Industrial Tribunals Northern Ireland Decisions

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Cite as: [2007] NIIT 3110_4, [2007] NIIT 3110_04

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THE INDUSTRIAL TRIBUNALS

CASE REFS: 3110/04

3111/04

APPELLANTS: 1. Henry Brothers (Magherafelt) Limited

2. F B McKee & Co Limited

RESPONDENT: Construction Industry Training Board

DECISION

The decision of the tribunal is that:-

The appeal of the first-named appellant against the assessment to the levy made by the respondent is dismissed, notice having been given to the tribunal and the respondent of abandonment of the said appeal.

The appeal of the second-named appellant against the assessment to the levy made by the respondent is dismissed, notice having been given to the tribunal and the respondent of abandonment of the said appeal.

The first-named appellant and the second-named appellant are each ordered to pay to the respondent the sum of £650.00 (inclusive of Value Added Tax) in respect of costs.

Constitution of Tribunal:

Chairman (sitting alone): Mr N Drennan QC

Appearances:

The appellants were represented by Mr C Dunford, Barrister-at-Law, instructed by John McKee & Sons, Solicitors.

The respondent was represented by Mr J Coyle, Barrister-at-Law, instructed by Babington & Croasdaile, Solicitors.

REASONS

1. The first and second-named appellants gave notice to the tribunal and the respondent on or about 12 September 2006, of the abandonment of the appeal brought by each appellant against the assessment to the levy which had been made by the respondent, pursuant to the relevant Industrial Training Levy (Construction Industry) Orders, under which the respondent is entitled to impose a levy upon employers in the construction industry. In the circumstances, following the said notice of abandonment of each appeal, it was agreed that the tribunal would dismiss each appeal.

2. In relation to each said appeal, following their abandonment and subsequent dismissal, the respondent has now made an application for costs in relation to each said appeal. In relation to the said application for costs, I noted that both appellants were represented by the same solicitors and counsel; and it is clear that, in relation to the conduct of the said appeals, they were treated by both parties and their representatives as if there had been an Order that they should be heard and considered together. No such Order was made by the tribunal. It has been necessary, as set out in the said decision, to make an Order for Costs in respect of each appeal.

3. I am satisfied that each of the said appeals, having been presented to the industrial tribunals on 3 December 2004, that the relevant Rules of Procedure relating to each said appeal are contained in the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2004 and, in particular, the Industrial Tribunals (Levy Appeals) Rules of Procedure set out in Schedule 4 to the said Regulations.

4. Rule 13 of the Industrial Tribunals (Levy Appeals) Rules of Procedure (‘Levy Appeals Rules of Procedure') provides as follows -

13 - (1) The decision of the tribunal may include –

(a) an Order that the Board shall pay to the appellant or that the appellant shall pay to the Board either a specified sum in respect of the costs incurred by the appellant or the Board, as the case may be, or, in default of agreement, the amount of those costs as assessed by way of detailed assessment;

……….

(2) Any costs required by an order under this rule to be assessed by way of detailed assessment may be so assessed in accordance with such of the scales prescribed by County Court rules for proceedings in the County Court as shall be directed by the order.

The said Rule does not provide therefore any preconditions for the application of the said Rule. I am satisfied that, although I have wide discretion in determining whether any such Order for Costs should be made; it must be exercised judicially and with regard to the circumstances of each case. Neither counsel was able to provide to me any legal authority where this Rule has been the subject of any judicial determination either in this jurisdiction or in Great Britain (where a similar provision applied, prior to the introduction of new Rules of Procedure in Great Britain in or around October 2004).

5. Rule 13 of the Levy Appeals Rules of Procedure are not in similar terms to Rule 14 of the Industrial Tribunals Rules of Procedure set out in Schedule 1 of the Industrial Tribunals (Constitution of Rules of Procedure) Regulations (Northern Ireland) 2004, which relate to applications for Order for Costs in relation to claims, for example, of unlawful discrimination/ unfair dismissal, brought before industrial tribunals, arising out of employment disputes in the workplace.

Rule 14 of the said Industrial Tribunals Rules of Procedure provides:-

14 - (1) Where in the opinion of the tribunal, a party has in bringing the proceedings, or a party or a party's representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or a party's actions in bringing the proceedings have been misconceived, the tribunal shall consider making, and if it so decides, may make –

(a) an Order containing an award against that party in respect of the costs incurred by another party;

…………..

(2) ……….

(3) An Order containing an award against a party (‘the first party') in respect of the costs incurred by another party (‘the second') shall be -

(a) where the tribunal thinks fit, an order that the first party pays to the second party a specified sum not exceeding £10,000;

(b) where those parties agree on a sum to be paid by the first party to the second party in respect of those costs, an order that the first party pay to the second party a specified sum, being the sum so agreed; or

(c) in any other case, an order that the first party pay to the second party the whole or a specified part of the costs incurred by the second party as assessed by way of detailed assessment (if not otherwise agreed).

……….

(6) Any costs required by an Order under this Rule to be assessed by way of detailed assessment may be so assessed in the County Court in accordance with such of the scales prescribed by County Court Rules for proceedings in the County Court as shall be directed by the order.

6. Under Rule 14 of the Industrial Tribunals Rules of Procedure, it is therefore necessary for a tribunal, when considering an application for costs under the said Rule, to embark on a two stage process. Firstly, the tribunal has to consider whether it has been established that the relevant party has satisfied the terms of Rule 14 (1) - for example a finding of unreasonable conduct. The tribunal has to consider, secondly and separately, whether to exercise its discretion to make an Order for Costs (see further Criddle v Epcot Leisure Ltd UK EAT/0275/05).

In the case of Lodwick v London Borough of Southwark [2004] IRLR 554, a case of unfair dismissal/breach of contract, Lord Justice Pill made it clear that, when considering whether an Order for Costs should be made under the said Rule – “to order costs in an employment tribunal is an exceptional course of action and the reasons for, and the basis of, an Order should be specified clearly; especially where a sum as substantial as £4,000.00 is involved”.

7. Under the Industrial Training Levy (Construction Industry) Orders, provision has always been made that an appeal, against the assessment to the levy made by the respondent, is made to the industrial tribunals and not to the ordinary Civil Courts. Specific Rules of Procedure have always been provided for the conduct of such appeals in the industrial tribunals.

8. The Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2004 replaced the Industrial Tribunals (Constitution and Rules of Procedures) Regulations (Northern Ireland) 1996. It is correct to note that the Rules of Procedure in relation to the costs that could have been ordered in a levy appeal under the said 1996 Regulations were in similar terms to these contained in Schedule 4 of the 2004 Regulations.

Similarly, Rule 14 of the Industrial Tribunals Rules of Procedure, contained in Schedule 1 of the 2004 Regulations as set out above, was broadly similar to that contained in the equivalent Rule under the 1996 Regulations; which also provided for a similar two stage process, with certain conditions to be fulfilled before the exercise of the discretion.

9. Neither counsel were able to discover, from their researches into this matter, any explanation why there were such differences in approach in relation to the making of an Order for Costs, by an industrial tribunal, under the relevant Rules of Procedure relating to levy appeals, and the making of an Order for Costs under the relevant Rules of Procedure relating to claims of, for example, unfair dismissal/ unlawful discrimination, brought before industrial tribunals arising out of employment disputes in the workplace.

10. The 2004 Regulations, like the 1996 Regulations, in addition to providing specific Rules of Procedure for levy appeals also provided specific Rules of Procedure for improvement and prohibition notice appeals and non-discrimination notices appeals. These Rules of Procedure also provided similar Rules, in relation to the making of an Order for Costs, which are found in the Levy Appeals Rules of Procedure. Counsel were not able to point to any document/extract from Hansard, which might have given any indication why Parliament thought it appropriate to make a distinction between the making for an Order for Costs in levy appeals and such ‘ordinary' industrial tribunal proceedings. It may be that the distinction is for historical reasons relating to how each type of proceeding came to fall within the jurisdiction of the industrial tribunals and/or it may relate to the nature of the parties to each type of proceedings. In the circumstances, any such reasons are, in my opinion, merely a matter of speculation and therefore do not assist in how the discretion under Rule 13 of the Levy Appeals Rules of Procedure is to be exercised.

11. However, as set out above, Rule 14 of the Industrial Tribunals Rules of Procedure does provide, in the second stage of the process, for the exercise of the tribunal's discretion. Although the Levy Appeals Rules of Procedure do not involve any requirement to satisfy certain preconditions, before making an Order for Costs, it still requires discretion to be exercised by the tribunal. The exercise of that discretion has to involve similar considerations to those seen in the second stage of the two stage process which is required to be followed, as seen above, in relation to Rule 14 of the Industrial Tribunals Rules of Procedure. Thus, the case law, relating to the exercise of that discretion, in the second stage of the two stage process in Rule 14, must be of assistance in relation to how a tribunal exercises its discretion under Rule 13 of the Levy Appeals Rules of Procedure.

12. However, whatever the reason for the above differences, it was clearly the intention of Parliament that the levy appeals would be determined by the industrial tribunals and would not be determined by the ordinary Civil Courts.

13. In passing, it has to be noted that, in the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005, which came into operation on 3 April 2005, subject to specific transitional provisions, and which are not applicable to these appeals, Schedule 4 of the said Regulations set out the Industrial Tribunals (Levy Appeals) Rules of Procedure. In particular, Schedule 4 applies Rule 40 of the Industrial Tribunals Rules of Procedure (contained in Schedule 1 of the Regulations) to levy appeals and to any application for an Order for Costs. As a result, under the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005 there is now a uniform cost procedure in relation to all jurisdictions, which are determined by industrial tribunals. This applies not only to the levy appeals but also those appeals against improvement and prohibition notices and non-discrimination notice appeals; together with claims of unfair dismissal and unlawful discrimination.

Rule 40 of the industrial tribunals Rules of Procedure 2005 provides:-

……….

(2) Tribunal or Chairman shall consider making a cost order against a paying party where, in the opinion of the tribunal or chairman (as the case may be) any of the circumstances in paragraph (3) apply. Having so considered, the tribunal or chairman may make a cost order against the paying party if it or he considers it appropriate to do so.

(3) 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.

……….

Thus, under the new Rules of Procedure, which did not operate in time for these appeals, a similar cost regime is imposed for a levy appeal and, in particular, it involves preconditions to be satisfied, before the discretion comes to be exercise.

14. Under Rule 13 of the Levy Appeals Rules of Procedure (see Paragraph 4.), where the tribunal decides to make an Order for Costs and not to make an order for a specified sum; but, in default of agreement, to make an order for a detailed assessment of costs, such assessment is done in accordance with the County Court scales. Indeed, enforcement of an Order for Costs by a tribunal is under the County Court Rules.

In relation to costs in the County Court, the general rule is that costs follow the event (ie the loser pays the winner's costs).

Under Order 55 Rule 1 of the County Court rules, it is provided:-

“Decree granted by a County Court shall, except as otherwise provided by any statutory rule, carry such costs as are provided by in this Order.”

Similarly, in the High Court, the basic principle is that costs follow the event.

Under Order 62 of the Rules of the Supreme Court (Northern Ireland) 1980, it is provided:-

“……….

(3) If the court, in the exercise of its discretion, sees fit to make any Order as to the costs of any proceedings, the court shall order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs”.

Thus, in the County Court and the High Court, the general starting point is that costs follow the event. No such starting point is prescribed in the Levy Appeals Rules of Procedure. In my opinion therefore it would be wrong, in the absence of a specific requirement to take that as a starting point when considering the exercise of any discretion, in any levy appeal, in relation to any issue of costs. Thus each costs order has to be determined on its own particular merits/circumstances; and there is, in my opinion, no general rule that costs follow the event, such as seen in the County Court and the High Court.

Equally, there is nothing in the Levy Appeals Rules of Procedure which states that Orders for Costs should be considered the exception rather than the rule. Certainly, that has been the view taken in relation to the exercise of the powers to order costs under the Industrial Tribunals Rules of Procedure (ie the general Rules of Procedure governing claims such as unfair dismissal/unlawful discrimination) (see further the case of Gee v Shell (UK) Ltd [2003] IRLR 82).

However, as Burton (P), in the case of Salinas -v- Bear Stearns International Holdings [2005] ICR 1117, stated the reason why cost orders are not made in the substantial majority of cases is that the tribunal rules contain a high hurdle to be surmounted before such an order can be considered. Those rules, to which Burton P was referring, were the preconditions which require to be considered before the issue of the discretion arises. It has to be remembered that in the Levy Appeals Rules of Procedure, applicable to these cases, no such preconditions have been provided for.

However, even in relation to the Industrial Tribunals Rules of Procedure, in the case of Beynon v Scadden [1999] IRLR 700, it was made clear that the Costs Rules are discretionary and, as such, cannot be fettered by case law. Matters to be derived from the case law can only be factors that may or may not be given weight by the tribunal.

Regardless of what Rules of Procedure are considered, I am satisfied that, as a general principle, any Order for Costs must be compensatory and not punitive.

(See further Lodwick v London Borough of Southwark [2004] IRLR 554)

15. In this matter, although the appeals were presented to the tribunal on 3 December 2004, they were not abandoned until 12 September 2006. I was informed by Mr Dunford that, following the commencement of the appeals, which were necessary to protect his clients' position, legal advice was sought in relation to whether the appellants were required to pay the levy under the terms of the statutory provisions and, in particular, in relation to the emoluments paid to labour only sub-contractors.

16. I am prepared to accept, at the time the commencement of these appeals, there was an issue in relation to the interpretation of the statutory provisions, which required to be considered and the subject of some detailed legal advice. It is not for me, in the course of this hearing, to determine the strengths or otherwise of the case which was sought to be made by the appellants. However, in September 2006, it was decided that the appeals should be abandoned; and there was an acceptance, by the appellants, that the legislation required the appellants to pay the levy and was not subject to any contrary interpretation. I was told by Mr Dunford that the matter was complex and involved lengthy and detailed legal advices, over a period of time, to be given; but ultimately the legal advice had resulted in the course of action seen above; and a decision by the appellants to pursue the matter, in a different forum, to see if the legislation could be changed. Mr Dunford did not go into details of what the above complications and difficulties were. However, I understood that it involved wider issues than the particular appeals themselves and included implications for the construction industry, as a whole, if the issue was pursued on appeal.

17. However, a relevant and significant factor has to be that it apparently took so long to come to the conclusion set out above. However, it is also necessary to take account of the fact that the monies, the subject matter of the levy appeal, were paid by the appellants to the respondent on or about 25 January 2006, under an arrangement, which was ‘without prejudice', to the outcome of these appeals. Mr Coyle argued that the legislation's interpretation was at all times straightforward and it should therefore not have taken so long for the appellants, to determine whether they intended to continue with the appeals.

I accept that there is some assistance to be found in the dicta, set out in the case of E T Marler Ltd v Robertson [1972] ICR 72 in which it was stated:-

“Ordinary experience of life frequently teaches us that that which is plain for all to see, once the dust of battle has subsided, was far from clear to the contestants when they took up arms.”

Issues of statutory interpretation can be difficult, and in particular, whether appeals should be contested; and which were likely to be, in essence, test cases and strongly resisted by the respondent. Thus any decision on whether to proceed in such circumstances I accept can take longer than might otherwise be the case. However, I have come to the conclusion, whatever may have been the complex nature of the issue, that the decision still took longer to take than it should have, albeit I fully recognise payment was made in January 2006. I think despite taking into account the above matters, that a decision should have been able to have been reached, before it was decided to, at least, pursue the application for discovery. It must be remembered that the appeal process had been commenced in December 2004.

18. The appellants sought discovery of various documents, following the commencement of the appeals, in correspondence with the respondent's solicitors from in or about February 2005. The respondent's representatives did not reply to the correspondence, and, as a result, the appellants made an application for discovery, which application came on for hearing before the tribunals at a Case Management Discussion on 31 May 2006. I am satisfied that, in connection with this application for discovery, after the hearing had been arranged, the respondent's representatives took advice from counsel on whether the Order should be granted by the tribunal. However, I am not satisfied that, prior to that date, the respondent's representatives had taken any meaningful or detailed action, which involved them in incurring any significant costs, in relation to the said appeals.

The Case Management Discussion was of limited duration as the Chairman decided not to make any Order for Discovery at that time; but, after hearing submissions from both representatives, the Chairman ordered both representatives to exchange, inter alia, statements of issues relating to whether such an Order should be made, together with skeleton arguments and a timetable for carrying out the above steps. It was anticipated by the Chairman there would be a full hearing of the application for the Order for Discovery, whenever the said matters had been attended to.

In fact, those steps were not required to be taken as the appellants, in the meantime, abandoned their appeals. I further understand that the decision to abandon the appeals was able to be taken, without regard to the failure, up until that time, to obtain discovery from the respondent.

19. I therefore accept that, before the said appeals were abandoned, the respondent had incurred some limited costs, in particular in relation to the application for discovery and the Case Management Discussion held on 31 May 2006 and the preparations for such a hearing. However, it is equally clear that, in view of the abandonment of the said appeals, the costs which might otherwise have been incurred by the respondent, if the order/directions of the Chairman at the Case Management Discussion had had to be carried out by the respondent, were not incurred; and neither were the costs which might otherwise have been incurred, if the appeals had proceeded to a full hearing.

20. In the case of McPherson v BNP Paribas (London Branch) [2004] ICR 1398 the Court of Appeal stated:-

“It will be legally erroneous if, acting on a misconceived analogy with the CPR rule that a claimant who discontinues proceedings is liable for the costs which a defendant has incurred before notice of discontinuance was served, tribunals took the line that it was unreasonable conduct for employment tribunal applicants to withdraw claims and that they should accordingly be made liable to pay all the costs of proceedings.”

The court also made clear withdrawal itself was not to be equated with unreasonableness, and in each case it must be shown that the claimant's conduct of the proceedings had been unreasonable. This was determined by looking at the conduct overall. Of course, it has to be recognised that this was a case involving application of the Costs Rule (Rule 14 of the Industrial Tribunals Rules of Procedure) – under which one of the said precondition relates to whether a party had acted unreasonably. However, the court made clear that it thought it would be unfortunate if claimants were deterred from dropping claims by the prospect of an Order for Costs on withdrawal, which might well not have been made against them if they had fought out the full hearing and failed.

“ … Tribunals should not adopt a practice on costs which would deter claimants from making sensible litigation decisions. On the other hand, they should not follow a practice on costs which might encourage speculative claims by allowing claimants to start cases and to pursue them down to the last week or two before the hearing in the hope of receiving an offer to settle, and then, failing an offer, dropping the case without any risk of a costs sanction”.

Despite the differences between Rule 14 of the Industrial Tribunals Rules of Procedure and Rule 13 of the Levy Appeal Rules of Procedure, to which I have referred above, I am of the opinion that the above dicta in the McPherson case is of some relevance and assistance in deciding how I should exercise my discretion in these matters.

21. Mr Coyle provided to me a draft schedule of the respondent's costs in relation to these appeals in the sum of £4,794.00 (inclusive of Value Added Tax). The schedule included, inter alia, counsel's brief fee, his costs of consultation, and appearances; together with solicitor's professional fees and disbursements.

Mr Coyle frankly and fairly acknowledged that the schedule of costs had been prepared on the basis that ‘costs follow the event'; and also had not been based on any specific County Court scale. He also acknowledged that some of the costs claimed would not be payable on the County Court scales for an ordinary civil bill. Both counsel suggested that, if any County Court scale was to be used for assessment, where a specified sum was not to be ordered, this would be the appropriate scale to use; and it should be based on the fact that the relevant levy, in the first-named appellant's appeal, was £8,315.00 and, in the second-named appellant's appeal, the relevant levy was £2,136.00.

It has to be noted that the relevant County Court scales for ordinary civil bills are in respect of a claim that has been heard and determined and also on the basis that ‘costs follow the event'. I have no doubt, if the appeals had gone to a full hearing, and it was decided that it would be appropriate in the exercise of my discretion to make an Order for Costs, by way of a specified sum, then those scales might have been of some assistance in determining what specified sum would be appropriate to be ordered under Rule 13 of the Levy Appeal Rules of Procedure.

However, in relation to appeals which did not so proceed to full hearing, the said County Court scales are of little assistance in the circumstances. Although the appeals were withdrawn, before hearing, and indeed before the full hearing of the discovery application, I think, for the reasons set out above, that the decision to abandon the said appeal should have been taken, at an earlier stage and before any costs, albeit these were limited, were incurred by the respondent, in relation to these appeals.

I have come to the conclusion in the exercise of my discretion, in the circumstances set out above and after having regard to the legal authorities referred to above, that an Order for Costs should be made, to reflect the limited costs incurred by the respondent. I have further decided that the Order for Costs should be for a specified sum and not by way of detailed assessment.

I have awarded the same sum in relation to each appeal, although I recognise different sums were involved in relation to each appeal. However, it was apparent to me that both appeals were treated by the parties, in essence, as one appeal. The sum ordered is to reflect the costs of both solicitor and counsel.

22. Mr Coyle asked that any Order for Costs would include an Order for Costs in relation to this hearing to determine whether an Order for Costs should be made. It is correct that I have decided to make an Order for Costs in relation to these appeals. However, in doing so, I have rejected the submission by Mr Coyle that, in my discretion, I should order a sum which reflects the principle that ‘costs follow the event'; but equally, I have rejected Mr Dunford's submission that, in my discretion, no Order for Costs should be made. In the circumstances, I took the view that having regard to my wide discretion in this matter, as set out above, any Order should only include a very modest uplift to reflect the costs of this hearing.

I therefore order:-

the first-named appellant to pay to the respondent the sum of £650.00 (inclusive of Value Added Tax); and

the second-named appellant to pay to the respondent the sum of £650.00 (inclusive of Valued Added Tax).

Chairman:

Date and place of hearing: 8 March 2007, Belfast

Date decision recorded in register and issued to parties: