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You are here: BAILII >> Databases >> Industrial Tribunals Northern Ireland Decisions >> McBurney v Vemac Engineering Limited [2014] NIIT 00512_13IT (03 April 2014)
URL: http://www.bailii.org/nie/cases/NIIT/2014/512_13IT.html
Cite as: [2014] NIIT 00512_13IT, [2014] NIIT 512_13IT
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THE INDUSTRIAL TRIBUNALS
CASE REF: 512/13
CLAIMANT: Paul McBurney
RESPONDENT: Vemac Engineering Limited
DECISION ON COSTS
The unanimous decision of the tribunal is as follows:-
“The tribunal orders the respondent to pay to the claimant the sum of £4,824.40, which is inclusive of Value Added Tax properly payable by the respondent to the claimant in respect of the claimant’s costs.”
Constitution of Tribunal:
Employment Judge: Employment Judge Drennan QC
Members: Mr A Barron
Mrs S Butcher
Appearances:
The claimant was represented by Mr P Ferrity, Barrister-at-Law, instructed by Anderson Agnew & Company, Solicitors.
The respondent was represented by Mr P Kearney, Barrister-at-Law, instructed by Mallon McCormick, Solicitors.
Reasons
1.1 At the conclusion of this costs hearing, the tribunal orally announced its decision, as set out above; but it stated that it would give its reason in writing, in due course, pursuant to Rule 30 of the Rules of Procedure contained in Schedule 1 of the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005 (‘the Rules of Procedure’).
1.2 The tribunal, in a decision recorded in the Register and issued to the parties on 24 January 2014 decided, inter alia, in an unanimous decision, that the claimant was unfairly dismissed and the respondent was ordered to pay the claimant, by way of compensation, the sum of £8,734.50.
1.3 By letter dated 13 February 2014, the solicitor for the claimant made application to the tribunal for costs, pursuant to Rules 38 and 40 of the Rules of Procedure on the grounds that the conducting to the proceedings by the respondent had been misconceived and/or had been conducted unreasonably. In the said letter, the claimant’s representative confirmed that a Schedule of Costs would follow.
1.4 By letter dated 13 March 2014, the claimant’s representative sent to the tribunal the claimant’s Schedule of Costs, a copy of which was also sent to the respondent’s representative. The costs set out in the said schedule were not agreed; but the respondent’s representative, at the hearing accepted he was not saying anything by way of challenge and, in particular, in relation to the method of calculation or the amount of same; and to which further reference shall be made elsewhere in this decision.
The said Schedule of Costs were made up as follows:-
Mr P Ferrity BL
Brief and hearing fee £1,000.00
CMD £ 250.00
Notice for Additional Information £ 100.00
Notice for Discovery £ 50.00
Issues paper £ 100.00
£1,500.00
VAT £ 300.00
Total £1,800.00
Professional fee to include drafting IT1 form and
lodging same with the tribunal office, instructing
Mr P Ferrity, corresponding with the respondent and
Mallon McCormick, drafting and serving Notices of Issues,
Discovery and Additional Information, attending a
Case Management Discussion on 20 May 2013, serving
list of documents and schedule of loss, preparing
trial bundle, attending at the trial on 5 August 2013,
all attendances, correspondence and telephone calls
in connection therewith
To 15 hours @ £150.00 per hour £2,250.00
Telephone calls and letters at £10.00 each £ 270.00
£2,520.00
VAT £ 504.00
£3,024.00
Total (£3,024.00 + £1,800.00) £4,824.40
2.1 Rule 40 of the Rules of Procedure, insofar as relevant and material, provides:-
“ ...
(2) A tribunal or chairman shall consider making a costs 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 costs 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.
... .”
At the outset of the hearing, the claimant’s representative confirmed that the claimant, in making his application for costs, was relying, in particular, on the following circumstances, namely the respondent had, in conducting the proceedings acted otherwise unreasonably and/or the bringing or conducting by the respondent had been misconceived (ie had no reasonable prospect of success – see later). Despite the terms of his application to the tribunal, as set out in the letter dated 13 February 2014, the claimant’s representative also tentatively sought to rely on the circumstance, namely the respondent or his representative had, in conducting the proceedings, acted vexatiously; albeit he recognised, from the outset, that this would be difficult to establish, in light of the relevant legal authorities (see later).
2.2 Rule 41 of the Rules of Procedure, insofar as relevant and material, provides:-
“(1) The amount of a costs order against the paying party shall be determined in any of the following ways –
(a) the tribunal may specify the sum which the paying party must pay to the receiving party, provided that sum does not exceed £10,000;
(b) the parties may agree on a sum to be paid by the paying party to the receiving party and if they do so the costs order shall be for the sum so agreed;
(c) the tribunal may order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party with the amount to be paid being determined by way of detailed assessment in a 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.
(2) The tribunal or chairman may have regard to the paying party’s ability to pay when considering whether it or he shall make a costs order or how much that order should be.
(3) For the avoidance of doubt, the amount of a costs order made under paragraph (1)(b) or (c) may exceed £10,000.”
2.3 In Article 2(1) of the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005, ‘misconceived’ is defined as including no reasonable prospect of success.
2.4 In Raggett v John Lewis PLC [2012] UKEAT/0082/12 the Employment Appeal Tribunal held that Value Added Tax should not be included in costs ordered to be paid (under Rule 41) if the receiving party is able to re-claim Value Added Tax as Input Tax. In light of the foregoing, both representatives were satisfied that if any Order for Costs was made by the tribunal in this matter it should include any Value Added Tax properly payable by the respondent to the claimant.
2.5 The tribunal is satisfied that the cap of £10,000.00 on the amount of costs which can be awarded, pursuant to Rule 41(1)(a) of the Rules of Procedure, includes any sum properly payable by way of Value Added Tax.
2.6 The claimant’s representative confirmed that, in making his application for costs, he was doing so pursuant to Rule 41(1)(a) of the Rules of Procedure (with the said cap of £10,000.00; and he was not seeking to make an application for assessment, pursuant to Rule 41(1)(c) of the Rules of Procedure. In this context, it has to be noted that the party seeking the assessment of costs by way of detailed assessment in the County Court, in accordance with such scales prescribed by County Court Rules for proceedings in the County Court, is of limited assistance, if any, to many parties, despite the provision in Rule 41(3) that such a costs order following such an assessment, may exceed £10,000.00. This is because none of the relevant County Court scales would allow for an Order for Costs in excess of the cap of £10,000.00, provided for in Rule 41(1)(a) of the Rules of Procedure. Having regard to the Schedule of Costs in this matter, the said cap of £10,000.00 was of no relevance in this matter. However, in this context, it is necessary to note that, increasingly, tribunals are faced with applications for Orders for Costs in excess of £10,000.00; but parties are unable to recover same because of the said cap and the absence of any relevant scale in the County Court which would allow for a detailed assessment of costs in excess of £10,000.00. In the tribunal’s judgment, this is an issue which should be urgently addressed by the relevant rule-making authorities, so that, in an appropriate case, a party can make an application for costs in excess of £10,000.00 and the tribunal can, in such circumstances, make such an order for assessment if it is appropriate to do so. In previous decisions of this tribunal, this lacuna in the Rules procedure has been referred to; but unfortunately, no further action has been taken by the relevant rule-making authorities.
3.1 Under Rule 40(2) and (3) of the Rules of Procedure, it has long been recognised that it is necessary for a Tribunal, when considering an application for costs under the said Rules of Procedure, 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 40(3) – for example a finding of otherwise unreasonable conduct and/or bringing or conducting of proceedings has been misconceived. A Tribunal then has to consider, secondly and separately, whether to exercise its discretion to make an Order for Costs (see further Criddle v Epcot Ltd [UKEAT/0275/05]. Vaughan v London Borough of Lewisham & Others [2013] UKEAT/0533/12. Mummery LJ in Khan v Kirklees BC [2007] EWCA Civ 1342, in the course of his judgment, stated that it was not possible to list exhaustively what all the circumstances at the second stage might be. However, he indicated (see Paragraph 8 of the judgment) potentially relevant considerations might include conduct, proportionality and the merits of the case and also whether a person is represented or unrepresented. However he emphasised this was not an exhaustive list and each case would depend on its own particular facts.
Unlike the Rules, which normally apply to proceedings in, for example, the High Court/County Court, costs do not follow the event. In addition, the Rules of Procedure do not replicate the general Rules, applicable in those Courts, which provide, where a plaintiff discontinues proceedings, he is normally liable for the costs which a defendant has incurred before a Notice of Discontinuance is served on him. 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, when considering whether an Order for Costs should be made under the said Rule:-
“To order costs in the Employment Tribunal is an exceptional course of action and the reason for, and the basis of, an Order should be specified clearly; especially where a sum as substantial as £4,000.00 is involved.”
There is nothing in the Rules of Procedure which expressly states that an Order for Costs should be considered the exception rather than the rule. Certainly, however, that has been the view taken in relation to the exercise of the power under the said Rule, which governs claims, such as unfair dismissal/unlawful discrimination (see further the case of Gee v Shell UK Ltd [2003] IRLR 82).
But, as Burton P in the case of Salinas v Bear Stearns International Holdings [2005] ICR 1117, stated:-
“The reason why Costs 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 pre-conditions which required to be considered before the issue of the discretion arises, as set out above. In the case of Benyon v Scadden [1999] IRLR 700, it was emphasised that the Costs Rules are discretionary and, as such, cannot be restricted 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. In any event, an Order for Costs must be compensatory and not punitive (see further Lodwick v London Borough of Southwark [2004] IRLR 554). (In the decision of the Employment Appeal Tribunal in the case of Baker v Toal Bookmakers Ltd t/a Tote Sports [UKEAT/0538/11], unreported, HH Judge Clark again emphasised that Costs Orders in the Tribunal are exceptional (see further the recent decision in Sud v London Borough of Ealing [2013] EWCA Civ 949.).)
3.2 However, in the judgment of this Tribunal, when exercising its discretion, the Tribunal also has to have regard to the judgment of Girvan LJ in the case of Peifer v Castlederg High School and Western Education & Library and Another [2008] NICA 49, where he confirmed that a Tribunal is required to give effect to the terms of the overriding objective, when it exercised any power given to it under the Rules of Procedure, which would include the power to order costs; and he stressed that these objectives were intended to be exactly what they were described as being, namely overriding objectives. Indeed, he went on to state that:-
“Tribunals should be encouraged to use their increased costs powers set out in the Rules of Procedure to penalise time wasting or the pursuit of cases in a way which unduly and unfairly increases the costs falling on opponents.”
3.3 In the well-known case of McPherson v BNP Paribas [2004] IRLR 558, the Court of Appeal emphasised that withdrawal on its own is not necessarily unreasonable behaviour for the purposes of the said Rules of Procedure.
In that case, the claimant withdrew his case several weeks before the hearing so there was no decision on the substantive merits, but the Tribunal nevertheless made an Order for Costs in favour of the respondent. Mummery LJ set out the conflicting considerations. He stated, on the one hand, it was important for claimants not to be deterred from making a sensible litigation decision by dropping a claim because of the prospect of an Order for Costs on withdrawal, which may not be made against them if they fought on to a full hearing and failed. He acknowledged that in most cases the withdrawal will result in a saving of costs. On the other hand, he also recognised that the practice of never making Costs Orders on withdrawal 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. He concluded:-
“The solution lay in the proper construction and sensible application of the Rule. The crucial question is whether, in all the circumstances of the case, the claimant withdrawing the claim has conducted the proceedings unreasonably. It is not whether the withdrawal of a claim is in itself unreasonable.”
On the facts of the McPherson case, the Court found that the Tribunal was entitled to conclude that there was unreasonable conduct at the proceedings on the part of the claimant.
3.4 In a recent decision of the Court of Appeal in the case of Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255, Mummery LJ took the opportunity to review the authorities in relation to the issue to costs under the Rules of Procedure applying in the Employment Tribunals in Great Britain, which are in similar terms to the Fair Employment Tribunals Rules of Procedure applying in Northern Ireland.
In particular, in the course of his judgment he stated:-
“39 I begin with some words of caution, first about the citation and value of authority on costs questions and, secondly, about the dangers of adopting an over analytical approach to the exercise of a broad exercise.
40 The official words of [Rule 40] are clear enough to be applied without the need to add layers of interpretation, which may themselves be open to differing interpretations. Unfortunately, the leading judgment in McPherson delivered by me has created some confusion in the ET, EAT and in this Court. I say ‘unfortunately’ because it was never my intention to re-write the Rule, or to add a gloss to it, either by disregarding questions for causation or by requiring the ET to dissect the case in detail and compartmentalise the relevant conduct under separate headings, such as ‘nature’, ‘gravity’ and ‘effect’. Perhaps I should have said less and simply kept the actual words of the Rule.
41 The vital point in exercising the discretion to order costs is to look at the whole picture of what happened in the case and to ask whether there has been unreasonable conduct by a claimant in bringing and conducting the case and, in doing so, to identify the conduct, what was unreasonable about it and what effects it had. The main thrust of the passages cited above from my judgment in McPherson was to reject as erroneous the submission to the Court that, in deciding whether to make a Costs Order, the ET had to determine whether or not there was a precise causal link between the unreasonable conduct in question and the specific costs being claimed. In rejecting that submission, I had no intention of giving birth to erroneous notions, such as that causation was irrelevant or that the circumstances had to be separated into sections and each section to be analysed separately so as to lose sight of the totality of the relevant circumstances.
42 On matters of discretion an earlier case only stands as authority for what are, or what are not, the principles governing the discretion and serving only as a broad steer on the factors on the paramount principles of relevance … .”
In addition, Mummery LJ in the course of his judgment (see, in particular, Paragraphs 7 – 9) repeated that costs are in the discretion of the Employment Tribunal and the Employment Tribunal’s powers to order costs are more sparingly exercised and are more circumscribed by the Rules of Procedure than those in the ordinary Courts; and that an Employment Tribunal Costs Order is the exception rather than the Rule. Mummery LJ, at Paragraph 49 of his judgment, also made it clear that Orders for Costs are based on and reflect broad brush first instance assessments.
3.5 In the recent case of Sud v London Borough of Ealing [2013] EWCA Civ 949, Lord Justice Fulford, having reviewed the above legal authorities, referred to in the previous sub-paragraphs, stated at Paragraph 75 of his judgment:-
“On the basis of those authorities, although an award of costs against a paying party in the Employment Tribunal, is an exceptional event, the Tribunal should focus principally on the criteria established in Rule 40. In the context of the present case, the Tribunal needed to consider whether the claimant’s conduct of the proceedings was unreasonable and, if it so concluded, it was necessary for the Court to identify the particular unreasonable conduct, along with its effect. This is not a process that entails a detailed or minute assessment, but instead the Court should adopt a broad brush approach, against the background of the totality of the relevant circumstances.”
3.6 In the case of A Q Ltd v Holden [UKEAT/0021/12], the Employment Appeal Tribunal confirmed that the threshold test in Rule [35(3)] are the same whether a litigant is or is not professionally represented; but, in the application of those tests, whether a litigant is professionally represented may well require to be taken into account. It held that a Tribunal cannot and should not judge a litigant-in-person by the standards of a professional representative. It suggested that, since lay people are entitled to represent themselves in Tribunals and since legal aid is not available and will not usually recover costs if they are successful, it is inevitable that many lay people will represent themselves. His Honour Judge Richardson stated:-
“Justice requires that Tribunals do not apply professional standards to lay people, who may be involved in legal proceedings for the only time in their life … lay people are likely to lack the objectivity and knowledge of law and practice brought by a professional legal adviser. Tribunals must bear this in mind when assessing the threshold test in Rule [35(3)]. Further, even if the threshold test for an Order for Costs are met, the Tribunal has discretion whether to make an Order. This discretion will be exercised having regard to all the circumstances. It is not irrelevant that a lay person may have brought proceedings with little or no access to specialist help and advice. This is not to say that lay people are immune for an Order for Costs; far from it as the case has made clear. Some litigant-in-persons are found to have behaved vexatiously or unreasonably even when proper allowance is made for their inexperience and lack of objectivity … .”
In this context, it is also relevant to consider the judgment of Girvan LJ in Peifer when he stated:-
“When parties before the Tribunal appear in person, without the benefit of legal representation, the lack of legal experience on the part of an unrepresented party may lead to the pursuit of irrelevancies and unnecessary lengthy proceedings. Whilst Tribunals must give some latitude to personal litigants who may be struggling in a complex field they must also be aware that the other parties will suffer from delay, incur increased cost, be exposed to unstructured and at times irrelevant cross-examination. While we must have sympathy for a Tribunal faced with such a situation the Tribunal remains under the same duty to ensure that the overriding objectives and Regulation 3 are pursued.”
In the context of the present case, it is also relevant to note the judgment of the Employment Appeal Tribunal in the case of Jackson v Walsall Metropolitan Borough Council [UKEATPA/1247/10], when the Employment Appeal Tribunal decided that it would not interfere with the Employment Tribunal’s discretion to award costs against a claimant whose five claims had been dismissed, noting the claimant was a barrister with special experience in employment law and sure she was a barrister meant that she should be alert to weaknesses in her case. It also confirmed that a barrister specialising in employment law and asserting her knowledge is particularly open to scrutiny.
3.7 In the case of Peat & Others v Birmingham City Council [UKEAT/0503/11], Mr Justice Supperstone noted that for a party to succeed in arguing for costs on the basis of unreasonable conduct, it was not necessary to show that the other party had no reasonable prospect of success. In his judgment he held, on the facts of the case, if the claimant’s solicitors had engaged with the issues and the costs warnings letters, they would have likely have appreciated that the claimant’s reasonable prospect of success was so thin that it was not worth going to the hearing.
As set out in Harvey on Industrial Relations and Employment Law, Paragraph 1047, Section P1:-
“Considering whether to award costs in respect of a party’s conduct in bringing or pursuing a case which is subsequently held to lack merit, the type of conduct that will be considered unreasonable by a Tribunal will obviously depend on the facts of the individual case and there can be no hard and fast principle applicable to every situation. In general, however, it would seem that the party must at least know or to be taken to have known that his case is unmeritorious (see Cartiers Superfoods Ltd v Laws [1978] IRLR 315) … .”
In Harvey on Industrial Relations and Employment Law, Paragraph 1052.01 it is stated:-
“The Court of Appeal has emphasised that a lie will not necessarily, of itself, be sufficient to find an Order for Costs (nor, conversely, will the absence of a lie necessarily mean that there cannot be a finding that the proceedings have been brought or conducted unreasonably or are misconceived … .”
In Arrowsmith v Nottingham Trent University [2011] EWCA Civ 797 …, at Paragraph 33, Rimer LJ giving the only reasoned judgment of the Court endorsed the statement of Cox J in the case of HCA International Ltd v May-Bheemul [UKEAT/0477/10] that neither the case of Daleside nor any other case established a point of principle of general application that lying, even in respect of a central allegation in the case, must inevitably result in an award of costs, and that “it will always be necessary for the Tribunal to examine the context and to look at the nature, gravity and effect of the lie in determining the unreasonableness of the alleged conduct”. … Rimer LJ added that the consideration of whether the elements of [Rule 40(3)] are satisfied in a particular case is ‘a fact-sensitive exercise’ and a decision in another case, in what might superficially appear to be circumstances similar to those in the instant case, will not dictate the decision in it. (Paragraph 33). The Employment Tribunal in Arrowsmith was held to have applied the test correctly and to have reached a conclusion that was open to it when awarding costs against the claimant in circumstances where she ‘had a made a case that was materially dependent on the advance by her of assertions that were untruthful’.
In a recent decision of the Employment Appeal Tribunal, Langstaff P in the case of Ladrick Lemonious v Church Commissioners [UKEAT/0253/12] endorsed the analysis and conclusion in the case of HCA International Ltd but also the judgment of the Court of Appeal in Arrowsmith v Nottingham Trent University [2011] EWCA Civ 797 where Rimer LJ had endorsed the words of Cox J in HCA International Ltd where she stated:-
“ … in some cases, a central allegation is found to be a lie. That may support an application for costs, but does not mean that on every occasion that a claimant fails to establish the central point of the claim, an award of costs must follow.” [Tribunal’s emphasis]
(See also Topic v Hollyland Pitta Bakery Company [2012] UKEAT/0523/11.)
In the recent decision of Kapoor v Governing Body of Barnhill Community School [2013] UKEAT/0352/13 the Employment Appeal Tribunal again has followed HCA International; but it has also reiterated that the context, nature, gravity and effect of any such lie were relevant and it is not necessary to show a clear causal link between the lie and the costs incurred.
3.8 Although in the case of Jilley v Birmingham and Solihull Mental Health NHS Trust [UKEAT/0584/06], HH Judge Richardson confirmed that there is no ‘absolute duty’ on a Tribunal to take ability into account, he commented that it would in many cases be desirable to take means into account before making an Order, as the ability of a party to pay may affect the exercise of an overall discretion. In Doyle v North West & London Hospitals NHS Trust [UKEAT/0271/11], the Employment Appeal Tribunal commented that Tribunals should always be cautious before making a very large costs award, given the very serious potential consequence to a claimant of such an Order because such Orders may act as a disincentive to those bringing legitimate claims. It was suggested that, in such a case, it would normally be necessary for a Tribunal to raise the issue of the potential paying party’s ability to pay costs, even if the issue was not raised by on or on behalf of that party. (See further Oni v NHS Leicester City [2012] UKEAT/0144.) In the case of Vaughan v London Borough of Lewisham & Others [2013] IRLR 713 Underhill J, as he then was, approved the decision in Jilley and went on to hold that it was not wrong in principle to make an award where a claimant could not in her present financial circumstances afford to pay and the Tribunal had formed the view that she might be able to meet it in due course.
3.9 In Vaughan v London Borough of Lewisham & Others [2013] IRLR 713 Underhill J gave guidance in relation to the issue where an applicant for and Order for Costs has never applied for a Deposit Order and/or no costs warning has been given.
Underhill J stated:-
“We do not believe that as a matter of law an award of costs can only be made where the party in question is being put on notice, by the making of a Deposit Order or otherwise that he or she is at risk as to costs. Nor, however, do we believe that the absence of such notice, or warning, is necessarily irrelevant : indeed it was expressly relied on in a recent decision of Mr Recorder Luba QC as one of the reasons for not exercising a discretion to award costs under the cognate jurisdiction in this tribunal – see Rogers v Dorothy Barley School [UKEAT/0013/12], at Para 9. What, if any, weight it should be given in any particular case must be judged in the circumstances of that case; and it is, as we have already observed, regrettable that the tribunal does not expressly address the question.”
Indeed, Underhill J stated elsewhere in the judgment that he did not believe that the respondent’s failure to seek a Deposit Order, or otherwise to issue any costs warning asserting that the claims were hopeless, was cogent evidence that those claims had in fact any reasonable prospect of success. He accepted that parties faced with what they believe to be weak claims/responses do not always seek Deposit Orders, on the grounds that sometimes it is thought that to do so risk the expenditure of further costs on a diversion which may not succeed or, which may only conduce to further delay appeals, or which in any event may not deter the claimant. He concluded:-
“Such a view may be over pessimistic – Deposit Orders properly used are a valuable tool for averting weak claims – nevertheless it is understandable; and that means the failure to seek an Order is not necessarily a recognition of the arguability of the claim.”
Although, under the Rules of Procedure, Deposit Orders may be sought by claimants and respondents, applications by claimants for Deposit Orders on the grounds that the response of the respondent has little reasonable prospect of success, regrettably, in the tribunal’s judgment, are not used as often as they should or could be used. In this particular case, the claimant’s representative acknowledged that there had been no costs warning issued nor had there been any application for a Deposit Order made in relation to the respondent’s response. In light of the judgment in Vaughan, the tribunal considered that the failure of the claimant to give a costs warning and/or to seek a Deposit Order against the respondent was not a determinative factor in the exercise of the tribunal’s discretion whether to make an Order for Costs – especially in the context that this was a one day hearing. It also recognised any application for a deposit hearing would have required a further day’s hearing, which would not necessarily have avoided the necessity for a hearing to enable the claimant to prove his remedy, even if a Deposit Order had been made and resulted in the strike-out of the response of the respondent or part of same.
3.10 In proceedings in the Civil Courts, if a winning party fails to do better than an offer made to him by the losing party, it will usually expect to pay the losing party’s costs from the date of the offer. The use of ‘Calderbank letters’ is common in the Civil Courts – an offer to settle without prejudice, save as to costs. Such a letter is not revealed to the Court until the end of the trial. In Kopel v Safeway Stores PLc [2003] IRLR 753, it was held that a failure by a party to beat a Calderbank offer will not, by itself, result in an award of costs against him. What must be shown is ‘that the conduct of the party in rejecting the offer was unreasonable before the rejection becomes a relevant factor in the exercise of the Tribunal’s discretion of the Rules of Procedure’.
As stated in Harvey on Industrial Relations and Employment Law, Paragraph 1052.07:-
“A costs warning letter will not of course necessary result in an Order for Costs being made where the party giving the warning is ultimately successful in obtaining a judgment in his favour. Whether it will do so will depend on the facts. But if a well-argued warning letter is sent, failure by the claimant to engage properly with the points raised in it can amount to unreasonable conduct and if a case proceeds to a hearing and the respondents are successful for substantially the reasons that were contained in the letter. A good example of this is Peat v Birmingham City Council [UKEAT/0503/11].”
In Raggett v John Lewis PLc [UKEAT/0082/12], Mrs Justice Slade referred, with approval, to the judgment of the EAT in Copel where it made clear at Paragraph 16 that whilst the Rule in Calderbank v Calderbank does not apply to Tribunals an offer of a Calderbank-type is a factor which the ET can take into account in assessing the amount of costs.
In the Employment Appeal Tribunal, in the case of Rogers v Dorothy Barley School [2012] UKEAT/0013/12 the Employment Tribunal recently emphasised the importance of issuing a written costs warning as early as possible, setting out reasons. This is to enable the other party to be put on clear notice that it is intended to pursue this course of action if the case proceeds in a certain way.
It is to be noted that Rogers was a case where the Employment Appeal Tribunal refused to award costs against an appellant, who was unrepresented, and who had refused to accept that his claim was wholly misconceived (ie no reasonable prospect of success), on the grounds that the respondent employers had at no stage given him a warning that they would seek costs nor given him any notice of the amount of such costs, with the result that he had no opportunity to consider his position.
3.11 In Jilley it was held that once the Tribunal has decided that it will have regard to the paying party’s ability to pay then, as set out in the judgment of the Employment Appeal Tribunal:-
“ … it should set out its findings about ability to pay, say what impact this has on its decision whether to award costs or on the amount of costs, and explain why. Lengthy reasons are not required. A succinct statement of how the Tribunal has dealt with the matter and why it has done so is generally essential.
Therefore if the Tribunal has decided that it will have regard to the paying party’s ability to pay, it has to take into account what is has found to be the paying party’s ability to pay.”
In Jilley the Employment Appeal Tribunal held that the Rules are wide enough … to allow a Tribunal to take account of ability to pay by placing a cap on an award of costs even where it orders a detailed assessment.
(See further Arrowsmith v Nottingham Trent University [2012] ICR 159 and Vaughan v London Borough of Lewisham & Others [2013] IRLR 715.)
In the recent case of Howman v The Queen Elizabeth Hospital Kings Lynn [2013] UKEAT/0509/12, the Employment Appeal Tribunal held that, if the Tribunal decides to have regard to someone’s ability to pay when deciding what Order for Costs it should make, it requires to balance the need to compensate the claimant who has unreasonably been put to expense against the other litigant’s ability to pay. It held ‘the latter does not necessarily trump the former, but it may do so’.
In Shields Automotive Ltd v Grieg [UKEATS/0024/10], the Employment Appeal Tribunal held that assessing a person’s ability to pay involves considering their whole means, which can include reference to a person’s capital, represented by property or other investments [Tribunal’s emphasis].
Interestingly, in relation to the Rules of Procedure relating to the imposition of a Deposit Order, where a similar term relating to ability to pay is found, albeit with no discretion (compare Rule 41(2) – ‘may’). In the case of Simpson v Strathclyde Police and Another [UKEATS/0030/11], a Deposit Order case, the Employment Appeal Tribunal took into account, when considering the claimant’s available resources the claimant’s student loan. Given the similarity under both Rules in respect of the terms relating to pay, the tribunal is satisfied the case law in relevant to the interpretation of both Rules – subject to the issue of discretion.
3.12 It is well-known that to show that a claim is misconceived (ie had no reasonable prospect of success) involves a high threshold.
Indeed, as set out in Harvey on Industrial Relations and Employment Law, Volume 3, Section PI, Paragraph 1083:-
“When considering whether to award costs in respect of a party’s conduct in bringing or pursuing a case which is subsequently held to have lacked merit, the type of conduct that will be considered unreasonable by a Tribunal will obviously depend on the facts of the individual case, and there can be no hard-and-fast principle applicable to every situation. In general, however, it would seem that the party must at least know or be taken to have known that his case is unmeritorious. See Cartiers Superfoods Ltd v Laws, which was decided under the old Rules, when the only grounds for awarding costs were whether the claimant or respondent to any proceedings had act frivolously or vexatiously.”
However, as stated at Paragraph 1084 of Harvey, such an approach needs to be applied with caution, otherwise parties could end up being penalised for not assessing the case at the outset in the same ways a Tribunal may do following a hearing and evidence. Indeed, as Sir Hugh Griffiths stated in E T Marler v Robertson [1974] ICR 72 NIRC:-
“The ordinary experience of life frequently teaches us that which is plain for all to see once the dust of battle has subsided was far from clear to the combatants once they took up arms.”
However, as Knox J stated in Keskar v Governors of All Saints Church of England School [1991] ICR 493:-
“The question whether a party against whom an Order for Costs is proposed to be made ought to have known that the claims he was making had no substance, is plainly something which is, at the lowest capable of being relevant.”
He emphasised that, where there was no significant material to support the allegations, it involved an assessment of the reasonableness of bringing the proceedings; and this ‘necessarily involved’ a consideration of the question whether the claimant ought to have known that there was no such supportive material.
3.13 The classic definition for vexatious claims is found in the case of ET Marler Ltd v Robinson [1974] ICR 72, which stated:-
“An employee brings a hopeless claim not with any expectation of recovering compensation but out of spite to harass his employers over some other improper motive, he acts vexatiously.”
The Court confirmed this was a particularly high hurdle for a party to show, stating:-
“ ... it is a serious finding to make against an applicant, for it will generally involve bad faith on his part and one would expect that discretion to be sparingly exercised ... .”
In a recent decision of the Employment Appeal Tribunal, in the case of HM Attorney General v Bentley [2012] UKEAT/0556/11, the tribunal referred to the judgment of Bingham CJ, as he then was, in the case of HM Attorney General v Parker [2002] SCR 1, when he stated:-
“The hallmark of vexatious proceeding is in my judgment that it has little or no basis in law (or at least no discernible basis); that, whatever the intention of the proceedings may be, its effect is to subject the defendant to inconvenience, harassment and expense out of all proportion to any likely gain to accrue to the claimant, and that it involves an abuse of the process of the court, meaning by that a use of the court process for the purpose or in a way which is significantly different from the ordinary and proper use of the court process.”
The Employment Appeal Tribunal also referred to the judgment of Rimer J, as he then was, in the case of HM Attorney General v Roberts [2005] AER (D) 138, when at Paragraph 6 of his judgment he said as follows:-
“Most cases of allegedly vexatious litigants, as Lord Bingham there points out (in a reference to Barker), concern repeated claims or applications in respect of one particular matter by which the litigant has become obsessed, commonly involving the same defendant or defendants. In the employment law field that is a less common feature. Instead what is commonly seen in the making of repeated applications of like type to an employment tribunals, usually against different respondents but founded on the like basis ... .”
In the tribunal’s judgment, the claimant’s representative, in his submissions to the tribunal, never established, on the facts of this case, that the respondent and/or his representative had in conducting the proceedings acted vexatiously, as set out in Rule 40(3) of the Rules of Procedure and as interpreted in the above case law. In the circumstances, the tribunal has considered this application for costs solely on the grounds as set out in Rule 40(3) of the Rules of Procedure, namely:-
“The respondent or his representative conducted the proceedings otherwise unreasonably or the bringing or conducting of the proceedings by the respondent was misconceived.”
4.1 In its decision, as set out in Paragraphs 5.2 – 5.5, the tribunal found that, although the tribunal had satisfied the requirements of Step 1 of the statutory dismissal procedures, it had failed to comply with Step 2 and Step 3 of the said statutory dismissal procedures; with the consequence the tribunal found the dismissal of the claimant was automatically unfair, pursuant to Article 130A(1) of the Employment Rights (Northern Ireland) Order 1996 (‘ERO 1996’). Firstly, as found by the tribunal, the claimant was not, as part of the Step 2 procedure, notified at any time of the right to appeal and indeed subsequently no appeal was found ever to have been granted by the respondent, in accordance with Step 3 of the Procedure. Further, as found by the tribunal, the claimant was not given even the minimum of information which would have enabled the requirement of Step 2 of the statutory procedures to be satisfied. Automatic unfairness, pursuant to Article 130A(1) of ERO 1996 was identified as an issue at the Case Management Discussion on 20 May 2013 and again at the commencement of the hearing. In the circumstances, the tribunal is satisfied the respondent, at all material times, must have known that its defence to the claim of automatic unfairness was misconceived (ie had no reasonable prospect of success). Further, despite the foregoing, the respondent contested the claimant’s claim of automatic unfairness throughout the substantive hearing; and the tribunal is satisfied that to do so was, in the circumstances, unreasonable conduct on the part of the respondent.
4.2 Further, the respondent continued to pursue, throughout the substantive hearing, the defence that the reason for the dismissal was the claimant was dismissed for redundancy; but, as set out in the tribunal’s decision at Paragraph 5.6, the respondent produced no relevant evidence to support the defence that this was the reason for the dismissal. To have acted in this way was, in the judgment of the tribunal, a further example of unreasonable conduct by the respondent and/or of pursing a defence which was misconceived (ie no reasonable prospect of success).
4.3 Having decided that the conduct of the respondent was unreasonable and that the respondent’s defence to the claimant’s claim of unfair dismissal was misconceived, pursuant to Rule 40(3) of the Rules of Procedure for the reasons and in the circumstances set out in the previous sub-paragraph, it was then necessary for the tribunal to consider, as part of a two-stage process, whether to exercise its discretion to make an Order for Costs. The tribunal had no hesitation in concluding, given the nature of the unreasonable conduct but also the failure by the respondent, to go about matters sensibly (see further Peat & Others v Birmingham City Council [UKEAT/0503/11] and Cartiers Superfoods Ltd v Laws [1978] IRLR 315) it would have known, following the Case Management Discussion, if not earlier, that the respondent’s defence was misconceived and to proceed with the defence in such circumstances was also unreasonable conduct. In such circumstances, the tribunal had no hesitation in concluding that, in the exercise of its discretion, it should make an Order for Costs against the respondent.
In this particular case, the tribunal found the conduct of the respondent, in failing to disclose to the claimant at the time he was in the process of dismissing the claimant, he was advertising for a full-time permanent employee, was a particularly serious omission. Indeed, as found by the tribunal, if the claimant had not found out about this situation, this might never have been known to the tribunal. Significantly, the respondent was fully aware, before commencement of the substantive hearing, that this evidence would be led by the claimant; but yet he continued the defence of the claim and took no steps to call any relevant evidence to refute the evidence produced by the claimant in relation to this issue. This failure by the respondent is not dissimilar to the conclusions reached in HCA International Ltd and Kapoor, referred to previously in relation to the effect where a party has ‘lied’, in the context of determining whether the tribunal should exercise its discretion to make an Order for Costs. As confirmed in Kapoor, the context, nature, gravity and effect of a ‘lie’ are relevant. Similarly, in the judgment of the tribunal, the context, nature, gravity and effect of the ‘omission’ by the respondent, as outlined above, was, in the tribunal’s judgment particularly serious, since it may never have been known about, but for the investigations by the claimant. If it had remained undiscovered it could have altered the ultimate decision by the tribunal, in particular, in relation to the reason for the dismissal.
In the tribunal’s view, there could be no clearer case where the tribunal should exercise its discretion and make an Order for Costs.
4.4 As stated previously, the fees and/or breakdown of same set out by the claimant’s representative, in the Schedule of Costs were not the subject of any serious challenge by the respondent’s representative. The tribunal is satisfied, in the circumstances, the said schedule were an appropriate basis for calculation, in the absence of any other evidence. Further, the tribunal was satisfied that the rates claimed by the claimant’s representative were in accordance with the letter from the Taxing Master re: hourly rates for solicitors, dated 4 April 2011, and the well-known authority of Donaldson v Eastern Health & Social Services Board [1997] NI 232, which allows for a normal mark-up/ uplift of 50%. For the reasons set out previously, (see Paragraph 3.9 of this decision) the tribunal did not consider that the failure of the claimant’s representative to make an application for a Deposit Order and/or to issue a costs warning letter prior to the commencement of the hearing were relevant factors in determining this application for an Order for Costs.
4.5 Under Rule 41(2) of the Rules of Procedure the tribunal may have regard to the paying party’s ability to pay, when considering whether it shall make a Costs Order and/or how much that Order should be. The tribunal made enquiries from the respondent’s representative in relation to this issue; but it was given little or no information to assist the tribunal, other than to confirm that the respondent was solvent and was in a ‘small way of business’. It was a striking feature of the substantive hearing in this matter, as illustrated in Paragraph 2.10 of the tribunal’s decision, that the respondent did not produce any relevant business records/ financial documents/bank statements. This failure to produce any relevant books of account/financial records, continued at this costs hearing. In these circumstances, the tribunal decided not to have any regard to the respondent’s ability to pay. If the tribunal is wrong and it should have had regard to the respondent’s ability to pay, the reality is that it was provided with no relevant evidence by the respondent’s representative, despite its request to do so. The tribunal, therefore, was not in a position to have any regard to the respondent’s ability to pay.
5.1 The tribunal therefore orders the respondent to pay to the claimant the sum of £4,824.40, which is inclusive of Value Added Tax properly payable by the respondent to the claimant, in respect of the claimant’s costs.
Employment Judge:
Date and place of hearing: 14 March 2014, Belfast
Date decision recorded in register and issued to parties: