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Cite as: [1993] UKEAT 470_92_502, [1993] UKEAT 470_92_0502

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BAILII case number: [1993] UKEAT 470_92_0502

Appeal No. EAT/470/92

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 5 February 1993

Before

THE HONOURABLE MR JUSTICE MAY

MR K GRAHAM CBE

MR K M YOUNG CBE

MR K J DIXON APPELLANT

HYLTON TYPESET RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellant MR DAVID BEAN

(OF COUNSEL)

Messrs Robin Thompson & Partners

2 Masshouse Circus

Queensway

Birmingham B47 NR

For the Respondents NO ATTENDANCE BY OR

ON BEHALF OF RESPONDENTS

MR JUSTICE MAY: This is an appeal on behalf of Kenneth Dixon against an award of costs made against him in favour of the Respondents, Hylton Typeset, by an Industrial Tribunal sitting at Birmingham, by a Decision given by that Tribunal for which there are full reasons. The unanimous decision of the Industrial Tribunal on the substantive complaint that was before them was that Mr Dixon's complaint of unfair dismissal failed and was dismissed and the Industrial Tribunal ordered that he pay one half of the Respondents' costs to be taxed in default of agreement on the County Court Higher Scale.

We have heard arguments today on behalf of Mr Dixon by Mr Bean. The Respondents have not appeared before us. They, or their solicitors, have written to the Registrar of the Appeal Tribunal indicating that in the present economic climate they have decided that regrettably they cannot be justified in incurring the costs of being represented at the hearing. However, the letter asks the Appeal Tribunal to dismiss the appeal on the grounds set out in their written answer. In reaching the decision which I am about to give, we have taken that written answer into account.

The decision of the Industrial Tribunal is long and very carefully written and it arises out of a 3 day hearing. The first day was 14 January 1992 and there were then two further days on 3 and 4 March 1992. The contention on behalf of the Respondents was that Mr Dixon had not been unfairly dismissed but that his employment had been terminated on account of redundancy. The case which the Reasons very carefully considers concerns, as is all too regrettably the case, a very small organisation with a falling off amount of work on account of, no doubt, the recession.

There were three issues before the Tribunal. The first was the issue of redundancy. The second, if the first were decided in favour of the Respondents, concerned whether or not the selection procedures for Mr Dixon's redundancy had been properly done. The third issue, which plainly did not take up much time, concerned Section 58 of the Employment Act 1978.

As it seems to us, the critical first question, which the Industrial Tribunal regarded as in effect determinate of the question of redundancy, concerned two letters, one from the Respondents' bank and the other from the Respondents' accountants which were before the Tribunal as evidence that this company was in serious financial difficulties and had to reduce the number of its workers.

The first of those letters, the one from the accountants, was dated 11 January and it read as follows:

"Further to our recent telephone conversation when we discussed the current financial situation of your business. I am concerned that you have substantially added to your running costs by taking on additional equipment without making appropriate adjustments to the number of people you employ. From what you have told me you are facing an extra £20,000 costs of leasing equipment but your turnover for the current year is expected to be lower than in 1990. Unless you reconsider your staffing levels as a matter of urgency your business will not survive.

Please let me know what you intend to do."

The letter from the bank indicated that the Respondents had a bank overdraft well in excess of a £20,000 limit which had been agreed.

As we have said, the Industrial Tribunal came to a carefully considered conclusion dismissing the substance of Mr Dixon's claim for unfair dismissal. As to the costs, the Reasons reads as follows:

"21 Mr Davis [he appeared for the Respondents] now asks for costs. He bases his submission on two principal points.

(a) Firstly, insofar as the Section 58 complaint is concerned, a complaint which carries a potentially very large and punitive amount of damages should the applicant have succeeded - it is supported by but the scantiest evidence. Mr Jordan, the full time official, did not mention that aspect of the matter once in his evidence, and did not raise it at all during the negotiations. The only evidence in support of it is the single phrase to which we have referred."

- that was a phrase in Mr Dixon's evidence about what might or might not have been said by one of his employers -

"(b) Secondly, on the question of whether or not a "redundancy situation" existed, the applicant was acting unreasonably in pursuing the point beyond the time when he became aware of the letters from the Bank and the accountant.

(c) Mr Thompson, for the applicant, quite rightly submits that Mr Davis' pleas of poverty on behalf of the respondents are beside the point. In Mr Thompson's submission, if we uphold the application for costs it means that no unsuccessful applicant can successfully defend an application for costs.

22 It is unfortunate, not merely that the letters from the accountant and the Bank were not disclosed by the partners during the course of the negotiation but were only disclosed to the applicant at the outset of the hearing. Had they been disclosed at an earlier date the tribunal might well have taken a very serious view of the applicant proceeding with this matter at all, so devastating are they, in our judgment, to any case which the applicant might have raised, certainly insofar as that case relates to the existence of the redundancy situation itself. But that having been said, they were disclosed on the first day of the hearing actually before the hearing began, and he ploughed on notwithstanding what, in our judgment, is the obvious message behind them. We accept Mr Davis' submission about the Section 58 point on which a certain amount of time was spent. There was no evidence whatsoever to support the Section 58 complaint other than the one line from Mr Dixon. The tribunal have also formed the general impression that most of the applicant's case seemed to be clutching at straws and chasing shadows rather than building anything constructive with formal evidence. It would not, in our judgment, be right to order the applicant to pay the whole of the respondents' costs. Nonetheless, it is clear that the conduct of the applicant's case has been thoroughly unreasonable in parts. We can see no basis on which he can have hoped reasonably to sustain the argument that there was no redundancy situation once the letters from the accountant and the Bank were disclosed. Nor can we see any basis on which any applicant could reasonably have expected to succeed on the Section 58 complaint. There simply was not a scintilla of evidence to support it, and it got no support at the time, not in this tribunal, from the full time Union official. In the circumstances the applicant is ordered to pay 50% of the respondents' costs, to be taxed and default of agreement on the County Court higher scale."

Those were the reasons given for the making, by the Industrial Tribunal, of this costs order.

The Industrial Tribunal (Rules of Procedure) Regulations 1985 contain in paragraph 11, provisions as to the award of costs and they include this:

"11.-(1)Subject to paragraphs (2),(3) and (4) of this Rule, a tribunal shall not normally make an award in respect of the costs or expenses incurred by a party to the proceedings but where in its opinion a party (and if he is a respondent whether or not he has entered an appearance) has in bringing or conducting the proceedings acted frivolously, vexatiously or otherwise unreasonably the tribunal may make-

(a)an order that that party shall pay to another party .......... either a specified sum in respect of the costs or expenses incurred by that other party ...... or the whole or part of those costs or expenses as taxed (if not otherwise agreed)."

Accordingly, the normal result, of even unsuccessful proceedings, before an Industrial Tribunal is that there is no award of costs. In this case, the Industrial Tribunal explicitly came to the conclusion that Mr Dixon's proceedings had been conducted unreasonably and they said so and gave their reasons.

Before us, Mr Bean has not sought to persuade us that this was a conclusion that he can properly attack as such on appeal. The Industrial Tribunal heard the case and they came to the conclusion which they did and Mr Bean does not submit that a conclusion that it was open to the Tribunal to make a costs order against Mr Dixon was perverse. He does, however, say, in effect, that it was quite wrong for this Industrial Tribunal to reach the conclusion that Mr Dixon should be ordered to pay so great an amount as 50% of the Respondents' costs to be taxed. He makes the following points in support of that.

Firstly, Mr Bean submits that the usual order for costs, if costs are to be ordered, is an order for a fixed assessed sum calculated on broad principles and that it would only be appropriate in unusual circumstances before an Industrial Tribunal to make an award for the whole or a proportion of a party's costs to be paid and to be taxed if not agreed. He refers to the case of The Lothian Health Board v Johnstone [1981] IRLR 321, a case before the Scottish Employment Appeals Tribunal the headnote of which reads:

"If expenses are to be awarded, there is much to be said for a fixed sum to be set by the Industrial Tribunal based upon broad considerations."

Mr Bean has also pointed out a number of cases referred to in a handbook all of which, so far as costs are awarded, award a fixed sum. We say straight away that, in our view, if costs are to be awarded, the fixing of a fixed sum is infinitely preferable in the vast majority of cases than ordering the whole or the percentage of costs to be taxed. It is, as each of us understands, normal practice and it is, in our view, a practice to be encouraged. That is not to say that there may not be unusual circumstances where it is appropriate for an order for taxation to be made but we conceive that the large majority of cases before Industrial Tribunals where costs are awarded will be suitable for the assessing by the Tribunal of a fixed sum.

The second point that is taken by Mr Bean may be put this way. He says that even if it was unassailable in principle to consider making a costs award, no reasonable Tribunal could, in the circumstances of this case, have come to the conclusion that 50% of the Respondents' taxed costs was the right amount to award. He submits that such an award was manifestly excessive for the following reasons. Firstly, he says, that the substantial reason why the Industrial Tribunal came to the conclusion that Mr Dixon's case had been unreasonably conducted was, in effect, that Mr Dixon did not throw his hand in and go home on the first day of the hearing when the accountant and Bank documents were produced. Yet, says Mr Bean, it cannot reasonably supposed and assessed that 50% of all the costs of these proceedings were incurred after the end of the first day. The first days cost will have been incurred by the time the documents were produced.

We agree in general terms with that conclusion. There was, so far as we are aware, no material before the Industrial Tribunal as to the proportion of costs incurred before the end of the first day and those incurred on the second and third days. However, using our experience we would find it very surprising indeed if it were the case that the cost of preparation and the costs of the first day's hearing amounted to no more than 50% of the total costs of these proceedings.

We also accept, in part at least, Mr Bean's submission that there was something to be said, notwithstanding the Tribunal's conclusion that it was unreasonable to proceed after the letters had been produced, for an Applicant who took the view that he had reached the hearing day and that, even though his case had received a set-back in the form of these letters, he nevertheless thought it right to proceed to the conclusion of the hearing. There was another issue which was not without substance, that is to say, the question of selection for redundancy, and we have found no substantial indication in the Industrial Tribunal's Reasons to indicate that this was a hopeless issue.

Accordingly, we are persuaded that to assess the appropriate amount of costs as 50% of the total costs to be taxed, was manifestly excessive in the circumstances of this case.

Mr Bean's next argument is perhaps the most effective if it succeeds. He submits that in assessing the amount of costs that ought to be awarded against Mr Dixon, it was incumbent upon the Tribunal to enquire into his ability to pay. The case of Wiggin Alloys Ltd v Jenkins [1981] IRLR 275, to which we have been referred, indicates in our view that where a Tribunal is considering making a costs order against an Applicant individual, it is not only proper to take into consideration the means of that person to pay those costs, but it is also something that the Industrial Tribunal ought to do. On this subject the Respondents written answer to the appeal suggests that this should not be a decisive point on the ground that the Applicant was represented by Counsel at the hearing and that the Industrial Tribunal was entitled to proceed, in the absence of submissions as to means by his Counsel, as they did.

In our view, it is necessary for an appropriate investigation to be made into an Applicant's (or indeed a Respondents' if he is the object of enquiry) ability to pay. There is no indication in the papers before us that such an enquiry was made and we are forced to conclude that it was not from the level of award which was in fact made. We are told that both at the time of the Industrial Tribunal hearing and indeed now, Mr Dixon is, and was, unemployed and on Income support. We cannot believe that if that matter has been considered and taken into account by the Industrial Tribunal they would have reached the conclusion they did without giving explicit reasons for doing so.

We are, accordingly, persuaded that this costs order cannot stand as to its amount. We have considered whether we should remit the case to the Industrial Tribunal for further consideration but have reached the conclusion that is not, in this case, an appropriate thing to do. We have reached that conclusion because to do so would generate more expense in circumstances where money on both sides is very scarce. We also consider, in circumstances where the Respondents in this appeal have chosen not to appear, that we have all the relevant information to enable us to reach a conclusion on this point.

In the circumstances where the Industrial Tribunal reached the conclusion that Mr Dixon's case had in part been unreasonably conducted and a costs order was, in principle, appropriate, we consider that it would not be correct to make no costs order but where Mr Dixon is plainly unable to meet any substantial costs at all, it is our view that the right thing to do is to substitute for the costs order in fact made and order that he pay a nominal amount of £25. The appeal is allowed to that extent and that costs order is substituted for the order of the Industrial Tribunal.