United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR MOHAMMED A HAY (Of Counsel) Instructed by: Pollard Associates The Old Mill Reedness Road Swine Fleet Near Goole The East Riding of Yorkshire DN14 8EN
For the Respondent	MR B F DALY In Person


 


SUMMARY

Whether the Employment Tribunal was entitled to refuse to order an applicant to pay costs to a respondent (i) after they had found that his claim was "misconceived" (ii) after the Employment Tribunal had previously warned him that his "claim is misconceived and may have no reasonable prospect of success" and (iii) the respondent knew that his claim was misconceived.


 


THE HONOURABLE MR JUSTICE SILBER

I Introduction

1. This appeal raises the question of whether an Employment Tribunal erred in refusing to order costs against a party (a) whose claim had been struck out by the Employment Tribunal as being misconceived, (b) who had previously been warned by the Employment Tribunal about his claim being misconceived and (c) who knew that he was not employed by the appellant.

II The Proceedings in the Employment Tribunal

2. In November 2003, Mr. Bartholomew Francis Daly ("the respondent") made an application to the Employment Tribunal in Leeds, contending that he had been unfairly dismissed by Npower ("the appellants"). On about 17 December 2003, the respondent's Trade Union, Amicus, sent to the Employment Tribunal in Leeds an amended application form from the respondent in which both the appellants and Accuread Limited were stated to be the respondent's employers. We add that we do not know whether Accuread were invited to enter a Notice of Appearance but they have apparently played no part in any of the subsequent proceedings with which this appeal is concerned or at the hearing of the present appeal. In January 2004, Mr. Pollard of Pollard Associates, acting on behalf of the appellants wrote to the Employment Tribunal, stating that the respondent's claims were misconceived and he requested a pre-hearing review.
3. On 29 January 2004, the Employment Tribunal notified the respondent and the appellants' representatives that a Chairman had reviewed the file and that he had decided "to hold a hearing for the purpose of giving directions for the future conduct of the case". The parties were notified that at that hearing, the Tribunal had the power to strike out all or part of an originating application. A directions hearing was duly held ("the 12 February 2004 Directions Hearing") on 12 February 2004 at which the respondent was ordered to respond to the appellants' request for Further and Better Particulars and also to answer certain further questions.
4. On 29 April 2004, the Employment Tribunal held a "pre-hearing review/strike out hearing" in relation to the respondent's claim. The respondent, who then appeared in person, agreed at that hearing that his employment had been transferred from the respondent to Accuread Limited, as a result of the application of the Transfer of Undertakings (Protection of Employment) Regulations 1981 ("the 1981 Regulations"). The Employment Tribunal concluded that even if the respondent had been successful in his application, his complaint should then have been against Accuread Limited and not against the appellants because the 1981 Regulations meant that all rights and liabilities of the respondent against his employer transferred at the time of the transfer of his employment from the appellants to Accuread Limited.
5. Thus, the unanimous view of the Employment Tribunal was that the respondent's application had "no reasonable prospects of success" and "that this application be struck out because it was certain to fail". It is appropriate to point out that previously on 7 April 2004, Mr. Pollard on behalf of the appellants had written to the respondent pointing out that his claim was "manifestly misconceived in law" and warning him that the appellants would seek to recover their costs from the respondent.
6. At the hearing on 29 April 2004, the appellants duly applied for their costs to be paid by the respondent but this application was refused. The appellants then requested extended written reasons for the decision of the Employment Tribunal and these ("the First Extended Reasons") were sent to the parties on 4 June 2004.
7. In those first Extended Reasons, it was explained that the representative for the appellants had invited the Employment Tribunal to order costs against the respondent. It was submitted on the appellants' behalf by Mr. Pollard first, that the respondent had received advice from his Trade Union, which by that stage had ceased to represent him and second, that he had also taken advice from the Humberside Law Centre, who did not appear at the hearing on the respondent's behalf. Thus, Mr. Pollard invited the Employment Tribunal to infer from the facts that neither the Trade Union of the respondent, nor the Humberside Law Centre had appeared on his behalf, that both those entities had come to the conclusion that the application of the respondent against the appellants had no reasonable prospects of success. The attention of the Employment Tribunal was also drawn to the letter from the appellants' representative to the respondent of 7 April 2004, to which we have referred in paragraph 5 above.
8. The Employment Tribunal rejected the appellants' application for costs. It concluded that the respondent had not acted unreasonably within the terms of Rule 14 of Schedule 1 of the 2000 Regulations and it is this order which is the subject of the present appeal.
9. The appellant duly appealed and when the Notice of Appeal was considered in this Appeal Tribunal in the usual way on the sift, Burton J, the President of the Employment Appeal Tribunal, ordered that the appeal be stayed while the case was referred back to the Employment Tribunal, pursuant to English v Emery Reimbold:-

"to make findings and/or give reasons in respect of the [appellants'] application for costs against the [respondent] on the ground that the bringing and/or conducting of proceedings by the [respondent] was misconceived. Did the Employment Tribunal consider making an order for costs on this ground? (as opposed to the ground it referred to in paragraph 12 of its Decision of acting [frivolously or] vexatiously, or unreasonably) and, if so, in the light of its findings, what were its reasons for not making any order for costs on that ground: if it did not consider such a ground, then what are its findings and/or reasons in that regard? The Employment Tribunal is at liberty to invite (but only if it chooses) written submissions from the parties, to be exchanged and served and in any event, at liberty to review its Decision of its own motion…..".

10. The matter was then considered again by the Employment Tribunal on 14 September 2004 in the absence of the parties but in the light of Burton J's comments. By a decision sent to the parties on 27 September 2004, the Employment Tribunal considered it appropriate in the light of Burton J's comments to give "further detailed reasons" ("the Second Extended Reasons") for refusing the appellants' application for costs.
11. The Employment Tribunal referred to Paragraph 14 of Schedule 1 of Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 ("the 2001 Regulations"), which states that:-

"Where, in the opinion of a Tribunal, a party has in bringing the proceedings or a party or a party's representatives has in conducting the proceedings acted vexatiously, abusively and disruptively or otherwise unreasonably or the bringing or conducting of the proceedings by a party was misconceived, the Tribunal shall consider making and if it so desires may make: (a) an order containing an award against that party in respect of the costs incurred by another party …..".

12. The Employment Tribunal accepted that Regulation 2(2) of the 2001 Regulations provides that the word "misconceived" is defined as including "having no reasonable prospect of success".
13. The Employment Tribunal explained at the hearing that it had concluded that the respondent's application had no reasonable prospects of success and that it was "misconceived". It acknowledged that under Rule 14 of the 2001 Regulations, it had a discretion whether to award costs on the grounds that the bringing or conducting of the proceedings by a party had been "misconceived".
14. The Tribunal's Determination continued as follows:-

"The duty on the Tribunal is that it shall consider making an order containing an award against that party in respect of the costs incurred. The Tribunal in deciding whether to award costs considered a number of factors including that the [Respondent] had been represented by his Trade Union when he had registered the application and had taken brief advice from a volunteer at Humberside Law Centre before the Pre-Hearing Review. The Tribunal found throughout the Pre-Hearing Review hearing that the [Respondent] was a totally genuine witness and that he had brought his application genuinely, believing that he had a number of complaints against the [Appellants]. It was also clear to the Tribunal that when the claim was originally registered it was an extremely complex claim involving allegations of dismissal and detriment caused by the [Appellants] and it had a Transfer of Undertakings (Protection of Employment) Regulations 1981 issue. If those Regulations did apply the [Appellant] in this case was the probable transferor with Accuread Limited the probably transferee. The Tribunal also noted that although the decision to list the case for a Pre-Hearing Review/Strike-Out hearing was made by a Chairman, … [Mr. Pollard] had requested that a Pre-Hearing Review be listed prior to the original Directions Hearing in his letter of 8 January 2004. No decision had been made until the Tribunal's decision at this Pre-Hearing Review hearing that the application was misconceived although Mr. Pollard had put this to the [Respondent] in the notice of appearance and in other letters. The Tribunal noted that although the [Respondent] had been represented originally by his Trade Union he attended both the hearings (the original Directions Hearing and the Pre-Hearing Review) unrepresented. The Tribunal noted that it is important not to decide automatically to award costs when an application has been found to be misconceived particularly when an Applicant is unrepresented at the hearing. The Tribunal found unanimously that there was no evidence as alleged by [Mr. Pollard] in his letter to the [Respondent], that the reason for the [Respondent] prosecuting his claims was to maximize the [Appellants'] costs. We also noted that in that very same letter [Mr. Pollard] accepted that the [Appellants] were not guaranteed to succeed in any application for costs to the Tribunal" [15].

III The Appellant's Submissions

15. Mr. Mohammed Hay, counsel for the appellants, contended that the Employment Tribunal should have directed itself to the issue of costs under Rule 14 of Schedule 1 of the 2000 Regulations by asking itself the substantial question relating to what the respondent knew or ought to have known in deciding whether it was misconceived for him to bring or persist in conducting the proceedings at particular dates in the chronology. His submission is that the Employment Tribunal failed to ask itself those questions but that if it actually had done so, it would have reached the conclusions first, that the respondent was wilfully blind to the obvious fact that he had no claim against the appellants and second, that if the respondent had acted reasonably, he would have discontinued his proceedings against the appellants.
16. Thus, Mr. Hay says the Employment Tribunal should then have considered whether the acts or omissions of the respondent caused the appellants to incur costs. He submits that if that question had been asked, the Employment Tribunal would have concluded that as a result of the decision of the respondent to bring and to continue the proceedings against the appellants, costs had been incurred by the appellants for which the respondent should compensate the appellants. So, the case for the appellants is that the consequence of the erroneous approach of the Employment Tribunal is that they have been deprived of an order of costs to which they were entitled. The respondent, who appeared in person, disputes these contentions and he contends that the Employment Tribunal reached a decision on the question of costs, which it was entitled to reach with the result that the appeal should be dismissed.

IV Discussion

17. Under Regulation 14 of the 2001 Regulations, the Tribunal has an obligation to "consider making an order in respect of the costs" where "the bringing or conducting of the proceedings by a party has been misconceived". "Misconceived" means, according to the 2001 Regulations, as we have explained "having no reasonable prospect of success". We are satisfied that the Employment Tribunal in this case was obliged to find the claim by the respondent against the appellants "misconceived" as "having no reasonable prospect of success" because, in the words of paragraph 9 of the first Extended Reasons, the Employment Tribunal held that:-

"there had been no dismissal. There could be no legal liability lying with this named [appellant] because of the application of the 1981 Regulations".

18. Although in those circumstances the Employment Tribunal has an obligation to consider making an order for costs, it is significant that it is given a discretion whether or not to make such an order, but the way in which the Employment Tribunal exercises its discretion can be the subject of an appeal on a matter of law to this Appeal Tribunal.
19. It is now appropriate to consider Mr. Hay's contention that the Employment Tribunal in its First and Second Extended Reasons made errors of law by analysing those reasons. In the First Extended Reasons, the Tribunal considered whether the respondent had acted unreasonably. The Employment Tribunal pointed out that there had been no costs warning by the Tribunal, although it noted that the appellants' representative had made clear in his letter of 7 April 2004 that costs would be sought against the respondent. The Determination states that:-

"The Tribunal's view was that the [respondent] had not acted unreasonably in attending today to see whether the Tribunal would decide that this application had a reasonable prospect of success" (paragraph 12).

20. Mr. Hay submits that this is erroneous reasoning. He points out that in Beynon and Others v. Scadden [1999] IRLR 700, Lindsay J giving the decision of this Appeal Tribunal, said that:-

"A person despite having had an apparent conclusive opposition to his case made plain to him, persists with the case down to the hearing in the "Micaweberish" hope that something might turn up and yet who does not even take such steps open to him to see whether anything is likely to turn up, runs the risk when nothing does turn up, that he will be regarded as having been at least unreasonable in the conduct of his litigation" [8].

21. More recently, Burton J in Thorpe v. Eaton Electricity Limited (6 December 2004 Appeal UKEAT/0497/04/DA), stated that:-

"we do think it is important for litigants to appreciate that, however late they come to the conclusion, or are advised, that their case has no realistic prospects of success, they should still abandon it but not regard it as a free opportunity to come to court simply because the case is listed; because that leads to expense, both inconvenience to the courts, who can deal with other peoples' cases and, in particular in this case, an expense for the [opposing party]" (paragraph 39).

22. These statements show that this Appeal Tribunal considered that a party is at fault if he goes to a hearing knowing that he was bound to lose, with the result that he should be liable for the costs of the opposing party. That raises the issue of what the respondent knew about the weaknesses of his case. We are persuaded by Mr. Hay that the approach of the Employment Tribunal was incorrect, bearing in mind that we were told frankly by the respondent that he knew from November 2003 onwards that he was employed by Accuread Limited. Indeed, that is not surprising because at the 12 February 2004 Directions Hearing, the Employment Tribunal explained that:-

"On a preliminary view following an examination of the case papers and the issues of what has been said by the [respondent] today, there has been a very clear transfer of the [respondent's] employment from the [appellants] to Accuread Limited by virtue of the Transfer of Undertakings (Protection of Employment) Regulations 1981 and the [respondent] has albeit reluctantly accepted that transfer and continues to work with all his previous terms and conditions of employment, including his continuity of service. It would appear, therefore, that to suggest he has any claim which involved an allegation of dismissal in that claim is misconceived and may have no reasonable prospect of success" (paragraph 6).

23. Further, at the hearing on 29 April 2004, the Chairman's Notes of that hearing provided to this Appeal Tribunal show that the respondent stated that:-

"I am now employed by Accuread Limited, I believe as a result of a transfer of my employment from the [appellants]. I agree that the Transfer of Undertakings (Protection of Employment) Regulations 1981 apply to this case. I am not happy about the move. I agree that the [appellants are] the Transferor and Accuread the Transferee .. I agree I was not dismissed – I accept that any complaint about dismissal must fail".

24. All those statements indicate clearly to us as was explained and accepted by the respondent frankly when he made his submissions to us, that he knew from October 2003 onwards that he was employed by Accuread as all his rights and obligations against his employer had been transferred from the appellants to Accuread.
25. In those circumstances, we are compelled to take the view that the Tribunal erred when it said that the respondent had not acted unreasonably in attending at the hearing on 29 April 2004 "to see whether the Tribunal would decide that [his] application had a reasonable prospect of success".
26. The second reason of the Employment Tribunal expressed in the First Extended Reasons was that:-

"the Tribunal was totally satisfied that the application, though a misconceived one, was genuinely brought and was not seen by the [respondent] as frivolous and not decided by the Tribunal to be either frivolous or vexatious" (paragraph 12).

27. In our view, it is not a conclusive or a proper answer to the claim for costs that a misconceived application was "genuinely brought" because the Employment Tribunal had to see if the application was thereafter properly pursued. Furthermore, in the light of what the respondent has candidly stated, we doubt if for much of the period it can have been described as "genuinely" pursued bearing in mind that the respondent accepted that he knew full well that his employers were not the appellants. Thus, again we are driven to the conclusion that the Employment Tribunal reached a decision which was not open to it.
28. The next reasons that were given by the Employment Tribunal and which were expressed in the Second Extended Reasons given by them after the order made by the President of this Appeal Tribunal, were that:-

"[the respondent] was a genuine witness and that he brought this application genuinely, believing that he had a number of complaints against the [respondent]" (paragraph 15).

29. As we have just explained, the mere fact that the respondent genuinely believed that he had a complaint does not take the matter further on the issue of whether costs should be awarded, especially as we have already explained the respondent was fully aware and accepted that his employer was not the appellants but was Accuread Limited after the transfer because of the 2001 Regulations.
30. The Employment Tribunal proceeded to say that it did not automatically follow that when an application had been found to be misconceived, that costs should be awarded, particularly when the prospective party was unrepresented at the hearing. There is clearly force in that point, but the stark fact is that the Employment Tribunal failed either to consider or to take into account two important factors, namely first the warning that had been given to the respondent at the 12 February 2004 hearing to which we referred in paragraph 22 above and second, the respondent's evidence that he knew that he did not have a claim to which we referred in paragraphs 23 and 24 above. We consider that each omission amounts to an error of law, as was the Employment Tribunal's justification in the First and Second Extended Reasons of its decision to refuse to award costs to the appellants, for the reasons which we have sought to explain.
31. In all those circumstances, we have come to the conclusion that the decision of the Employment Tribunal to refuse to award costs in favour of the appellants and against the respondent is flawed because it fails to take account of important considerations. Instead, the Employment Tribunal relies on factors which are either erroneous or have little or no weight for the reasons which we have sought to explain.
32. Thus, we have come to the conclusion that the matter has to be remitted to the Employment Tribunal which heard the initial application or if the Regional Chairman considers it appropriate to a differently constituted Tribunal. As we understand it, Mr. Hay wishes us to remit this matter to the Employment Tribunal so that they can consider whether to order the respondent to pay the appellant's costs. We would have made that order in any event in the light of our conclusions as the Employment Tribunal should now have the opportunity of considering how to exercise its discretion in the light of our judgment. In addition, in the absence of detailed submissions on that issue, we do not know if the costs incurred by Pollard Associates can be recovered.
33. At that remitted hearing, the Employment Tribunal will have to consider:-

(a) if the respondent should be ordered to pay any of the costs to the appellants and if not, why not;

(b) if the respondent is so ordered, for what period and in respect of what hearings or for what matters should costs be ordered, as well as how much should be ordered, and

(c) whether any sums can be claimed by the appellants in respect of the costs incurred by Pollard Associates, who acted for the appellants in the Employment Tribunal, as Pollard Associates is apparently comprised of neither solicitors nor counsel. We simply do not know if their costs can be recovered and this is a matter which will have to be investigated.

34. We have been told by the respondent, who conducted his case with great courtesy, that he has been on sick leave for six months. It is clear from what we have been told by him that the continuance of this litigation is causing him great worry and continuing concern. Bearing in mind the small amount of costs which would probably be recoverable in respect of the Employment Tribunal proceedings, the appellants might well wish to consider whether, having now established the principle in front of this Appeal Tribunal, they still wish to pursue the respondent especially as it will no doubt mean that the appellants will incur further costs in order to attempt to recover some of their earlier costs. That, of course, is a matter for the appellants to consider.
35. After a draft of this judgment was circulated in the usual way, Mr. Hay submitted in writing that:-

(a) this judgment should be amended so as to include further guidelines on the approach which Employment Tribunals should approach to costs orders. Even assuming that further guidance is needed in spite of the clear wording of the Rules, we do not think that it would be appropriate to give it in this case as the respondent was not legally represented and so he was unable to make a useful contribution to any discussion on guidelines.

(b) the contents of paragraph 33 above should be amended so as to specify what steps the Employment Tribunal should adopt on the remitted application for costs. We are not persuaded that we should make these changes. The Rules give the Employment Tribunal a discretion and we would neither wish to fetter it nor do we think that the Employment Tribunal would exercise its discretion incorrectly, especially as the Employment Tribunal will have the benefit of our judgment and the detailed submission of the kind set out in Mr. Hay's latest skeleton argument.

(c) the matters set out in paragraph 33(c) above should be deleted or altered. In the absence of oral submissions by the respondent (who was not legally represented before us), we are unable to reach a decision on the matters set out in paragraph 33(c). Again, the Employment Tribunal will have the benefit of detailed submissions of the kind set out in Mr. Hay's skeleton argument and in the cases to which he refers. The Employment Tribunal will then be in a position to deal with the matter fairly and properly.