A costly business - Case Round-Up: October 2016

In this month's round-up, Mark Shulman, consultant solicitor with Keystone Law, looks at recent decisions on ET costs orders.

Mark Shulman*, Consultant Solicitor at Keystone Law
ET Rules
Rule 76 of the Employment Tribunal Rules of Procedure (in Schedule 1 to The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013) provides as follows:

"(1) A Tribunal may make a costs order or a preparation time order, and shall consider whether to do so, where it considers that -

(a) a party (or that party's representative) has acted vexatiously, abusively, disruptively or otherwise unreasonably in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted; or
(b) any claim or response had no reasonable prospect of success."

Rule 80 of the ET Rules permits an ET to make a "wasted costs" order where a party has incurred costs -

"(a) as a result of any improper, unreasonable or negligent act or omission on the part of the representative; or
(b) which, in the light of any such act or omission occurring after they were incurred, the Tribunal considers it unreasonable to expect the receiving party to pay."

These rules, whilst simple to understand, do sometimes present issues in their application. Recent cases reflect how in practice ETs should approach the making of costs orders, both as between the parties and also where there is an application made for wasted costs against a representative.

Unreasonable conduct
Should a costs order have been made against a Claimant who left the ET on the second day of a 7-day hearing when her application for an adjournment had been refused? Yes, said the EAT in [Itulu v London Fire & Emergency Planning Authority ]()UKEAT/0055/16/LA, but the amount of costs ordered to be paid was reduced.

The Claimant made complaints of direct race discrimination, victimisation and unlawful deduction from wages. They were listed together for a 7-day hearing. However, the Claimant and her representative left the ET on the second day of the hearing after they were unsuccessful in certain procedural applications. The hearing proceeded for another 2 days in their absence and judgment was made against the Claimant. The Respondent claimed costs. That claim was limited to counsel's fees for the hearing (rather than the total costs exceeding £40,000), the Respondent contending that the Claimant's actions were unreasonable in not withdrawing her claim, but refusing to participate in the proceedings.

The ET found that the Claimant had acted unreasonably in absenting herself from the hearing when her applications for strike out and an adjournment were refused. Instead of withdrawing her claims, the Claimant had left the Respondent to call all of its witnesses. A costs order was made against her in the sum of £1,900 (representing the refresher fees of £950 a day for counsel on the second and third days of the hearing) and she appealed.

Was a costs order appropriate?
At the EAT, the Claimant contended that:

the only result of the Claimant absenting herself was that the costs liability of the Respondent reduced*; it did not increase - effectively, a 7-day hearing was reduced to a 4-day hearing; * any costs after the Claimant absented herself were caused by the ET's decision to proceed with the hearing, not by her conduct, as the ET could have dismissed the claims without further evidence or accede to the Respondent's strike out request.

The EAT rejected these arguments. It ruled that the Claimant's departure from an ET in the circumstances, leaving the case to proceed or be disposed of in her absence, was plainly unreasonable conduct both by the Claimant and her representative. In their absence, the claim was doomed to failure but they took no steps to withdraw it. They left the ET to dispose of it, which involved the Respondent calling its witnesses.

Secondly, the Claimant could have no complaint that the ET had chosen to continue with the hearing. It had read its way into the papers on the first day. There was a public interest in the open determination of claims of race discrimination and the Respondent had brought  witnesses and could bring others the following day. Further, the ET had warned the Claimant that it might take this course and the need to dispose of the case one way or the other was the result of the Claimant's actions.

*Amount of costs
*It was also argued that the refresher fee for the Respondent's counsel for the second day of the hearing had already been incurred prior to the decision of the Claimant to absent herself. This, it was argued, could therefore not be attributed to the Claimant's conduct.

On this point the EAT agreed. The ET had been careful to restrict its criticism of the Claimant to the moment on the second day when she absented herself from the hearing. By that time the refresher for the second day had already been incurred. The ET had not explained why it awarded the refresher for the second day. It is possible that it had some specific reason for doing so but it was also possible that it had simply overlooked that the £950 fee for the second day had already been incurred.

Given the ET's decision that the unreasonable conduct was the Claimant absenting herself on day two, it would be bound at the very least to give some reasoning for awarding an item of costs incurred prior to that time.

Therefore, since the £950 was incurred prior to the commencement of the Claimant's unreasonable conduct, on a proper appreciation of the facts and the law, the ET ought not to have awarded it and so the EAT itself reduced the costs order to the sum of £950.

EAT costs
As she had been partly successful, the Claimant claimed her fees of £1,600 for the appeal to the EAT. However, although the EAT decided that the Claimant ought to have the bulk of her costs (because it was necessary for her to incur expense in order to bring the appeal), in the exercise of its discretion, the sum of £1,000 was appropriate.

In [Hussain v Nottinghamshire Healthcare NHS Trust ]()UKEAT/0080/16/DM (another case on unreasonable conduct), the EAT also had to consider when such conduct started and therefore from what date costs should be awarded.

During the hearing of claims of victimisation, disability discrimination, race discrimination and of unfair dismissal, the Claimant alleged there was an appearance of bias from the ET. He wrote a lengthy letter of complaint against the ET to the Regional EJ, who duly investigated and responded in detail rejecting the complaint and advising the Claimant as to other possible courses open to him, including as to how an application might be made for an ET panel to recuse itself. Upon the resumption of the ET Liability Hearing the Claimant made no such application.

Also during the liability hearing, the ET had warned the Claimant about the apparent weaknesses in his case - other than the unfair dismissal claim and an aspect of the disability discrimination claim - and that a costs award might be made against him.

After all of the Claimants claims were dismissed, the Respondent made an application for costs in a total sum of £94,156.96 (to be assessed by the County Court), on the basis that the Claimant had acted unreasonably in the bringing of the proceedings and/or their pursuit or, alternatively, that the claims were misconceived. It also came to light that the Respondent had written in a careful and balanced way to the Claimant on three occasions putting him on notice as to its view of the merits and likely outcomes of the claims and also of its intention to seek its costs and the possible amount of those costs should he continue. In addition, it had offered that it would forgo its costs if the Claimant withdrew his claims, but he did not do so.

The ET made a costs order against the Claimant on the basis that he had behaved "otherwise unreasonably" in pursuing the proceedings "at latest from the first costs warning". Having regard to the Claimant's means and the fact that the unfair dismissal case "just about might have had some reasonable prospect of success requiring a Hearing", the ET assessed the appropriate level of an award of costs to be 85% of the total claimed.

*Inadequate reasons
*At his appeal to the EAT the Claimant submitted that the ET had been wrong in making an award for all of the Respondent's costs, including those incurred prior to the Respondent's first costs warning, when some of the overall costs had already been incurred (on other aspects of the case prior to the Claimant lodging his fourth and final claim).

The EAT agreed that this had not been explained and confirmed that a party against whom a costs Order has been made is entitled to understand the basis for the award. There had been a 15% reduction expressly related to the unfair dismissal claim. The figure of 15% was a matter for the ET and it had properly carried out a broad brush assessment and was best placed to determine how to proportion the relevant costs between the different types of claims and in the best position to assess how the unfair dismissal case would have gone, how long it would have taken, and the likely costs involved if the other claims had not been pursued.

The focus of the ET's decision had very much been on the reasonableness of the Claimant's conduct in pursuing his claims once the weaknesses of those claims and the possible risks of a costs application had been made clear to him by the Respondent (the first costs warning). However, it appeared that no allowance had been made for the period prior to the first costs warning – the ET's order was for 85% of the total costs.

Therefore, the case was remitted to the original ET for consideration of the sole issue as to whether the ET's award of 85% of the total costs was meant to apply to costs post-dating the first costs warning sent by the Respondent, or to all costs and, if the latter, on what basis that award was made.

Wasted costs
Had an ET correctly approached the making of a wasted costs order against solicitors? No, said the EAT in [Isteed v London Borough of Redbridge ]()UKEAT/0442/14/DA.

The Claimant made claims of unfair dismissal and unlawful age discrimination arising from his retirement from employment at the age of 65, but the solicitors representing him lodged the claims out of time. At a hearing 2 years later and after a protracted series of hearings, the ET ruled that they did not have jurisdiction to hear the claims and they were dismissed. The Respondent made an application for wasted costs, in the sum of around £35,000 (to be assessed), against the Claimant's solicitors. The EJ acceded to that application and made a wasted costs order.

Three-stage approach to wasted costs
The solicitors appealed on various grounds, including that the EJ made no express reference to nor had applied the well established guidelines identified in cases such as Ridehalgh v Horsefield [1994] EWCA Civ 40 when making a wasted costs order and in particular, failed to apply the three-stage approach that is required.

The EAT confirmed that the failure by the EJ to refer to case authorities on wasted costs did not of itself give rise to any arguable error of law. However, the jurisdiction to make a wasted costs order extended only to conduct that had actually caused wasted costs and only to the extent of such wasted costs. Such a causal link was essential; where the conduct is proved but there are no wasted costs, that was not a matter for the exercise of the wasted costs jurisdiction.

The EJ had not made positive findings on causation (even though he had negatively excluded from the Costs Schedule those matters he regarded as caused by the ET's maladministration). The absence of positive findings meant that there was no proper examination of how precisely the unreasonable conduct had caused the specific costs said to have been wasted. That analysis was missing. One example was that £22,000 had been claimed in wasted costs for an aborted full hearing (listed on that basis through no fault of the Claimant's solicitors). In fact, the matter should have been listed for a preliminary hearing. However, the EJ had not explored the question whether the Respondent ought to have requested a Preliminary Hearing at an early stage or whether the Respondent ought to have considered not incurring the costs of preparing for the Full Hearing in circumstances where a limitation argument was to be pursued.

The reality was that the issue of causation had not properly been explored. The EJ had simply excluded those costs that were plainly and obviously caused by the ET's maladministration and the remaining costs were costs that he ordered on the assumption that they were attributable to the negligence or the unreasonable conduct found. That, the EAT held, was inadequate and an error of law which vitiated the wasted costs order (the appeal was also allowed on other grounds).

Mark Shulman is a Consultant Solicitor with Keystone Law and an accredited workplace and employment mediator. His blog on new employment legislation can be found here.

Published: 10/10/2016 12:08

Sign up for free email alerts

Email address
First name
Last name
Receive daily
Receive weekly
I agree to this site's terms and conditions