The claimant was represented by the appellant in this appeal, who had no formal legal qualifications. He told the EJ that he was to take the ILEX qualification and that he acted for no profit. The claimant lost her claims at the ET and the respondent applied for a wasted costs order which was granted but only against the claimant's representative. The EJ said that the appellant's behaviour was reprehensible and clearly amounted to vexatious and abusive conduct of the proceedings. The EJ then said this:

'I am not satisfied that [the appellant] is acting not in pursuit of profit.  His communications which demand payment for costs of substantial sums makes it clear that he hoped to gain financially from this litigation.  I do make an order for wasted costs against [the appellant].  […]  I accept that costs might well be a substantial amount, the current schedule being over £12,000 on the basis of apparently reasonable fee levels, in very large part because of the voluminous correspondence which the appellant produces and I therefore refer it for assessment to the County Court.'

The appellant appealed on the grounds that 1) the Employment Judge failed to specify in her order contrary to rule 48(7) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 the amount to be paid, but instead referred the assessment of costs to the County Court, for which there was no power; 2) the Employment Judge failed to consider applying the correct legal test as set out in Ridehalgh v Horsefield [1994] Ch 205,  which costs or what part of the costs schedule had been caused by the unreasonable conduct of the Appellant and whether it was just to order him to pay costs and 3) the EJ had erred in reaching the conclusion that the appellant was within the wasted costs provisions in that he fell within rule 48(4) as a person who was acting in pursuit of profit.

The EAT upheld the first 2 grounds of the appeal and rejected the third. The application for a wasted costs order was remitted to a different Employment Judge.

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Appeal Nos. UKEAT/0085/12/MAA

UKEAT/0086/12/MAA

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

At the Tribunal

On 14 June 2012

Before

THE HONOURABLE MRS JUSTICE SLADE DBE (SITTING ALONE)

MR D B CASQUEIRO (IN A MATTER OF WASTED COSTS) (APPELLANT)

BARCLAYS BANK PLC (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR MATTHEW PURCHASE (of Counsel)

Bar Pro Bono Unit

For the Respondent
No appearance or representation by or on behalf of the Respondent

PRACTICE AND PROCEDURE – Costs

Unlike for 'ordinary costs' under Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 rule 41 (1) (c), there is no power to refer wasted costs ordered under rule 48 to be assessed in the County Court. Further, the Employment Judge failed to consider, applying Ridehalgh v Horsefield [1994] Ch 205, which costs or what part of the costs schedule had been caused by the unreasonable conduct of the Appellant and whether it was just to order him to pay costs. Appeal allowed. Application for a wasted costs order remitted to a different Employment Judge.

1. Mr Casqueiro appeals from a wasted costs order made by Employment Judge Manley in a Judgment sent to the parties on 2 June 2011. The Appellant represented Mrs Mazhar, the Claimant, in her claims for unfair dismissal and disability discrimination against the Respondent. A Pre Hearing Review was held at which the Employment Judge determined whether the claims were brought out of time, and she held that they were.

1. The Appellant had been assisting the Claimant for some time in bringing and then pursuing her claims against the Respondent and represented her before the Employment Judge. The Claimant, who was a personal banker, was employed by the Respondent from 1 December 2008 until 16 July 2009, when she was dismissed for gross misconduct. The Appellant met the Claimant in October 2010 and assisted her in her dispute with the Respondent from that date. The Employment Judge found at paragraph 12 of the Reasons that the Appellant had no formal legal qualifications:

"[…] although he tells me he is to take the Institute of Legal Executives qualification. He tells me he acts for no profit but also tells me he is setting up a 'law firm' with solicitors and barristers."

1. When the Claimant put in her claim to the Employment Tribunal, at a time when the Appellant was assisting her; although this is not in the evidence it was said by Mr Purchase on his behalf before me that she completed the claim form on her own. Nonetheless, in the ET1 there was the following claim:

"Costs of my lay representative that is a grade 4 paralegal as per Practice Direction 48B of the CPR (2/3 of solicitors fees) £12,000"

1. The Employment Judge, having held that there was no jurisdiction to hear the Claimant's claims and having dismissed them, considered the Respondent's applications for costs against both the Claimant, which were not awarded, and against the Claimant's representative, the Appellant. At paragraph 16 of her Judgment the Employment Judge held:

"As far as wasted costs is concerned, I do consider Mr Baldwin's [that is, the Appellant's] behaviour to be reprehensible. The comments made by him in many of the emails, both to those employed by the respondent and including comments of a personal nature to the respondent's solicitor; four reports to the Solicitors Regulation Authority and the many hundreds of pages of emails that he has sent to them over the course of these proceedings, clearly amounts to vexatious and abusive conduct of the proceedings. It clearly falls within the very exceptional cases where costs can be awarded against the party. It is also clear to me that it amounts to improper and unreasonable behaviour and falls into circumstances within the wasted costs regime. I am not satisfied that Mr Baldwin is acting not in pursuit of profit. His communications which demand payment for costs of substantial sums makes it clear that he hoped to gain financially from this litigation. I do make an order for wasted costs against Mr Baldwin. […] I accept that costs might well be a substantial amount, the current schedule being over £12,000 on the basis of apparently reasonable fee levels, in very large part because of the voluminous correspondence which Mr Baldwin produces and I therefore refer it for assessment to the County Court."

1. Mr Purchase appears on behalf of the Appellant on a pro bono basis. The Respondent's solicitors wrote to the Employment Appeal Tribunal indicating that they will not be attending because they consider that:

"[…] the Respondent has already wasted substantial costs as a result of the Appellant's unreasonable conduct and the Respondent is of the considered view that its continued involvement in these proceedings is likely to result in a further, disproportionate waste of its time and resources."

The Respondent therefore was not going to take an active part in the proceedings. Accordingly, there has been no appearance on behalf of the Respondent on this appeal, although the points made by their solicitors in the letter of 21 February 2012 have been read.

1. The following grounds are advanced in the amended grounds of appeal produced helpfully by Mr Purchase on a previous occasion: first, that the Employment Judge failed to specify in her order contrary to rule 48(7) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 the amount to be paid, but instead referred the assessment of costs to the County Court, for which there was no power. Second, that the Employment Judge failed to apply the correct legal test as set out in Ridehalgh v Horsefield [1994] Ch 205 and in particular failed or failed properly to address (1) whether the Appellant's conduct caused the Respondent to incur unnecessary costs and (2) whether in all the circumstances it was just to order the legal representative to compensate the Respondent for the whole or any part of the legal costs. These submissions would only be relevant if the Appellant is to be treated as a legal representative, or if this applied to him. It was contended that it was necessary for the Employment Judge to identify with precision (i) the improper conduct of the Appellant and (ii) the cost caused by it, which she failed to do. Further it was said that the Employment Judge's decision that the Appellant was acting in pursuit of profit failed to take into account material considerations, in particular, first, the Claimant's evidence that she was not paying the Appellant or was party to a conditional fee agreement, and, second, the Appellant's threat to apply for costs was explicable by the fact that the claim generated costs such as copying charges not related to profit and/or as a litigation tactic as in [Jackson v Cambridgeshire County Council]() UKEAT/0402/09/505 8 June 2011.

1. There was originally a contention in the third ground of appeal that the Employment Tribunal's decision that the Appellant was acting in pursuit of profit was perverse. Quite rightly, Mr Purchase did not pursue such a ground of appeal before me today.

1. The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 ('the ET Rules') provide in rule 48:

"(1) A tribunal or Employment Judge may make a wasted-costs order against a party's representative. […]

(4) In this rule 'representative' means a party's legal or other representative, or any employee of such representative, but it does not include a representative who is not acting in pursuit of profit with regard to those proceedings. A person is considered to be acting in pursuit of profit if he is acting on a conditional fee arrangement.

(7) When a tribunal or Employment Judge makes a wasted-costs order it must specify in the order the amount to be disallowed or paid."

1. It is also material to consider rule 41 of the ET Rules, which applies to what was described as an ordinary costs order, not a wasted costs order, which provides:

"41. (1) The amount of costs order against the paying party shall be determined in any of the following ways—

(a) the tribunal may specify the sum which the paying party must pay to the receiving party, provided that sum does not exceed £10,000, […]

(c) the tribunal may order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party, with the amount to be paid being determined by way of a detailed assessment in a County Court in accordance with the Civil Procedure Rules 1998 […].

(2) The Tribunal or Employment Judge may have regard to the paying party's ability to pay when considering whether it or he shall make a costs order or how much that order should be."

1. So far as ground 1 is concerned, it is submitted that in direct contravention of the ET Rules, rule 48(7) the Employment Judge failed to specify the amount to be paid under the wasted costs order. Further, the order made by the Employment Judge to refer costs for assessment to the County Court was not provided for in accordance with the powers to make a wasted costs order. With some concern, I accept the submission made by Mr Purchase that since there is no express provision for doing so in rule 48, in contrast to the express provision in what has been described as the ordinary costs provisions in rule 41(1)(c), I conclude that there is no power to make a reference to the County Court for assessment of wasted costs. This may be an oversight in the drafting of these Rules. In accordance with the ET Rules, the Employment Tribunal or Employment Judge themselves must make that assessment and make an order in a specified amount. Accordingly, ground 1 of the grounds of appeal succeeds.

1. So far as ground 2 is concerned, the Employment Judge did refer tangentially to authorities on the exercise of the power to make a wasted costs order but did not set out any such authority or any principles to be derived from such authority. The principles set out in Ridehalgh at page 231F establish that a court, or, here, a Tribunal, in considering the making of a wasted costs order must ask themselves three questions:

"(1) Has the legal representative of whom complaint is made acted improperly, unreasonably or negligently?

(2) If so, did such conduct cause the applicant to incur unnecessary costs?

(3) If so, is it in all the circumstances just to order the legal representative to compensate the applicant for the whole or any part of the relevant costs?"

1. The Employment Judge stated at the end of the Reasons in paragraph 16:

"I accept that costs might well be a substantial amount, the current schedule being over £12,000 on the basis of apparently reasonable fee levels, in very large part because of the voluminous correspondence which Mr Baldwin produces and I therefore refer it for assessment to the County Court."

Whilst that passage shows that the Employment Judge did to a certain extent consider what costs were incurred because of "Mr Baldwin's voluminous correspondence", which the Tribunal Judge had held to be unreasonable, nonetheless there is, in my judgment, force in the argument made by Mr Purchase that the Employment Judge failed properly to consider which costs or which part of the costs schedule had been caused by the unreasonable conduct in respect of which the wasted costs order was made. Accordingly, whilst there was some reference by the Employment Judge to the second question posed in Ridehalgh, in my judgment the consideration did not go far enough to satisfy the requirements for making a wasted costs order.

1. As for whether the Employment Judge applied or properly applied the third test in Ridehalgh, whether it was just in all the circumstances to order the legal representative to compensate the applicant for the whole or any part of the relevant costs, there is ample material referred to in the Employment Judge's Judgment which cites the extracts relied upon by the Respondent in their application for costs to lead to a conclusion that the conduct was unreasonable in the extreme. However, there is force in Mr Purchase's argument that the Employment Judge did not or did not properly weigh the considerations to be taken into account in assessing the justice of making an award in a particular amount of wasted costs. The circumstances taken into account in assessing the justice of making an award in the amount contemplated were not clear from the Employment Judge's Judgment. Accordingly, this ground of appeal also succeeds, namely that the Employment Judge failed to consider which specific costs were incurred by the conduct of the Appellant that has found to have been unreasonable, and whether in all the circumstances it was just to make an award in a specific amount.

1. Having regard to the nature and the volume of the correspondence from the Appellant referred to in the Judgment, extracts from which were set out in the application for wasted costs, it may be that a Tribunal Judge considering the justice of making an award in the sum decided upon may not have reached any different conclusion than that reached in this case. However, the Appellant is entitled to have the third question outlined by the Court of Appeal in Ridehalgh considered.

1. The third ground of appeal was whether the Employment Judge erred in reaching the conclusion that the Appellant was within the wasted costs provisions in that he fell within rule 48(4) as a person who was acting in pursuit of profit with regard to these proceedings, Mr Purchase relies on the Employment Judge's finding "I am not satisfied that Mr Baldwin is acting not in pursuit of profit" to contend that she erroneously regarded the burden as being on the Appellant to prove that he was not acting for profit rather than the other way round. Whilst linguistically in expressing herself with a double negative there may be something in that argument, on the findings of fact and the basis upon which the Employment Judge came to her conclusion, I do not accept that the approach to the burden of proof affected the outcome. The Employment Judge continued after the offending sentence:

"His communications which demand payment for costs of substantial sums makes it clear that he hoped to gain financially from this litigation."

1. That is an observation on the facts which is not challenged. The communications referred to have not been produced to this Employment Appeal Tribunal in any attempt to show that the conclusion drawn from those communications was perverse. In light of that conclusion there was, it appears, material before the Employment Judge that entitled her to come to the unchallenged conclusion that from those communications it could reasonably be inferred that the Appellant hoped to gain financially from the litigation. Moreover, such a conclusion is entirely consistent with what the Claimant said in her original ET1, in which she claimed £12,000 on the basis that the Appellant, as a lay representative, was acting as a grade 4 paralegal and claimed two thirds of solicitor's fees.

1. As for the contention that the Employment Judge erred in failing to take into account the evidence of the Claimant that she said that she had not paid the Appellant any money which assertion she accepted may have been contrary to the claim made in her ET1, having regard to the basis upon which the Employment Judge came to her conclusion, which was based on the unchallengeable inference of fact from communications from the Appellant demanding payments, it cannot be said that she failed to consider and take into account the evidence of the Claimant and that if she had, a different conclusion would have been reached.

1. As for the contention based on the case of Jackson, that the Employment Judge erred in failing to consider other explanations for the demands for costs made by the Appellant in his letters to the Respondent or the Respondent's representatives, and that the Employment Judge erred in failing to consider whether this was bluster or an attempt to get a settlement, in my judgment there is no error of law or arguable error of law here at all. The facts of Jackson are very different from the instant appeal. In that case the representative against whom a wasted costs order was made was a solicitor. He was the cousin of the Claimant in that case. Very different reasons and considerations arose which led to the conclusion that the Appellant's behaviour was seeking to put maximum pressure on the Respondent to reach a final financial settlement. It appears that the suggestion that the Employment Judge erred in failing to take into account or consider other possibilities or other reasons for the Appellant demanding payment for his services or costs other than that he was operating for profit – and no criticism is made here – was something raised for the first time in the amended grounds of appeal.

1. It is suggested that the question of whether the Appellant had other reasons for making demands for payment other than operating for profit should have occurred to the Employment Judge because of the nature of the unreasonable correspondence in which the Appellant had engaged. It is said by Mr Purchase that because such correspondence had been found to be unreasonable, and indeed it was, it therefore should have occurred to the Employment Judge to consider whether the correspondence asking for costs was also unreasonable and therefore may have been made for other reasons than a genuine request for costs. This is an interesting submission. Although Mr Purchase did not expressly refer to some of the extracts of the correspondence upon which the Tribunal Judge based her decision that the conduct of the Appellant was unreasonable and which now forms the basis of the contention that she should have considered other explanations for demanding costs than the Appellant asking for costs for himself, an example may be at paragraph 11 in the Employment Judge's Reasons:

"At page 129 of the bundle, the Claimant's representative refers to a recent article regarding our client which was in the news and states 'when these old pensioners came to your Bank and told you they were dying in their houses because they had lost all their money and could no longer afford to heat themselves – you laughed and dismissed their complaints'."

That was part of correspondence engaged in by the Appellant in pursuit of his representation of the Claimant in her claims for unfair dismissal and disability discrimination. The Respondent's solicitors wrote:

"The Claimant's representative has repeatedly threatened pursuing us for 'astronomical punitive costs' if we continue to defend this claim on behalf of our client […]."

It is apparent that the bundles of documents before the Employment Judge contained many communications from the Appellant to the Respondent or their representatives.

1. In my judgment, the Employment Judge did not err in failing to consider alternative reasons why the Appellant may have been seeking costs from the Respondent. There is no suggestion in the material placed before me that this was an argument raised by him before the Employment Judge. Every wasted costs application is fact specific. Jackson was decided on its own facts. No point of principle established in Jackson has direct applicability to the facts of this case. In any event there is no evidence that such an argument or material upon which it could be made was before the Employment Judge. Accordingly, ground 3 of the grounds of appeal does not succeed.

1. The appeal is allowed on grounds 1 and 2. The order in relation to wasted costs is therefore set aside. The application for wasted costs is remitted to a different Employment Judge for decision on the basis of the Judgment of the Employment Judge sent to the parties on 2 June 2011 save in the respects on which the appeal has been allowed. In addition, the Employment Judge to whom the matter is to be remitted is to consider the amount of the wasted costs order to be made. In undertaking that enquiry and decision, the Employment Judge will consider and decide which costs were caused to be wasted by the unreasonable conduct of the Appellant. Such conduct and such wasted costs should be identified by the Employment Judge.

1. Further, the Employment Judge should consider, in addition to the second test in Ridehalgh, the third, namely whether in all the circumstances it is just to order the Appellant to compensate the applicant for the whole or any part of the relevant costs. The Employment Judge must determine a specific amount to be paid. If the Appellant wishes to raise a consideration to be taken into account in determining the amount of such an award, he should make a statement with supporting evidence for such an argument, such statement and documentation to be disclosed to the Respondent three weeks before any hearing, and he should tender himself for cross examination.

1. I have not heard argument on whether the provision for taking into account the paying party's ability to pay is restricted to an ordinary costs order, because that provision appears in rule 41, namely at 41(2), and not in rule 48. The Respondent is not here to deal with this new point, which had not been raised before, and was not raised on appeal. However, I have been persuaded that this issue may be considered on the remitted hearing for determination of any costs order. The parties are at liberty to raise any argument that is appropriate on the applicability of rule 41(2) to the making of the order. It may well be that this consideration is comprehended within the third Ridehalgh test and that it is more appropriately considered in that context rather than under the rule, rule 41 (2) which applies to ordinary costs orders.

1. As to the material that should be before the Employment Judge on the remitted hearing, in addition to any oral evidence, restricted to the issue of ability to pay, as to which the Respondent should have the ability themselves to adduce evidence if they think fit, there should be before the Employment Judge the bundles which were before the Employment Tribunal, which should both the letters held by the Employment Judge to be unreasonable and the responses of the Respondent or its solicitors to those letters, and the letters from the Appellant requesting payment and the responses of the Respondent or its solicitors to those. On that material, the matter is remitted to a different Employment Judge for determination of whether and if so in what amount a wasted costs order against the Appellant should be made having regard to the issues identified in this judgment.