Industrial Tribunals Northern Ireland Decisions
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Cite as: [2015] NIIT 1521_13IT
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THE INDUSTRIAL TRIBUNALS
CASE REF: 1521/13
CLAIMANT: Anthony Brophy
RESPONDENT: Norbrook Laboratories Ltd
DECISION (COSTS)
This decision is supplemental to the main decision of the tribunal issued on 5 August 2014. Unanimously the tribunal finds that it would not be appropriate in this case to exercise its discretion to order the claimant to pay costs or to make a wasted costs order against the claimant’s representatives. The respondent’s application for costs is therefore refused.
Constitution of Tribunal:
Employment Judge: Employment Judge McCaffrey
Members: Mr H Stevenson
Mr P McKenna
Appearances:
The claimant was represented by Mr C Fegan, Barrister-at-Law instructed by McNamee McDonnell Duffy Solicitors LLP.
The respondent was represented by Mr J Algazy, Barrister-at-Law instructed by Mr G McGennity, the In-House Solicitor of the respondent.
1. The decision of the tribunal in this case was issued on 5 August 2014. The claimant’s claim of unfair dismissal was dismissed. The crux of the case put forward by the claimant was that the disciplinary procedure carried out by the respondent (and in particular the investigation) had been unfair because of the appointment of Sean Canavan the Group Packing Manager as investigator. He alleged that this was a breach of natural justice because Mr Canavan was in effect a judge in his own cause. This argument was rejected by the tribunal as we set out in detail in paragraphs 43 and 44 of the decision. First of all we did not consider that Mr Canavan was “conflicted” in carrying out the investigation in this matter and secondly, we rejected the suggestion that Mr Canavan was acting in an adjudicative capacity as investigator in carrying out an investigation into the alleged theft of goods from his own department.
2. The respondent then sought an order for costs against the claimant which is the subject of this decision. Mr Algazy argued that the claimant’s case was premised on a faulty appreciation of the proper application of the principle of natural justice to one who was an investigating officer and not acting in a judicial or similar capacity. The respondent argued that this untenable line permeated the claimant’s case in such a way the proceedings were thereafter “impermissibly and irretrievably tainted” and bound to fail. They also referred to the fact that the claimant had raised no issue about Mr Canavan’s involvement at the investigation or disciplinary stages of the original disciplinary process, nor was it raised in the appeal letter. While the issue was raised in a very limited way during the course of the appeal hearing, this was confined to whether or not Mr Canavan should himself had been interviewed.
3. It was further suggested that, in spite of lack of evidence, the claimant had pursued the argument that Mr Canavan’s job would be “on the line” if they didn’t find the culprit; that Mr Canavan had a direct financial interest in the outcome of the disciplinary action and that he himself would be vulnerable to disciplinary action.
4. As against the claimant, the respondent argued that in bringing the proceedings the claimant had, or he or his representative had in conducting the proceedings, acted vexatiously and unreasonably or that they had pursued a claim which was misconceived in that it had no reasonable prospect of success. The claimant had included a claim for injury to feelings to the amount of £25000 as part of his claim and it was pointed out to his representatives that this was wholly inappropriate in an unfair dismissal claim. Mr Algazy highlighted in his submissions a number of other ways in which he alleged the claimant had acted unreasonably in pursuing the claim, including the fact that the claimant and his representative had not responded to a costs warning latter issued a few weeks before the hearing. Further, it was alleged that the claimant’s solicitor had rejected an offer to withdraw the case in return for an undertaking from the respondent that they would not pursue an application for costs. At the time of the withdrawal offer, the respondents’ solicitor reminded the claimant’s representative of the tribunal’s power to make a wasted costs order, which the claimant’s representatives considered an unreasonable threat. As against the claimant’s representatives, the respondent sought a wasted costs order arguing that representatives had behaved unreasonably and/or negligently in their conduct of the claim. The claimant’s representative disputed both applications.
THE RELEVANT LAW
5. The tribunal’s power to award legal costs is set out in the Industrial Tribunals (Constitution and Rules of Procedure) Regulations (Northern Ireland) 2005 (“the 2005 Rules”). The general power to make costs orders is set out in Schedule 1 at Rule 38. We were referred specifically to the provisions of Rule 40, the relevant parts which state as follows:-
“(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) Circumstances referred to in paragraph (2) above 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”.
“Misconceived” is defined at Regulation 2 as including “no reasonable prospect of success”.
6. In relation to wasted costs, the tribunal’s powers are set out in Rule 48 of the 2005 Rules and provide as follows:-
“(48(1)) A tribunal or chairman may make a wasted costs order against the party’s representative.
(2) In a wasted costs order the tribunal or chairman may –
(a) disallow, or order the representative or the parties to meet, the whole or any part of a wasted costs order of any party (including an order that the representative repay to his client any costs which have already been paid); and
(b) order the representative to pay to the Department in whole or in part, any allowances paid by the Department to any person for the purposes of, or in connection with, that person’s attendance at the tribunal by reason of the representative’s conduct of the proceedings.
(3) “Wasted costs” means any costs incurred by a party –
(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 tribunal or chairman considers it unreasonable to expect that party to pay.
(4) In this rule “representative” means the party’s legal or other representative or any employee of such representative, but it does not include a representative who is not acting in pursuit of profit with regard to those proceedings ...”
7. The tribunal’s jurisdiction in relation to costs is outlined in Harvey on Industrial Relations and Employment Law Division P1 (Practice and Procedure) at paragraph 1044 and following. Harvey emphasises that, despite changes which have extended the tribunal’s powers to make orders for costs considerably, the fundamental principle remains that costs are the exception rather than the rule and that costs do not automatically follow the event in employment tribunals (McPherson v BNP Paribas (London Branch) [2004] EWCA Civ 569 at paragraph 2; and Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255 at paragraph 7). It is also important to note that the tribunal must apply a two stage test to an application for costs. First of all, they must consider whether the relevant party’s behaviour falls within Rule 40(3). Secondly, they must consider whether it is an appropriate case in which for them to exercise their discretion to make a costs order.
Misconceived claims
8. It is clear from considering the case law that the test to be applied in deciding whether or not to make an award of costs is more than a simple objective assessment whether the claimant knew or ought to have known that his case lacked substance or merit. The tribunal must look not just at the proceedings themselves but at the claimant’s conduct in bringing or conducting the proceedings. The type of conduct which would be considered unreasonable by a tribunal will obviously depend on the facts of the individual case and there is no hard and fast principle applicable to every situation (Harvey, Paragraph 1083.) In Cartiers Superfoods Ltd v Laws [1978] IRLR 315, Philips J considered it was necessary “to look and see what that party knew or ought to have known if he had gone about the matter sensibly”. In that particular case, the EAT held that if the employers had taken the trouble to enquire into the facts surrounding the alleged misconduct for which the employee had been dismissed, instead of reacting in a hostile manner with threats of statements that the employee was guilty of dishonesty, they would have realised that they had no possible defence at all to the claim except as to the amount of compensation. While it is important to treat this approach with caution given that it is all too easy to be wise with hindsight after the hearing of the case, it may nevertheless be reasonable to have regard to what a party knew or ought to have known if he had indeed “gone about the matter sensibly”. If there is nothing in the evidence to support the allegations being made, this necessarily involves an assessment of the reasonableness of bringing the proceedings, including a consideration of the question of whether a claimant ought to have known that there was no such supportive material.
Unreasonable conduct
9. Harvey (see Paragraph 1064) indicates that unreasonable conduct includes conduct that is vexatious, abusive or disruptive. The discretion of the tribunal is not fettered by any requirement to link the award causally to the particular cost which had been incurred as a result of specific conduct which has been identified as unreasonable. In McPherson, Mummery LJ stated:-
“The principle of relevance means the tribunal must have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion, but that is not the same as requiring [the receiving party] to prove that specific unreasonable conduct by [the paying party] caused particular costs to be incurred”.
10. Subsequently in Yerraklava, he stressed that this passage in McPherson was not intended to be interpreted as meaning either that questions of causation are to be disregarded or that tribunals must dissect the case in detail and compartmentalise conduct. As he observed:
“The vital point in exercising the discretion to order costs is to look at the whole picture of what happened in the case and ask whether there has been unreasonable conduct by the 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”.
11. He also observed that, “A costs decision in one case will not in most cases predetermine the outcome of a costs application in another case: the facts of the cases will be different, as will be the interaction of the relevant factors with one another and the varying weight to be attached to them”.
The significance of a costs warning letter
12. It was noted by the respondent’s representative in this matter that a costs warning letter had been sent to the claimant’s representative on 18 June 2014, approximately 10 days before the commencement of the hearing of this case. That costs warning letter set out the respondent’s reservations about the claimant’s case and indicated that if the claimant was unsuccessful at tribunal they reserved the right to draw to the tribunal’s attention to this letter in support of a claim for costs. We were advised that subsequently, on the second day of hearing the respondent’s solicitor approached the claimant’s solicitor, putting forward a proposal that if the claimant withdrew his claim, the respondent would agree not to make an application for costs. He also reminded the claimant’s representative of the tribunal’s power to make a wasted costs order against the claimant’s representative. This was construed by the claimant’s representative as a threat and the decision was taken on the claimant’s side that the case would proceed.
13. We were referred to the case of Vaughan v London Borough of Lewisham & Ors [2013] IRLR 713 where it was held that it was not essential for a costs warning letter to have been issued in order for a costs application to be successful. In that case Underhill J noted that the failure of a respondent to seek a costs order or failure to warn the claimant of the hopelessness of her claims by way of a costs warning letter may not necessarily be fatal to an application for costs, if the order for costs is otherwise justified (see paragraph 19 at the judgment). In that case it was noted that the claimant had never suggested she would have discontinued her claim had she received such a letter and even if she had, such an assertion in that particular case would not have been credible.
The claimant’s means
14. For reasons which become apparent later in this decision, the question of the claimant’s means became significant. Mr Algazy referred us to the decision in Jilley v Birmingham and Solihull Mental Health Trust and Others (UK EAT/0584/06). That decision makes it clear that the paying party’s means may be taken into account and lack of means is not a bar to a costs order being made:-
“[53] The first question is whether to take the ability to pay into account. The tribunal has no absolute duty to do so. As we have seen, if it does not do so, a County Court may do so at a later stage. In any case it will be desirable to take means into account before making an order; ability to pay may affect the exercise of an overall discretion, and this course will encourage finality and may award lengthy enforcement proceedings. But there may be cases where for good reason ability to pay should not be taken into account; for example, if a paying party has not attended or has given unsatisfactory evidence about means”.
It is not essential for the claimant’s means to be taken into account, although they may be a factor. The claimant’s means may be taken into account but if they are, the party’s whole means must be considered. This includes capital and savings as well as (see Scottish EAT case of Sheilds Automotive v Greig UKEAT/0024/10).
Reasons and Decision
(a) The costs application
15. Both counsel in the matter provided written submissions and supplemented these at length by oral submissions. We have attached copies of the written submissions to this decision, as they are too lengthy to rehearse in detail. At its core, however the respondent’s application for costs is based on the assertion that the claimant’s claim was misconceived and had no reasonable prospect of success. For that reason we have not set out in detail the submissions made in relation to other matters which were secondary to that core argument.
16. This is a case where the claimant confined his unfair dismissal claim to an assertion that the investigating officer, Mr Canavan, suffered from a conflict of interest in carrying out the investigation of the matter, that he was in fact a judge in his own cause and a decision maker in relation to the finding of unfair dismissal against the claimant. Mr Algazy indicated that in his view this approach was doomed from the start. The claimant’s representative disputed this, arguing that if the argument was so flawed, the tribunal would not have spent some time in its decision setting out the reasons for its decision. It was pointed out to Mr Fegan that Industrial Tribunals are obliged to give reasoned decisions in every case and that failure to do so could well lead to adverse comment from a higher court in the event that the matter was appealed. The fact that the tribunal took some time to deal with the argument and set out its reasons for finding against the claimant on this point did not mean to say that the tribunal considered that the argument was a good one.
17. For the reasons set out at paragraphs 43 and 44 of our decision, we repeat that we were not satisfied that Mr Canavan was conflicted in carrying out investigation in this matter or that he was acting as a “de facto” decision maker. Indeed, we set out in our decision that in our opinion it would be normal to invite a manager of a department to carry out an investigation involving that department. No evidence was adduced by the claimant to show that Mr Canavan was convicted or that he was acting as a judge in his own course.
18. For the reasons we gave in our decision in relation to this matter, we consider that the claimant’s claim was misconceived. The only aspect of the respondent’s case which was really attacked by the claimant was the conduct of the investigation and for the reasons set out above and in our decision, we believe that the claimant’s arguments in this matter were ill-founded and had no reasonable prospect of success. The question then remains for us as to whether this is an appropriate case in which to exercise our discretion to make an order for costs against the claimant.
19. Towards the end of the hearing when the issue of the claimant’s ability to pay was raised, we were rather belatedly handed a copy of correspondence in relation to an individual voluntary arrangement which the claimant had recently entered into. Not surprisingly, this caused a strong reaction from the representatives for the respondent, who had not been made aware of the IVA until a copy of the documentation was handed to the panel.
20. The correspondence indicated that a meeting of creditors had been called for 21 November 2014, a week before the hearing in this costs application. At that meeting the individual voluntary arrangement had been approved. We were not told whether there was an interim order of the High Court in force in relation to the claimant, or the terms of any such order. We are aware that is highly probable such an order was in place and that an interim order will almost always impose a moratorium on the commencement or continuation of proceedings in any other court against the claimant. We are also aware that the Insolvency (Northern Ireland) Order 1989 provides at Article 234(4) that any interim order in force in relation to the debtor immediately preceding the expiration of 28 days from the day in which the report in relation to the Creditors’ meeting is made to the High Court ceases to have effect at the end of that period. It may well be therefore that at the time the costs hearing in this matter took place, there was an Order of the High Court in place, preventing us from continuing with any other proceedings against the claimant. We were not however clearly told that this was the case and so did not halt the hearing.
21. What is also relevant is that the claimant’s nominee under the IVA had sent him a copy of the summary sheet of his report. It was clear from this that the claimant, who is currently separated from his wife, now owes a substantial amount of money. His dwelling house, which is in joint names with his estranged wife, is in negative equity and that house is occupied by his wife and children. While the claimant is in full-time employment, he indicated that he was earning less than he had been while employed by the respondent and that, after paying his living costs, he had approximately £150 per month which he proposed to devote to repaying his creditors.
22. In all the circumstances of this case, we do not believe that it would be appropriate in this situation to exercise our discretion to make an order for costs against the claimant. While we accept his claim was misconceived, we are concerned that there may be a High Court order in place preventing the continuation of these proceedings and since the claimant is already in severe financial difficulties, we have decided against making an order for costs in this case.
(b) The wasted costs application
23. The application before us from Mr Algazy suggested that the actions and omissions of the claimant’s representatives crossed the necessary threshold for the award of a wasted costs order. He suggested that their acts and/or omissions were unreasonable, if not actually negligent. He did not however set out in any detail the relevant authorities in relation to wasted costs orders. Mr Fegan clearly was concerned about this and set out the relevant authorities in more detail in his submission. He argued first of all that it was not possible for wasted costs to be made against counsel and he referred in this regard to the decision in Davy-Chiesman v Davy-Chiesman. He noted that while counsel and solicitor may be liable in an action for negligence, in England barristers are no longer immune for actions in negligence for advocacy in similar criminal proceedings, but that does not appear to be the rule in Northern Ireland.
24. The argument put forward by Mr Fegan was that the claimant was strongly of the view that Mr Canavan was in a position of conflict in carrying out the investigation against him and that he was the decision maker in relation to this matter. Notwithstanding the fact that the claimant did not raise this in any detail during the disciplinary procedure and (and only briefly at the appeal hearing) and that he did not make this case in his claim form, it is set out in some detail in his witness statement to the tribunal. That witness statement (which was the cause of some adverse comment from Mr Algazy) set out legal arguments and included the appropriate Latin maxim for the relevant principle of natural justice, that no-one should be a judge in his own cause. It was pointed out that the witness statement should contain only evidence and not legal argument. It was implied that the witness statement was not the claimant’s own words, but had been prepared by his representatives. It was suggested that all of this prolonged the case and that effectively the arguments put forward on behalf of the claimant in this regard were untenable.
25. Mr Fegan referred us to the decision of the Court of Appeal in England and Wales in Ridehalgh v Horsefield [1994] CH205, which deals with the issue of wasted costs orders. The test in deciding whether or not to make a wasted costs order is to consider first of all, whether the legal representative against whom the complaint was made acted improperly, unreasonably or negligently. Secondly, if so, did their conduct cause the applicant to incur unnecessary costs? Thirdly, if so, is it in all the circumstances just to order the legal representative to compensate the applicant for whole or part of the relevant costs?
26. Mr Algazy suggested that the claimant’s representatives had acted unreasonably or potentially negligently. According to the principles set out at Harvey Division P Paragraph 1110 and following, “unreasonable” aptly describes conduct which is vexatious, designed to harass the other side rather than advance resolution of the case and it makes no difference that the conduct is the product of excessive zeal and not improper motive. The acid test is whether the conduct permits a reasonable explanation. “Negligent” should be understood in an untechnical way to denote failure to act with the competence reasonably to be expected of ordinary members of the profession. It is also noted however in Harvey that:-
“A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or defence which is clearly doomed to fail. It is rarely if ever safe for a court to assume that a hopeless case is being litigated on the advice of the lawyers involved. They are there to present the case; it is for the judge and not the lawyers to judge it. On the other hand, a legal representative must not lend his assistance to proceedings which are an abuse of the process of the Court. It is not entirely easy to distinguish between a hopeless case and a case which amounts to an abuse of process, but in practice is not hard to say which is which, and if there is doubt, the legal representative is entitled to the benefit of it ...”
“Where an applicant seeks a wasted costs order against the lawyers on the other side, legal professional privilege may be relevant as both the applicant and his lawyers and as between the respondent lawyers and their client. If the applicant’s privileged communications are germane an issue in the application, he can remove his privilege, and if he declines, adverse inferences can be drawn. The respondent’s lawyers are in a different position, as the privilege is not theirs to waive. Judges who are invited to contemplate making a wasted costs order must make full allowance for the inability of respondent lawyers to tell the whole story. Where there is room for doubt, the respondent lawyers are entitled to the benefit of it. It is again only when, with all allowances made, a lawyer’s conduct of proceedings is quite plainly unjustifiable but it can be appropriate to make a wasted costs order.”
27. Mr Fegan made it clear that the claimant was determined to proceed with his case and that while the claimant’s statement had included legal arguments and principles, that these had been inserted in the witness statement at the claimant’s request. He acknowledged that he and his instructing solicitor had assisted the claimant in formulating these comments, and took on board that legal arguments should not have been included in the witness statement. He was adamant however that at all times they were following the claimant’s instructions. We are not in a position to go behind this representation. In a perfect world, clients would give solicitors reasonable instructions and lawyers would provide sound and comprehensive advice, which their clients would take on board and follow. In the real world, this does not always happen.
28. We are not persuaded in this case that we have evidence before us to show that the claimant’s representative acted unreasonably or negligently. We are not persuaded, either, that it would be just in all the circumstances to make an order for wasted costs in this case. We appreciate that, as set out in Harvey, there is a fine line between a lawyer presenting a case on behalf of a party, having advised him that his argument is likely to fail, and a legal representative lending his assistance to proceedings which are an abuse of the process of the court. We cannot say definitively that the latter occurred in this case, and in all the circumstances we do not consider that it would be just to make an award for wasted costs. Accordingly the respondent’s application for costs against both the claimant and legal representatives in this matter is dismissed.
Employment Judge:
Date and place of hearing: 28 November 2014, Belfast.
Date decision recorded in register and issued to parties:
