United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0025/16/RN

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8AE

                                                                                                             At the Tribunal

                                                                                                             On 23 November 2016

Before

HER HONOUR JUDGE EADY QC

(SITTING ALONE)

FAITHORN FARRELL TIMMS LLP                                                           APPELLANT

MRS S BAILEY                                                                                         RESPONDENT

Transcript of Proceedings

JUDGMENT

APPLICATIONS FOR COSTS

APPEARANCES

SUMMARY

PRACTICE AND PROCEDURE - Costs

Costs before the Employment Appeal Tribunal - Rules 34A(1) and 34A(2A) Employment Appeal Tribunal Rules 1993 (as amended)

Although the Appellant had been partly successful on its appeal, its conduct of the appeal had been such that no award would be made on its application under Rule 34A(2A) EAT Rules.  Moreover, that conduct had been such as to unreasonably put the Respondent (Claimant) to unnecessary expense such that it was appropriate to make an award of costs against the Appellant under Rule 34A(1).

HER HONOUR JUDGE EADY QC

1.               The Full Hearing of the appeal and the cross-appeal in this matter took place on 20 May 2016.  I reserved judgment, which I later handed down on 28 June 2016, allowing both the appeal and cross-appeal in part.  As I stated at the end of my Judgment, the parties were then given permission to make any further applications in writing.  Both did so, each seeking an order for costs against the other.  Given the degree of dispute, I directed that the applications should be determined at a further hearing; thus the matter returns to me today.

2.               The first application for costs was made by the Claimant pursuant to Rule 34A(1) of the Employment Appeal Tribunal Rules 1993 (as amended).  That permits the EAT to make a costs award where it considers any proceedings brought by the prospective paying party were unnecessary, improper, vexatious or misconceived or there has been unreasonable delay or other unreasonable conduct in the bringing or conduct of proceedings by that party.  The Claimant contends that the Respondent’s appeal was unnecessary, vexatious and was brought and conducted unreasonably.

3.               The second application before me is that made by the Respondent, which seeks an order for costs under Rule 34A(2A) EAT Rules 1993.  That Rule provides that the EAT’s jurisdiction to make an award of costs is also engaged in relation to the fees incurred in lodging the appeal and pursuing it to a Full Hearing where an Appellant has been successful wholly or in part on an appeal.  The Respondent contends that, having been in part successful, it should be entitled to some recovery of the £1,600 it incurred by way of appeal fees, albeit that it recognises that the Claimant’s part-success on her cross-appeal means any award should be limited to half the fees incurred; that is, £800.

4.               Finally, the parties have both made further applications for the costs of pursuing these costs applications.

5.               I start with the Claimant’s application under Rule 34A(1), not least as if I were to agree with the Claimant’s characterisation of the appeal that would be a relevant factor in my consideration of the Respondent’s application in any event.  The Claimant’s application requires some revisiting of the background to this appeal in terms of how the issue of admissibility came to be taken in the first place.  I addressed this to some extent at paragraphs 10 to 12 of my substantive Judgment, but I remind myself of that background as follows:

(1)     The Claimant is pursuing complaints of sex discrimination and unfair dismissal before the Employment Tribunal (“the ET”).  Prior to the commencement of litigation there had been communications between the parties relating to a possible settlement agreement.  Both parties made reference to the settlement agreement discussions in their ET pleadings.

(2)     No issue was taken as to admissibility until quite late in the interlocutory stages of the ET proceedings; it was then initially pursued as a question of litigation privilege.

(3)     When the point was argued before the ET, the Respondent contended that section 111A of the Employment Rights Act 1996 (“ERA”) meant that the material in issue was inadmissible both for the purposes of the unfair dismissal claim and the sex discrimination claim.  On appeal Mr Rees (who had not appeared before the ET) accepted that was incorrect: section 111A only applied to evidence for the purposes of an unfair dismissal claim.  Part of the Respondent’s criticism of the ET’s reasoning, however, related to its addressing the point that the Respondent had erroneously taken before it (see paragraphs 57 and 58 of my Judgment on the appeal).

6.               For the Claimant, it is observed that the Respondent’s position on the question of admissibility has shifted during the proceedings (see above); it has never provided an adequate answer to the issue of waiver at common law; and it only succeeded on the issue of waiver under section 111A ERA on a basis it had not actually argued before the EAT (see paragraphs 44 and 45 of my Judgment in that respect).  It is further noted that the position following the appeal is that (1) all material is validly before the ET as regards the Claimant’s discrimination claim and (2) in relation to the unfair dismissal claim, the ET now has to determine (a) the extent to which the disputed material is evidence of pre-termination discussions at all, and (b) whether the Respondent behaved improperly for the purposes of section 111A(4).  On these bases Mr Milsom contends that the outcome of the appeal was hardly a resounding success for the Respondent.  The Claimant’s primary claim before the ET, he says, was that of sex discrimination, and the appeal was to a considerable extent academic.  He points to the chronology of the application before the ET and how the Respondent lodged its appeal on the penultimate day of the limitation period, only five working days before the Full Merits Hearing was due to commence, seeking a postponement of the hearing the following day.  He understands that the Respondent’s lead witness was in fact out of the country on annual leave for a significant period before 1 February 2016 and suggests the circumstances in which the admissibility challenge was (1) raised before the ET and (2) then taken on appeal, raise suspicions as to the Respondent’s good faith.

7.               I make no finding as to the primacy or otherwise of either claim; at this stage, I have to proceed on the basis that there are two claims pursued before the ET: sex discrimination and unfair dismissal.  On the former, it is correct that the admissibility issue has entirely fallen away: first, because I was satisfied that the ET had approached its task correctly; and secondly, because it was clear that any without prejudice privilege had been waived by the parties in their ET pleadings, if not before (see paragraph 55 of my Judgment).  Issues do still remain in respect of admissibility of evidence on the unfair dismissal claim, in part because I was satisfied that the ET had erroneously approached its task under section 111A (informed by common law, without prejudice privilege principles), although I also accepted on the Claimant’s cross-appeal that matters remained outstanding on the Claimant’s arguments in that regard.

8.               From all this, can I conclude that the appeal was unnecessary or vexatious or was pursued or conducted unreasonably?  I can see that the Claimant might have suspicions as to the Respondent’s motivations for raising the question of admissibility before the ET in the first place and also as to the timing of the lodgement of the appeal.  The resolution of the first of those questions must, however, ultimately be a matter for the ET, although its view may be informed by my finding on the issue of waiver at common law.  As for the second, I do not see how I can reach a finding of bad faith in the pursuit of the appeal on the basis of what can at most be described as suspicions (indeed Mr Milsom accepted he could not put it any higher).  So, putting to one side any suggestion of bad faith, can I say the appeal was unnecessary or unreasonably pursued given my view on the arguments, in particular the issue of waiver at common law? 

9.               For the Respondent, it is observed that the appeal was permitted to proceed to a Full Hearing after consideration on the papers; Mr Rees submits that must suggest it was not an unreasonable matter for the Respondent to pursue. 

10.            Whilst that is true, I note that the permission decision was made without sight of any arguments by the Claimant on the question of waiver; specifically, HHJ Hand QC proceeded on the (mistaken) assumption that (per his Reasons on the paper sift) there “appears to be no question of [privilege] having been waived”.  In any event, that submission cannot provide a complete answer, for the reasons identified by Burton P in Iron & Steel Trades Confederation v ASW Ltd (in Liquidation) [2004] IRLR 926 EAT.

11.            That said, ultimately, I do not feel able to say that the appeal was wholly unnecessary, vexatious or unreasonable in being brought in the first place.  The ET’s approach to admissibility under section 111A ERA was a matter that warranted consideration at a Full Hearing, and there was no concession on the part of the Claimant - however much unfair dismissal might not be her primary claim - so as to avoid that course.  I note what Mr Milsom says in terms of whether a more sensible course might not have been adopted by the Respondent in these proceedings, but whether or not that can really be said in terms of the application before the ET I consider remains open to be determined in those underlying proceedings; it may be that the ET is in a position to conclude that the way the application was made and pursued was such that costs should be awarded in the Claimant’s favour.

12.            All that said, I do agree that points were taken on the appeal relevant to the question of common law admissibility in relation to the sex discrimination claim that unreasonably failed to engage with the obvious issue of waiver.  Although not addressed by the ET, that was a point that had plainly been raised by the Claimant below; the Respondent was on notice of that point and the cross-appeal was unanswerable to the extent that the ET had plainly failed to address this aspect of the Claimant’s case.  Even if the Respondent was entitled to pursue a point of appeal on the ET’s approach (permitted to proceed to a Full Hearing but ultimately unsuccessful), pursuit of all points of challenge was rendered unreasonable by the Respondent’s failure to engage with the question of waiver arising from its own pleading before the ET.  I thus find that my costs jurisdiction is engaged, at least in part, under Rule 34A(1).  Do I consider that it is appropriate to make an award of costs as sought by the Claimant?  At this stage, I consider it relevant to bring into play the order sought by the Respondent for recovery of its fees under Rule 34A(2A).

13.            In this regard, I note (as Mr Milsom submits) that although the Respondent was partly successful, its victory might ultimately prove to be Pyrrhic and could only extend to the unfair dismissal claim in any event.  Moreover, it entirely failed on any appeal in respect of the sex discrimination claim and, on my findings, unreasonably failed to properly engage with the question of waiver.  In the circumstances, I take the view that the Respondent should itself meet the costs incurred by way of fees paid to pursue the appeal and I make no order in respect of its application.

14.            Should I then go further and make a separate award of costs against the Respondent?  I do not do so on the basis of bad faith, because, as I have explained, I make no assumption in that regard.  I equally do not do so to the extent that the Claimant’s application is based on matters that I consider would be properly for the ET.  I also bear in mind, as I have said, that some part of the appeal was necessary and reasonable and there was no attempt by those acting for the Claimant to avoid any aspect of the Full Hearing by putting forward proposals as to an agreed basis on which the appeal might be allowed and the outstanding matters remitted to the ET.  Finally, I remind myself that costs are not normally awarded in the EAT, even if a party is partly successful.  That said, I am entitled to take account of what I have found was a clear waiver of privilege in the ET3 by the Respondent and yet a failure on its part to acknowledge that point and where that must go for the purposes of the discrimination claim on the appeal and cross-appeal.  That was unreasonable and not only deprives the Respondent of my exercise of discretion in its favour on its fees but has also put the Claimant to unnecessary cost in having to address that part of the appeal.

15.            Having reached the view that it is appropriate for me to make an award of costs against the Respondent, I then have to take a proportionate view as to the amount of any award that should be made in that regard, and of course I have to accept, given the approach I have taken, that only part of the costs claimed by the Claimant should be allowed.  Carrying out a summary assessment and doing the best I can with the material I have, I consider that the appropriate award is £1,000 to be paid towards the Claimant’s costs on appeal, allowing that it remains open to her to pursue any appropriate applications before the ET.

16.            As for the costs in respect of the applications before me today or for the parties’ attendance at this hearing, I make no order.  Mr Rees says the Respondent should be entitled to its costs because of the imputation of bad faith.  Mr Milsom says the Claimant should be entitled to her costs because of the Respondent’s conduct generally and because she had valid reasons for making her application.  There is, plainly, a great deal of heat in these proceedings, and I can see that will not have been assisted by the way in which the admissibility issues were raised and pursued by the Respondent (even allowing that there might not have been any bad faith in that regard, an issue on which I have made no finding and which may ultimately need to be resolved by the ET).  Further heat has no doubt been generated by the costs application pursued by the Claimant, in particular insofar as that relates to the raising of suspicions as to the Respondent’s motivations.  It is probably fairly pointless to suggest that the parties might wish to step back from where they currently stand and seek to conduct these proceedings in a more nuanced and measured way, but, standing apart as I do, I can allow that a heated pursuit of a point does not mean that a party is unreasonable, still less does it mean that they are right.  The parties have raised valid points on the issue of costs, and those have been appropriately and proportionately addressed at this hearing.  The applications made do not further engage my costs jurisdiction, and I make no further order.

17.            I therefore dismiss the Respondent’s application for costs, and I make an award of costs in favour of the Claimant, the Respondent to the appeal, in the sum of £1,000.