Neutral Citation Number: [2005] EWCA Civ 122
Case No: A2/2004/1239EATRF
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 16/02/2005
Before :

LORD JUSTICE PILL
LORD JUSTICE KEENE
and
LORD JUSTICE NEUBERGER
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Between :

	Mrs S Murphy 	Appellant	
	- and -		
	Slough Borough Council (1)
Governing Body of Langleywood School (2) 	Respondents	

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Antony White QC and Aileen McColgan (instructed by Messrs Graham Clayton) for the Appellant
Peter Oldham (instructed by Slough Borough Council ) for the Respondents

Hearing date : 25th January 2005
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Judgment 

Lord Justice Keene : 
1.	The principal issue in this appeal concerns the appropriate respondent or respondents when a claim for disability discrimination is brought by a teacher employed at a maintained community school with a delegated budget.  The teacher’s contract of employment is with the local education authority (“LEA”), but the Governing Body of such a school is given extensive employment powers by the legislation, and in certain respects employment by the LEA is to be treated as if it were employment by the Governing Body.
The Facts
2.	The appellant, Mrs Shahina Murphy, began employment as a teacher at Langleywood School in the borough of Slough on 1 September 2000.  She suffers from a congenital heart disorder which makes it dangerous for her to carry a pregnancy to full term.  She and her husband therefore arranged for a surrogate mother in the United States of America to give birth to their child.  While the birth was awaited, the appellant requested a period of paid maternity leave, so as to be able to bond with the child once it was born.
3.	The child was born on 19 November 2001.  However, the Governing Body of the school decided that the appellant should only be allowed to take unpaid leave because the school was in a precarious financial position with a deficit in its budget.  During the three years before the academic year beginning in September 2001, the school had been the subject of “special measures” resulting from an inspection by OFSTED.  The Head Teacher sought additional funds from the Slough Borough Council (“the first respondent”), the relevant LEA, from its contingency fund, but the application was refused.  The appellant received the formal decision of the Governing Body by way of a letter dated 22 November 2001 from the Head Teacher.
4.	Langleywood School is a maintained community school with a delegated budget under section 49 of the School Standards and Framework Act 1998 (“the 1998 Act”).
The Proceedings Below
5.	The appellant then presented a claim to an employment tribunal under the Disability Discrimination Act 1995 (“the DDA”).  She accepted that she was not entitled to statutory maternity leave because the birth had taken place with a surrogate mother, but she complained of disability discrimination both under section 5(1) of the DDA (less favourable treatment) and under section 5(2) (failure to comply with section 6 duty to make reasonable adjustments).  Her application cited both the Governing Body and the LEA as respondents.
6.	It was conceded before the employment tribunal that the appellant was a disabled person within the meaning of the DDA.  But the majority of the tribunal found that she had not been discriminated against under section 5(1) because she had not been treated less favourably for a reason which related to her disability.  On this issue, the tribunal’s decision was reversed by the Employment Appeal Tribunal (“EAT”) presided over by Silber J., and there is no cross- appeal by the respondents against that part of the decision.  I say no more about it.
7.	However, the employment tribunal also found that the correct respondent was the Governing Body and only the Governing Body.  On this basis it concluded unanimously that, even if there was discrimination under section 5(1), the defence of justification was made out, because the reason for the Governing Body’s refusal of paid leave was both material and substantial, given the financial situation of the school.  In respect of the section 5(2) claim, which alleged a failure to take reasonable steps (in the form of providing paid leave of absence) to perform the section 6 duty, the employment tribunal found by a majority that the Governing Body had not failed to comply with its duty.  Unanimously it also found that, if there had been such a failure, the defence of justification applied.  It will be necessary to look in due course in more detail at the employment tribunal’s process of reasoning on these aspects of the case.
8.	Its decisions on the correct respondent and on justification were upheld by the EAT.  It is those decisions which are now challenged by Mrs Murphy in this appeal.  It will be appreciated from the statutory references already given that this case is governed by the DDA in the form in which it stood before the amendments made by the Disability Discrimination Act 1995(Amendment) Regulations 2003 came into force.  In due course it will be necessary, when dealing with the justification issue, to look at the detailed provisions of the relevant sections of the DDA.  But for the purposes of the main issue, namely whether the Governing Body alone was the correct respondent, it is enough to note that the provisions of section 5(1) and section 5(2) are concerned with discrimination by “an employer”.  With that in mind, I turn to that issue.
The Appropriate Respondent
(i) Introduction 
9.	This is not a purely formal issue.  Of course, in any consideration of a claim under section 5(1), one needs to be able to identify the employer in order to ascertain the reason for the less favourable treatment, and a claim under section 5(2) necessitates establishing by whom the section 6 duty is owed.  But the real significance in the present case, and no doubt in others too, of this issue relates to the financial position of the employer.  That may be relevant both to justification under section 5(3) and to whether there is a breach of any section 6 duty.  On that last aspect, section 6(4)(d) expressly requires regard to be had to the “financial and other resources” of the employer.  In the present case, once the employment tribunal had decided that the employer here was the Governing Body of Langleywood School, it concentrated on the financial position of the school rather than on that of the LEA.  There is a passing reference in the tribunal’s extended reasons to a suggestion that the LEA’s budget also was in deficit but it is clear that the tribunal did not examine the financial position of the LEA to any significant degree.  One cannot say with any confidence what the outcome of these proceedings would have been if the LEA were to be treated as the employer or an employer of the appellant for the purposes of these claims.  Hence the importance of this issue.
(ii) The Legislative Framework 
10.	I noted at the outset that the appellant’s contract of employment was with the LEA.  This could not be otherwise:  Schedule 10, paragraph 3(6) of the 1998 Act prohibits the governing body of a community school from entering into contracts for the employment of teachers and other staff.  It is the 1998 Act which provides that each maintained school (including a community school) shall have a governing body, which shall be a body corporate: section 36(1).  It also deals with the general powers of such a body (section 36(2)), its responsibility for the conduct of the school (section 38(1)) and its delegated budget (section 49(1)).  Under that last provision every maintained school has a delegated budget, unless the school’s right to a delegated budget has been suspended by the LEA in the circumstances set out in section 17 or in section 51 and Schedule 15.  The governing body of a school with a delegated budget may spend any such amounts as they think fit for any purposes of the school, subject to any provision made by or under the LEA’s financial scheme for the schools in its area: see sections 50(3) and 48(1).
11.	The 1998 Act also deals with the staffing of community schools, distinguishing between those with a delegated budget and those without one because the right to it has been suspended.  Those with a delegated budget are covered by section 54(1), which provides that Schedule 16 shall have effect in relation to staffing.  That Schedule gives very extensive powers over staffing to the governing body of a school with a delegated budget, such as Langleywood School.  Thus, when it comes to the appointment of teachers (other than head teachers and deputy head teachers), it is in effect the governing body which selects the person to fill the vacancy.  It is the LEA which formally makes the appointment but by paragraph 15(1) of Schedule 16 
“the local education authority shall appoint the person recommended or accepted for appointment by the governing body unless he does not meet any staff qualification requirement which are applicable in relation to his appointment.” (emphasis added)
12.	It is the governing body (and indeed the head teacher) which has the power to suspend a teacher where his exclusion from the school is required, and it also has the power to end such a suspension: paragraph 24(1) and (3).  Likewise, the governing body has the power to decide that a teacher at the school should be dismissed.  The procedure is similar to that for appointments: the governing body notifies the LEA of its decision and the reasons for it and, if the teacher in question works solely at that school, the LEA is required to terminate his contract of employment: paragraph 25(1) and (2).  
13.	Paragraph 22 of Schedule 16 deals with the powers of the governing body in respect of teachers and other staff at the school during the time those individuals are employed at the school.  The material parts of the paragraph (which is headed “Discipline”) for present purposes are subparagraphs 1, 2 and 5.  They provide as follows:
“22. – 	(1) The regulation of conduct and discipline in relation to the staff of the school, and any procedures for giving members of the staff opportunities for seeking redress of any grievances relating to their employment, shall be under the control of the governing body.
(2) The governing body shall establish – 
(a) disciplinary rules and procedures (including such rules and procedures for dealing with lack of capability on the part of members of the staff), and 
(b) procedures such as are mentioned in sub-paragraph (1);
and shall take such steps as appear to the governing body to be appropriate for making them known to members of the staff.
…
…
(5) Where the implementation of any determination made by the governing body in the exercise of their control over the conduct and discipline of the staff requires any action which – 
(a) is not within the functions exercisable by the governing body by virtue of this Act, but
(b) is within the power of the local education authority, 
the authority shall take that action at the request of the governing body.”
14.	It is clear that an LEA retains certain powers in respect of the employment of teachers at a school with a delegated budget.  As has already been indicated, it can decline to appoint a teacher recommended by the governing body if he does not meet the staff qualification requirements, which by paragraph 1(3) relate to qualifications, registration, health and physical capacity, and fitness on educational grounds or in any other respect.  It has some powers to dismiss a teacher without there having been a decision to that effect by the governing body, but these powers exist only in very limited circumstances: see paragraph 29.  And the LEA’s chief education officer is entitled to give advice to a governing body on teacher appointments: paragraph 18.  But this recital of those retained powers serves only to emphasise how extensive are the powers of a governing body of a school with a delegated budget with respect to the employment of teachers.  The contract of employment may be with the LEA, but the bulk of the powers of an employer are given to the governing body.
15.	This structure set up by the 1998 Act inevitably has a bearing on a range of matters which can be brought by an employed teacher before an employment tribunal, whether in respect of unfair dismissal or alleged discrimination on grounds of race, sex or disability.  It was suggested in argument that it was late in the passage of the Bill through Parliament that it was realised that some clarification as to who was to be treated as the employer for such purposes was required.  Be that as it may, there is no doubt that the 1998 Act left such clarification to be dealt with by subordinate legislation.  Section 81(1) gave to the Secretary of State the power to make by order 
“such modifications in any enactment relating to employment, and in particular in any enactment – 
(a)	conferring powers or imposing duties on employers,
(b)	conferring rights on employees, or 
(c)	otherwise regulating the relations between employers and employees, 
as he considers necessary or expedient in consequence of the operation of sections 54 and 57(1) to (3), Schedule 16 and paragraph 27 of Schedule 17.”
16.	That power was exercised by the Secretary of State in making the Education (Modification of Enactments Relating to Employment) Order 1999 (“the 1999 Order”).  The relevant parts of that Order for present purposes provide:
“Interpretation
2.(2) In this order references to employment powers are references to the powers of appointment, suspension, discipline and dismissal of staff conferred by or under sections 54 and 57(1) to (3) of, and Schedule 16 and paragraph 27 of Schedule 17 to, the 1998 Act.
General modifications of employment enactments
3. (1) In their application to governing bodies having a right to a delegated budget, the enactments set out in the Schedule shall have effect as if – 
(a) any reference (however expressed) to an employer, a person by whom employment is offered, or a principal included a reference to the governing body acting in the exercise of their employment powers and as if that governing body had at all material times been such an employer, person or principal;
(b) in relation to the exercise of the governing body’s employment powers, employment by the local education authority at a school were employment by the governing body of that school; 
(c) references to employees were references to employees at the school in question.”
17.	The Schedule to the 1999 Order, referred to in the early part of Article 3(1), lists a number of statutory provisions, including those in the Sex Discrimination Act 1975 and the Race Relations Act 1976 which enable claims of discrimination to be brought against an employer or prospective employer, and a number of sections of the Employment Rights Act 1996, including those dealing with unfair dismissal.  Sections 4 to 6 of the DDA are also listed, those being the provisions under which Mrs Murphy brought her claim in the present case.  So Article 3(1) of the Order applies to them.
18.	Article 6 of the 1999 Order, insofar as material, states:
“Applications to Employment Tribunals
6 (1) Without prejudice to articles 3 and 4, and notwithstanding any provision in the Employment Tribunals Act 1996 and any regulations made under section 1(1) of that Act, this article applies in respect of any application to an employment tribunal, and any proceedings pursuant to such an application, in relation to which by virtue of article 3 or 4 a governing body are to be treated as if they were an employer, person by whom employment is offered , or a principal.
(2) The application shall be made, and the proceedings shall be carried on, against that governing body.
…
(4) Where any application is made against a governing body pursuant to paragraph 2 – 
(a) the governing body shall notify the local education authority within 14 days of receiving notification thereof; and
(b) the local education authority shall, on written application to the employment tribunal, be entitled to be made an additional party to the proceedings and to take part in the proceedings accordingly.”
(iii) The Arguments
19.	It is these provisions of the 1999 Order which are at the heart of this case.  The employment tribunal seems to have regarded them as making the governing body the employer in all cases brought by a teacher under the DDA.  Some passages in the EAT’s decision appear to proceed on the same basis, though elsewhere in that decision the EAT makes it clear that it is dealing specifically with the claim brought by this appellant.  Mr White, Q.C., on behalf of Mrs Murphy, submits that the 1999 Order does not mean that only the governing body can be made the respondent to a claim under the DDA brought by a teacher at a school with a delegated budget.  He draw attention to the wording of Article 3(1)(a), by which a reference to an employer
“included a reference to the governing body.” (emphasis added)

20.	That in itself does not substitute the governing body for the LEA, but merely adds the governing body as an employer.  Those words, says Mr White, are not words of exclusion so as to exclude the LEA from the category of employer.  He also emphasises that some employment powers remain with the LEA (as indeed I have set out earlier in this judgment) and that, when it comes to an alleged breach of the employer’s duty under section 6 of the DDA, some of the steps which are reasonably required to prevent the disabled person being placed at a substantial disadvantage may be ones which only the LEA has the power to take.  In this respect the appellant relies on some of those steps listed as examples in section 6(3) of the DDA.  Making adjustments to premises may, in some instances, require capital expenditure the expending of which lies outside the power of the governing body.  Transferring a disabled teacher to fill a vacancy at another school is again a matter for the LEA, not for the governing body of the school at which the teacher is currently employed.  Such instances, it is submitted, demonstrate that an “All or Nothing” approach to claims by a teacher under the DDA is wrong.
21.	I agree, and Mr Oldham for the respondent does not seek to argue otherwise.  In my judgment, the key to this issue is to be found in the words in Article 3(1)(b) 
“in the exercise of the governing body’s employment powers.”

Similar wording appears in Article 3(1)(a).  It is clear that the liability of the governing body as an employer when a claim is brought by a teacher under the DDA exists, and only exists, when the claim relates to the exercise by such a body of the employment powers vested in it.  That makes practical sense.  If complaint is being made about the exercise of an employment power retained by the LEA, the originating application lodged with the employment tribunal should cite the LEA as the respondent.  But where the power being exercised is one vested in the governing body, that body is the proper respondent.
22.	It is conceded on behalf of the appellant that if the act complained of is one where the governing body is given the power, then only that body can be made a respondent.  The LEA in such a case has no liability as an “employer”, despite the contract of employment.  That seems to me to follow from the wording of Article 3(1)(b) of the 1999 Order, which in relation to the exercise of the governing body’s employment powers, provides that the specified statutory provisions have effect as if the employment 
“were employment by the governing body of that school.”
Those are words of substitution, making the governing body and not the LEA the employer in such cases.  As I have indicated, Mr White accepts that that is so.  It is also interesting to observe that the relevant government circular on these matters, D f EE Circular 20/99, adopts the same approach.  Paragraph 17 of the circular states:
“This means that the governing bodies of LEA maintained, voluntary controlled, community and community special schools, must not discriminate against disabled employees or prospective employees when exercising their staff powers, for example, when appointing or dismissing staff.  Governing bodies are also responsible, within the limits of their powers, for making reasonable adjustments to their employment arrangements or premises for disabled employees or prospective employees.  LEAs must not discriminate against disabled employees or prospective employees when exercising their employer powers, for example, when offering professional advice to governing bodies about teacher appointments or checking that the selected candidate meets the legal requirements on health before formally appointing them to the post.  LEAs too, not least as employer, are responsible for considering reasonable adjustments.  Given that both LEAs and governing bodies have duties under the DDA, they may find it useful to consult closely with each other in taking decisions on the employment of disabled people.”
23.	But though the employment tribunal was too sweeping in its description of the legal position, that is not the end of the matter.  This court needs to determine whether or not it was right to decide that the Governing Body was the proper respondent, and the only proper respondent, to this claim.  The crucial question in the present case is whether the refusal of paid leave to Mrs Murphy was an exercise by this Governing Body of its “employment powers” as defined by Article 2(2) of the 1999 Order.  If so, that body was and is the correct respondent.  The appellant argues that the power to grant or refuse paid leave to a teacher does not fall within that definition, which only refers to “powers of appointment, suspension, discipline and dismissal of staff” and requires those powers to have been conferred by or under certain specified statutory provisions.  The main provision listed is Schedule 16 of the 1998 Act, whose terms have been described earlier in this judgment.  Mr White points out that there is no reference to any power in Schedule 16 to grant or refuse paid leave to a teacher for reasons of maternity or indeed any other reason.  In the course of argument he was driven to contend that the governing body of such a school has no power from any statutory source to grant or refuse leave, whether paid or unpaid and whatever the reason.  The consequences of his submission would be that such leave could only be granted or refused by the LEA under its powers conferred by the contract of employment.  As this would include such everyday matters as the granting of compassionate leave, it was acknowledged that the result of this argument may not be practical or desirable, but it follows (it was said) from the absence of any express statutory power in Schedule 16 or elsewhere.
24.	In advocating this interpretation, Mr White sought to distinguish this court’s decision in Green v. Governing Body of Victoria Road Primary School and the Kent County Council [2004] EWCA Civ 11; [2004] ICR 684.  There too this court had to consider the meaning of the phrase “employment powers” in the 1999 Order, and it held that, despite the absence of any express reference to constructive dismissal in the Order or in Schedule 16 to the 1998 Act, those powers were wide enough to render the governing body of a community school with a delegated budget the proper respondent to a claim of unfair constructive dismissal.  The LEA was dismissed from the proceedings.  Pill LJ referred to paragraph 22 of Schedule 16 (set out earlier in this judgment) and observed that the word “discipline” in that paragraph appeared to be widely defined and to include exercises of power which would affect the interests of members of staff.  He went on at paragraph 23 of his judgment to state:
“Paragraph 22 describes broad management functions in relation to staff including control over the conduct and discipline of the staff and disciplinary rules and procedures.  The governing body is entitled to determine the capability of members of the staff and shall establish rules and procedures for dealing with lack of capability.”
At paragraph 24 he added:
“The words conduct and discipline in paragraph 22 of Schedule 16 should, in the statutory context, be given a broad construction.”
25.	Mummery LJ did not rely simply on paragraph 22 of Schedule 16 but on the wider legislative framework.  He said at paragraph 39 of his judgment:
“Although the references to “employment powers” in article 2(2) and the statutory provisions mentioned there, notably Schedule 16 of the 1998 Act, do not expressly cover the case of constructive dismissal, it is, in my view, implicit in the scheme of the Order and related legislative provisions, read as a whole and with regard to their procedural context and objective, that the governing body are the proper respondent to all employment tribunal applications arising out of the dismissal of staff, whether the result of (a) invoking the procedure for the exercise of an express power of dismissal terminating a contract of employment or (b) other actions by a governing body in relation to the treatment of staff in the community school, which could lead to the termination of a contract of employment and to alleged unfair dismissal.”
26.	May LJ agreed that the employment powers of a governing body referred to in article 2(2) of the 1999 Order are wide enough to embrace a claim for constructive dismissal, though he was unwilling to identify any single paragraph of Schedule 16 as being that which conferred the relevant power.  He described the words “the powers of appointment, suspension, discipline and dismissal of staff” in article 2(2) as being “a legislative signpost, not a definition.”
27.	Mr White draws attention to the differences in reasoning in the judgments in Green and emphasises that the case was not concerned with the DDA but with a claim for constructive dismissal.  That is true, but it has to be borne in mind that discrimination by an employer against a disabled person may be such as to amount to a constructive dismissal: see, for example, Nottinghamshire County Council v. Meikle [2004] EWCA Civ 859; [2004] 4 All E.R. 97.  What undoubtedly emerges from the Green judgments is the need for a broad purposive approach to the construction of the relevant legislative provisions.  Moreover, as Mr Oldham pointed out in argument, it would be wrong to interpret the word “discipline” in paragraph 22 of Schedule 16 as referring only to cases where there has been some form of misconduct on the part of a teacher.  Paragraph 22 (2) (a) expressly refers to “lack of capability” as part of the subject-matter of disciplinary rules and procedures, and “capability” in the employment context is to be taken to include limitations relating to health: see, for example, section 98(3)(a) of the Employment Rights Act, 1996.  So when paragraph 22 places “the regulation of conduct and discipline” in relation to staff under the control of the governing body, that power to regulate is clearly an extensive one.  That is reinforced by the fact that it is the governing body which controls the procedures by which teachers may seek redress of “any grievances relating to their employment”: paragraph 22(1) (my emphasis).  I therefore regard that paragraph as one which does implicitly give the governing body the power to grant leave to a teacher for reasons relating to physical and mental health.
28.	That must be the source of its power to grant maternity leave in cases of more conventional childbirth.  It clearly has that power: one of the statutory provisions listed in the Schedule to the 1999 Order is section 71 of the Employment Rights Act 1996, which is the provision dealing with an employee’s right to ordinary maternity leave.  There would have been no purpose served by including that section in the Schedule if the governing body of such a school were not the employer for the purpose of granting such maternity leave and dealing with the consequences thereof.
29.	Looking at the matter more widely, one needs to bear in mind that the governing body of a school with a delegated budget is patently given the power by Schedule 16 to appoint, suspend and dismiss a teacher, and that the LEA has no power to prevent the suspension or dismissal of a teacher from employment at the school in question.  In those circumstances it would be an absurdity if the governing body were not to be held to have the power to grant leave to a teacher at its school, whether on compassionate grounds or for any other proper purpose, and to decide whether or not such leave should be paid or unpaid.  Its financial powers granted by section 50(3) of the 1998 Act confirm that: see paragraph 10 of this judgment.  I am satisfied therefore that, for all these reasons, the governing body of such a school has that power and only the governing body of such a school has that power.

30.	That means that the Governing Body of Langleywood School was the only proper respondent to the complaint about the refusal of paid leave in the present case.  That is so, whether the complaint is  presented as one of less favourable treatment under section 5(1) of the DDA or as one of failure to comply with a section 6 duty to make reasonable adjustments by granting paid leave, thereby breaching section 5(2).  During the course of argument it was contended by the appellant that, while that might be so, nonetheless the LEA was involved in the decision to refuse paid leave, because it refused to provide extra funding to the Governing Body from its contingency fund.  Consequently, submits Mr White, the LEA was in breach of its duty to make reasonable adjustments.

31.	While I accept that the LEA in a particular case can properly be made a respondent to a DDA claim where it has used or failed to use its powers in such a way that it has not performed a duty resting on it under section 6 of the DDA, this is not such a case.  The claim in the present case, as the Amended Details of Complaint filed with the employment tribunal demonstrate, was based on the refusal of paid leave.  There was no mention of the decision of the LEA not to provide additional funding for the school from its contingency fund.  That decision may have made the Governing Body’s position more difficult, but ultimately it was for the Governing Body to decide whether or not to grant paid leave.  That body still retained the discretion to grant paid leave, despite the refusal of extra money by the LEA.  In those circumstances I cannot accept that the LEA is responsible for the Governing Body’s decision.  
32.	On this, the main issue, I conclude therefore that the EAT and the employment tribunal were right to find that the Governing Body was the only proper respondent, even though the employment tribunal arrived at that finding on too sweeping a view of the law.  On the facts of this case, the finding was correct.
Justification
33.	This issue has to be considered on the basis that the Governing Body was the appropriate respondent.  The employment tribunal and the EAT both found that the refusal of paid leave was justified, whether one was dealing with the claim under section 5(1) or section 5(2) of the DDA.  The relevant parts of the statutory provisions are as follows:
“5. Meaning of “discrimination”
(1) For the purposes of this Part, an employer discriminates against a disabled person if -
(a) for a reason which relates to the disabled person’s disability, he treats him less favourably than he treats or would treat others to whom that reason does not or would not apply; and
(b) he cannot show that the treatment in question is justified.
(2) For the purposes of this Part, an employer also discriminates against a disabled person if –
(a) he fails to comply with a section 6 duty imposed on him in relation to the disabled person; and
(b) he cannot show that his failure to comply with that duty is justified.
(3) Subject to subsection 5, for the purposes of subsection (1) treatment is justified if, but only if, the reason for it is both material to the circumstances of the particular case and substantial.
(4) For the purposes of subsection (2), failure to comply with a section 6 duty is justified if, but only if, the reason for the failure is both material to the circumstances of the particular case and substantial.
(5) If, in a case falling within subsection (1), the employer is under a section 6 duty in relation to the disabled person but fails without justification to comply with that duty, his treatment of that person cannot be justified under subsection (3) unless it would have been justified even if he had complied with the section 6 duty.
6 Duty of employer to make adjustments
(1) Where – 
(a) any arrangements made by or on behalf of an employer, or 
(b) any physical feature of premises occupied by the employer, 
place the disabled person concerned at a substantial disadvantage in comparison with persons who are not disabled, it is the duty of the employer to take such steps as it is reasonable, in all the circumstances of the case, for him to have to take in order to prevent the arrangements or feature having that effect.
(2) Subsection (1)(a) applies only in relation to -
(a) arrangements for determining to whom employment should be offered;
(b) any term, condition or arrangements on which employment, promotion, a transfer, training or any other benefit is offered or afforded.
(3) The following are examples of steps which an employer may have to take in relation to a disabled person in order to comply with subsection (1) –
(a) making adjustments to premises;
(b) allocating some of the disabled person’s duties to another person;
(c) transferring him to fill an existing vacancy;
(d) altering his working hours;
(e) assigning him to a different place of work;
(f) allowing him to be absent during working hours for rehabilitation, assessment or treatment;
(g) giving him, or arranging for him to be given, training;
(h) acquiring or modifying equipment;
(i) modifying instructions or reference manuals;
(j) modifying procedures for testing or assessment;
(k) providing a reader or interpreter;
(l) providing supervision.
(4) In determining whether it is reasonable for an employer to have to take a particular step in order to comply with subsection (1), regard shall be had, in particular, to –
(a) the extent to which taking the step would prevent the effect in question;
(b) the extent to which it is practicable for the employer to take the step;
(c) the financial and other costs which would be incurred by the employer in taking the step and the extent to which taking it would disrupt any of his activities;
(d) the extent of the employer’s financial and other resources;
(e) the availability to the employer of financial or other assistance with respect to taking the step.
This subsection is subject to any provision of regulations made under subsection (8).”
34.	In dealing with the claim under section (5)(1), the employment tribunal considered justification only “for the avoidance of doubt”, since the majority had already concluded that the treatment of Mrs Murphy was not less favourable for a reason relating to her disability.  In the EAT’s decision, the defence of justification became more critical, because of the EAT’s conclusion that she had been less favourably treated.
35.	The employment tribunal referred to the decision of this court in Jones v. The Post Office [2001] EWCA Civ 558, [2001] ICR 805, in reliance on which it stated:
“16. The Tribunal must consider the materiality and substantiality of the employer’s reason.  Provided the opinion of the employer is for a reason which is both material to the particular case, even if it is different from the decision that the Tribunal itself might reach, in the absence of any perverseness it should apply.  The Tribunal heard extensive evidence about the state of Langley Wood School.  It was a school that had been the subject of special measures i.e. deemed to a failing school.  In order to address those special measures, it had been necessary for Mrs Alder as Head Teacher to appoint staff on higher than standard salaries for the area.  The school budget was in deficit and the Tribunal was advised, but without any documentary evidence to support it, the LEA’s budget was also in deficit.
…
17. Mrs Alder gave evidence that the impact on the school should they pay the applicant was that they would be unable to recover any of those costs as they would have been, had it been statutory maternity pay and it would be the equivalent amount to about the cost of two pupils in a year.  With a school budget that was in deficit this was money that they could not afford.  Having received advice that the applicant should be treated the same as if she were a person adopting a child, she was given leave of absence, unpaid.  We considered that given the financial situation of the school such a view was justified.”
This was the unanimous view of the employment tribunal, which then turned to deal with the section 5(2) claim.  On this it said (in two paragraphs both numbered 18):
“The Section 5(2) claim which related to the adjustments made i.e. the provision of paid leave of absence: For the reasons set out for the majority in relation to the Section 5(1) claim, the majority again found that the respondent had not failed to comply with their duty.  They had provided the applicant with leave, albeit not paid.  For the same reasons as set out in the minority view above, the minority, Mr Appleton, again found that the applicant was placed at a substantial disadvantage in comparison to a person who is not disabled.
The Tribunal unanimously considered that if there were a Section 5(2) duty, the defence of justification again applied.  For the same reasons as set out in paragraph 17 above, the reason that paid as opposed to unpaid leave, was not provided related to the predicament of the school as such that it was a material and substantial reason which related to the failure to apply the adjustment.  The school was entitled to rely on Section 6(4)(d) & (e).”
36.	The EAT, following the approach in Jones, upheld the decision on justification in respect of the section 5(1) claim.  In dealing with the section 5(2) claim that there had been a failure to make reasonable adjustments, it noted that:
“It was not suggested by [Counsel for the appellant] that the conclusion on the justification defence in relation to the adjustment issue should be different from this Appeal Tribunal’s decision on the justification defence in relation to the discrimination issue.”
37.	It then stated that there was an additional reason why the decision on justification on the section 5(2) claim should be upheld, and this was because of the provisions of section 6(4).  The EAT said:
“The factors in s. 6(4) to which we have referred justify the decision of the school not to make an adjustment so that the appellant received paid leave.  So we agree with the Employment Tribunal on this issue.”
38.	The appellant makes a number of criticisms of both the employment tribunal’s and the EAT’s decisions on this aspect of the case.  Most of them concern the section 5(2) claim.  However, Mr White does submit that it was wrong for the section 5(1) claim to have been considered before the section 5(2) claim, because of the terms of section 5(5).  That subsection prevents justification succeeding under section 5(3) in respect of a less favourable treatment claim under section 5(1) unless the treatment would have been justified even if he had complied with the section 6 duty.  The appellant places reliance on the decision of the EAT, presided over by Cox J., in Paul v. National Probation Service [2004] IRLR 190, where at paragraph 20 it was said that, where there are claims under both section 5(1) and 5(2), then if the section 5(2) claim succeeds the tribunal must return to the issue of justification in respect of the section 5(1) claim.
39.	I agree with the way the EAT approaches the matter in paragraph 20 of Paul, though I would emphasise what it went on to say in the first part of the paragraph immediately following, namely that:
“there is no requirement for a tribunal always to follow a rigid, formulaic approach to the questions to be asked.”
But this point does not arise if the tribunal properly finds that the section 5(2) claim fails.  So this criticism of the decision on justification in respect of the section 5(1) claim is dependent on the outcome of the appellant’s challenge to the decision on whether there was justification in respect of the section 5(2) claim.  I turn therefore to that issue.
40.	Here the appellant principally attacks the reasoning of the employment tribunal.  Mr White submits that the reference at the end of the second paragraph 18 to section 6(4)(d) and (e) was inappropriate when dealing with justification.  Those provisions concern whether or not there has been a breach of duty, a question to be answered before one gets to the issue of justification.  Reliance is placed on the decision of this court in Collins v. Royal National Theatre Board Limited [2004] EWCA Civ 144; [2004] IRLR 395.  The same error was made, it is said, by the EAT when it took account of the section 6(4) factors in considering the issue of justification.  It is also argued that it was wrong of the tribunal to adopt the Jones approach to justification when dealing with a section 5(2) claim.
41.	I see theoretical force in these points.  However, this is a case where the breach of duty said to give rise to the issue of justification is the refusal to grant paid leave to Mrs Murphy.  This is the identical action by the Governing Body complained about in the section 5(1) claim, which the employment tribunal clearly regarded as justifiable treatment because of the financial predicament of the school.  While the employment tribunal and the EAT should more properly have treated those financial problems as going to whether or not there had been a breach of duty at all by the Governing Body (in the light of the Collins decision), it is to my mind quite obvious what their finding on that issue would have been.  The employment tribunal expressly referred in its decision on justification in the second paragraph 18 to the reasons it had set out in paragraph 17.  There it had accepted the evidence of the head-teacher about the impact which paid leave would have had on the school’s precarious financial position, and it clearly saw that as justifying the Governing Body’s decision.  It is inconceivable that, properly applying Collins, it would have found that that same decision amounted to a breach of the section 6 duty.
42.	In those circumstances I can see no proper basis on which this appeal should be allowed on the issues raised in this part of the case.  It follows that I would dismiss this appeal.
Lord Justice Neuberger:
43.	I agree.
Lord Justice Pill:
44.	I agree that the appeal should be dismissed.  I agree with Keene LJ’s analysis of the employment powers of a Governing Body and in particular of paragraph 22 of Schedule 16 to the School Standards and Framework Act 1998.
45.	The Employment Tribunal put it too broadly when holding (paragraph 9) that for “all matters” arising under the Disability Discrimination Act 1995 (“the 1995 Act”) the Governing Body is the employer but the power to grant leave and decide whether it should be paid or unpaid is that, and only that, of the Governing Body.  Nor can the LEA be made a party by the indirect route of identifying, as the reason for the Governing Body’s decision that the leave should be unpaid, the refusal of the LEA to provide additional funding for paid leave.  An employer’s decisions affecting an employee will often be taken for reasons arising from the conduct  of other parties.  That normally does not give rise to a claim by the employee against these parties.
46.	I also agree with the conclusion of Keene LJ on the justification issue.  On the findings of fact, a breach of duty by the Governing Body cannot be established.
47.	In paragraph 9 of his judgment, Keene LJ refers to the practical consequence, in the context of the 1995 Act, of the issue as to who is the appropriate respondent.  This deserves emphasis, though I am expressing no view upon the merits of the degree of autonomy conferred by the legislation on the governing bodies of certain schools.  Issues under sections 5 and 6 of the 1995 Act may well be decided differently, and I would expect usually less favourably to the employee, when it is the resources of the individual school which fall to be considered under those sections rather than the resources of the LEA.