United Kingdom Employment Appeal Tribunal

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Cite as: [2012] UKEAT 49_11_1804, [2012] UKEAT 0049_11_1804

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Appeal No. UKEATS/0049/11/BI

EMPLOYMENT APPEAL TRIBUNAL

52 MELVILLE STREET, EDINBURGH, EH3 7HF

At the Tribunal

On 18 April 2012

Before

THE HONOURABLE LADY SMITH

(SITTING ALONE)

TURNING POINT SCOTLAND APPELLANT

(1) MRS M PERRY

(2) MRS K HAMILTON RESPONDENTS

JUDGMENT

APPEARANCES

For the Appellant

MR D CAMERON

(Advocate)

Instructed by:

TC Young Solicitors

Melrose House

69A George Street

Edinburgh

EH2 2JG

For the Respondents

MS E FORREST

(Advocate)

Instructed by:

Thompsons Solicitors

Berkeley House

285 Bath Street

Glasgow

G2 4HQ

SUMMARY

PRACTICE AND PROCEDURE – Costs

Expenses. Whether competent to award expenses where claims withdrawn but not dismissed. Whether circumstances were such as to demonstrate that the bringing and conducting of the claims was misconceived and/or unreasonable. On appeal, held that the Employment Tribunal had erred in both respects. It was competent to seek expenses where claims withdrawn but dismissal not sought and circumstances plainly indicated that the claims were both misconceived and their conduct had been unreasonable.

THE HONOURABLE LADY SMITH

Introduction

1. This is an employers’ appeal from a Judgment of the Employment Tribunal sitting at Dundee (Employment Judge Mr I McFatridge) registered on 10 August 2011 refusing their application for an order for expenses.

2. I propose to continue referring to parties as Claimants and Respondents.

3. The Claimants were represented by Ms Bruce, solicitor, before the Tribunal and by Ms Forrest, advocate, before me. The Respondents were represented by Ms Platts, solicitor, before the Tribunal and by Mr D Cameron, advocate, before me.

Background

4. The First Claimant’s solicitor, Messrs Thompsons, presented a form ET1 to the Employment Tribunal on 14 January 2011 in which the following was stated on her behalf. First, that the claim was for “arrears of pay and other payments”. Secondly, in part 6 of the form, in response to the question “What compensation or remedy are you seeking?”, it stated:

“Compensation – a schedule of loss will be provided during proceedings. The Claimant seeks payment of any additional remuneration owed under the Claimant’s contracts of employment from the commencement of their employment to the date of determination.”

5. Thirdly, in a paper apart, it stated:

· She was employed for a 39 hour week but worked 66 hours each week over seven days, at a salary of £15,979 per annum;

· She worked ‘sleepover’ shifts on an average of two nights each week;

· The sleepover periods were working time under the Working Time Regulations;

· She was paid less than the national minimum wage (“NMW”).

· She was, accordingly, entitled to receive additional remuneration in terms of section 17 of the National Minimum Wage Act 1998. She also sought a declaration of the Respondents’ failure to pay her the national minimum wage.

· She asserted that the Respondents had breached her contract.

· She reserved her right “to produce further and better particulars”.

6. The ET1 set out the shift hours that it was said that the First Claimant worked. They totalled not 66 hours but 62 hours.

7. An ET1 was presented by the same solicitors, on 13 January 2011, on behalf of the Second Claimant. It was in almost identical terms to the First Claimant’s ET1. The only differences were that she asserted that she had been working a 60 hour week and her salary was higher; it was £19,661 per annum.

8. In their forms ET3 in response, the Respondents averred that the Claimants worked about 39 hours per week and denied that they worked the longer hours claimed by them. They added, however, that even if the Claimants did work the longer hours claimed, they had still been paid the NMW. They specifically averred that the Claimants’ average hourly rate did not fall below the NMW at any time during their employment. They called on the Claimants to explain the basis on which they were alleging a failure to pay the NMW. They also stated that they sought an award of expenses on the ground that in bringing the claims, the Claimants were acting vexatiously and/or unreasonably and their claims were misconceived, all under reference to rule 40(3) of the relevant rules.

9. In the case of the First Claimant, the Respondents’ ET3 also contained a defence of time bar. In paragraph 2 of the paper apart, they averred:

“The Claimant’s ET1 was presented to the Employment Tribunal on 13 January 2011, which is outside the time limit imposed for presentation of such complaints being the 20^th April 2010, as the Claimant worked her last shift for the Respondent on 21^st January 2010. It is submitted that the undernoted claims are time- barred.”

10. The claims were conjoined.

11. By email to the Employment Tribunal dated 4 March 2011, the Respondents’ solicitor enquired as to whether or not the issue of time bar would be dealt with as a preliminary matter at the substantive hearing. The enquiry was referred to Employment Judge McFatridge and by letter dated 7 March 2011, the Employment Tribunal advised that he stated it would be discussed as a preliminary point before the start of the hearing.

12. By email to Thompsons dated 9 March 2011, the Respondents’ solicitor sought disclosure, in respect of both claims, of:

· “With regard to paragraph 5.2.1 of the ET1, please provide a breakdown of the 66 hours the Claimant alleges to have worked over a 7 day period during her tenure with the Respondent as the information noted in paragraph 5.2.3 does not equate to 66 hours.

· With regard to paragraph 5.2.2 of the ET1, please provide a list of all dates and times when the Claimant alleges she was disturbed during her sleep over shifts.

· With regard to paragraph 5.2.4 of the ET1, please specify the basis upon which the Claimant has calculated that she was paid less than the national minimum wage during her tenure with the Respondent.

· With regard to paragraph 5.2.6, please specify the basis upon which the Claimant asserts she has a contractual claim under the Employment Rights Act 1996 and also specify the sections of said Act she seeks to rely upon.

· With regard to paragraph 5.2.7 of the ET1 please specify the nature of the claim made by the Claimant under the Employment Tribunals (Extension of Jurisdiction Order).”

13. The email concluded by warning Thompsons that if the information sought was not forthcoming within 7 days, they would apply to the Employment Tribunal for an order seeking disclosure. Thompsons did not respond.

14. On 21 March 2011, Thompsons instructed counsel to provide an opinion. The Employment Judge was not advised of the date when counsel’s opinion became available and nor was I.

15. By email of 22 March 2011, the Respondents’ solicitor applied to the Employment Tribunal for such an order and Employment Judge McFatridge granted an order requiring the Claimants to provide the information specified in the above bullet points, dated 31 March 2011.

16. By letter dated 14 April 2011, Thompsons wrote to the Respondents’ solicitor enclosing a response to the order and stating “Schedules of loss will be produced in early course.” The second and third bullet points are not addressed in that letter. Regarding the last two bullet points, Thompsons advised that the First Claimant was not in fact asserting that she had a contractual claim under the Employment Rights Act 1996; her only assertion was that they had a statutory right to the NMW. The Working Time Regulations are not referred to or relied on. The Second Claimant was, it was said, claiming breach of contract on the basis that there were damages due to her at the date her employment was terminated.

17. By letter dated 6 May 2011 to the Employment Tribunal, Thompsons advised:

“We have been instructed by both Claimants, Mrs K Hamilton and Mrs M Perry to withdraw their Employment Tribunal claims from the Dundee Employment Tribunal under the terms of Rule 25 of the Employment Tribunal Rules of Procedure 2004.”

18. Whilst no explanation for the withdrawal of the claims was provided in that letter, the Employment Tribunal was advised , as was I, that the withdrawal was on the basis of counsel’s advice as contained in the opinion that was instructed on 21 March 2011.

The Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 Sch 1

19. The following rules are relevant:

“Right to withdraw proceedings

25.—(1) A claimant may withdraw all or part of his claim at any time – this may be done either orally at a hearing or in writing in accordance with paragraph (2).

(2) To withdraw a claim or part of one in writing the claimant must inform the Employment Tribunal Office of the claim or the parts of it which are to be withdrawn. Where there is more than one respondent the notification must specify against which respondents the claim is being withdrawn.

(3) The Secretary shall inform all other parties of the withdrawal. Withdrawal takes effect on the date on which the Employment Tribunal Office (in the case of written notifications) or the tribunal (in the case of oral notification) receives notice of it and where the whole claim is withdrawn, subject to paragraph (4), proceedings are brought to an end against the relevant respondent on that date. Withdrawal does not affect proceedings as to costs, preparation time or wasted costs.

(4) Where a claim has been withdrawn, a respondent may make an application to have the proceedings against him dismissed. Such an application must be made by the respondent in writing to the Employment Tribunal Office within 28 days of the notice of the withdrawal being sent to the respondent. If the respondent’s application is granted and the proceedings are dismissed those proceedings cannot be continued by the claimant (unless the decision to dismiss is successfully reviewed or appealed).

(5) The time limit in paragraph (4) may be extended by a chairman if he considers it just and equitable to do so.

….

General power to make costs and expenses orders

38. –

(1)...

(2) A costs order may be made under rules 39, 40 and 47 only where the receiving party has been legally represented at the Hearing or, in proceedings which are determined without a Hearing, if the receiving party is legally represented when the proceedings are determined. If the receiving party has not been so legally represented a tribunal may make a preparation time order (subject to rules 42 to 45). (See rule 46 on the restriction on making a costs order and a preparation time order in the same proceedings.)

(3) For the purposes of these rules “costs” shall mean fees, charges, disbursements or expenses incurred by or on behalf of a party, in relation to the proceedings. In Scotland all references to costs (except when used in the expression “wasted costs”) or costs orders shall be read as references to expenses or orders for expenses.

…

(7) A party may apply for a costs order to be made at any time during the proceedings. An application may be made at the end of a hearing, or in writing to the Employment Tribunal Office. An application for costs which is received by the Employment Tribunal Office later than 28 days from the issuing of the judgment determining the claim shall not be accepted or considered by a tribunal or chairman unless it or he considers that it is in the interests of justice to do so.

…

When a costs or expenses order may be made

40.-

(1)...

(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.

The amount of a costs or expenses order

41.—(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 the Civil Procedure Rules 1998(8) or, in Scotland, as taxed according to such part of the table of fees prescribed for proceedings in the sheriff 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 paragraphs (1)(b) or (c) may exceed £10,000.

General power to make preparation time orders

42.—(1) Subject to paragraph (2) and in the circumstances described in rules 43, 44 and 47 a tribunal or chairman may make an order (“a preparation time order”) that a party (“the paying party”) make a payment in respect of the preparation time of another party (“the receiving party”).

(2) A preparation time order may be made under rules 43, 44 or 47 only where the receiving party has not been legally represented at a Hearing or, in proceedings which are determined without a Hearing, if the receiving party has not been legally represented when the proceedings are determined. (See: rules 38 to 41 on when a costs order may be made; rule 38(5) for the definition of legally represented; and rule 46 on the restriction on making a costs order and a preparation time order in the same proceedings).

(3) For the purposes of these rules preparation time shall mean time spent by —

(a) the receiving party or his employees carrying out preparatory work directly relating to the proceedings; and

(b) the receiving party’s legal or other advisers relating to the conduct of the proceedings;

up to but not including time spent at any Hearing…”

20. Under the earlier 2001 rules, when the withdrawal of a claim was notified, the Employment Judge proceeded, without further reference to parties, to dismiss the proceedings, under rule 15(1)(a) of those rules. Since dismissal was generally thought to prevent a claimant from raising a fresh claim on the same or similar grounds, the consequences for a claimant of simply withdrawing a claim were potentially serious. In England and Wales, the effect of dismissal could create what is there referred to as “cause of action estoppel” even if there had been no consideration of the merits of the claim. Accordingly, when the 2004 rules were enacted, the opportunity was taken to clarify matters. As the terms of rule 25 show, dismissal does not automatically follow on from the withdrawal of a claim; the respondent who seeks to have the claimant put in the position of being barred from raising a fresh claim on the same or similar grounds requires to apply for – and justify – an order for dismissal. That gives the claimant an opportunity to object to dismissal and to seek review of or appeal against the Employment Judge’s decision on the matter (which, since it would constitute a final determination of the proceedings, would be a “judgment” in terms of rule 28(1)). Thus, by seeking dismissal under rule 25(4) of the 2004 rules, the respondent opens up the possibility of further proceedings on the issue of whether or not dismissal is the appropriate disposal in response to the claimant’s withdrawal.

21. Regarding the effect of withdrawal simpliciter, it brings those particular proceedings to an end and they cannot be revived against the respondent; the employment tribunal requires to close the file and take no further action in respect of those proceedings. That is implicit given the terms of rule 25(3). However, where the claim has not been dismissed, fresh proceedings on the same or a similar basis may ensue if a fresh complaint is presented to the tribunal (Khan v Heywood & Middleton Primary Care Trust [2007] ICR 24).

22. HHJ David Richardson considered the effect of rule 25 of the 2004 rules in the case of Verdin v Harrods Ltd [2006] ICR 396 and I would fully agree with his observations at paragraphs 34–36:

“34. Rule 25 of the 2004 Rules is substantially new.

35. There are only two ways in which a claim or part of a claim may be withdrawn. It may be withdrawn in writing, or it may be withdrawn orally at a hearing. If it is withdrawn in writing, withdrawal takes effect on the date on which the employment tribunal office receives notification of it. Withdrawal does not depend on any decision by the tribunal. The consent of the opposite party is not required. All that is required is that the opposite party is notified. If the withdrawal is given orally at a hearing, withdrawal takes effect when the tribunal receives notice of it. Again withdrawal does not depend on any decision by the tribunal. The consent of the opposite party is not required.

36. Where the whole claim is withdrawn, rule 25(3) sets out the effect of withdrawal. The proceedings are brought to an end. But there are two exceptions. Firstly, there may still be proceedings as to costs, preparation time or wasted costs. Secondly, there may be an application for the proceedings to be dismissed. It is plain, however, that no application to dismiss is necessary to bring the proceedings to an end; rule 25(3) expressly says the proceedings are at an end.”

NMW – “Sleepover” Claims

23. I would refer to the recent decisions of this Tribunal in the cases of City of Edinburgh Council v Lauder UKEATS/0048/11/BI and South Manchester Abbeyfield Society Ltd v Hopkins [2011] ICR 254 (handed down on 30 November 2010). Both appeal decisions confirmed that, put shortly, as had been determined by the Inner House in Scottbridge Construction Ltd v Wright [2003] IRLR 21 and the Court of Appeal in British Nursing Association v Inland Revenue [2003] ICR 19, in “on call” cases, the exceptions provided for in paragraphs 15(1A) and 16(1A) of the NMW Regulations 1999 apply so that workers are only to be treated as being on time or salaried hours work during such period(s) within the ‘on call’ period as they are actually “awake for the purpose of working”.

24. On the face of the forms ET1, these claims were claims for payment of the NMW during periods when the Claimants were ‘on call’; their claims appear to be on all fours with the ‘on call’ circumstances referred to in the above authorities. Accordingly, the issues that required to be addressed were (a) during what periods, if any, were they, when ‘on call’, actually awake for the purpose of working, and (b) whether, once any such periods were added to their normal hours, they had been paid at least the NMW?

25. Although the Working Time Regulations 1998 are referred to in the ET1’s the Claimants’ claims were, manifestly, not claims for any remedy that is available under those regulations, as Ms Forrest accepted was the case.

The Tribunal’s Judgment and Reasons

26. The Employment Judge considered that he was constrained by the wording of rule 38(2) so as to disable him from making any award of expenses because, the claims having been withdrawn, they had not been “determined”. At paragraph 27, he stated:

“27. It appeared to me that taking the ordinary meaning of the word determine involves in the context of the Employment Tribunal proceedings the Tribunal (whether consisting of one or three members) making a decision which ends the case.”

27. He added, at paragraph 33, that since the Respondents had not sought dismissal of the claims (as they could, under rule 25(4), have done), there had been no determination of the case. He said:

“Once the claim has been dismissed there has been a determination of the case and the terms of section 38(2) are met.…..Withdrawal does not conclusively end the case. A claimant has the right to raise proceedings again (subject to any time bar issues) unless the claim is being dismissed. That would clearly not be the case if withdrawal was seen as determining the case.”

28. It was “with some regret” that he reached that conclusion.

29. The Employment Judge also provided his views as to whether or not, had the claim for an award of expenses been competent, it ought to have been acceded to and concluded that he would have refused it. His reasoning was that he could not, there having been no hearing, determine whether or not the spreadsheets were correct, that he had not seen the Claimants’ contracts and

“36….it might well be that the claimants believed that a claim that sleepovers be treated as core working time night result in them being entitled to some additional contractual payment even if the spreadsheets were correct in showing that they had been paid over the national minimum wage when all hours worked (including sleepovers) were taken into account.”

30. He then continued:

“37. On the basis of the information before me it was therefore not possible for me to come to any view as to whether the claimants would in fact have lost their claim had it gone to a hearing. There was evidence which, if accepted, would have defeated part of their claim. The part of the claim that alleged a failure to pay national minimum wage (whether categorised as unlawful deductions from wages or breach of contract) would have failed if this evidence had been accepted. I cannot really say anything about any other part of this breach of contract claim as I never saw any specification of it.”

31. Further, the Employment Judge took the view that the Claimants and their solicitor had carried out as much checking as it was reasonable for them to prior to lodging their claims (paragraph 41). He considered that:

“40…it would not be appropriate to impose upon claimants an obligation to investigate the precise factual circumstances before lodging their claim when the time taken for them to carry out such an exercise amounts to longer than the 3 months within which they can lodge their claim.”

32. That conclusion about the time to investigate the facts was based on the Respondent having intimated the spreadsheets on 18 May, which was more than four months after the claims were lodged. There are, however, no findings in fact as to how long it took the Respondents to prepare them and the Employment Judge does not refer to the fact that when the form ET3 was presented, within 28 days of the presentation of the forms ET1, they were in a position to positively assert that the Claimants had been paid more than the NMW, even if the Claimants were correct in their assertions as to the hours that they had worked. Indeed, simply carrying out a rough calculation on the basis of the salaries and hours averred in their forms ET1, the proposition that the Claimants were not paid the NMW seems questionable, particularly in the case of the Second Claimant, who was paid at a supervisory rate.

33. Further, at paragraph 41, the Employment Judge stated:

“41. In my view the claimants and their solicitor carried out as much checking as it was reasonable for them to do prior to lodging the claim.”

34. He did not, however, make any findings in fact at all about the Claimants or their solicitor having carried out any checking prior to presenting their claims. With regard to that aspect of the claims that referred to the Claimants having a breach of contract claim, the Employment Judge accepted, at paragraph 36, that that claim was not specified by them. He dealt with that by stating that he had not seen their contracts of employment and that:

“….it might well be that the claimants’ believed that a claim that sleepovers be treated as core working time might result in them being entitled to some additional contractual payment even if the spreadsheets were correct in showing that they had been paid over the national minimum wage amount when all hours worked (including sleepovers) were taken into account.”

and adding, at paragraph 37, that it was “therefore not possible” for him to come to a view as to whether or not the Claimants would have lost their claim if it had gone to a hearing. That is, he seemed to be saying that whilst he could not tell from the forms ET1 or from any submission made to him, whether or not the Claimants had a reasonable claim for breach of contract, he could not rule that out and therefore the paucity of specification of that claim ought not to count against them when considering the claim for expenses.

35. Finally, judging by a subsequent reference to the Working Time Regulations (in paragraph 37) the Employment Judge seemed to think that the application of those regulations might affect the validity of the Claimants’ claims. However, as above noted, their claims were not claims under those regulations. The Employment Judge does not appear to have appreciated that.

The Appeal

Submissions for the Respondents

36. Mr Cameron presented the Respondents’ appeal in a clear and cogent submission that (a) the Employment Judge had erred in concluding that it was not competent to make an award of expenses because the claims were not dismissed, and (b) the Employment Judge had erred in concluding that the circumstances could not, in any event, justify an award being made; it was perverse to make that finding.

37. Regarding (a), he submitted that “determine” in rule 38(2) simply meant the end of the proceedings. The Employment Judge was wrong to have concluded that there needed to be a judicial decision. He was wrong to have concluded that proceedings could only be determined if there was a dismissal. That was not the plain meaning or import of the rules, as properly understood. He referred, in support of his submission to the reliance of this Tribunal on the case of Khan in Downing v McAllister UKEATS/0040/08 and to the case of Verdin. He also referred to Harvey at para 628 in section P1.

38. Regarding (b), having referred to the chronology as set out in the background section above, Mr Cameron submitted that it was plain that these claims were not properly pursued, that the Claimants’ claims were unreasonable and that they were misconceived. It was unreasonable for claims which were plainly unmeritorious to have been pursued. It was not enough to point to the claims being genuinely brought; that did not mean that they were properly pursued: NPower Yorkshire Ltd v Daly UKEAT/0842/04/ ILB at paragraphs 27 and 29. The Respondents had made their position clear in the ET3’s and at the hearing before the Employment Judge, namely that even if the Claimants were correct in their assertion as to the number of hours they had worked, there was no NMW shortfall. The Employment Judge’s approach had been to say, in effect, that it was enough that the Claimants believed that they might have a claim, given the shortness of tribunal time scales. That was wrong in law. Claimants had a responsibility to ascertain whether or not their claims were properly based and justifiable. He referred to Marler Ltd v Robertson [1974] ICR 72 at p.76, Cartiers Superfoods Ltd v Laws [1978] IRLR 315 at para 17, Keskar v Governors of All Saints Church of England School and another [1991] ICR 493 at p.500 and Beynon v Scaddon [1999] IRLR 700 at para 8. Here, the Claimants did nothing to obtain the relevant details which were, simply those of what hours had they actually worked and what had they been paid, all of which was within their own direct knowledge. The Claimants did not address these fundamental issues, even when pressed by the Respondents and by reason of the Tribunal’s order of 31 March. If, somehow, they had a problem with checking the basic facts, they could have sought orders for information but had not done so. The law was not in a state of flux – the South Manchester case clearly confirmed the position and was not appealed (as could have been readily ascertained) – and even if it had been, that was no excuse. Counsel’s advice was not taken until instructed on 21 March 2011; it could and should have been sought earlier. There was no excuse for the Claimants’ inaction particularly in the face of the costs warning that was sounded in the forms ET3. Overall, whilst the tenor of the Employment Judge’s approach was that the Respondents were at fault – at paragraph 43, for instance - how could that be so? The only criticisms to be lodged were those which could properly be directed at the Claimants on whom the onus had lain.

39. Further, the Employment Judge was, he submitted, wrong to link the timing of the Respondents’ production of spreadsheets showing the hours worked by the Claimants and pay received by them. He was wrong to have ignored the feature of the First Claimant not having been at work since January 2010 and to ignore that the level of the Second Claimant’s salary very clearly raised the issue of whether there could, even on her hypothesis of her working hours, possibly have been an NMW shortfall.

40. As to disposal, Mr Cameron submitted that the appeal should be upheld, that I should find that the Claimants had brought claims that were misconceived and acted unreasonably in bringing and conducting their claims, to find that there should, accordingly, be an award of expenses and thereafter to remit to the Employment Tribunal to determine the amount.

Submissions for the Claimants

41. For the Claimants, Ms Forrest adopted the approach of the Employment Judge to the issue of competence. She submitted that the purpose of rule 25(3) was to indicate to parties who are behaving so as to merit a costs order that they will not be able to escape it simply by withdrawing their claim but that was as far as it went. Withdrawal did not of itself prevent fresh proceedings. For there to have been a determination, the Respondents required to have applied for dismissal. Only then could there be an award of expenses. She suggested that it was usual practice for dismissal to be applied for but accepted that did mean that the Respondents would thereby be required to engage in further possibly protracted procedure.

42. As regards the merits of the application for expenses, she accepted that the authorities relied on by Mr Cameron were all relevant and added a reference to the case of Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255 at paragraphs 39 to 41, where Mummery LJ sounded a reminder that there was a broad discretion involved when awarding costs and what was required was to look at the “whole picture” and not to lose sight of the “totality of the relevant circumstances”.

43. Otherwise, she submitted that the Employment Judge had been correct to say that there was nothing misconceived about the claims. Whilst it was fair to say that the Claimants could have been expected to retain and consult their own wage slips, it would, she suggested, have been easier for the Respondents to identify the relevant information; that said, she did seem to accept that where, as in this case, the respondent was an employer with a large number of employees, it might not be such a simple task after all.

Discussion and Decision

Competency

44. I am satisfied that the Employment Judge has fallen into error. There would seem to be three causes of his erroneous conclusion.

45. First, he has conflated the concept of an employee’s claim – or “case” – and that of a set of “proceedings”. He has failed to note that they are different concepts. If he had done, he would, as I have explained above, have recognised that it is quite possible for a set of proceedings to be concluded but their subject matter be made the basis of a fresh claim (if there has not been a order for dismissal). The Employment Judge has had no regard to that being the position as a matter of law. If he had done, he could not, in my view, have concluded that it was not competent to award expenses.

46. Secondly, he has construed the term “determine” too narrowly. There is nothing in the rules to show that its interpretation requires to be limited to circumstances where there has been judicial consideration and conclusion on the merits of the claim. The natural and ordinary meaning of the word is such as to encompass conclusion or the putting to an end of a matter. Further, even if “determine” is to be taken as connoting only the making of a decision which ends the case (see paragraph 27 of the Employment Judge’s reasons) he has failed to take account of the possibility of the decision in question being the decision of the claimant to withdraw the claim, thereby putting an end to those proceedings.

47. Thirdly, he has, I consider, misinterpreted rule 38(2). The purpose of that provision is plainly to make it clear that if a party has not had legal representation then he cannot apply for costs/expenses; he can only apply for a preparation time order. It is not a provision to limit the circumstances in which a legally represented party can apply for expenses in what would be a wholly artificial manner, particularly since, on the Claimants’ interpretation, if the Respondents had not been legally represented they could have applied for a preparation time order even if they had not sought dismissal. That would follow from their approach since the reference to proceedings being determined does not appear in the sentence that deals with circumstances where the receiving party has not been legally represented.

48. Further, it seems to me to be plain from the last sentence of rule 25(3) that in no circumstances can the fact of withdrawal of a claim prejudice a party’s right to seek expenses. There is nothing in that rule or in the rules relating to expenses to suggest that a respondent must go to the length (and potential time, trouble and expense) of seeking dismissal before he can secure an award of expenses.

Expenses - Merits

49. I am readily persuaded that the Employment Judge’s conclusions on the merits of the Respondents’ claim for expenses are not tenable when the totality of the circumstances are properly considered. Mr Cameron was justified in his criticisms and I accept all his submissions on the matter as being well founded. What stands out is that there was nothing before the Employment Judge to demonstrate that the Claimants had taken any steps to check whether their NMW claims (which is what these claims were – they were not claims under the Working Time Regulations) were soundly based as a matter of fact, let alone law. There was nothing to show that they had done so prior to presentation of their claims and nothing to show that they did so thereafter. The Employment Judge, instead, focussed on the matter of spreadsheets that the Respondents produced for the purposes of the expenses hearing but that was not the point. Any employee who makes a NMW claim ought themselves to know from their own knowledge and from their payslips what it is they have to say about the hours they actually worked and what they were paid. Where they are legally represented, as in the present case, these are obvious questions for the lawyers to investigate. It is not unreasonable to expect them to have done so before presenting claims such as these and, at the very least, in prompt response to any challenges to their assertions that are intimated in the ET3, particularly where a costs warning is included.

50. As above noted, the hours alleged and salary figures stated in these cases of themselves raised questions as to whether or not there could possibly have been a failure to pay the NMW, particularly in the case of the Second Claimant and in the case of the First Claimant, the fact of her not having been at work at all since January 2010 raised obvious questions of time bar which her ET1 did not begin to address. Then, once the forms ET3 were lodged, the Claimants were put very clearly on notice that not only did the Respondents not accept that their relevant working hours were as they stated they were but even if they were, there was no NMW shortfall. None of this was the Respondents’ fault, contrary to the approach of the Employment Judge. At no time did they fail to respond to any request for information – no such requests were ever made whether before the institution of proceedings or thereafter. Further, at no time did the Claimants face up to the need to provide specification of the hours they were saying that they had worked and what they said they had been paid for them. They – or their solicitors – dealt with that fundamental issue by repeatedly stating that ‘Schedules’ would be produced but they never did so and there was no suggestion that any such schedules had ever been prepared.

51. The Employment Judge has approached matters on the basis that it is not appropriate to impose on Claimants “an obligation to investigate the precise factual circumstances before lodging their claim when the time taken for them to carry out such an exercise amounts to longer than the 3 months within which they can lodge their claim” (para 40) but there was nothing about this case to demonstrate that the Claimants needed more than three months to investigate their claims. Further, the Claimants did nothing to address the fundamental factual matters on which they were challenged even when they were called on to do so by the Respondents. They ought, sensibly, to have done so. As Phillips J, as he then was, observed in the case of Cartier Superfoods, when considering the matter of costs “it is right to look and see what the party in question knew or ought to have known if he had gone about the matter sensibly” (at para 18).

52. In these circumstances, it should have been plain at the outset that there were very real factual difficulties with the Claimants’ cases, irrespective of their legal basis. Then, so far as the law was concerned, the South Manchester case had provided an up to date review of the relevant law before these claims were lodged demonstrating that, on the face of matters, the NMW was not automatically payable for the whole of their sleepover periods – it only applied to those hours when they were awake for the purpose of working. The time for appealing had expired when these claims were lodged and it had not been appealed as could easily have been confirmed by, for instance, a telephone call to this Tribunal. Then, the Claimants delayed until 21 March 2011, over two months after the presentation of their claims, to instruct counsel for an opinion; that was in circumstances where they had solicitors acting for them from a date in December 2010. All in all, their approach was such as to fail throughout to engage properly and appropriately with the central issues in these claims until they had the advice of counsel which would appear to have been that these claims had no reasonable prospects of success.

53. The observations of Lindsay J, in the case of Beynon seem apt:

“A party who, despite having had an apparently conclusive opposition to his case made plain to him, persists with the case down to the hearing in the ‘Micawberish’ 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 a risk, when nothing does turn up, that he will be regarded as having been at least unreasonable in his conduct of his litigation.”

54. Those observations also show that the Employment Judge’s approach to the breach of contract aspect of the claims was also ill founded; it was nothing less than to say that something might have turned up to support that bare claim at some point in the future and therefore the Claimants could not be criticised for it.

55. It seems clear to me that the only reasonable conclusion open to the Employment Judge was that these claims were misconceived, it was unreasonable to raise them and they were conducted in an unreasonable manner.

Disposal

56. In these circumstances, I will pronounce an order upholding the appeal, finding that the Claimants’ claims were misconceived, that it was unreasonable to raise them and that they were conducted unreasonably. I will direct that the Employment Tribunal find the Claimants liable to the Respondents in the expenses incurred by them in relation to their claims and remit the cases to the Employment Tribunal to determine the amount of the award under and in terms of rule 41 of the Employment Tribunal (Constitution and Rules of Proceedings) Regulations 2004, Schedule 1.