EXTRA DIVISION, INNER HOUSE, COURT OF SESSION
OPINION OF THE COURT
delivered by LORD HAMILTON
GLASGOW CITY COUNCIL
Act: Napier, Q.C.; Thompsons (Appellant)
Alt: Truscott, Q.C.; MacRoberts (Respondent)
1 December 2005
 The appellant is a British citizen of Zimbabwean origin. After training as a nurse, he obtained employment with the respondent in August 1977. He worked in its Social Work Department and, having gained a Diploma in Social Work, held various posts concerned with the residential care of older people. From 1982 he held a senior management position. From about 1996 or 1997 he had been Depute Unit Manager of an establishment known as Balornock House.
 On 18 August 2000 the appellant, having noticed a job advertisement on the internal vacancy list for a Unit Manager at an establishment known as Cheviot House, submitted an application form for that post. Five candidates were interviewed, of whom four were male and one female and four were white and one (the appellant) black. The appellant was not appointed to the post, the white female (a Ms McGuire) being the successful candidate.
 On 9 January 2001 the appellant presented an application to an employment tribunal claiming that in a number of ways he had, in respect of his application for the post of Unit Manager, been unlawfully discriminated against by the respondent, contrary to section 4(2)(b) of the Race Relations Act 1976. The only such claim which is material for present purposes is one made of "direct" discrimination as described in section 1(1)(a) of the Act, which provides that "a person discriminates against another ... if ... on racial grounds he treats that other less favourably than he treats or would treat other persons ...".
 The employment tribunal sustained that claim and made a calculation of compensation payable to the appellant. The respondent appealed to the Employment Appeal Tribunal which reversed the employment tribunal's decision, both in respect of the finding of unlawful discrimination and on the calculation of compensation. The Employment Appeal Tribunal stated that, if it had been with the then respondent on the matter of discrimination, it would have remitted the case back to the same employment tribunal to reassess compensation in the light of certain criticisms which it held to be well-founded (Employment Appeal Tribunal Judgment, paras. 8 and 9). The appellant has appealed to this court against the Employment Appeal Tribunal's disposal (which was to quash the decision of the employment tribunal) but accepts that, if he is successful in having the decision of the employment tribunal on discrimination restored, the case should be remitted to the same tribunal, as envisaged by the Employment Appeal Tribunal, on the matter of reassessment of compensation. For completeness it should be added that a cross-appeal by the appellant on a particular issue was before the Employment Appeal Tribunal but that issue is no longer live.
 The employment tribunal, having heard evidence from the appellant and from various other witnesses, including two of the three persons who comprised the panel which interviewed him and the other candidates, in their extended reasons reviewed that evidence, made certain findings-in-fact and reached certain conclusions. One of its factual conclusions, based on certain findings which it had earlier made, was that the appellant had been treated less favourably when he was not successful in securing the promoted post for which he was interviewed (Reasons, page 36, lines 11-13). The tribunal then turned to the issue of whether that treatment was on racial grounds. It reminded itself of the guidance given by Neill L.J. in King v The Great Britain-China Centre  IRLR 513. (The last date of the hearing before the employment tribunal occurred shortly before the coming into force of section 54A of the 1976 Act.) In particular it referred to point (4) of the principles and guidance given by Neill L.J. at para. 38 of the report, where his Lordship states:
"Though there will be some cases where, for example, the non-selection of the applicant for a post or for promotion is clearly not on racial grounds, a finding of discrimination and a finding of a difference in race will often point to the possibility of racial discrimination. In such circumstances the Tribunal will look to the employer for an explanation. If no explanation is then put forward or if the Tribunal considers the explanation to be inadequate or unsatisfactory it will be legitimate for the Tribunal to infer that the discrimination was on racial grounds ...".
 The employment tribunal noted that it had found that there was a difference in race involving the appellant, that it had earlier set out the respondent's explanation of various points bearing on discriminatory treatment and the reasons why it had found those explanations to be inadequate or unsatisfactory and that it then had to consider whether it was prepared to draw the inference that the discrimination had been on racial grounds. It then stated:-
"The Interview and Interview Assessment
We made findings of fact - the serious breach of the code when the respondents failed to complete the interview assessment sheets after each interview; Mr Grant's lack of training on the respondent's code was a breach of the code; the use of the word 'articulate'; the marking of the factor career development and the exclusion of the factor 'qualifications - experience -' and have set out above why we did not consider the respondent's explanation to be adequate or satisfactory.
We decided in the circumstances, that it would be legitimate to draw an adverse inference that the interview panel's assessment of the applicant at interview was influenced by racial factors. We decided it was legitimate to draw this inference in circumstances where the employer was unable to adequately/credibly explain why the applicant had scored lower than Ms McGuire in these factors. This failure was, in the opinion of the Tribunal, compounded by the undisputed fact of the breaches of the respondent's code which the respondent endeavoured - unsuccessfully - to explain as standard practice.
The Second Reference
The fact Mr Smith decided to obtain a second reference from the external line managers was not in dispute. The fact that Ms Burke failed to inform the applicant she had provided a second reference was not in dispute. We found as a matter of fact that the second reference for Ms McGuire was better than the one for the applicant and that the areas of development identified in the applicant's second reference had not been included in his suspension notes or brought to his attention.
We found the respondent's explanation for deciding to obtain a second reference from the external line manager and Ms Burke's explanation why she failed to inform the applicant of the reference to be wholly inadequate and without credibility. We were prepared to draw the following adverse inferences:-
● Mr Smith deliberately sought to justify the decision of the interview panel to appoint Ms McGuire by seeking the second reference;
● Mr Smith deliberately sought a second reference from the external line managers knowing that Mr Grant would provide a stronger reference for Ms McGuire and that Ms Burke would provide a weaker reference for the applicant.
● Mr Smith deliberately sought a second reference because the applicant was black and had previously raised issues of race discrimination.
● Mr Smith deliberately sought the second reference from the external line managers knowing that Ms Burke was a fellow black employee. We considered this to be a cynical decision by Mr Smith, made in the hope that with Ms Burke being a black employee it would look favourable for the respondents in any subsequent proceedings.
● Ms Burke aided the respondents objective by providing a poorer reference for the applicant.
We decided for all the above reasons that the applicant had been treated less favourably by the respondent on racial grounds, and that he had been discriminated against contrary to the provisions of section 4(2)(b) Race Relations Act 1976."
 Some explanation of that passage is called for under reference to earlier passages in the tribunal's extended reasons. The respondent's Code of Practice on Recruitment and Selection provided that an interview assessment form for each applicant, rating those factors which were detailed on the person specification and were relevant to the job, should be completed immediately after that applicant's interview. That requirement was not followed by the interview panel in this case. Rather, the assessment sheets for all the candidates were completed at the end of all the interviews following a discussion about each candidate's performance; the appellant had been interviewed first and Ms McGuire last. Mr Grant (a member of the interview panel) had received no training in the Code of Practice. One of the factors listed for scoring on the assessment sheet used for the interview was "speech, manner", an aspect of "Personal Qualities". Against this factor there was entered in respect of the appellant the description "nervous hesitant" with a score of 7, and in respect of Ms McGuire the description "clear/articulate" with a score of 12. These descriptions and scores were explored in evidence, particularly the use of the word "articulate". There was an issue as to whether the appellant had been marked less favourably because, having been born in Zimbabwe, he had learned English as a second language at school. The assessment form listed a factor "Evidence of career development" in which Ms McGuire had again been scored higher than the appellant despite it being clear on the evidence that he was, in terms of career development, considerably more experienced than she was. The form also listed a factor "Experience"; but no score had been entered against this factor for either candidate despite the appellant's greater length of service and experience at senior management level. The tribunal, in considering the issue of whether there had been less favourable treatment, had considered such explanations as were proffered by the respondent's witnesses for these, among other, aspects of conduct but had found these explanations to be inadequate or unsatisfactory. As regards "The Second Reference", it was undisputed that, after all the interviews had been completed, a decision was taken by the interview panel to seek second references for each of the appellant and Ms McGuire. That decision had been taken after the interview panel had decided to offer the post to Ms McGuire. The respondent's usual practice was for internal candidates to nominate only one referee (as had the appellant); but, if an interview panel felt it required a second reference, Personnel would contact the candidate to obtain the details of a second referee. That practice was not followed by the interview panel in this case. Instead, it decided to seek a second reference from the external line manager of each of Ms McGuire and the appellant. Ms McGuire's external line manager was Mr Grant (who was himself a member of the interview panel). The appellant's external line manager was a Ms Burke, a black African Caribbean. References were sought and obtained from each of those persons. Neither candidate was informed that this unusual course was being adopted, which also involved the disregarding of a second referee whom Ms McGuire had herself nominated. The tribunal, having heard an explanation proffered by Mr Smith for the adoption of this course of action, found that explanation not to be credible. It also heard evidence from Ms Burke. It took an adverse view of her evidence, which it found incredible not only in respect of certain particular matters but also in respect of the explanations she offered for being party to the provision in the circumstances of a second reference for the appellant.
 In its written grounds of appeal to the Employment Appeal Tribunal the present respondent, while identifying a question of law which arose as being whether "the employment tribunal erred in law in concluding that the applicant was treated less favourably by the appellant on racial grounds: or, alternatively has drawn inferences which are perverse and, therefore, ill-founded", advanced the relative ground of appeal under the heading "No basis for inferences of racial discrimination". Its development in that document of that ground of appeal was directed to whether discrimination was on racial grounds, including whether the adverse inferences drawn in relation to the post-decision conduct, and in particular the last three of the five inferences, were "speculative and not supported by a proper evidential basis". No contention was advanced in that document that the tribunal had erred in law in its prior conclusion that the appellant had been treated less favourably when he was not successful in securing the post. The Employment Appeal Tribunal's decision, consistently with that line of argument, appears to have proceeded solely upon the question whether the employment tribunal was entitled to conclude that the non-selection of the appellant was on racial grounds. In its Answers to the appellant's Grounds of Appeal to this court the respondent sought only to support the decision of the Employment Appeal Tribunal on the basis on which that decision was expressly made.
 At the hearing of this appeal Mr Napier on behalf of the appellant made his submissions on the basis that there was no challenge by the respondent, either before the Employment Appeal Tribunal or in this court, to the employment tribunal's finding that the appellant had been treated less favourably than others. In his response Mr Truscott for the respondent made submissions which sought to put in issue the employment tribunal's findings in respect of less favourable treatment, as well as whether any such treatment was on racial grounds. After the whole submissions had been made in this appeal and the court was in the course of hearing argument in another case (Dhesi v Glasgow City Council) which had been set down for the same diet, Mr Truscott tendered grounds of appeal for the respondent in which reference was made to inter alia the matter of less favourable treatment; it was claimed that this matter had been raised in oral argument before the Employment Appeal Tribunal, albeit that tribunal had made no reference to such argument or made any finding on it. We refused to allow these grounds to be received. We were satisfied that, having regard to the procedural history, it was not in the interests of justice that such contentions should be entertained by this court at this stage. Although an issue of law bearing on the question of less favourable treatment might have arisen (in particular, in respect of whether the employment tribunal had, in addressing that question, used in all respects the correct comparator or comparators), no such issue is properly before this court. We accordingly proceed on the basis that the employment tribunal was entitled to conclude that the respondent had in the relevant respect treated the appellant less favourably than it treated or would treat other persons.
 In Nagarajan v London Regional Transport  I.C.R. 877, Lord Nicholls of Birkenhead said at page 884:
"To be within section 1(1)(a) the less favourable treatment must be on racial grounds. Thus, in every case it is necessary to inquire why the complainant received less favourable treatment. This is the crucial question. Was it on grounds of race? Or was it for some other reason, for instance, because the complainant was not so well qualified for the job? Save in obvious cases, answering the crucial question will call for some consideration of the mental processes of the alleged discriminator. Treatment, favourable or unfavourable, is a consequence which follows from a decision. Direct evidence of a decision to discriminate on racial grounds will seldom be forthcoming. Usually the grounds of the decision will have to be deduced, or inferred, from the surrounding circumstances".
Thus, except and in so far as there was direct evidence that the decision not to appoint the appellant to the post of Unit Manager was on racial grounds, the employment tribunal in this case required to deduce or infer the grounds of that decision from the surrounding circumstances. In doing so it rightly (section 54A of the Act not being at the relevant time in force) had regard to the guidance given by Neill L.J. in King (quoted above), that guidance having been approved by the House of Lords in City of Glasgow Council v Zafar 1998 S.C. (H.L.) 27 (especially per Lord Browne-Wilkinson at pages 31-2). In relation to the interview and the interview assessment, the tribunal concluded that it would be legitimate to draw an adverse inference that the interview panel's assessment of the appellant at interview was influenced by racial factors. That inference appears to have been based largely on the manner in which the appellant and Miss McGuire were scored, seen against the circumstance that the respondent had been unable adequately or credibly to explain the manner of that scoring. That state of affairs was compounded by the respondent's departure from its own Code of Conduct, again seen against the respondent's failure adequately or credibly to explain that departure. The explanations were not such as to point convincingly or obviously to a genuine non-racial "reason why" (cf. The Law Society v Bahl  IRLR 640, per Elias J. at para. 97). The circumstances were accordingly such that it was open to the employment tribunal to find that the appellant's non-selection was influenced by racial factors, even if the conduct did not point overtly to the decision having been made on racial grounds (see Anya v University of Oxford  I.C.R. 847, per Sedley L.J. at para. 28). It was thus not the respondent's conduct alone which rendered that finding open to the tribunal, but that conduct combined with the respondent's inability to explain it (see Anya, per Sedley L.J. at para. 14, as approved and explained by the Court of Appeal in Bahl v The Law Society  IRLR 799 at para. 101).
 Although those circumstances might of themselves have justified the employment tribunal concluding that the appellant had been treated unlawfully, it also took into account the circumstances of the second reference and certain inferences which it drew, in the light of its assessment of the witnesses which it had seen and heard, about why that reference had been sought. The witnesses whom the tribunal saw and heard included both Mr Smith and Ms Burke. The factual inferences which the tribunal drew as to deliberate conduct by Mr Smith and as to Ms Burke's participation may not in all respects be such as are immediately obvious to an appeal court which has not had the advantage of seeing or hearing that evidence. But nothing has been put before us to justify our holding that these were not findings which the tribunal, having had that advantage, was not entitled to make. Once it is recognised that these factual conclusions are unchallengeable, it is plain that the employment tribunal was entitled to reach the conclusion which it did.
 The Employment Appeal Tribunal concluded that the decision of the employment tribunal "was nothing short of perverse in the proper use of that word". The test for "perversity" is a high one (Salamis (Marine & Industrial) Limited v Forbes, Extra Division of the Inner House of the Court of Session, 14 July 2005, unreported, at para. , referring to Yeboah v Crofton  IRLR 634, especially per Mummery L.J. at para. 93). We are satisfied that the requisite test was not met so as to entitle the Employment Appeal Tribunal to interfere with the employment tribunal's decision on discrimination. As Sedley L.J. pointed out in Anya at para. 7, deciding cases of alleged discrimination on racial grounds is not easy; at para. 8 he added:
" ... evidence that one or more members of the panel were not unbiased, or that equal opportunities procedures were not used when they should have been, may point to the possibility of conscious or unconscious racial bias having entered into the process. It will always be a matter for the tribunal's conscientious judgment".
There is no warrant for the conclusion that the decision of the employment tribunal in this case was vitiated by any perversity. It being a decision which that tribunal was entitled to come to, the Employment Appeal Tribunal erred in law in interfering with it.
 In these circumstances we shall allow the appeal and remit the case to the employment tribunal (as originally constituted) to reassess the computation of compensation in light of the observations made by the Employment Appeal Tribunal in paras. 8 and 9 of its decision.