached, if it is reached at all, the job is done.
27. This approach finds support in the EAT's decision in Abbey National plc v Fairbrother  IRLR 320, and with qualification in Claridge v Daler Rowney Ltd  ICR 1267, §30. But, without retracing the complex path which the EAT was compelled to take, it is an approach which cannot stand with the authority of Western Excavating v Sharp  ICR 221, in which this court counterposed the objective test and the unreasonableness test of constructive dismissal and held in clear terms that the former was the correct one.
28. It is nevertheless arguable, I would accept, that reasonableness is one of the tools in the employment tribunal's factual analysis kit for deciding whether there has been a fundamental breach. There are likely to be cases in which it is useful. But it cannot be a legal requirement. Take the simplest and commonest of fundamental breaches on an employer's part, a failure to pay wages. If the failure is due, as it not infrequently is, to a major customer defaulting on payment, not paying the staff's wages is arguably the most, indeed the only, reasonable response to the situation. But to hold that it is not a fundamental breach would drive a coach and four through the law of contract, of which this aspect of employment law is an integral part.
29. Where, if at all, the reasonableness of the employer's conduct may enter the picture is through the statutory additions to the law of contract. Assuming, in other words, that there can be conduct which is both reasonable and a fundamental breach of contract, a constructive dismissal claim would be impossible to decide unless stage (1) was tested objectively on ordinary principles and reasonableness deferred to stage (4).
30. As counsel agree, the statutory provision for justification of a dismissal appears at more than one point not to fit constructive dismissal, notwithstanding the express inclusion of constructive dismissal in the statutory scheme. But, reverting to my example, if the employer could satisfy a tribunal that, albeit not a listed reason, the unexpected lack of funds amounted to some other substantial reason for dismissal within s. 98(1), and that in all the circumstances the employer had "acted reasonably in treating it as a sufficient reason for dismissing the employee" as required by s. 98(4), it might be arguable that the claim should fail. Although it will need to be revisited on the last of the issues before us, this is a conundrum we do not have to resolve in order to decide the cross-appeal."
- For the purposes of a reduction in compensation for unfair dismissal, there must be culpable conduct: Nelson v BBC No 2  ICR 110.
- A Tribunal is required to give reasons for its decision so the parties can understand why they have won and lost: Meek v City of Birmingham City Council  IRLR 250 CA.
- At the outset of this hearing, it was contended by Mr Ward that the Employment Tribunal and specifically EJ Cole had given the appearance of bias. Actual bias was not advanced. The test for apparent bias as agreed is found in Porter v Magill  2 AC 357 in the speech of Lord Hope at paragraphs 102 and 103: Would a fair-minded informed observer take the view that the judge was biased against one of the parties?
- Mr Ward put forward five grounds which also merge into perversity points. We will deal with these points together with Mr O'Dair's response analytically and then holistically. The objective is to set aside the judgment on the ground of apparent bias by the Tribunal, essentially by the judge. This allegation of bias had been put to EJ Cole and to the Members of the Tribunal following directions of HHJ Serota QC and so we now have a full picture. No point has been taken before us as to the extensive response given by EJ Cole to the allegation of apparent bias. Neither party has said, applying the principles in Woodhouse School v Webster  IRLR 568 CA that we should not pay attention to this. Neither party wished oral evidence to be adduced and so we deal with it on the papers. On the material which we see, as to which we first find the facts, would the above observer take the view we have described?
- The first ground is that findings were wrongly made by the Tribunal that the Claimant was seen leaving the hotel room on the night of the Christmas party with a male colleague. Helpfully this point is accepted by EJ Cole. The reason it is said to be biased is that it came from nowhere but the Respondents' response to the claim. It is perverse because there is no evidence about the two being seen on the morning. It is however of insignificance given the facts found by the Employment Tribunal and the irresistible inference that the couple spent the night together. It is said to cause the gossip but, as the evidence showed, the gossip was about their conduct and not about the pregnancy. That is made clear in the evidence of Ms Brain which we have cited above, "gossip about relationship, not pregnancy".
- Although the Judge may be criticised for reading a Respondent's response into the evidence, it indicates an error of fact but it is of no significance. It does not give on its own an appearance of bias.
- The second contention relates to an offensive comment said to be made by Mr Coates. We need not repeat it. Clear analysis of the evidence is that others reported the comment (Owen Ash and Samantha Catchpole). But the Tribunal attributed the report to the Claimant. In a sense it was right. She was responsible for a press release that paid attention to this. But as a matter of strict evidence she did not say that the comment had been uttered by Mr Coates. Thus, again, there is an error of fact. It is harmful to the Claimant since it is connected to an offensive remark said to be made by Mr Coates. But that is as far as it goes. It does not indicate apparent bias by the Employment Tribunal against the Claimant.
- The third issue is that the Tribunal considered evidence not presented by either party - the evidence of Nazmin Saltan. She was an employee of the firm. She brought proceedings before the Employment Tribunal differently constituted. EJ Cole conducted preliminary case management and knew about the issues. The case was settled on the first day without a hearing.
- When Ms Ash was called to give evidence in the Nixon case, she read from her witness statement to be used by her in Nazmin Saltan's case. This was an unusual procedure. The parties had exchanged witness statements in advance. She had a witness statement tailored to the Nixon case but because a letter had attached her witness statement in the Saltan case, she was invited by Mr Ward to read it out and she did. In those circumstances it is not for Mr Ward to contend that the evidence of Ms Saltan was not presented by either party. It plainly was.
- The Employment Tribunal took a dim view of Ms Saltan. On the material produced for the purposes of today's hearing, coming from the lay members, there is plainly a divergence. It cannot be said, as one member (Ms O'Flynn) says, "that it is nonsense to assert that we were swayed by Ms Saltan's case when we knew nothing about it." The point is that the Tribunal took a dim view about Ms Saltan, probably deriving from her case against the firm about which they heard. It cannot be said that the Tribunal knew nothing about it but, on the other hand, they were introduced to it by Mr Ward. This ground goes nowhere, is not a perverse finding and it does not indicate a failure by the Tribunal, or a deliberate use by the Tribunal of material not adduced before it.
- The fourth issue relates to an allegation that the Claimant had not been afforded an opportunity to rebut material put forward by the Respondents. Reliance is placed on a judgment that I gave on behalf of the Employment Appeal Tribunal in Gill v Humanware European Ltd UKEAT/031208. In oral argument Mr Ward withdrew that on the ground that Gill is concerned with secret communications between the Judge and counsel, which did not occur here. The setting is highly unusual but not irregular, we hold. Mr Ward did not assert irregularity. After the oral hearing had closed on 11 September 2009, EJ Cole called a CMD at which only lawyers attended. At that stage he gave an indication to the parties, as he had earlier, that they should try to settle. There is no doubt that foremost in the Tribunal's mind was the acuteness of the issues raised, the publicity and embarrassment certainly to the Respondents and, in fairness, to the Claimant too. In order to encourage the parties to settle and, we are told if need be in order to avoid a judgment against either one or all of the parties, EJ Cole indicated the Tribunal's preliminary views which were as they turned out to be in the final judgment. As to contribution, the figure of 80 per cent was floated although other figures may have been too. As a result of that unsolicited indication, the solicitors for the Respondents, on the advice of counsel, drafted a letter of settlement to the Claimant. She was to come out with £706. She was to sign an agreed press release which, in our judgment, indicates complete surrender. It is non negotiable and it indicates capitulation by the Claimant on almost all of the issues except constructive dismissal. It was copied to the Judge. Neither counsel nor we have ever seen anything like this. It is axiomatic that before judgment on liability and remedy a Judge should not see this kind of correspondence because, of course, it may sway him in what he is about to do.
- There then followed bilateral correspondence including at one stage the presentation to the Judge by the Respondents' solicitors of a letter from the Solicitors Regulation Authority (SRA) dated 21 September 2009. The SRA had picked up in the Daily Mail a report of this case and indicated that Ms Nixon's application had been brought to its attention and that they may contact Mr Coates again in relation to this pending the outcome of the ET hearing. It was noted that Ms Nixon may have the right to ask the Ombudsman to deal with any handling by the SRA of this matter. Neither the Claimant nor her advisers had informed the SRA. This was made clear on 8 October 2009 by the Respondents' solicitors. But the express impact was this:
"3. It is respectfully submitted that the attentions of the SRA only served to reinforce the truth of the submission made by Counsel for the Respondent that this case is more about reputation than money, and that therefore
4. The Tribunal is requested in its judgement to make it abundantly clear that the Claimant's allegations of sex discrimination are baseless."
They also indicated that he had never received a counter proposal to their non negotiable offer of 14 September, although it is true to say that in bilateral correspondence they had somewhat softened and might have been prepared to accept one later. But the Judge was told there had been no response. The Judge indicated that if anybody wanted to say anything they had 10 days to do so. There was no reply to the Judge.
- How does this affect the contention that the Judge showed bias? It must be recalled how narrow is the application. It is that the material was provided and there was no opportunity for the Claimant to rebut it. As a matter of fact we find that is plainly wrong. The Judge invited comments, the Claimant was represented, her solicitors would not be slow in coming forward to challenge any point which they thought was against them. They could not have been intimidated so as not to put any material forward. In our judgment, this is a matter of fact that cannot succeed. We have no doubt that this was an unusual procedure and it should not happen in any Tribunal proceedings. It is proper in certain cases to draw the attention of the Tribunal to press comment in order that the Tribunal may keep its eye focussed upon the material available or, if it is sought, to make orders as appropriate. But to disclose the unilateral offer to the Judge was wrong. A Judge should not see this kind of correspondence. Nevertheless the complaint made is not as to what he saw and so this ground is dismissed.
- The fifth ground relates to an application made by the Claimant for disclosure. It was cast as disclosure by it is actually inspection. The application was properly made in advance. There was a CMD on 1 April 2009. The application was resisted on the grounds the material sought was privileged. The basis of the application was paragraph 18 of Mr Coates' first witness statement disclosed and exchanged in accordance with orders. It is not signed or dated but no point is taken on this. He said:
"Subsequent to the meeting on the 5th February all matters relating to the Claimant's claim had been conducted through and on the advice of the firm's solicitors and legal advisers. On their advice I was told I could not deal with the matter personally thereafter and I put the issue in their hands."
Using that as a springboard an application was made in very wide terms for inspection. It included all relevant communications pertaining to the case with the solicitors and all documentation including attendance notes and all advice. It said:
"For the avoidance of doubt this includes any and all advice given to the Respondents in respect to the meeting on 5th February 2008 that would ordinarily be protected by legal professional privilege."
- Legal professional privilege was raised by Mr O'Dair. He first said that in any event this is to do with draft documents. With respect that cannot be right. This was a witness statement exchanged pursuant to orders. Secondly, he contended the material had not been relied upon and on authority privilege was not waived until reliance was placed on it at a hearing. There may be some substance in that argument. The purpose of it is however to show that there was no substance in the application.
- The Judge did not decide this matter at the CMD. Quite properly at the trial Mr Ward raised it again and the Judge said he thought the matter had been dealt with and it was water under the bridge. It washes up before us as an allegation of apparent bias viz the Judge did not decide this matter in order to show favour to Mr Coates.
- We reject that. The content of paragraph 18 does not in any event waive the privilege. It is simply saying that this Respondent to inchoate legal proceedings (as they became) on receiving a formal complaint from a Claimant, seeks legal advice. Thereafter the matter is handled by his solicitor. That seems to us to be entirely proper. That is what people who have access to lawyers and advisers do and are encouraged to do. He was right, because shortly thereafter a formal grievance was lodged. As I said in Scotthorne v Four Seasons  UKEAT/0178/10 this is a natural precursor to employment relations these days in the light of the 2002 Act regime.
- Thus, the allegation that the Judge exhibited apparent bias by failing to deal with inspection application must founder. Put logically, what a Judge who was biased would do, would be to accept the submissions of Mr O'Dair, as we have set out above. They are actually correct. To avoid making a decision, we think, does not manifest bias. Looking at it realistically, he probably concluded in favour of the Respondents at the CMD, and by the time of the trial certainly thought he had. The Claimant's team felt they had lost the application. In any event, we would be inclined to accept Mr O'Dair's submissions.
- What then remains of the above five matters as we stand back and look from the perspective of the reasonable and informed observer? In our judgment, this claim of bias is hopeless. Mistakes there were by the Judge - at least two perversity allegations get home - but they are insignificant and they do not portray apparent bias.
Discussion and conclusions on the substantive issues
- We prefer the argument of Mr Ward in respect of sex and pregnancy discrimination. It has been pointed out to us throughout this case that the contention is that the Claimant was dissatisfied because Debbie O'Hara was spreading gossip in relation to her. The gossip was about the paternity of her child. It stemmed from the night of the Christmas party. In Debbie O'Hara's and others' eyes there were at least two contenders. This was uncomfortable for the Claimant and she had evidence that Debbie O'Hara was spreading it (see for example Ms Brain). It is connected with pregnancy. The evidence as to discomfort felt by the Claimant was not challenged. It does constitute a course of unwanted conduct, meeting the definition of harassment, and the Tribunal was wrong not to see this. We consider that in this, as in other respects, the Tribunal's earlier comments expressing its disapproval of the Claimant's conduct leaked into its judgment on the law. Although the Claimant's evidence was regarded as unreliable, the extrinsic evidence of Debbie O'Hara's conduct is available and should have been accepted. The Tribunal erred in law.
- Secondly, as to the work at Kesgrave, in this respect the harassment allegation is not maintained but there is said to be discrimination on the grounds of pregnancy. Again, we agree with Mr Ward's submission. It is related. The Tribunal's simple finding that the Kesgrave issue was not related to her sex or pregnancy is wrong. It was related to Debbie O'Hara and the content of her gossip was unarguably related to pregnancy and pregnancy is related to her sex. On that ground too the refusal to accept the Claimant's case on Kesgrave as an act of sex discrimination and pregnancy discrimination is wrong in law. It follows that the failure to pay wages was in the same category.
- The findings in relation to constructive dismissal fed into this. The reasons for the dismissal had been made clear - we have set them out above. The Tribunal, while rejecting most of the Claimant's case, was firm in upholding her on these matters. The failure by Mr Coates to deal with the grievance and his insistence that the Claimant return to the atmosphere which she found and which we uphold was unfavourable to her, constituted a failure by Mr Coates to carry out the implied term of trust and confidence. The Tribunal was correct in its application of the authorities which it cited dealing with a constrictive unfair dismissal.
- We then turn to the remedy. The Tribunal in the passages we have cited made an error. It is conceded by Mr O'Dair that a Tribunal in looking at reduction for conduct, for the purposes of the basic award and separately for compensatory award, must focus on the time up to the dismissal. For the basic award it is any conduct. We hold it would include the conduct at the Christmas party. But for the compensatory award it is only conduct causing or contributing to the dismissal. By definition this must all occur before the Claimant's acceptance of the repudiation on 15 March 2008. The Tribunal in its paragraph 84 makes a number of errors. It deals with events before and even after these proceedings. The cut off is 15 March, long before these proceedings started.
- In an attempt to rescue this decision on contribution, Mr O'Dair contends that the Tribunal was reaching an alternative decision to slice the compensation down by 90 per cent, in the second part of paragraph 84. We reject that. The language of section 123(1) is that jurisdiction is focussed firmly upon what is just and equitable, having regard to the loss sustained by the Claimant as a result of the action of the Respondent. That passage is subject to the deduction provision in section 123(6). There would be double counting if you could deduct under both subsections. Subsection 123(6) comes first. It takes priority and it is mandatory. There must be a reduction if there is causation. The Tribunal must look at the reason for dismissal and how, if at all, the Claimant contributed to it by her conduct or caused the dismissal. Put in simple terms, if the Claimant had been disciplined in an unfair way on 23 December 2007, for her conduct the night before, she may have succeeded in unfair dismissal but she would have contributed to it by her conduct. The two are absolutely joined. But where the Tribunal has found what the reason was, and it was not her conduct on the night, then it is difficult to see the relationship. Nevertheless, there may be one. The point is this Employment Tribunal, in the light of its earlier comments, has caused its view about the conduct of the proceedings to affect its judgment on contribution.
- Secondly, Mr O'Dair is wrong because the Tribunal does not have a general power to award what is just and equitable. We know it took a very dim view about the Claimant's conduct on the night of the Christmas party, but it must not visit that in its award of what is just and equitable. This has to be in accordance with the loss sustained. So with those directions in mind, the judgment on compensation is set aside.
- We have heard submissions about the appropriate disposal of this case. It will be remitted to the same Tribunal. In summary, it will have to consider compensation for sex discrimination in the three detriments set out in paragraph 78 which we have upheld. It will have to consider compensation for unfair dismissal under the Employment Rights Act and not, we note under the Sex Discrimination Act. As part of that it will consider any deductions of the basic and compensatory awards. The appeal is allowed in part, the cross appeal dismissed.