The claimant was ordered to pay £10,000 in costs after her claim was struck out. The respondent had incurred costs in excess of £60,000. The Tribunal had analysed the claimant’s conduct in relation to the strike out and made the maximum order for costs, inviting the claimant to give reasons why such an order should not be made. The EJ dismissed the claimant’s application for a review and said that the claimant had failed to set out reasons why such an order should not be made in either of the two letters sent to the court. The claimant appealed.

The EAT upheld the appeal. The claimant had submitted details of her ability to pay but the EJ held, without reasons, that she had failed to show cause and this was an error. The respondent made no submission and the parties consented to the EAT deciding the issue without remission.  The costs order was reduced to £750.

____________________

Appeal No. UKEAT/0553/11/ZT

EMPLOYMENT APPEAL TRIBUNAL

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

At the Tribunal

On 10 September 2012

Before

HIS HONOUR JUDGE McMULLEN QC (SITTING ALONE)

OLATUNJI (APPELLANT)

NETWORK RAIL INFRASTRUCTURE LTD (RESPONDENT)

Transcript of Proceedings

JUDGMENT

For the Appellant
MR JAKE DAVIES (of Counsel)

Bar Pro Bono Unit

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

PRACTIC AND PROCEDURE – Costs

The Employment Tribunal struck out the Claimant's case after she did not appear. It ordered her to show cause why she should not pay £10,000 costs. She submitted details of her ability to pay. The Employment Judge held without reasons that she had failed to show cause. This was an error. On the Claimant's appeal, the Respondent made no submission and the parties consented to the EAT deciding the issue without remission. £750 costs ordered.

1. This case concerns the amount of costs ordered by an Employment Tribunal to be paid by a party. I shall describe the parties as the Claimant, Miss Olatunji, and the Respondent, Network Rail Infrastructure Ltd. The Claimant was not represented until the proceedings before me, where she has the advantage to be represented free by Mr Jake Davies of counsel; the Respondent had been represented by counsel.

1. The Claimant brought a number of claims, set up to be heard at London Central Employment Tribunal under the chairmanship of Employment Judge Lewzey over some 20 days; on the first day, the claim was struck out. The Tribunal went on to order costs in the following circumstances:

"16. There remains the application for costs made by Ms Shepherd on behalf of the Respondent. This is an application for an award of costs of £10,000 which is the maximum the Tribunal can award without assessment, although we are told that the Respondent's costs exceed £60,000.

17. The application is made under Rule 38 and Rule 40. Rule 40(3) provides that:

'The circumstances referred to in paragraph (2) are where the paying party has in bringing the proceedings or he has in conducting the proceedings acted vexatiously, abusively, disruptively or otherwise unreasonably or the bringing or conducting of the proceedings by the paying party has been misconceived.'

18. We have already analysed the Claimant's conduct in relation to the strike out application and we rely on those matters. This is a situation where the Tribunal does have jurisdiction to make an award of costs for the same reasons that we have given in relation to strike out, it is a situation where the Tribunal would exercise its discretion to make an award of £10,000. However, the provisions of Rule 38(9) provide:

'No costs order shall be made unless the Secretary has sent notice to the party against whom the order may be made, giving him the opportunity to give reasons why the order should not be made.'

We give notice to the Claimant that she should give reasons why such an order should not be made within 14 days from promulgation of this decision.

19. It is not the Tribunal's intention to incur further unnecessary costs to the public purse or the Respondent by holding a further hearing in relation to costs. The matter will therefore be determined in writing only."

1. The Claimant appealed. The matter was considered first by HHJ Peter Clark on the sift, who sent the matter to a preliminary hearing conducted by HHJ Shanks. Judge Shanks dismissed the substantive elements of the claim, and in particular the appeal against the decision to award costs at all, but did consider that there were substantial prospects of success in the Claimant's contention that the Tribunal had not considered the Claimant's ability to pay. The Tribunal, as it is clear from the extract above, was presented with a bill by the Respondent for £60,000. It was minded to award £10,000, which is within its jurisdiction.

1. The claims were struck out because of the conduct of the Claimant in failing to carry out orders of the Employment Tribunal, and it was that that triggered the application for and the award of costs. In the exceptional jurisdiction of the Employment Tribunal, the conduct of the party under rules 38 and 40 is relevant, but so is the ability to pay, which is not cited in the extract from the Rules given by the Employment Tribunal.

1. The matter as it developed before Judge Shanks therefore came down to the single issue of the ability to pay. The case was then sent for a full hearing before a single Judge.

1. The court has a skeleton argument from Mr Davies; the Respondent indicated it was not prepared to spend any more money on this case and would, while not consenting to the order, continue to present opposition to the appeal based upon the Tribunal's judgment itself.

1. That being so, Mr Davies appears without any human opposition today and raises two issues. In case management of this matter I invited the parties to consider what would be the position if I allowed the appeal, and both sides agree that there is no point in sending the matter back to an Employment Tribunal and I should decide it myself. That is a sensible way forward.

1. The second issue I put to the parties related to Mr Davies' proposition in his skeleton argument, which is that since there is no challenge to the jurisdiction to make an award of costs no costs order should be made or one for a much lower sum than £10,000. Having taken instructions, Mr Davies accepts and puts to me that his client could pay £750 given time, and the time would be 10 March 2013; that is, six months from today.

1. A jurisdictional issue that I referred to might have arisen because this could be considered to be a decision of the three person Employment Tribunal, but in my judgment this appeal is correctly made against the two orders of the single Employment Judge. When the Tribunal decided that it would order costs it invited the Claimant to show cause why she should not pay the £10,000. The Judge herself considered an application for a review and dismissed that on 10 June 2011. The order she also made on that day is in the following terms:

"The Claimant having been given 14 days from the promulgation of the Judgment made on 14 March 2011 and promulgated on 17 March 2011, to show cause why an order for costs in the sum of £10,000 should not be made against her, and the Claimant having failed to set out reasons why such an order should not be made in either of her two letters both dated 28 March 2011:

The Claimant is ordered to pay the Respondent's costs in the sum of £10,000"

1. This Judgment contains no reasoning. The reasoning has to be that of the Judge alone, because there is no indication here that the Claimant's response has been considered by the lay members. The Claimant responded in a lengthy letter expressly setting out the difficulties she had with ability to pay. There is no mention of any aspect of this lengthy "show cause" letter by the Judge. The material she put forward was bound to elicit some form of reasoned Judgment. In short, she simply was not in a position by way of income or capital to meet the sum, and that was a matter that had to be dealt with by a Judge.

1. This I consider to be an error. I will set aside the decision of the Judge on 10 June 2011 holding that the Claimant had failed in either of her two letters to set out reasons why such an order should not be made. As a matter of construction of both of those letters, reasons are put forward; whether they are substantial or not was a matter that required a decision by the Judge and reasons given.

1. It is plain to me that one of the substantial reasons here is inability to pay, and so it is correct to set aside the Judge's order. By consent of the parties, the matter is now before me. Costs orders in the Employment Tribunal are exceptional, but in a case where there has been unreasonable conduct or disobedience and very substantial costs incurred it is open to a Tribunal to make such an order. It is also open to a Tribunal to invite the Claimant to show cause; she was not at the hearing, so she had to be given an opportunity, and when she does make responses she has to say why. In my judgment, the Employment Tribunal was correct, as held by Judge Shanks, in making the criticism that it did of the Claimant's conduct and the waste of time and money that had occurred as a result of her conduct, so that it was open to it to make a costs order.

1. I then turn to the value. The material before me, which I need not descend to in detail, indicates very difficult circumstances for the Claimant; fortunately, she is still employed. I accept that this is not a punitive regime but is simply compensatory, and that the Respondent has not come forward with any argument as to the value except to uphold the Tribunal's order. The solution to this matter is to take Mr Davies' very helpful approach. I note that the Claimant's primary position is that she should not pay anything; I reject that. She has wasted a lot of money. But in my discretion I consider her ability to pay extends only to the sum of £750, which, having canvassed the matter with Mr Davies, and he having taken instructions, she can clearly meet by an order that it be paid on or before six months from today.