Mark Shulman, Consultant Solicitor at Keystone Law

**COSTS
Whether appropriate**
Was an EJ right to make a costs order against a Claimant for £10,000? In [Ayoola v St Christopher's Fellowship ]()UKEAT/0508/13/BA it was unclear said the EAT, remitting the case back to the ET.

There were claims for unfair dismissal and notice pay. The Respondent resisted the unfair dismissal claim on the basis that the Claimant was an agency worker (working for an agency called Social WorkLine) and had only been employed by the Respondent for three months – he did not therefore have the requisite period of qualifying service to bring an unfair dismissal claim. The Respondent sought disclosure of documentation from the Claimant relating to his working arrangements with Social WorkLine; documents that only he would have had. These were seen as essential to enable the ET to determine the issue of the Claimant's employment status in the relevant period.

Following the Respondent's request for information the ET sent a written notice that required the Claimant to provide disclosure of specified documentation relating to his working relationship with Social WorkLine, failing which his claim would be struck out. The Claimant failed to comply and his claims were struck out.

The ET awarded costs against the Claimant in the sum of £10,000, his claim having been struck out for non-compliance with the unless order. The order was made on the basis that the claim had been misconceived as the Claimant did not have one year's service and had been unable to show any evidence to the contrary. Secondly, the EJ held that the Claimant's conduct of the case had been unreasonable because he had failed to comply with an unless order and had provided no justification for that failure. The EJ also referred to the fact that in without prejudice correspondence between the parties, the Respondent had previously warned the Claimant of an intention to seek costs if his claim was struck out.

There were two grounds of appeal in relation to the ET's costs order. First, that the EJ had erred in proceeding directly from a finding that the case had been misconceived or unreasonable without finding or giving any adequate reasons for finding that the conduct of the Claimant had been so misconceived or so unreasonable as to attract costs. Secondly, it was contended that the EJ had erred in granting costs in the sum of £10,000 or in failing to provide adequate reasons for making a costs order of that amount.

*Costs principles
*The EAT began by re-stating the principle that in the ET, an award of costs is still the exception rather than the rule (Gee v Shell UK Ltd [2002] IRLR 82 at page 85, Lodwick v London Borough of Southwark [2004] ICR 884 at page 890, Yerrakalva v Barnsley MBC .

It is not enough for an ET to find unreasonable conduct or that a claim was misconceived. The ET must then specifically address the question as to whether it was appropriate to exercise its discretion to award costs. Even if the ET's costs jurisdiction is engaged, costs will not automatically follow the event. The ET still has to be satisfied that it would be appropriate to make such an order (see Robinson and Another v Hall Gregory Recruitment Ltd .

Misconceived claims
The extension of the Tribunal's costs jurisdiction to cases where the bringing of the claim was "misconceived" has been seen as a lowering of the threshold for making costs awards (Gee v Shell UK Ltd [2002] IRLR 82). In such cases the question is not simply whether the paying party themselves realised that the claim was misconceived, but whether they might reasonably have been expected to have realised that it was, and if so, at what point they should have realised.

Unreasonable conduct
When  making a costs order on the basis of unreasonable conduct, the ET has to identify the conduct, state what was unreasonable about it and identify what effect it had (Yerrakalva per Mummery LJ at paragraph 41).

Was a costs award appropriate?
Had the EJ  considered the question of whether a costs order was  appropriate? Yes, said the EAT. The EJ had explained her reasons for exercising the discretion to award costs. She had had regard to the fact that the Respondent had warned the Claimant of its intention to seek costs in various without prejudice communications. There was also reference to her reasons for striking out the claim, including the damning finding regarding the Claimant's conduct, (i.e. that his failure to obtain evidence of his relationship with the Social Workline agency "must be viewed as an intentional failure").

The EJ was entitled to find unreasonable conduct in failing to comply with the unless order. The finding of intentional default by the Claimant and the clear scepticism regarding the Claimant's case made plain that the EJ had accepted that the Claimant knew that his claim was misconceived (or should reasonably have known it was misconceived at an early stage). These factors (amongst others) demonstrated the reasoning why the E J concluded it was appropriate to award costs, rather than being a re-statement to the effect that the costs jurisdiction was engaged. Therefore the first ground of appeal was dismissed.

*Amount of costs award
*As to the ground of appeal regarding the amount of costs awarded, the discretion as to the amount of an award must be exercised judicially. Although not bound by the same rules as the civil courts and although the discretion under the ET Rules is very broad, the costs awarded should not breach the indemnity principle and must compensate and not penalise. There must be some indication that the ET adopted an approach to explain how the amount of costs was calculated.

However, there had been no written explanation by the EJ of her scrutiny of the costs figure sought by the Respondent. Although she had set out in some detail the amount the Respondent was seeking, what she did not do was to indicate that she had conducted any independent scrutiny of the sum, or set out the reasons for her conclusion that it was appropriate to award costs of £10,000.

That may have been an error of approach (in terms of the lack of scrutiny by the EJ of the sum claimed), or it may have been an error in terms of an inadequacy in the EJ's reasoning for making an award of £10,000. But the EAT could not be sure which of these applied.  Therefore that aspect of the appeal was allowed.

The EAT was not in a position to fill the gap as there was the possibility of more than one outcome. That was because the EJ, upon scrutinising the amount of costs, may reach a different conclusion. On the other hand, it may be that it would simply be a matter of stating her reasoning for the amount already awarded. Accordingly, the EAT remitted this matter back to the same EJ for further consideration.

Jurisdiction
Could an EJ sitting alone make a costs decision after a full hearing with a panel of three members? No, said the EAT in [Riley v Secretary of State for Justice & Ors ]()UKEAT/0438/14/DXA where the case had already been heard by a full ET panel.

An EJ sat alone to determine an application for costs which was related to the conduct of the losing Claimant when he brought a claim that he had been victimised and unfairly dismissed. The claim itself had been decided by an ET panel of three.

The Claimant appealed arguing that the ET had no power within statute or under the ET Rules to sit as a panel of one since the appropriate provisions required a panel of three.

Composition of ET
The EAT allowed the appeal. Section 4 of the Employment Tribunal Act 1996 (ETA 1996) deals with the composition of ETs and section 4(6) specifically addresses the circumstances when an EJ may sit alone. Therefore, unless the ET Rules made provision for an EJ to sit alone to hear any particular category of matter, the full ET panel must sit as provided by the ETA 1996.
The draftsman of the ET Rules had been careful to draw a distinction between "the Tribunal" and "the Employment Judge"; the costs provisions in the ET Rules (Rules 74 to 84) always use the expression "Tribunal", rather than refer to an EJ. Accordingly the ETA and the Rules were to be construed as not permitting any power to the ET to sit other than as that statute required. There was no specific provision in the Rules allowing an EJ to sit alone in respect of a costs application made after the determination of a substantive hearing in the present case.

It was acknowledged by the EAT that if at the Preliminary Hearing in the present case there had then been an application for costs, the EJ would have been within his entitlement then and there to determine it. He would have been "the Tribunal" which was referred to in the costs Rules. But the costs application which was the subject of the appeal related to what had happened in front of the full ET panel. Accordingly, in the absence of any power in the EJ in such a case to sit on his own, the appeal succeeded.

Exercise of discretion
The EAT went on to say that even if it was wrong on the jurisdictional point, then in any event the EJ should have considered exercising his discretion as to whether there should have been a determination by the full panel. He would have had discretion whether to sit on his own or with two lay ET members. Relevant to the exercise of that discretion would be that the claim for costs related to matters which all three members of the ET panel had heard and upon which each would have had their own individual views. Lay litigants, having heard a case decided against them by a panel of three, would be surprised to find that a subsequent costs claim against them was to be heard only by one of those three. That was capable of giving rise to a real sense of injustice.

The EJ should not have taken it for granted that he would sit alone. If anything, the circumstances would suggest the opposite and at least that he should have made enquiry as to whether there was consent (if consent could give him the jurisdiction, which may be questionable) as to whether he should sit on his own. There was however no material to show that he turned his mind to it and so the inference was that he did not.

The case was remitted to the same ET (to be constituted with the three members) for it to make a determination on the costs application.

Costs orders and time preparation orders
A costs order can be made in respect of costs incurred while a Claimant is legally represented (see Rule 75(1)(a) of the ET Rules). A preparation time order can be made in respect of preparation time while the Claimant is not legally represented (see Rule 75(2)). Could both types of order be made in favour of a Claimant who was represented for part of the time and unrepresented for part of the time in the same proceedings? No, said the EAT in [Duhoe v Support Services Group Ltd - In Liquidation]() UKEAT/0102/15/MC.

The Claimant won her claims of unfair dismissal, outstanding holiday pay and failure to give written reasons for dismissal. At different points in the proceedings the Claimant made two relevant applications: the first for a costs order in the sum of £1,625 paid by her to the solicitors who engaged in correspondence on her behalf and submitted her Claim Form. The second application was for a preparation time order when the Respondent's general manager arrived half a day late for a hearing and an adjournment was ordered: the application was to cover the time thrown away by the unnecessary adjournment. The EJ had noted that whilst the Claimant could make an application for a preparation time order, it was inappropriate to determine it at that stage "since there is an outstanding application for costs in any event".

At the final hearing the EJ dealt with the application for a preparation time order, awarding £462 for the time thrown away by the adjournment. She did not deal with the other costs application and an application for reconsideration was made on the Claimant's behalf. The Regional EJ dealt with that application saying that there was a difficulty because of Rule 75(3) of the 2013 ET rules. That Rule provides that:

"A costs order under paragraph (1)(a) and a preparation time order may not both be made in favour of the same party in the same proceedings. A tribunal may, if it wishes, decide in the course of the proceedings that a party is entitled to one order or the other but defer until a later stage in the proceedings deciding which kind of order to make."

*Good practice
*What is the position where a Claimant is represented for part of the time and unrepresented for part of the time in the same proceedings? The EAT stated that the answer is that a Claimant should not be put to an election: he or she is entitled to make both types of applications. The ET can consider the question of entitlement to each order and decide which type of order to make. It would be "good practice" for the ET to explain the provisions and invite submissions about the type of order to be made. Where this is done as soon as it becomes apparent that there are  applications for the two kinds of order (i.e. an application for a costs order and a preparation time order by the same party in the same proceedings) it might result in a voluntary withdrawal of one of the applications.

As the EJ had overlooked the existence of the outstanding costs application, she did not decide that costs application, nor did she make any conscious decision about the type of order to be made. These were errors of law and so the matter had to be remitted. The EAT set aside the preparation time order which had already been made in order to clear the field, leaving it open to the EJ to decide which type of order to make.

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.