Appeal No. UKEAT/0271/11/RN
EMPLOYMENT APPEAL TRIBUNAL
FLEETBANK HOUSE, 2-6
SALISBURY SQUARE, LONDON, EC4Y 8JX
At
the Tribunal
On
4 April 2012
Judgment handed down on 20 April 2012
Before
HIS HONOUR JUDGE SHANKS
MR P PAGLIARI
MR M SMITH OBE JP
MS
Y DOYLE APPELLANT
NORTH
WEST LONDON HOSPITALS NHS TRUST RESPONDENT
Transcript of Proceedings
JUDGMENT
SUMMARY
PRACTICE AND PROCEDURE – Costs
An appeal against a costs order under rule 41(1)(c) ETR that
the Claimant pay the whole costs of the proceedings to be assessed.
Subject to “ability to pay” point, no error of law in Tribunal’s
decision to order the whole of the costs based on Claimant’s conduct and
effects thereof.
On “ability to pay”, Tribunal erred in law in failing itself to
raise the question of means before making such an order (which was going to
amount to £100K) against a Claimant even though she was legally represented.
HIS
HONOUR JUDGE SHANKS
Introduction
1.
On 24 August 2010, following a seven day hearing at which both sides
were represented by counsel, the Employment Tribunal sitting in Watford
dismissed a claim for breach of contract brought by the Appellant against the
Respondent to this appeal and 12 complaints of race discrimination or
victimization brought by her against the Respondent and six other named
individuals. The Tribunal then acceded to an application by the Respondent that
the Appellant should pay the whole costs of the proceedings to be assessed
under rule 41(1)(c) of the Employment Tribunals Rules of Procedure. The
Respondent’s costs have not yet been assessed but it has presented bills
totalling some £95,000. We were told by Mr Sutton, who represented the
Respondent in this Tribunal and below, that the Employment Tribunal was given an
estimate of about £60,000; in any event it must have been evident to the
members of the Tribunal that the whole of the costs of the proceedings, even
following an assessment, would be very substantial.
2.
It is accepted that the Tribunal had jurisdiction to make an order for
costs against the Appellant and in our view it was clearly appropriate to make some
order. However the Appellant appeals against the costs order as made on two
main grounds:
(a) that, having regard to
any relevant conduct and its effects, the Tribunal was wrong to order the whole
of the costs of the proceedings to be paid;
(b) that the Tribunal failed to
have regard to the Appellant’s ability to pay in deciding on the appropriate order
for costs.
The legal framework
3.
Costs do not “follow the event” in the Employment Tribunal. Rule 40
sets out the circumstances when a costs order can be made. The relevant parts
of that rule for the purposes of this appeal are as follows:
“(2) A tribunal … shall consider making a costs order against a
paying party where, in the opinion of the tribunal … any of the circumstances
in paragraph (3) apply. Having so considered, the tribunal … may make a costs
order against the paying party if it … 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.”
Rule 41 deals with the amount of any costs order as follows:
“(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 …;
(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 a
detailed assessment in the county court …
(2) The tribunal … may have regard to the paying party’s ability
to pay when considering whether it … 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.”
4.
In exercising its discretion to order costs the Employment Tribunal does
not have to find a precise causal link between any relevant conduct and any
specific costs claimed. However, Mummery LJ in the Court of Appeal in Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255 gave the following important guidance:
“[41] The vital point in exercising the discretion to order
costs is to look at the whole picture of what happened in the case and to ask
whether there has been unreasonable conduct by the claimant in bring and
conducting the case and, in doing so, to identify the conduct, what was
unreasonable about it and what effects it had.”
5.
So far as “ability to pay” is concerned, it is clear from rule 41(2),
and has been repeated many times (see in particular Arrowsmith v
Nottingham Trent University [2011] EWCA Civ 797 at [37]), that the Tribunal
is not obliged to take it into account in deciding the amount of any costs
order. However, a Tribunal must obviously act judicially in deciding not to do
so and we concur with the judgment of this Tribunal in Jilley v Birmingham and Solihull Mental Health NHS Trust (21 November 2007) where HH Judge David
Richardson stated:
“[44] Rule 41(2) gives to the Tribunal a discretion whether to
take into account the paying party’s ability to pay. If a Tribunal decides not
to do so, it should say why. If it decides to take into account ability to
pay, it should set out its findings about ability to pay, say what impact this
has had on its decision whether to award costs or on the amount of costs, and
explain why. Lengthy written reasons are not required. A succinct statement
of how the Tribunal has dealt with the matter and why it has done so is
generally essential.”
6.
We also endorse the view expressed by HH Judge Richardson in that
case at [47], which may be of relevance in this case, that it is open to a
tribunal to take account of ability to pay by placing a cap on an award of
costs even where it orders a detailed assessment.
The whole costs point
7.
The Tribunal’s decision on costs is at paras 176 to 186 of the
judgment. The Tribunal recorded at para 177 that Mr Sutton’s application was
brought on the basis that the bringing of proceedings was both misconceived and
unreasonable; it set out at paras 178 to 180 a number of criticisms made by Mr
Sutton of the Appellant’s conduct and at para 183 made a finding that three of
the complaints were “unsustainable on their facts” from the outset; in para 185
it expressed itself satisfied that Mr Sutton’s points were “substantial” and
that the discretion under rule 40 had arisen; it recorded that Mr Sutton had
requested an order under rule 41(1)(c) and stated (wrongly, on any view) that
“this is an all or nothing decision”; it then recorded his submission that the criticisms
of the way the case had proceeded “underpin[ned] substantially the entirety of
the proceedings”, stated that Mr Welch (counsel for the Appellant before the Tribunal)
had not responded to “that element of the application” but had only said that
no order should be made at all, and concluded: “In the circumstances we make
the order as asked.”
8.
Mr Barklem, who appeared for the Appellant in this Tribunal but not
below, made many criticisms of the Tribunal’s judgment in relation to costs in
support of his basic submission that the Tribunal ought not to have ordered the
Appellant to pay the whole of the Respondent’s costs. He referred to the
criticism of the Appellant’s case set out at para 179 which related in
particular to the fact that she had joined a number of individuals as
respondents to the claim who were themselves professionally involved in the field
of equality and diversity. He submitted in effect that it cannot be right that
there is a higher threshold of sustainability or a greater risk of a costs
order depending on the profession of the person against whom a claim is made.
In general we would accept that submission but we would also accept as valid Mr
Sutton’s submission that the heightened effect of any particular false allegation
against an individual respondent is something that can legitimately be taken
into account in the exercise of the costs discretion.
9.
Mr Barklem referred to the findings as to the Appellant’s credit
referred to at para 180. The Tribunal had earlier in the judgment (at paras 10
to 20) decided that the Appellant’s evidence on the main issues in the case
could only be accepted where it was corroborated because she had been
responsible for false statements in two documents before the Tribunal, one a
set of accounts submitted to Companies House and the other a schedule of loss
relating to the case the Tribunal was dealing with (in which the Appellant’s
claim of some £30,000 (we understand from Mr Sutton) was overstated by
£1,400). We record at this point that Mr Welch had attempted to take
responsibility for the false statement in the schedule of loss on the basis
that it arose from his own error but the Tribunal had rejected this in part
because he was not only the Appellant’s lawyer but also her partner (see para
16). Mr Barklem’s point in relation to the findings on credit was that they
were peripheral to the real issues in the case and that, on analysis, (he said)
only the first of the 12 complaints was rejected on the basis that the
Appellant’s evidence was actually disbelieved so that the Tribunal had elevated
the issue of credibility to an unjustified level in considering costs. In
relation to para 180 he also noted that the final sentence recorded that Mr
Sutton was submitting that “some of the allegations made by the claimant
were not factually true … and part of the proceedings have been
misconceived” (our emphasis).
10.
Mr Barklem noted that para 183 referred to only three (out of 12)
complaints as being misconceived (or “unsustainable”) and that the first and
last sentence of that para referred to “statements … without credible
foundation” and “the continuance of the allegations [amounting to] unreasonable
conduct” without giving any clear indication of which “statements” or
“allegations” the Tribunal was referring to. It is right to point out that para
183 was the only part of the judgment on costs where findings were expressly made
by the Tribunal.
11.
Mr Sutton in response referred us to his submissions recorded by the Tribunal
at para 178 (and apparently accepted) to the effect that the whole claim was
misconceived “as race discrimination” in that, until the Tribunal had raised
the point, race discrimination was not even put to the Respondent’s witnesses
in cross-examination; he reminded the Tribunal that three of the complaints
were found to be factually unsustainable (see para 183); he pointed out that
two others had been found to be based on “gross distortions” (see paras 42 and
165); and he submitted that the finding of dishonesty against the Appellant in
relation to the schedule of loss (which would have been a central document in
the case if she had succeeded on liability) was of great significance in
assessing the Appellant’s overall good faith in bringing the claims.
12.
It is right that the wording of the Tribunal’s judgment on costs was not
perfect: the judgment is not always expressed as clearly as it might be; it does
not analyse the matters referred to by Mummery LJ in the quotation at para 4
above as rigorously as it might do; there is at least one clear error (see para
7 above); and it does not distinguish clearly between Mr Sutton’s submissions
and the Tribunal’s own findings. However, looking at paras 176 to 186 in the
context of the judgment as a whole and giving them a fair reading, it is clear
to us that the Tribunal has asked itself the right questions and that it has
found, in effect, that the Appellant’s whole case was not brought in good
faith. In those circumstances, it was well within the Tribunal’s discretion,
subject to the question of means, to order the Appellant to pay the whole of
the Respondent’s assessed costs of the proceedings and we therefore find no
error of law and reject this part of the appeal.
The ability to pay point
13.
We turn to the question of ability to pay. It is common ground that the
Tribunal made an order for costs against the Appellant which amounts to almost
£100,000 without giving any consideration at all to the Appellant’s means. As
Mr Sutton emphasised, that was a course which was in principle open to the Tribunal
under rule 41(2). However, as set out at para 5 above, in our judgment if a
tribunal chooses not to have regard to means it should have a reason for doing
so and say what the reason is. No such reason is set out in the Tribunal’s
judgment but Mr Sutton says, and we accept, that the reason that no account was
taken of the Appellant’s means by the Tribunal was quite simply that the issue
was not raised on behalf of the Appellant. In those circumstances, he says,
the Tribunal was under no obligation to have regard to ability to pay.
14.
It seems to us that there must be some circumstances (for example
where a claimant is completely unrepresented) where, in the face of an
application for costs, the tribunal ought to raise the issue of means itself
before making an order. But Mr Sutton submitted that in the circumstances
of this case there was no such obligation. The Appellant was represented by
experienced counsel and there may have been good forensic or other reasons why
he did not wish to raise the issue. In those circumstances, he says, the Tribunal
was entitled to rely on him to raise the issue of means if it was in his
client’s interest and to ignore the issue if he did not.
15.
We consider the relevant circumstances to go somewhat further:
(a) the Tribunal
was being asked to make an order for costs in a very large amount against a
claimant; such an order will often be well beyond means of the paying party and
have very serious potential consequences for him or her and it may also act as
a disincentive to other claimants bringing legitimate claims; for those reasons
in our view a tribunal should always be cautious before making such an order;
(b) so
far as we are aware there was nothing to indicate that this was a case where the
Appellant was clearly going to be able to pay such an amount (she was obviously
not, for example, “an employer with very large resources”: see [34] of Benjamin
v Interlacing Ribbon EAT 1 November 2005);
(c) although
the Appellant was indeed represented by experienced counsel the Tribunal had
reason to regard his position as somewhat compromised: they knew he was the Appellant’s
partner; as we record at para 9 above, they had rejected his assertion that a
false statement in her schedule of loss was the result of his own error; and they
clearly did not think much of quality of the representations he had made in
relation to costs, describing them at para 181 of the judgment as “long and
discursive” and rejecting them more or less out of hand;
(d) (unless
the Tribunal members were themselves overlooking the question of means) we
think they must have thought (as do we) that there was at least a risk that Mr
Welch had overlooked the point.
16.
Taking into account all the circumstances the members of this Tribunal
(and in particular the lay members, who regularly sit in the employment
tribunal) are firmly of the view that the question of means should have been
raised by the Tribunal in this case before making a decision on the costs
application. Whether the failure to do so is categorized as a procedural
irregularity or a failure to give effect to the overriding objective to deal
with cases justly or a Wednesbury unreasonable omission, in our
judgment it was an error of law and an error of law which may have led to a
substantial injustice to the Appellant.
Disposal
17.
We therefore allow the appeal and set aside the Tribunal’s costs order.
After the hearing we told the parties of our decisions on the appeal and accepted
Mr Sutton’s submission that the matter would have to be remitted to the same Tribunal
as heard the case for them to reconsider their costs order in the light of our
decision. We therefore remit the matter to the Tribunal with directions that:
(a) they make reasonable
enquiries into the Appellant’s means; and
(b) they consider (in the
light of those enquiries along with the findings in their judgment dated 17
November 2010 and any further submissions by the parties):
(i) whether
to have regard to her ability to pay; and (if so)
(ii) what
is the appropriate costs order having regard to her ability to pay.
If the Tribunal decide not to have regard to the Appellant’s
ability to pay for any reason we take it that logically they would simply make
an order for the whole of the Respondent’s costs to be assessed as before. We have
deliberately not specified any date as at which the Appellant’s means are to be
considered: if there have been any substantial changes either way over the
years since the proceedings started we see no reason why the Tribunal should
not if it thinks fit enquire as to their cause and look at the whole picture
when deciding what order to make.
18.
Mr Sutton invited the Tribunal to give leave to appeal on the basis that
our decision would give rise to an arguable point of law on the construction of
the rules and that a further appeal would therefore be in the public interest.
In the event we do not believe we have said anything novel in relation to the
construction of the rules and do not consider the case appropriate for leave.
We have not sought to lay down any guidelines as to what is a good reason for
deciding not to have regard to ability to pay; all we have decided is that in
the circumstances of this case the fact that the point was not raised on behalf
of the Appellant was not a sufficient reason in itself.