England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL

		Royal Courts of Justice Strand, London, WC2A 2LL
		3rd February 2010

Lady Justice Smith:

1. This is an appeal against the order of the Employment Appeal Tribunal in which it made a wasted costs order of £750 in favour of Mr Toni Gill against Miss Nicola Twine of counsel. The order arose as a result of allegations of improper conduct by Miss Twine in the course of proceedings before an employment tribunal sitting at Leeds in January 2008.
2. The background to those proceedings is that Mr Gill was employed for some years as a sales representative by Humanware Europe Limited. Relations with his line manager, Mr Davis, deteriorated and in 2005 and 2006 Mr Gill lodged grievances against Mr Davis. These were investigated and upheld.
3. In October 2006, Mr Gill applied for a newly created post as a regional sales manager. Mr Davis was the interviewer. Mr Gill was not selected. He considered that the selection exercise had been unfair and he lodged another grievance. This was investigated and dismissed, as was the internal appeal. Soon afterwards Mr Gill resigned his position and brought proceedings in the employment tribunal alleging that he had been constructively dismissed.
4. The hearing was fixed for 3 days in January 2008. Mr Gill was unrepresented and Miss Twine appeared for Humanware, instructed by solicitors Messrs Wilson Browne. Witness statements had been exchanged in the usual way. It was apparent from Mr Gill's witness statement that he wished to give evidence about all three of his grievances against Mr Davis. His case was that what had happened in late 2006 had been the last straw that drove him to resign; the other incidents giving rise to grievances were part of the history which led to that final resignation. However, it appears that the tribunal (Employment Judge Burton, Mr Khan-Malik and Mr Lannaman) took the view on reading the papers that the earlier grievances were irrelevant. Almost immediately on coming into the tribunal room, the judge announced that Mr Gill would not be permitted to give evidence about those earlier matters. The EAT was later to observe that the tribunal had made that decision without hearing submissions from Mr Gill.
5. Mr Gill gave his evidence and was cross-examined. It appears that at the end of the first day an incident occurred in which the judge and Miss Twine spoke to each other about the management of the remainder of the hearing. Because the first two grievances were not to be discussed in evidence, the respondent's evidence would be shorter than anticipated and the hearing was likely to be concluded in two days rather than three. Apparently Mr Gill was not included in that conversation although it took place in the tribunal room.
6. The hearing resumed the following day. At some time during the day an incident allegedly occurred to which I will return. At the end of the second day the tribunal gave a judgment dismissing Mr Gill's claim.
7. Mr Gill appealed to the EAT. He was still unrepresented but his grounds were clearly set out. He complained about a number of errors of law, principally the exclusion of the evidence relating to his first two grievances. He also made a number of allegations of bias by the tribunal. There were 11 particular complaints. One was that the evidence of the two grievances had been excluded without reference to him. Another was that the employment judge had had a conversation with counsel about case management matters which had excluded him. It was alleged that in the course of that the judge had suggested that the evidence of Mr Davis would be central. Mr Gill also complained that, on the second day, Miss Twine had asked to speak to the judge in private. She had left the tribunal room and so had the judge. It appeared to Mr Gill that they had had a private conversation, about what he did not know.
8. Following the usual procedure of the EAT, Mr Gill was asked to swear an affidavit confirming his allegations of bias. These were then put to the employment judge and panel members for their comments. The two panel members said that they had no recollection of any incidents such as were alleged. The chairman, however, did accept that he might have discussed case management matters with Miss Twine at the end of the first day. He said that for administrative reasons he wished to find out whether the case would finish within two days. As to the allegation that he had had a private conversation with Miss Twine, he said that he had a vague recollection of a brief conversation about a personal matter to do with either Mr Davis or the claimant, but he said that in effect this had been harmless as he had already appreciated the import of what Miss Twine had wished to tell him.
9. On consideration of the papers Elias P, as he then was, allowed the appeal to proceed on the substantive issues but refused to allow the allegations of bias to proceed. Mr Gill renewed his application in respect of the bias allegations at an oral hearing before HHJ Clark. HHJ Clark allowed those allegations to proceed to a full hearing.
10. At the hearing, Mr Gill was represented pro bono by Mr Spencer Keen of counsel. Due to his intervention the grounds of appeal and skeleton argument were somewhat refined and, in particular, the alleged legal errors more clearly delineated. Humanware were represented by Mr Robin White of counsel. Miss Twine was not instructed and did not attend. Before the hearing, however, her former instructing solicitors had put in an affidavit from her dealing with the allegations of bias. She denied having any private conversation with the judge.
11. The hearing of the EAT was before HHJ McMullen QC, Mr JLP Drake and Mr DG Smith. The tribunal dealt first with the allegations of bias. Mr Gill gave oral evidence and was cross-examined. In the judgment, the EAT considered Porter v Magill [2002] 2 AC 357. They said that they must decide what the circumstances were and then ask themselves whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility that the tribunal had been biased.
12. The EAT held, first, that the tribunal had decided to exclude the evidence of the first two grievances without reference to Mr Gill. In effect, it had presented that decision to him as a fait accompli. Although the EAT did not say so in terms, it is clear that the EAT regarded that process as unfair. It later went on to hold that the decision had also been wrong as a matter of law. The EAT then considered the two allegations of bias in which Miss Twine was concerned. They made findings of fact about what had happened. As to the incident at the end of the first day, they found that there had been a private conversation between Miss Twine and the judge in the tribunal room about the remainder of the hearing, which included the view expressed by the judge that the evidence of Mr Davis was central. The EAT did not in terms say who had instigated that conversation. However it declared that this conduct crossed the threshold envisaged in Porter v Magill.
13. As to the second incident, which the EAT said caused them greater concern, they found that Miss Twine had asked to have a word with the judge and had done so in private. Mr Gill had not heard what had been said but the EAT took what had happened from the employment judge's recollection, which I have already described. The EAT dismissed Miss Twine's affidavit, saying that it took matters no further. They held that that incident also crossed the Porter v Magill threshold.
14. The EAT said nothing about the remaining allegations of bias. It may well be that they had not been stressed by Mr Keen in oral argument. However, at paragraph 27 of their judgment they considered the three issues which had been discussed. That is the exclusion of evidence of the fait accompli, the case management discussion from which Mr Gill was excluded and the private conversation with counsel. They concluded:

"When they are put together, as they must be in considering the question of apparent bias, the claimant's case is correct."

15. The EAT then went on to consider the substantive allegations of errors of law. They held that there were several errors, the first of which was the wrongful exclusion of relevant evidence relating to the first two grievances. At paragraph 30 the EAT concluded that the tribunal's judgment could not stand:

"…either because of the unfair procedure adopted in relation to the two incidents or because of the errors of law in excluding evidence relevant to the last straw."

The case was remitted for hearing by another tribunal.

16. That judgment was given extempore at the end of the hearing. It was followed, we are told, by some inconclusive discussion about the possibility of Mr Gill claiming some wasted costs. He did not then decide to do so but made an application a few days later. He directed his complaint against Miss Twine's solicitor, but it was clear to the EAT that the real target of his complaint was Miss Twine herself. He attached to his application a schedule of costs which he alleged had been wasted. These were modest because he had acted in person for much of the time and had had assistance pro bono in the EAT. The costs claims related mainly to his preparation for and attendance at the Rule 3.10 hearing before HHJ Clark and to the expenses of attendance on counsel in chambers and later at the substantive EAT hearing. He also claimed a small amount in respect of the original employment tribunal hearing. The total claim was for just under £1400.
17. Wilson Browne, Humanware's solicitors, were informed of the application and put in a response. Miss Twine also became aware of the application and instructed solicitors Fishburns and Co to act on her behalf. On 29 April 2009 Fishburns wrote to the EAT asking for time in which to make representations. On 1 May the EAT replied, issuing HHJ McMullen's direction that Miss Twine could have until 19 May in which to lodge her submissions. Miss Twine was also asked to confirm whether she was content for the costs application to be determined on the papers.
18. On 15 May Fishburns put in a five-page response. First, they drew attention to the fact that there had been a conflict of evidence as to what had happened at the tribunal, particularly in relation to the second and potentially more serious incident. Second, they made a number of submissions to be derived from the authority of Ridehalgh v Horsefield [1994] Ch 205. These included the submission that a wasted costs procedure should be summary and proportionate and would not be appropriate except in the most clear cases. It was submitted that there should be no need for detailed inquiry into the facts. The submission was then made that this case was far from clear, but there would have to be inquiry into the facts from people who had been present at the EAT. This would not be simple or proportionate. This was not a clear case and no wasted costs order should be made. Fishburns added that Miss Twine wished to have the application determined at a hearing at which she would be represented by counsel. It was pointed out that the costs of such a hearing would themselves be disproportionate as they would exceed the sum claimed by Mr Gill.
19. Fishburns' response then turned to the question of causation. The importance of proving causation was stressed. It was submitted that all Mr Gill's expenses would have been incurred in any event regardless of any action by Miss Twine. For that reason no wasted costs order should be made. The response concluded by saying:

"We trust that these submissions are of assistance and that the Court will decide now that no order should be made so that the application can be dismissed on paper. If despite these submissions the Court wishes to consider the matter further, then our client should like the matter to be considered at a hearing, not on the papers. Our client wishes to be represented by counsel at such a hearing"

20. The EAT then considered the application on paper without further reference to Miss Twine or Fishburns. They regarded Fishburns' response as equivocal on the question of whether Miss Twine wanted an oral hearing and they proceeded without such a hearing. They held that counsel had acted improperly in respect of the two incidents I have described. There was no discussion in the decision about the existence of a conflict of evidence. The EAT's findings of fact in relation to Miss Twine's conduct were taken directly from their main judgment, notwithstanding the fact that Miss Twine had not been present or represented. They said that their principal criticism of the conduct of the hearing had been in relation to the conduct of the judge and that ultimately the judgment had been set aside because of the appearance of bias. However, they recognised that the ET had also made a number of errors of legal substance and that the error relating to the admission of evidence had had nothing to do with Miss Twine. They felt that they could not say that the tribunal's other errors of law had not been affected by counsel's interventions. They said that they must assume that they may have been. They observed that Fishburns had made no challenge to the sums claimed if an order was correct in principle. They then said that Mr Gill had been put to additional expense by having to attend two employment tribunal hearings rather than one, and two hearings at the EAT. They assessed his wasted costs at £750.
21. On this appeal, for which I gave permission after consideration of the papers, Mr Graeme McPherson QC for the appellant submitted, first, that although this case did not involve a significant amount of money, it was important to the appellant because her professional reputation had been damaged by the finding of improper conduct. He submitted that this wasted costs application should have been dismissed at the outset because it had never been suitable for summary determination. That was because there was a conflict of evidence as to what had happened and any inquiry would be disproportionately expensive. Instead the EAT had embarked upon a process which was manifestly unfair. There should have been a two-stage hearing and, in this case, that should have included an oral hearing.
22. Third, and by no means least important, the EAT had erred in its consideration of the issues of causation. Even if Miss Twine had been guilty of improper conduct, as alleged, there was no evidence upon which the EAT could have been satisfied that it had led to any wasted costs for Mr Gill. The course of the proceedings would have been exactly as they had been.
23. Mr Keen has once again appeared pro bono for Mr Gill and we are most grateful to him for his helpful and succinct submissions. He submitted that there was nothing wrong with the procedure that had been adopted. Rule 34C of the EAT's Rules of Procedure 1993 (as amended) provides the EAT with a wide discretion as to how it is to proceed on a wasted costs application. The procedure, he submitted, should be flexible and the only overriding requirement was that it should be fair. This process had been fair.
24. So far as causation was concerned, it was open to the EAT to conclude that the result of the tribunal hearing might have been different had it not been for counsel's intervention. He submitted that the decision should stand.
25. I will begin with undisputed matters. The power of the EAT to make a wasted costs order is found in the EAT Rules, Rule 34 C. I will read sub-rules 1, 3 and 5, which seem to be the only ones which are relevant for present purposes:

"1) The Appeal Tribunal may make a wasted costs order against a party's representative;

…

3) 'Wasted costs' means any costs incurred by a party (including the representative's own client and any party who does not have a legal representative)–

(a) as a result of any improper, unreasonable or negligent act or omission on the part of any representative; or

(b) which, in the light of any such act or omission occurring after they were incurred, the Appeal Tribunal considers it reasonable to expect that party to pay.

…

5. Before making a wasted costs order, the Appeal Tribunal shall give the representative a reasonable opportunity to make oral or written representations as to reasons why such an order should not be made. The Appeal Tribunal may also have regard to the representative's ability to pay when considering whether it shall make a wasted costs order or how much that order should be."

26. Counsel on both sides accepted that that rule must be interpreted in the light of the guidance given by this court in Ridehalgh's case, to which I have referred, and other cases in this court such as Hedrich v Standard Bank London Ltd [2008] EWCA Civ 905 and by the House of Lords in Medcalf v Weatherill [2002] UKHL 27; [2003] 1 AC 120. However, counsel also accepted that it may be appropriate for procedures in the EAT to be less formal than might be required in other forum. The essential requirement is for fairness.
27. I will deal first with the question of whether a wasted costs order should have been entertained at all. It is clear from the observations at paragraph 24 of Lord Bingham's speech in Medcalf v Weatherill that care should be exercised before embarking on such a process. At paragraph 24 Lord Bingham said:

"Save in the clearest case, applications against the lawyers acting for an opposing party are unlikely to be apt for summary determination, since any hearing to investigate the conduct of a complex action is itself likely to be expensive and time-consuming. The desirability of compensating litigating parties who have been put to unnecessary expense by the unjustified conduct of their opponents' lawyers is, without doubt, an important public interest, but it is, as the Court of Appeal pointed out in Ridehalgh at page 226, only one of the public interests which have to be considered."

28. Those words were echoed by Millett LJ in Re Freudiana Holdings Ltd (unreported, 28 November 1995). He said that jurisdiction in a wasted costs application should only be exercised in a reasonably plain and obvious case. I do not suggest that this case could be described as a complex or difficult case. However, there was a conflict of evidence as to what had happened at the hearing in particular on the second day. Although the EAT made a finding of fact as to what had happened, that finding was not binding on the appellant, who had not been present. True, she had sworn an affidavit, but that was done in the context of the allegations of bias as a whole and did not necessarily provide the detail that she would have liked to give had she known that she was facing personal criticism as to her improper conduct. The EAT did not apparently consider whether it should embark on hearing the application at all because it appears to have thought that the issues were reasonably plain and obvious. In that, I think that they were wrong, because there remained an issue of fact which required resolution as between Mr Gill and Miss Twine in the context of an allegation of improper conduct by her and not merely in the context of an appeal alleging apparent bias by the employment judge.
29. I do not consider that it could be said that the issues of fact here were such as could not have been resolved proportionately had there been a hearing, although I am doubtful as to whether they could. I think that if the judge was concerned about Miss Twine's conduct, as he appears to have been, the better course would have been for him to make a report to the Bar Standards Board which can investigate the alleged misconduct properly and, if appropriate, referring it to a hearing before a disciplinary tribunal. It should be known that it is possible for such a tribunal to make an order for compensation if it finds a complaint proven.
30. My conclusion on this issue is that I would not allow this appeal on the ground that the EAT should never have embarked on the hearing of the application. However, I do think that appeal tribunals should think carefully before doing so in a case in which there is a conflict of evidence to be resolved.
31. I turn next to Mr McPherson's complaint about procedure. Initially he argued that the case of Ridehalgh imposed an invariable requirement for a two-stage process, at which the court considers first whether there is a strong prima facie case for the making of a wasted costs order and then at a second stage decides whether it is appropriate to make one. I do not accept that submission and I think that to some extent it was abandoned in the course of argument. It seems to me that Rule 34C gives the EAT some discretion as to how it proceeds on an application such as this. The procedure to be adopted should depend upon the circumstances. Sometimes the application will be made at the end of a substantive hearing, sometimes not. Sometimes the person against whom it is to be made will have been present throughout that hearing; sometimes he or she will not. If the application is made at the end of a hearing at which the respondent has been present, it may be possible to deal quite fairly with the whole application there and then. On the other hand it may be necessary to allow an adjournment for the respondent to make representations or even to call evidence from witnesses not then present. It all depends upon the facts. If the respondent has not been present at the hearing at which his or her conduct has been considered, plainly there will have to be an adjournment. Whether or not there will then have to be an oral hearing will depend upon the nature of the issues in question and the way in which they will have to be resolved. Of course one issue for consideration will be the amount of money at stake. If it is small, it may be sensible, fair and proportionate to decide matters without an oral hearing. If the sum is large or if a reputation is at stake, that might not be appropriate. Also it may be necessary to hold an oral hearing in order to determine issues of fact.
32. In the present case I am concerned that the judge asked Miss Twine whether she consented to the application being dealt with on paper but, when she did not consent, the EAT moved immediately to determination on paper. The EAT considered that Miss Twine's attitude towards a paper determination was equivocal. I cannot accept that. It seems to me that the passage of Fishburns' letter, which I have read out, was perfectly plain. If the EAT was minded to dismiss the application, of course Miss Twine did not want a hearing, but she made it plain that, if they were minded to consider the application further, she wanted a hearing at which she would be represented by counsel.
33. In my judgment, on the particular facts of this case, where findings of fact had been made in Miss Twine's absence, where she had specifically drawn attention to the disputes of fact and where she had requested an oral hearing, fairness required that that should be allowed. She did not have one, and for that reason I would hold that the findings of improper conduct made at that hearing must be set aside.
34. That would, in the ordinary course of events, mean that this matter should be remitted for a further hearing. However, I have concluded that in my view that should not happen because I do not think that the application could succeed if a proper approach to causation were then to be taken. It is clear from Rule 34C itself that a wasted costs order can be made only if the improper or unreasonable or negligent conduct complained of results in wasted costs. Ridehalgh and other cases stress the need for causation to be proved. The test, in my judgment, should be the usual test of causation. In this case, the test is whether, but for the actions complained of, Mr Gill would have avoided some expense and, if so, how much?
35. The EAT's analysis of causation was brief. They reminded themselves that, apart from the apparent bias the tribunal had displayed in respect of the two incidents involving Miss Twine, it had been unfair in a way which had nothing to do with her when it excluded important evidence without even hearing from Mr Gill. It had then made a number of errors of legal approach.
36. In my judgment, the only sensible conclusion one could draw from those observations was that, however much Miss Twine's conduct might be deprecated, it had not affected the course of the proceedings at all. The appeal to the EAT would still have had to take place and it would have been allowed for unfair process and errors of substantive law. The costs of the appeal to the EAT were inevitable. As for the costs of the Rule 3.10 hearing, which Mr Gill particularly claimed, they were incurred because Elias P refused to allow the allegations of bias to proceed. One might say that, in the light of subsequent events, he was wrong, but that was nothing to do with Miss Twine.
37. In my view, the EAT's reasoning in respect of causation was flawed. It held that causation was proved because it had to assume that, if Miss Twine had not acted as she did, the tribunal might not have made the errors of law it did make. In my judgment that is pure speculation and is without foundation. This tribunal made its most fundamental error even before it came into the tribunal room. Having decided in advance without hearing submissions that it would exclude the evidence of the first two grievances, an appeal to the EAT was inevitable as was the cost of a re-hearing.
38. It follows, in my view, that the appeal must be allowed. The appellant did not have a fair hearing of the wasted costs issue and the findings and order of the EAT must therefore be set aside. As the application could not in any event succeed, in my judgment, I would refuse to remit it for a rehearing.

Lord Justice Longmore:

39. I agree with my Lady that this appeal should be allowed and with her reasons, save in one respect. I would not myself say that, on the facts of this case, the EAT were bound to grant an oral hearing of Mr Gill's application for a wasted costs order against Miss Twine. Whether they decided to hold an oral hearing or not was a matter within their discretion, but I do think that before deciding whether to have an oral hearing they should have considered whether the matter could not have been better dealt with by a reference to the Bar Standards Board, which now has jurisdiction to award compensation up to £15,000 to a complainant who has suffered financial loss as a result of counsel's improper conduct.
40. I also consider that if the EAT were going to proceed without an oral hearing they should have written to Miss Twine to tell her that that was their decision and to ask her whether she wanted to amplify her written submissions in any way in the light of that decision. Had the EAT done this, they might have reached a different conclusion, and I agree therefore that the finding of impropriety should be set aside.
41. In this case, Mr McPherson QC's submission that it is impossible for Mr Gill to show that any improper conduct on the part of Miss Twine caused him actual financial loss is in my view unanswerable for the reasons which my Lady has given. While grateful for Mr Keen's pro bono appearance here on Mr Gill's behalf, I agree that this appeal should be allowed and the wasted costs order should be discharged.

Lord Neuberger:

42. The EAT wrote to Miss Twine's solicitors on 1 May 2009 asking whether they were "content for the costs application to be determined on the papers". In their letter of 15 May Miss Twine's solicitors made it clear that, not least because of the conflict of evidence to which the wasted costs application gave rise, they would not be content, and that a hearing was required unless the application was summarily dismissed. In the circumstances it seems to me that the EAT should not have gone ahead and determined the wasted costs application against Miss Twine, particularly as it involved a finding that she, a professionally qualified person, had acted in an "improper" way. The EAT should at least have given Miss Twine an opportunity (a) to object to their intended course of proceeding without a hearing and/or (b) to make further submissions on the basis that the EAT would proceed on that course. The 15 May letter was in my view clearly written on the basis that Miss Twine was declining the invitation to consent to the matter being dealt with on the papers – at least if it was not summarily dismissed.
43. If the EAT had replied to the letter of 15 May by saying that they intended not to have an oral hearing and to deal with matters on paper, it seems likely that Miss Twine's solicitors would have objected to this course, explaining why. Longmore LJ, has said, that may well have resulted in the EAT deciding to have an oral hearing. If they had not decided to have an oral hearing I would not go quite so far as Smith LJ, in saying that, on any view, the EAT would have been obliged to have an oral hearing. I would agree with Longmore LJ, that it would have been a matter for them, and the exercise of their powers in that connection would have to have been reasonable, and would have had, no doubt, to take into account the submissions made on behalf of Miss Twine. I think it is possible, depending on the nature of those submissions which she never had an opportunity to make, that on the basis of those submissions, the EAT could only have decided to have an oral hearing, but in the absence of seeing any such submissions, because she had no opportunity to make them, it is impossible to express a concluded view on that, indeed there might have been submissions from Mr Gill taken into account as well.
44. I have nothing more to add: on all the other issues Smith and Longmore LJJ are agreed and I agree with them. Accordingly, this appeal will be allowed. I too would like to express my gratitude to both parties and in particular to Mr Gill who has acted pro bono.

Order: Appeal allowed