England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HON MR JUSTICE NELSON
UKEAT/0553/07/DM

		Royal Courts of Justice Strand, London, WC2A 2LL
		24/07/2009

Lord Justice Mummery :

1. This appeal is about costs, which is unusual. Costs are pre-eminently in the discretion of the court or tribunal hearing and deciding the case. A costs appeal is even rarer in an unfair dismissal case tried and appealed within a tribunal system in which costs orders are the exception rather than the rule.
2. The case is also an instance of the way in which the fortunes of the parties can fluctuate at different levels of decision - in the employment tribunal (ET), in the Employment Appeal Tribunal (EAT) and in this court. The invitation in this court is to overturn the decision of the EAT refusing to exercise its discretion to make an order for costs in favour of the appellant, Mr Afolayan, against his former employer, MRCS Limited.
3. The litigation began life as proceedings for unfair dismissal in which the ET held in its judgment of 16 September 2007 that Mr Afolayan, who has acted in person throughout, had, as a result of errors in the disciplinary procedure, been unfairly dismissed by MRCS on 28 January 2006. He had been employed as a residential social worker in a residential care home for disadvantaged young people aged between 10 and 18. The second respondent was manager of the child care unit.
4. Disciplinary action leading to dismissal and then an unsuccessful internal appeal followed a confrontation between Mr Afolayan and one of the young people on 24 November 2005. MRCS took a serious view of the incident in question. Its case, which the ET accepted, was that Mr Afolayan's conduct breached "the bounds of safe childcare practices as set out in [its] policies and procedures" and amounted to gross misconduct.
5. As explained in more detail below, the ET held the dismissal to have been procedurally unfair, but went on to conclude that Mr Afolayan had contributed 100% to his dismissal. That outcome is legally possible, though uncommon in practice. Mr Afolayan also made an unsuccessful claim for race discrimination and a successful claim for unlawful deduction of wages (holiday pay). Neither features in this appeal.
6. On 4 June 2008 Mr Afolayan won his appeal in the EAT on various grounds affecting the soundness of the ruling against him on contributory fault. The EAT remitted the case to a fresh ET to deal with remedies and the contributory fault point.
7. Mr Afolayan applied to the EAT for an order for costs against MRCS. He estimated his costs at around £10,000, though the schedule of costs produced by him totalled less than £1,000. He said that he spent many hours preparing for the case both before the ET and the EAT and that his claim for costs is reasonable.
8. The costs application was opposed. On 13 August 2008 the EAT dismissed it for reasons given in a judgment dated 18 July by Nelson J, who had presided over the substantive appeal. In this court permission to appeal on costs was refused on the papers, but was later granted at a renewed hearing. The permission was limited to "the discipline ground only." That ground was based on Mr Afolayan's allegations that MRCS instigated and conducted the disciplinary hearing leading to dismissal in bad faith and that it resisted the unfair dismissal claim in bad faith. Permission was given to amend the grounds of appeal which was duly done.
9. At the hearing of the appeal the parties updated the court on recent developments in the ongoing litigation. On 14 January 2009 the ET gave judgment on the remitted matter. It concluded that Mr Afolayan had contributed to his dismissal such that it was just and equitable that the basic and compensatory awards be reduced by 40%. There was also an application for costs of the remitted hearing . The hearing was adjourned.
10. Both sides then applied to the ET for a review of the order of 14 January 2009. The hearing of those applications began on 2 June 2009. It has been adjourned part heard. Directions have been given for a further hearing on 4 August 2009.
11. I should also mention that MRCS was late in serving a skeleton argument for this hearing. It did not arrive until the day before the hearing. Although Ms Russell appearing for MRCS gave the court an explanation and offered an apology, which the court accepts, the lateness of this important document caused problems for Mr Afolayan as a litigant in person. He did not ask for an adjournment of the hearing, but said that he had had no sleep since receipt of the document. He had stayed up all night re-writing his skeleton argument. He handed in revised submissions which we read. We were satisfied that he had been able, in the short time available, to deal with the other side's points. I suggested to Ms Russell that her instructing solicitors might consider sending a letter of apology to Mr Afolayan. Litigants in person labour under enough handicaps as it is, without having to contend with professionally represented opponents who fail to observe the rules.

The EAT Rules 1993

12. The EAT has power to make an order for costs, including an order in favour of a person who is a litigant in person: (rule 34D of the EAT Rules 1993).
13. There is no right to the costs of an appeal to the EAT simply because the appeal succeeds. Costs in the employment tribunal system do not automatically or even generally follow the event. The EAT can only make a costs order in specified circumstances as laid down in rule 34A of the EAT Rules. The circumstances focus on the conduct of the paying party in relation to proceedings.

"(1) Where it appears to the Appeal Tribunal that any proceedings brought by the paying party were unnecessary, improper, vexatious, or misconceived or that there has been unreasonable delay or other unreasonable conduct in the bringing or conducting of proceedings by the paying party, the Appeal Tribunal may make a costs order against the paying party ."

14. Particular examples are given in rule 34A(2), such as not complying with a direction of the Appeal Tribunal, making amendments to the appeal notice and causing an adjournment of proceedings. The specific examples, which all relate to the proceedings in the EAT, do not, however, restrict the Appeal Tribunal's discretion to award costs under (1): see rule 34A(3).
15. In my judgment, the "proceedings" referred to in rule 34A(1) are primarily proceedings in the EAT. Although "any proceedings" is very wide, the expression clearly does not cover proceedings in the ordinary courts, such as a county court action for wrongful dismissal, even arising out of the same facts. That jurisdiction is outside the tribunal system, is not subject to appeal to the EAT and is governed by the Civil Procedure Rules, which include their own costs regime. It is clear from other provisions of the EAT Rules that the expression "any proceedings" generally refers to proceedings before the EAT. See, for example, the power of the Appeal Tribunal in rule 24 to give directions to facilitate "the future conduct of any proceedings." See also rule 25 and 26.
16. As for costs in the ET an appeal lies to the EAT against the actual making of a costs order by the ET and against the ET's refusal to make a costs order, but costs in the ET are not governed by the EAT Rules. There are specific provisions in the Employment Tribunal Regulations 2004, rules 38-41. Rule 40 (2) of the ET rules provides that a tribunal or chairman shall consider making a costs order against a paying party where, in the opinion of the tribunal or chairman any of the circumstances appearing in paragraph (3) apply. Having so considered, the tribunal or chairman may make a costs order against the paying party if it or he considers it appropriate to do so.
17. Paragraph (3) of rule 40 is in these terms:

"The circumstances referred to in paragraph (2) are where the paying party has in bringing the proceedings or he or his representative 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. The specified circumstances are not exactly the same as those in the EAT Rules and, in my view, the "proceedings" referred to there are proceedings in the ET, not proceedings in the EAT or in the ordinary courts.

The ET decision

19. The ET held that Mr Afolayan was dismissed for the potentially fair reason of gross misconduct and that his dismissal for that reason was permissible. He had breached the bounds of safe child care practices.
20. However, his dismissal was procedurally unfair for two reasons. First, MRCS did not supply him with copies of documents which were to be produced at the disciplinary meeting and, secondly, the hearing of the internal appeal conducted by Mr Kevin Henry was pre-judgmental and unfair as indicated by the latter's comment ("I would rather see you go").
21. The ET went on to consider whether Mr Afolayan had contributed to his dismissal. It concluded that he had to an extent that, even if there had been procedural fairness, his dismissal was inevitable. Contributory fault was assessed at 100%.

The EAT decision

22. Mr Afolayan appealed to the EAT, which found errors of law in the ET's decision. As well as lack of clarity in identifying the reason for dismissal, the ET had erred in saying that the procedural failings would have made no difference and in holding that there was a 100% contributory fault.
23. The EAT accordingly remitted the matter to a fresh tribunal to hear the question of remedy, including any points of contribution.

EAT costs ruling

24. The costs application was considered by the EAT on the basis of written submissions. There was no oral hearing.
25. The EAT dismissed the application on the ground that MRCS was entitled to seek to uphold the favourable decision (on 100% contribution) obtained from the ET and that it was not unnecessary, improper, vexatious or misconceived or unreasonable to resist the appeal against that ruling nor could MRCS's conduct of the appeal be described in those critical terms.
26. Mr Afolayan's contention that the resistance to his case could be so described was rejected. His allegations that MRCS knew that his dismissal was borne out of bad faith, that it had no genuine belief in his misconduct to justify his dismissal, that it had acted in a vexatious manner during the hearing, that it knew that the 100% culpability argument was unsustainable and that it was guilty of delaying tactics were not accepted by the EAT.

Mr Afolayan's submissions

27. On the appeal Mr Afolayan reiterated his case that his dismissal was the product of bad faith and personal vendatta and that MRCS had no genuine belief in his alleged misconduct leading to dismissal. He said that he was an effective worker capable of making sound judgment as evidence by his appraisal rating by MRCS. He criticised MRCS for not having sufficient members of staff for the night of the incident on 24 November 2005 and said that, if they had, the incident might not have occurred.
28. In particular, he complained of pre-judgment of his case by those involved in the disciplinary process coupled with suppression of documents, fabrication of evidence and production of an edited account of events. The procedure was not, he alleged, conducted fairly, impartially or in good faith. As permitted by the amendment to his grounds, he submitted that the EAT's approach had not reflected the defects in the disciplinary procedure used by MRCS. The element of pre-judgment in the disciplinary investigation and process meant that MRCS had "made [its] mind up against his innocence" "in its desperate attempt to get rid of [him]."
29. He submitted that the EAT had considered only MRCS's impropriety in defending the ET decision in the EAT. It had not considered whether its opposition to his claim in the ET was improper. The EAT had not dealt at all with his contention that the disciplinary proceedings were brought in bad faith from the beginning and that the unfair dismissal claim was contested in bad faith in the ET. MRCS had not kept an open mind about his alleged misconduct or judged it on proper evidence. He referred to the lack of credibility of MRCS's witnesses, such as Mr Kevin Henry and Mr Rhys-Taylor, and to the lack of corroboration.
30. Mr Afolayan also referred to the remedies hearing and decision and to the part heard review proceedings in the ET. He complained of the conduct of MRCS in those proceedings, such as not supplying him with bundles of documents before the hearing in the ET on 2 June 2009.

Discussion and conclusion

31. The starting point is the discretion of the EAT on matters of costs. This court is not entitled to substitute a different decision unless there was a error of legal principle in declining to make an order for costs or if for some other reason it was plainly wrong not to do so.
32. I look first at the proceedings in the EAT itself. In my judgment, the EAT was entitled to conclude that the conduct of MRCS in the appeal proceedings could not be described in any of the ways necessary to bring the case within rule 34A(1). Mr Afolayan appealed on various grounds against the finding of 100% contribution. In light of the facts found by the ET about the reason for his dismissal and the permissible nature of the dismissal option, MRCS's resistance to the appeal, which Mr Afolayan could only bring on a question of law, could not possibly be described as unnecessary, improper, vexatious or misconceived or unreasonable. MRCS was only seeking to uphold the contributory fault ruling made in its favour by the ET. It could not reasonably be criticised for doing that.
33. So I look next at the conduct of MRCS in the disciplinary process and in the proceedings outside the EAT. Mr Afolayan's appeal to this court is based on the central allegation that MRCS acted in bad faith both in the disciplinary process and in its defence to his claim in the ET.
34. I am prepared to assume in Mr Afolayan's favour that the EAT ought, in the exercise of its discretion on his costs application, to have taken account of the conduct of MRCS in the disciplinary process and in the ET proceedings. His difficulty is in the findings of the ET. The core findings were that MRCS had a potentially fair reason for dismissal, that it was permissible to dismiss him for that reason and that he had contributed to his dismissal, the extent of his fault being disputed on appeal and in the subsequent remitted hearing in the ET.
35. The ET's conclusion that Mr Afolayan was unfairly dismissed was based purely on the identified errors in the disciplinary procedure. That was not a finding of bad faith. There was nothing in the other findings of the ET to support his case that MRCS had acted in bad faith or improperly at any stage before or during the proceedings.
36. Although the grounds on which the EAT allowed Mr Afolayan's appeal included errors of the ET in identifying the reason for dismissal, in the finding that he would have been dismissed anyway and in the finding of contributory fault, the EAT concluded that it was not possible for it to substitute different findings. Hence the EAT's order remitting the matter of contribution and remedies to a fresh tribunal. The position therefore was that there were no findings by the ET or the EAT which supported Mr Afolayan's allegation of bad faith or improper conduct on the part of MRCS in the disciplinary process or in the ET.
37. Mr Afolayan's costs appeal fails on that ground alone. It is unnecessary to say more in this case about the extent to which the EAT, in the exercise of its costs jurisdiction, ought to take account of the conduct of the paying party outside the proceedings in the EAT.

Result

38. I would dismiss the appeal. The EAT had a discretion whether or not to make an order for costs. There was no error of law in its refusal to grant Mr Afolayan's application.

Lord Justice Moses:

39. I agree.

Lord Justice Etherton:

40. I also agree.