• Robert Spicer

Employment Tribunal: Costs

COSTS

Costs are not automatically awarded in the ET against a losing party. The tribunal may award costs where it is satisfied that a party has acted vexatiously, abusively, disruptively or otherwise unreasonably, or any claim or response had no reasonable prospect of success. “Vexatious” means bringing proceedings without sufficient grounds, for the purpose of causing trouble or annoyance to the respondent. Whether or not costs should be awarded is entirely a matter for the discretion of the ET.

Claimants need to be prepared to receive a costs warning letter from the other side, often stating that the claim has no chance of success and that an application for costs will be made. This is meant to frighten claimants and it may well succeed in doing so. The current wisdom is that a costs warning has become a standard practice by large firms of solicitors acting for employers. If you have a realistic claim, there is little chance of costs being awarded against you. But note the following recent cases:

£170,000 costs order

Brooks v Nottingham University Hospitals NHS Trust (2018). B made 18 protected disclosures. He complained that he had been subjected to a number of detriments by the employer as a result of having made those disclosures. The complaint was rejected by the ET because B had not established that any of those detriments were because of the disclosures. The employer applied for costs on the basis that B’s allegations were so weak as to have no reasonable prospects of success and B had acted unreasonably in pursuing them. The ET allowed the application and ordered B to pay the employer’s costs, estimated at £170,000. B’s appeal to the EAT was unsuccessful.

Costs limited to amount of compensation

Kuwait Oil Company (KSC) v Al-Tarkait(2019). A was dismissed by K for gross misconduct. He complained of disability discrimination, unfair dismissal and notice pay based on wrongful dismissal. The unfair dismissal claim succeeded. A’s basic award was reduced by 80 per cent for contributory conduct. The ET then dealt with rival costs applications. It decided that the costs awarded to K should be limited to the amount of compensation awarded to A and the costs awarded to the A, on the basis that K should not have incurred any costs in excess of that amount, and it was a reasonable level at which to set costs, taking account of A’s financial resources. K appealed, arguing that the ET had erred in making the orders limiting the costs recoverable by K.

The appeal was dismissed. The order made was sufficiently clear to meet the requirement that it must specify the part of K’s costs payable by A. However, orders such as this one were not to be encouraged. A cap consisting of an exact amount would be much better, and an exact amount could easily have been stated here.

Possible deterrence

Smolarek v Tewin Bury Farm Hotel Ltd (2017). The ET ordered S to pay £5200 costs towards the respondent’s costs of £29,000. It found that S had unreasonably pursued claims with no reasonable prospect of success. The amount of costs was based on S’s ability to pay and would cause her to consider carefully before bringing any further claims. S appealed to the EAT. The appeal was allowed. The award of costs had been partly based on deterrence. This was an improper consideration. The real issue was the appropriate level of award without any consideration of deterrence. The issues were remitted to the tribunal for further consideration.

Amount of costs

Herry v Dudley Metropolitan Council and another (2017). H, a teacher at a community school, complained of race, sex and disability discrimination based on dyslexia and stress. All the complaints were dismissed. In relation to disability, the employment judge found that H had worked effectively as a teacher for more than two years before taking a long period of sick leave. This indicated that he had developed coping strategies to reduce the effect of any impairment. While stress might have occasionally exacerbated his dyslexia, he had failed to show that either the dyslexia or the stress had a substantial adverse effect on his ability to carry out normal day-to-day activities.

The respondent applied for costs. The tribunal found that H had proceeded with his complaints despite costs warnings from his union and two legal advice centres that his claims had no reasonable prospects of success. The tribunal took account of H’s means and found that although he was impecunious and unable to work, his future earnings prospects were good. He was ordered to pay the whole of the costs which amounted to £110,000. H appealed to the EAT.

The appeal against the costs order was allowed. The ET had been justified in making the order on the basis that H had acted unreasonably and the respondents had acted reasonably. However, the ET failed to explain sufficiently why its award was reasonable and proportionate, or to consider whether it should award a proportion of the costs or cap the amount payable, having regard to H’s ability to pay. The matter would be remitted to the ET to consider the issues.

Costs compensatory not punitive

Oni v Unison (2015). O’s claims to the ET were dismissed. The ET ruled that, by pursuing her claims after a deposit order had been made, she had acted unreasonably and was ordered to pay the whole of the respondent’s costs as assessed by the county court. O appealed to the EAT.

The appeal was allowed.

The ET had not considered whether, despite O’s unreasonable behaviour, it was appropriate and proportionate to make the costs order sought, leaving aside means, but by reference to all the circumstances of the case. Costs orders needed detailed and reasoned consideration. Costs were compensatory and not punitive.

The fact that a party was unrepresented was a relevant consideration.

The means of a party might be considered twice: in whether to make an award and in deciding how much was to be awarded. The tribunal had a broad discretion in making an award of costs but it had to be exercised judicially and reasons ought to be given.

Ability to pay

Flint v Coventry University (2015). F was refused an adjournment and withdrew his ET claim. The tribunal dismissed the claim and ordered him to pay £9000 costs, having considered his ability to pay. F appealed to the EAT.

The appeal was allowed.

The means of a party to pay costs should be considered at two stages: first, if an award should be made, and second, the amount of the award. It was not compulsory for a tribunal to consider means.

The tribunal had failed to take into account relevant matters which went to the ability to pay. Alternatively, it had taken into account irrelevant matters or simply reached a perverse conclusion on the evidence before it.

Risk warning

Hussain v Nottinghamshire Healthcare NHS Trust (2016). During the hearing of a claim by H, the tribunal judge warned him that the apparent weaknesses in his case were such that a costs award might be made against him. After the case was adjourned, H lodged a complaint that the tribunal was biased. This was rejected. On the determination of the employer’s application for £100,000 costs, the tribunal noted that the employer had written to H three times pointing out the weaknesses in his claims and putting him on notice that it would seek costs against him. It awarded costs of 85 per cent of the total claimed. H appealed to the EAT which stated that tribunals have to give guidance to parties as to how their case might be viewed and the risks they might be taking if they continue down a particular path.

The EAT decided that the tribunal had not made up its mind early on. It had simply warned H of the risks. The tribunal had not adequately explained why it had made an order for 85% of the costs. This point was remitted to the same tribunal.

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