United Kingdom Employment Appeal Tribunal

Appeal No. UKEAT/0007/16/JOJ

UKEAT/0008/16/JOJ

 

 

EMPLOYMENT APPEAL TRIBUNAL

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

 

 

At the Tribunal

On 24 January 2017

Judgment handed down on 13 June 2017

 

 

 

Before

THE HONOURABLE MRS JUSTICE SLADE DBE

(SITTING ALONE)

 

 

 

 

 

 

SWISSPORT LIMITED APPELLANT

 

 

(1) MR A EXLEY & OTHERS

(2) SERVISAIR UK LIMITED

(3) UNITE THE UNION

(4) MR C BREEZE RESPONDENTS

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant	MR NICHOLAS SIDDALL (of Counsel) Instructed by: Eversheds LLP Eversheds House 70 Great Bridgewater Street Manchester M1 5ES
For the Respondents For the First Respondents	MRS LOUISE MANKAU (of Counsel) Instructed by: SA Law LLP 91 Wimpole Street London W1G 0EF
For the Third and Fourth Respondents	MR BRUCE HENRY (of Counsel) Instructed by: Thompsons Solicitors 23 Princess Street Manchester M2 4ER
For the Second Respondent	No appearance or representation by or on behalf of the Second Respondent

 

SUMMARY

TRANSFER OF UNDERTAKINGS - Economic technical or organisational reason

PRACTICE AND PROCEDURE - Costs

UNFAIR DISMISSAL - Polkey deduction

 

The Respondent resisted claims for unfair dismissal following the loss of a ground handling contract at an airport.  Grounds of resistance to ‘ordinary’ unfair dismissal claims were struck out.  Economic technical or organisational (“ETO”) and Polkey defences proceeded.  A Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) assignment defence was conceded.  There was no hearing of the ETO ground of resistance.  The Respondent failed to establish a Polkey defence.  At a Remedies Hearing the Employment Tribunal awarded compensation for future loss of the same period for six of the nine Claimants.  Costs were awarded under Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 Schedule 1 Rule 76(1)(b) on the basis that the assignment, ETO and Polkey defences had no reasonable prospect of success.  A ‘period’ award was made from receipt of the ET3 to the conclusion of the Polkey Hearing up to the maximum payable under Damages Based Agreements (“DBA”) made in accordance with the Damages Based Agreements Regulations 2013 under which Claimants were obliged to pay 10% of compensation recovered for their solicitors’ services.

 

The Employment Tribunal did not err in holding that a ‘period’ costs award may be made when a party has entered into a DBA.  CPR Rules and the indemnity principle apply.  The Employment Tribunal did not err in holding that the assignment and ETO defences had no reasonable prospect of success within the meaning of ET Rule 76(1)(b).  The Employment Tribunal erred in so holding in respect of Polkey.  They failed to consider whether the Claimants would have continued in employment and if so on what terms (Software 2000 Ltd v Andrews [2007] IRLR 568).  The Employment Tribunal erred in imposing a tariff for future loss.  Remedy and application for costs remitted for rehearing.

 

THE HONOURABLE MRS JUSTICE SLADE DBE

 

1.                  Swissport Limited (“Swissport”) the Second Respondent before the Employment Tribunal) appeal from the decision of an Employment Tribunal, Employment Judge Grazin and members (“the ET”) who by a Judgment sent to the parties on 13 July 2015 (“the Costs Judgment”) ordered Swissport to pay the costs of the Claimants Mr Alan Exley and others (“the Prolegal Claimants”).  The Order made under Rule 76(1)(b) of Schedule 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 (“ET Rules”) was that Swissport pay the costs of the Prolegal Claimants from the date of receipt of Swissport’s response, their ET3, up to and including the conclusion of the ‘Polkey’(Polkey v A E Dayton Services Ltd [1987] IRLR 503) hearing on 10 and 11 February 2015 following which a Judgment was sent to the parties on 24 February 2015 (the “Polkey Judgment”).  Swissport also appeal from the Judgment of the ET on remedy.  The Remedy Judgment was sent to the parties on 7 July 2015 (“the Remedy Judgment”).  As before the ET, Swissport was represented by Mr Siddall of counsel, the Prolegal Claimants by Mrs Mankau of counsel and Mr Breeze by Mr Henry of counsel.  In this Judgment paragraphs in the three Judgments will be referred to as P+number, R+number and C+number.

 

2.                  Following a Preliminary Hearing at the Employment Appeal Tribunal (“EAT”), by a Judgment on 27 April 2016 HH Judge Peter Clark decided that one ground of appeal from the Remedy Judgment should proceed to a Full Hearing and all grounds of the costs appeal.  HH Judge Peter Clark summarised the ground of appeal against the Remedy Judgment which was to proceed to a Full Hearing as “Incorrect application of a 2 year “tariff” for future loss of earnings”.  As for the grounds of appeal from the Costs Judgment, HH Judge Peter Clark considered that as the Prolegal Claimants entered into a Damages Based Agreement (“DBA”) in accordance with the Damages-Based Agreement Regulations 2013 (“the DBA Regulations”) under which the fee payable by those Claimants was entirely dependent on the amount of damages recovered, it was arguable that a period award of costs was inappropriate as the amount paid by the individual Claimants would not vary according to the amount of work performed by their solicitors.

 

Outline Material Facts

3.                  The Prolegal Claimants and Mr Breeze together with others previously employed by Servisair UK Limited (“Servisair”) lodged claims against Swissport arising from the alleged transfer of their employment under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) from Servisair to Swissport.  All of the Claimants were employed until 31 March 2013 by Servisair at Manchester airport.  They were employed in two groups.  One group which included Mr Breeze worked in the bag hall dealing with luggage to be sorted for conveyance to the relevant flight and with taking luggage from ramp staff who had unloaded luggage from returning flights so that it can be put on carousels.  The second group were ramp staff whose work of loading and unloading passengers’ luggage onto and off flights took place largely in the open air.

 

4.                  Servisair lost their ground handling contract with Thomson Airways (“Thomson”) to Swissport.  The changeover date was 31 March 2013.  Servisair considered that TUPE applied to the transfer.  Swissport did not.  Swissport maintained that as Servisair held contracts not only with Thomson but with other airlines, primarily for non-charter flights, the Claimants were not part of an organised grouping of employees subject to the transfer and therefore did not fall within TUPE.  The Claimants’ contracts of employment with Servisair terminated on that date. 

 

5.                  The Claimants and other former employees of Servisair presented themselves for work with Swissport on 1 April 2013.  Swissport offered them employment on different terms and conditions from those they had previously enjoyed.  Those who declined the offer of employment on Swissport terms and brought claims in the ET were grouped for the purpose of these proceedings.  The Claimants in Schedule 1 save for Mr Breeze, accepted alternative employment with Swissport.  Agreement was reached on the claims of other Claimants.  With the exception of Mr Breeze, the Claimants whose claims remained to be decided in proceedings before the ET were those employed on the ramp or in the case of two in an office.  These are the eight Prolegal Claimants represented by Mrs Mankau.

 

6.                  Resisting proceedings brought by the Prolegal Claimants and Mr Breeze, Swissport lodged an ET3 in May 2013 contending that there had been no TUPE transfer from Servisair to Swissport.  If contrary to that submission there had been a TUPE transfer to them, Swissport contended that the Claimants were fairly dismissed or dismissed for an economic, technical or organisational reason (“ETO”) within the meaning of TUPE and the dismissals were fair.  Alternatively Swissport contended that by application of Polkey they should be awarded no or reduced compensation.

 

7.                  During 2014 Swissport acquired Servisair.  The ET held at paragraph P12:

“12. … Both respondents were then represented by the same solicitors and, not surprisingly, the two parties (now one commercial entity) decided that no purpose was served by continuing that legal battle.  It was therefore concluded that a formal concession should be made that the TUPE Regulations applied.”

 

Swissport therefore became the sole effective Respondent to the claims.

 

8.                  At a Preliminary Hearing before Employment Judge Slater on 14 November 2014, the defence of Swissport to the ‘ordinary’ unfair dismissal claims was struck out.  The Employment Judge allowed the unfair dismissal claim under TUPE, which raised the ETO defence, to proceed.

 

9.                  At the commencement of the Full Hearing before the ET on 10 February 2015 all counsel agreed that once the ordinary unfair dismissal defence had been struck out the ET was bound to make a declaration of unfair dismissal.  All three counsel also agreed that no purpose was served by enquiring into the merits of the ETO defence.  Immediately prior to the hearing a complaint by UNITE the union that Swissport had failed to consult as required by the Trade Union and Labour Relations (Consolidation) Act 1992 was settled.  The ET then considered the Polkey defence.

 

The Polkey Judgment (24 February 2015)

10.              Swissport contended that the ET should make no or a reduction in any award of compensation by applying the principles in Polkey.

 

11.              The ET recorded that it was common ground that the burden of proof was on Swissport to establish that if fair procedures had been used the Claimants would have been dismissed when they were.  In this regard the ET referred to the judgment of the EAT in Software 2000 Ltd v Andrews & Others [2007] IRLR 568.

 

12.              The ET accepted that in deciding whether there should be a Polkey reduction in compensation on the basis that if a fair procedure had been adopted the Claimants would have been fairly dismissed in any event, the ET were not to consider what they, as a reasonable employer, would have done.  The relevant question was how this employer, acting reasonably would have acted.  However, contrary to the submissions of Mr Siddall, they took into account in deciding this issue that Swissport originally and subsequently failed to accept their responsibilities under TUPE.

 

13.              The ET recorded at paragraph P27 that it was accepted that they could not properly reach a conclusion that there should be a Polkey reduction in the award to Mr Breeze as no sufficient evidence was given by Mr Baxter, the sole witness for Swissport, to found such a conclusion.

 

14.              The primary finding of the ET in paragraph P33 was that there was no redundancy situation in relation to the six ramp operatives.  They did not therefore accept that it was likely that Swissport would have fairly dismissed these Claimants in any event.

 

15.              At paragraph P37 the ET found that if Swissport had accepted their obligations under TUPE the night shift ramp allocators employed by Servisair on the Thomson contract would have been slotted into employment with Swissport doing the same work.  Accordingly there was no redundancy and no fair reason for dismissal.

 

16.              The ET held that even if there were a redundancy situation affecting the two ramp allocators, having regard to the turnover of staff, the duty on Swissport to seek alternative employment for them during the consultation period and the wish of the allocators to remain working at the airport, they would have remained in employment.

 

17.              Accordingly the ET concluded at paragraph P39 that in the case of all nine Claimants including Mr Breeze, there was no reason to make any Polkey reduction in their compensation.

 

The Remedy Judgment (7 July 2015)

18.              Swissport asserted that each of the Claimants had failed to mitigate their loss.  The ET observed at paragraph R2 that:

“2. … It was therefore necessary to hear the evidence of each of the relevant claimants, so as to determine the amount of the gross losses … and to deal with the respondents’ principal contention, namely that each of these claimants should have obtained other work at comparable rates well before the date of this hearing.  In that connection, there was, in practical terms, a period of just over two years between the date of dismissal of each of these claimants (1 April 2013) and the date when these proceedings were concluded, at our last deliberation in Chambers on 14 August 2015. …”

 

19.              The ET considered issues regarding mitigation which applied to all the Claimants.  They concluded that they were entitled to refuse the offer of continued employment made by Swissport in 2013 because of the company’s attitude to TUPE and the attempt to offer the same employment at reduced pay.  The ET dismissed the suggestion that there was a continuing obligation on the Claimants to apply for seasonal work at the airport in the summer of 2014 on the basis that they would know that such work was available.  The ET held at paragraph R8 that the Claimants were even more entitled to keep to their original view by reason of the 2014 concession by which Swissport changed their position on the application of TUPE.  The ET held that each of the Claimants was entitled to refuse alternative employment with Swissport.

 

20.              The ET then made six general comments which they held applied to each of the Claimants.  The main points were that the burden of proof was on Swissport to establish that the Claimants had failed to mitigate their loss.  The ET accepted that the Claimants had made numerous job applications without success.  The Claimants were unskilled.  Where applications were made for unskilled work, the rates of pay offered were substantially below those they had earned with Servisair.  The ET were satisfied that unskilled work in the Manchester area pays very much less than the Claimants had earned with Servisair.  Looking at the matter generally the ET were of the view that it is reasonable to stay in lesser-paid work if the wage paid in that work is itself reasonable.

 

21.              The ET then considered the compensation awards to be made for each Claimant.  Their conclusions are set out later in this Judgment.

 

The Costs Judgment (13 July 2015)

22.              The Prolegal Claimants claimed costs from Swissport under ET Rules 76(1)(a) and (b).  The claim for costs under Rule 76(1)(b) was made on the ground that none of the four grounds of resistance to the claims had a reasonable prospect of success.  The ET held at paragraph C17, that the ground of resisting the claims that the Claimants were not assigned to the part of the undertaking transferred and that TUPE did not apply to the transfer had no reasonable prospect of success.

 

23.              At paragraph C19 the ET then considered whether the ETO defence had a reasonable prospect of success.  The ET observed that there was no reduction in headcount of the six ramp employees.  Even if there was a reduction of 1.5 hours for each Claimant they did not accept that:

“19. … very minor change amounts to an ETO reason such as to entitle the respondent to have relied upon that defence at any stage of these proceedings. …”

 

Further the ET held that Swissport made no reference to the two allocators in either set of Particulars given of their ET3.  The ET concluded that Swissport “gave no thought whatsoever” to the position of the two allocators, Mrs Exley and Mr Yates.  They had no difficulty in concluding that there was no reasonable prospect of success of an ETO ground of resistance to their claims.

 

24.              Thirdly the ET held at paragraphs C20 and C21 that even if Swissport had been able to establish an ETO reason for the dismissals of the Prolegal Claimants, the dismissals would not have been fair within the meaning of the Employment Rights Act 1996 (“ERA”) section 98(4).  All parties agreed that there was no attempt at consultation with the ramp staff and no pool for selection for redundancy.  As for the allocators, the ET held that there may have been evidence of a potential redundancy but there was never any prospect of success of a finding of a fair dismissal had a fair procedure been adopted.  The ET held that the ETO defence had no reasonable prospect of success.

 

25.              The ET therefore held that none of the three grounds of resisting liability for the claims for unfair dismissal had any reasonable prospect of success.

 

26.              The ET then considered a fourth issue, whether the Polkey defence had a reasonable prospect of success.

 

27.              The ET held at paragraph R25 that as there was no reduction in headcount of ramp agents there was no redundancy situation in relation to them.  Accordingly their dismissals could not be fair as a fair reason could not be established and a fair procedure would not affect that conclusion.  The ET concluded that the Polkey argument had no reasonable prospect of success in relation to ramp agents.

 

28.              As for allocators, at paragraph R26 the ET held that there may have been a potential redundancy situation however they concluded that any dismissal for that reason would have been unfair as Swissport had “made no attempt whatsoever to follow the standards of fairness and reasonableness”.

 

29.              Accordingly the ET concluded that there was no basis upon which the Polkey argument could succeed in relation either to the allocators or the ramp agents.

 

30.              The ET therefore held that ET Rule 76(1)(b) was satisfied.  None of the four grounds of resistance to the claims had a reasonable prospect of success.  There was no application for costs in respect of the Remedy Hearing.

 

31.              The ET then considered whether, in the exercise of their discretion they should make a Costs Order.

 

32.              In paragraph C30 the ET observed that Costs Orders in the Employment Tribunal are exceptional but they held that this is an exceptional case.  They noted that a costs warning was included in the original claim form and was repeated.  The ET recognised that although the defence to ‘ordinary’ unfair dismissal was struck out at the Preliminary Hearing as having no reasonable prospect of success the ETO defence was allowed to proceed to a Full Hearing.

 

33.              At paragraph C30 the ET recorded the contention of the Prolegal Claimants that resistance to the claims continued for a period of very nearly two years.  The assignment point was conceded one year after the dismissals but not the claims for unfair dismissal.  The ET held at paragraph 30:

“30. … We have been told that each of these claimants is liable for payment of costs up to one tenth of any amount that might be awarded to them, so that there is clearly a cost to each of them which is properly to be described as compensatory rather than punitive of the respondent. …”

 

After a Full Hearing the ET had concluded that the ETO and Polkey grounds of resistance had no reasonable prospect of success.

 

34.              The ET decided in paragraph C33::

“33. … In the exercise of our discretion, we consider that the second respondent should pay to these claimants the entirety of their costs between the date of receipt of the response document and the conclusion of the Polkey hearing.  That order is, of course, subject to a limitation if it is shown that the costs so calculated (see below) exceed 10% of the amounts awarded to each individual claimant”

 

The Costs Appeal

35.              The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 provide:

“74. Definitions

(1) “Costs” means fees, charges, disbursements or expenses incurred by or on behalf of the receiving party (including expenses that witnesses incur for the purpose of, or in connection with, attendance at a Tribunal hearing). …

75. Costs orders and preparation time orders

(1) A costs order is an order that a party (“the paying party”) make a payment to -

(a) another party (“the receiving party”) in respect of the costs that the receiving party has incurred while legally represented or while represented by a lay representative;

…

76. When a costs order or a preparation time order may or shall be made

(1) A Tribunal may make a costs order or a preparation time order, and shall consider whether to do so, where it considers that -

…

(b) any claim or response had no reasonable prospect of success.

…

 

 

 

78. The amount of a costs order

(1) A costs order may -

(a) order the paying party to pay the receiving party a specified amount, not exceeding £20,000, in respect of the costs of the receiving party;

(b) 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, in England and Wales, by way of detailed assessment carried out either by a county court in accordance with the Civil Procedure Rules 1998, or by an Employment Judge applying the same principles; …

(3) For the avoidance of doubt, the amount of a costs order under sub-paragraphs (b) to (e) of paragraph (1) may exceed £20,000.”

 

Ground 1

36.              By their first ground of appeal, Swissport contend that the ET erred in making a ‘period’ costs award.  The ET ordered at paragraph C33 that Swissport pay the Claimants the entirety of their costs between the date of receipt of the response document, the ET3, and the conclusion of the Polkey Hearing subject to a limit of 10% of the compensation awarded to each of the Prolegal Claimants who had entered into a DBA.

 

37.              In his oral submissions on appeal, Mr Siddal referred to the origins of Damages Based Agreements (“DBA”) pursuant to which the Prolegal Claimants funded their claim.  These were rendered lawful by the Damages-Based Agreements Regulations 2013 (“DBA Regulations”) which replaced the Damages-Based Agreements Regulations 2010.  By Regulation 1(5)(a) Regulation 4 does not apply to a DBA in respect of an employment matter, by Regulation 1(5)(b) Regulations 5, 6, 7 and 8 apply.

 

38.              The DBA Regulations provide:

“4. Payment in respect of claims or proceedings other than an employment matter

(1) In respect of any claim or proceedings, other than an employment matter, to which these Regulations apply, a damages-based agreement must not require an amount to be paid by the client other than -

 

(a) the payment, net of -

(i) any costs (including fixed costs under Part 45 of the Civil Procedure Rules 1998); and

(ii) where relevant, any sum in respect of disbursements incurred by the representative in respect of counsel’s fees,

that have been paid or are payable by another party to the proceedings by agreement or order; and

(b) any expenses incurred by the representative, net of any amount which has been paid or is payable by another party to the proceedings by agreement or order.

…

Payment in an employment matter

7. In an employment matter, a damages-based agreement must not provide for a payment above an amount which, including VAT, is equal to 35% of the sums ultimately recovered by the client in the claim or proceedings.

8. Terms and conditions of termination in an employment matter

(1) In an employment matter, the additional requirements prescribed for the purposes of section 58AA(4)(c) of the Act are that the terms and conditions of a damages-based agreement must be in accordance with paragraphs (2), (3) and (4).

(2) If the agreement is terminated, the representatives may not charge the client more than the representative’s costs and expenses for the work undertaken in respect of the client’s claim or proceedings.

(3) The client may not terminate the agreement -

(a) after settlement has been agreed; or

(b) within seven days before the start of the tribunal hearing.

(4) The representative may not terminate the agreement and charge costs unless the client has behaved or is behaving unreasonably.

(5) Paragraphs (3) and (4) are without prejudice to any right of either party under general law of contract to terminate the agreement.”

 

39.              It was common ground between the parties that the effect of Rule 78(1)(b) of the ET Rules is to import the provisions of the Civil Procedure Rules (“CPR”) into the assessment of costs in the ET Rules.  The CPR provides:

“44.1. (3) Where advocacy or litigation services are provided to a client under a conditional fee agreement, costs are recoverable under Parts 44 to 47 notwithstanding that the client is liable to pay the legal representative’s fees and expenses only to the extent that sums are recovered in respect of the proceedings, whether by way of costs or otherwise.

44.2. (4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including -

(a) the conduct of all the parties;

 

(5) The conduct of the parties includes -

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(6) The orders which the court may make under this rule include an order that a party must pay -

(c) costs from or until a certain date only;

44.18. (1) The fact that a party has entered a damages-based agreement will not affect the making of any order for costs which otherwise would be made in favour of that party.

(2) Where costs are to be assessed in favour of a party who has entered into a damages-based agreement …

(b) the party may not recover by way of costs more than the total amount payable by that party under the damages-based agreement for legal services provided under that agreement.”

 

40.              By ground 1 of the Notice of Appeal Mr Siddall contended that the ET erred by awarding the Claimants the entirety of their costs for a defined period despite finding that irrespective of the issues raised their costs were set at 10% of the compensation awarded to them.  It was said that this award failed to take into account that Swissport had valid arguments on the value of the claims.  It is said that the ET erred in indicating an intention to assess costs to a maximum of 10% of the amounts awarded despite this representing the total liability of the Claimants for their costs and their own finding that no award of costs in respect of the period after 11 February 2015, the conclusion of the hearing of the Polkey issue, was appropriate.  Counsel submitted that alternatively the ET failed to consider and give adequate reasons why a ‘period’ costs award was appropriate on the facts of this case.

 

41.              At the heart of Mr Siddall’s submission that the ET erred in awarding costs on a ‘period’ basis, costs up to the conclusion of the Polkey Hearing, was that under a DBA the amount of the Prolegal Claimants’ liability to pay costs to their solicitors did not depend on the amount of time spent on their cases or the point at which they were concluded.  The liability would always be 10% of the compensation agreed or ordered.  The liability of the Claimants to their solicitors was the same whether their claims settled immediately after service of their ET1s or after protracted proceedings.  Mr Siddall contended that in the context of a DBA an award of costs on a period basis does not work.

 

42.              Mr Siddall drew attention to the difference in the DBA Regulations applicable to non-employment and employment matters.  Both Mr Siddall and Mrs Mankau drew attention to Regulation 4 which provides that in a non-employment matter any costs paid or payable to a successful claimant from the paying party are to be set off against the percentage of damages agreed to be paid to the claimant’s solicitor under the DBA (“the Ontario model”).  Mr Siddall pointed out that there was no similar off setting provision in Regulation 7 dealing with employment matters.  Accordingly it was submitted that the ET was in error in making a ‘period’ costs award when the success or failure of Swissport on various issues had no effect on the sums the Claimants were obliged to pay their solicitors.  It was submitted that the primary error of the ET was in making a ‘period’ costs award at all when the conduct of Swissport had no temporal, causative or logical effect on the level of costs payable by the Claimants to their solicitors.

 

43.              Further Mr Siddall contended that the ET failed to consider why or give reasons for their decision that a ‘period’ costs award was appropriate when these Claimants had entered into a DBA.

 

44.              Mrs Mankau for the Prolegal Claimants submitted that where, as in this case, an ET makes an Order for costs to be assessed, by reason of ET Rule 78(1)(b) the detailed assessment will be carried out in accordance with CPR 44 and CPR 44.18 applies.  It is only once the court has reached a figure on such a detailed assessment that CPR 44.18(2)(b) comes into play and the Order will be limited to the total amount payable by the Claimant to their solicitor under the DBA.  In this case the 10% of compensation recovered or recoverable would be the limit of liability of the Claimants and consequently of Swissport.  10% is a maximum.  If costs were assessed at more than 10% of the compensation awarded, Swissport would only be liable to pay the Claimants costs up to 10% of their compensation.  If costs were assessed at less, the amount payable by Swissport to the Claimants would be less than 10% of compensation.  However if these costs exceeded that amount the Claimants would remain liable to pay their solicitors the greater amount of 10% of compensation recovered.

 

45.              Mrs Mankau submitted that it is not significant that DBA Regulation 7 does not provide for the offsetting which is required of DBAs in civil claims.

 

46.              It was contended by Mrs Mankau that the ‘period’ approach to costs was wholly correct in accordance both with CPR costs rules and with ET Rule 78(1)(b).  Under the ET Rules an ET may make an Order of “the whole or a specified part of the costs of the receiving party”.

 

Ground 1: Discussion and Conclusion

47.              The ET did not make an Order for Swissport to pay the Prolegal Claimants a specified amount under ET Rule 78(1)(a).  Their Order was made under Rule 78(1)(b) for payment of a specified part of the Claimants’ costs.  As the Order was made under Rule 78(1)(b) there was to be a detailed assessment of the Claimants’ costs to be carried out in accordance with the CPR.

 

48.              CPR 44.18 provides that where costs are to be assessed in favour of a party who has entered into a DBA the DBA will not affect the making of an Order for costs which would otherwise be made in favour of that party.  On the indemnity principle the liability of the paying party is limited to the amount of costs payable by the receiving party for legal services under the DBA.  The making of an Order for costs where the receiving party has entered into a DBA is a two stage process.  The procedure is that the assessor makes an assessment of costs to be paid on CPR principles.  If that assessment results in a figure which is less than the sum agreed to be paid for legal services by the receiving party under the DBA, the sum assessed will be the amount payable by the paying party.  If the sum assessed is more than the amount payable by the receiving party for legal services under the DBA, under the indemnity principle the paying party’s liability will be limited to that amount.

 

49.              CPR Rule 44.2 provides in relation to a Costs Order:

“(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances including -

(a) the conduct of all the parties;

…

(5) The conduct of the parties includes -

…

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; …

(6) The orders which the court may make under this rule include an order that a party must pay -

…

(c) costs from or until a certain date only.”

 

In my judgment these factors are relevant in considering whether a ‘period’ Order for costs by an ET in favour of a party who has entered into a DBA is appropriate.  CPR Rule 44.2(6) applies to Costs Orders in civil claims for which the Claimant has entered into a DBA.  In my judgment the application of Regulation 4 to such claims but not to employment claims does not affect the appropriateness of a ‘period’ Costs Order in the ET.  Such an argument is not particular to a ‘period’ Costs Order but would apply generally to all Costs Orders made under ET Rule 78(1) where the receiving party has entered a DBA.  If the paying party has or will pay or be liable to pay the receiving party any expenses under agreement or other Order, in exercise of their discretion there is nothing to prevent the ET making an Order which would have a similar effect to Regulation 4 between those parties up to the limit agreed to be paid by the Claimant to their legal advisor under the DBA.

 

50.              Nor in my judgment can it be said that the ET erred in making a period costs award under which the maximum liability of the Claimant under the DBA was met notwithstanding that the Claimants’ legal advisors would have incurred costs in the compensation part of the proceedings.  The basis of Mr Siddall’s contention is that the Prolegal Claimants’ 10% liability under the DBA should be attributed to the entirety of the proceedings and pro-rated to take account of the fact that no Order was made against Swissport in respect of the Compensation Hearing.  To limit a Costs Order in this way would advantage a paying party where the receiving party has entered into a DBA compared with a case in which the receiving party had not entered into such an agreement.  Further such an Order would have to be made under Rule 78(1)(a) rather than under 78(1)(b).  The amount of those costs is for detailed assessment.  Absent any escalating staging in the DBA applying ET Rule 78(1)(b) and CPR principles there is no scope for pro-rating the maximum amount payable by Swissport as contended by Mr Siddall.  In my judgment the ET did not err in stating that the limit on Swissport’s liability on costs was the amount the Claimants were obliged to pay under the DBA.

 

51.              In my judgment the decision of the ET to make a ‘period’ costs award from the service of the ET3 to the conclusion of the Polkey Hearing was Meek compliant.  The ET set out clearly each of Swissport’s grounds of resisting liability for the claims and their reasons for not accepting them.  Those grounds were the subject of the proceedings up to the conclusion of the Polkey Hearing.  The ET gave adequate reasons for making their ‘period’ award.  Whether a ‘period’ costs award is made and if so for what period is for the exercise of the discretion of the Employment Tribunal taking into account all relevant circumstances.  Accordingly if in this case the Employment Tribunal took into account a factor which it should not have taken into account or omitted one it should have taken into account the basis of any costs award would have to be reconsidered to decide whether a ‘period’ award is appropriate in the relevant circumstances.

 

Ground 2

52.              Mr Siddall contended that the ET adopted an erroneous approach to the question of whether Swissport’s grounds of resistance to the claims had no reasonable prospect of success, the basis upon which they made their Costs Order.

 

53.              Counsel for Swissport contended that the ET erroneously considered whether it was reasonable to pursue certain lines of defence on the basis of what they considered the company should have known rather than what the company reasonably knew at the time.  Mr Siddall referred to Vaughan v London Borough of Lewisham [2013] IRLR 713 in which Mr Justice Underhill (as he then was) and members set out in paragraph 8 the reference by the ET in that case to the statement by Sedley LJ in Scott v Commissioners of Inland Revenue [2004] IRLR 713 that:

“8. … the relevant question in considering whether the pursuit, or defence, of a claim was misconceived was not whether the party in question thought they were right but whether they had reasonable grounds for so thinking (see paragraph 46 of his judgment, at p.719). …”

 

It was submitted that the ET erred in assessing Swissport’s arguments through the prism of their findings following argument and evidence rather than what they reasonably knew when lodging the ET3.  Mr Siddall gave examples of the way in which the ET dealt with Swissport’s resistance to the claims raising an ETO defence.  At paragraph C18 the ET held of the contention:

“18. … The actual position was that set out by Mr Baxter on the Polkey hearing and summarised by us at paragraph 24 of those Reasons.  Whatever the original pleading said in its brief form, and whatever the subsequent particulars contended, the actual position, as we have found, is that there was no reduction in the workforce. …”

 

The pleaded Particulars stated that there was a reduction in the number of ramp agents from eight to six.  The ET recorded that at the Polkey Hearing Mr Baxter accepted that there was no reduction in headcount but a reduction in working hours from thirty nine to thirty seven and a half.  The ET concluded that this change in working hours did not amount to an ETO reason.  It was said that this shows that the ET adopted an erroneous approach by assessing the reasonableness of the defence after the Full Hearing rather than at the time the defence was raised in the ET3 and Particulars.

 

54.              Mr Siddall gave a further example of the ET basing their conclusion on the reasonableness of Swissport’s defence on evidence given at the hearing.  The ET concluded at paragraph C25 that the Polkey defence in relation to the ramp agents had no reasonable prospect of success

“25. … based upon the actual evidence which Mr Baxter gave on the hearing, as opposed to the case pleaded in correspondence on the day before the preliminary hearing before Judge Slater.”

 

55.              Mr Siddall contended that the ET erred in compartmentalising Swissport’s defences and in failing to recognise that they overlapped.  They failed to recognise that, for example, evidence on the ETO defence was also relevant to Polkey.

 

56.              Further it was contended that the ET erred in treating Swissport’s concession in their email of 22 April 2014 that the Claimants were assigned to the undertaking transferred as equivalent to a pleading.  Mr Siddall pointed out that at paragraph P12 of the Polkey Judgment the ET had found that the concession was made on a commercial basis.  Swissport acquired Servisair in 2014.  The ET recorded the conclusion of Swissport that no purpose would be served by continuing the legal battle over the assignment issue as one or other company would have to answer the claims.

 

57.              Mr Siddall submitted that in any event Swissport should not have been made liable for any of the Claimants’ costs incurred in relation to the assignment issue after the concession on 22 April 2014.  Thereafter that issue was academic as was the ‘ordinary’ dismissal issue after Swissport’s defence to those claims was struck out on 14 November 2014.

 

58.              Mr Siddall submitted that the ET erred in concluding that the company behaved unreasonably in pursuing the ETO and Polkey defences without deciding what relevant material should have been considered by the company and what conclusions they should have reasonably reached on those defences before the Polkey Hearing.

 

59.              Mrs Mankau submitted that the ET did not err in their approach to whether it was reasonable for Swissport to advance their ETO and Polkey defences.  Counsel contended that the ET did not err in relying on evidence given at the hearing for an assessment of the reasonableness of those defences.  Further it was submitted that paragraph C18 of the Costs Judgment relied upon by Mr Siddall had to be read in context.  The ET gave full reasons why the ETO defence never enjoyed a reasonable prospect of success.

 

60.              Counsel for the Prolegal Claimants referred to paragraph 14(4) of Vaughan in which the EAT observed that where some questions are only finally resolved at a hearing that:

“… does not mean that a reliable assessment of the prospects of success could not have been made at an earlier stage …”

 

As in Vaughan, the ET in this case did not err in having regard to the evidence given at the hearings before them in deciding that Swissport acted unreasonably in pursuing the ETO and Polkey defences.

 

61.              As for the ‘concession’ email, Mrs Mankau pointed out that the observation by the ET in paragraph P12 of the Polkey Judgment was made before they had seen the email and heard full submissions on the point as they did in the Costs Judgment.

 

Ground 2: Discussion and Conclusion

62.              The ‘period’ award of costs was for the entirety of the Claimants’ costs from the date of the service of the ET3 on 4 June 2013 up to the conclusion of the Polkey Hearing on 11 February 2015.  The costs award was made under ET Rule 76(1)(b) on the basis that Swissport’s response had no reasonable prospect of success.

 

63.              By ground 2(ii) Swissport contend that the ET erred in deciding whether their grounds of resistance to the claims had a reasonable prospect of success by taking into account evidence and argument at the hearings before them.  It was submitted that the ET should have reached their decision on costs without taking into account that material, in effect deciding whether it was reasonable for the Swissport to raise their defences in the first place.

 

64.              The ET Rules have similar provisions which give rise to the exercise of a discretion by the ET to strike out or make a Costs Order in respect of a response.  Rule 37(1) provides:

“(1) At any stage of the proceedings … a Tribunal may strike out all or part of a claim response on any of the following grounds -

(a) that it … has no reasonable prospects of success;

…”

 

Rule 76 provides:

“(1) A Tribunal may make a costs order … and shall consider whether to do so, where it considers that -

…

(b) any claim or response had no reasonable prospect of success.”

 

Whilst the threshold for the exercise of discretion to make an Order is the same both for a strike out and for making a Costs Order, “no reasonable prospect of success”, the test for a strike out is current and prospective “has” no such prospect, for a Costs Order to be made it is retrospective “had”.  A strike out application is considered before a Full Hearing of the claim, usually on the papers.  A costs application is considered after the hearing of the claim.  However in this case there was no hearing on liability: the assignment defence was conceded (C11), the ‘ordinary’ unfair dismissal was struck out by EJ Slater and at the Polkey Hearing all counsel agreed that no purpose would be served by enquiring into the merits of the ETO defence (P15).

 

65.              Both counsel agreed that the test to be applied by an ET in assessing whether a ground of resistance has a reasonable prospect of success is that explained by Sedley LJ in Scott referred to by Mr Justice Underhill at paragraph 8 of Vaughan.  They contended that the issue for the ET to consider was therefore whether Swissport had reasonable grounds for each defence to liability.

66.              It should be noted that the basis for the application for costs in Vaughan was both (a) that the appellant’s claims “were misconceived from the outset” and (b) that “the bringing and continuance of such unmeritorious claims constituted unreasonable conduct”.  The EAT endorsed the two stage approach of the ET in that case quoting the reasoning at paragraph 9 of the ET which included:

“… The claimant did not at any stage of the proceedings have an adequate response as to why the non discriminatory explanations of the respondents were not acceptable. …”

 

67.              Mr Justice Underhill considered in paragraph 13 the ‘first-stage’ question, whether as alleged in Vaughan it was unreasonable for the Claimant to pursue her allegations of unlawful discrimination.  The EAT held:

“13. … The tribunal had heard the evidence and was well placed to judge whether there had ever been any reasonable grounds for the allegations made. …”

 

In my judgment this passage clearly shows that in considering the differently worded predecessor to Rule 76 of the current ET Rules the EAT proceeded on the basis that whether a claim was misconceived and whether there had ever been any reasonable grounds for the allegations made was to be judged on all the information available to the Employment Tribunal at the time of making that decision.  In Vaughan the Employment Tribunal took their decision on costs after a twenty day hearing following which the Claimant lost her claim.  The EAT at paragraph 13 held that the approach of the Employment Tribunal, which included taking into account evidence given at that Liability Hearing, was unimpeachable.

 

68.              In my judgment the ET did not err in assessing whether the grounds of resistance on which Swissport relied had a reasonable prospect of success on the basis of all the material before them by the time the costs application was made.  That included evidence given and argument advanced at all three hearings.

69.              As for ground 2(iii), the first defence of Swissport to liability was that the Claimants were not assigned to the part of the undertaking transferred.  This was pleaded in the ET3.  The ET observed at paragraph C13 that they did not know what evidence Swissport or their legal advisers had in their possession when the response was originally prepared.  They observed:

“13. … It was open to the second respondent, in resisting this application for costs, to produce whatever witness statements and/or solicitors’ file notes and/or documents which formed the basis of the pleaded case on this issue.  No such attempt was made. …”

 

The ET rejected reliance advanced by Mr Siddall on the excuse that relevant staff had left the Respondents’ employment and could not be called as witnesses.  Further the ET rejected the suggestion that Swissport had difficulty in obtaining relevant documents.  The ET considered that the evidential burden on the assignment issue was on Swissport.  Accordingly it was for that party to obtain documentary and witness evidence in support of their position.

 

70.              Mr Siddall criticised the ET for treating the concession email of 22 April 2014 as a pleading.  Mr Siddall relied on that email to contend that the ET should not award any costs against Swissport in relation to the assignment issue after that date.  Swissport have taken the position that the Claimants should have altered their position on the basis of the email.  In my judgment the ET cannot be criticised for giving it as much weight as is to be given to a pleading. 

 

71.              In my judgment the ET did not err in concluding that in the absence of any evidence to the contrary, the assignment defence had no reasonable prospect of success.  However there would be force in a contention that no costs should be awarded to the Claimants in respect of work exclusively attributable to the assignment issue after the date the point was conceded, 22 April 2014.

72.              The ET observed that the ETO defence was never properly pleaded.  They stated at paragraph C18 that Particulars given on 6 October 2014 of the ETO defence “were wrong on two separate occasions and were only corrected to the respondent’s final position immediately before the hearing before Judge Slater”.

 

73.              Particulars of the ETO defence given by Swissport on 6 October 2014 stated that there was a reduction in headcount of ramp staff from eight to six.  In their Costs Judgment the ET refer to the “actual position” as set out by Mr Baxter, a shift manager, at the Polkey Hearing.  This was that six night shift ramp staff positions were to be filled (P24).  The ET record in the Costs Judgment C19 that:

“19. On the hearing before us, Mr Baxter accepted there were six ramp employees (as opposed to allocators), so that there was no reduction in headcount. …”

 

Further, the ET did not accept that the reduction in weekly hours of one and a half which they held to be minor amounted to an ETO reason for dismissal.

 

74.              The ET assessed the reasonableness of the ETO defence as explained by Mr Siddall at the Costs Hearing.  The ET in the Polkey Judgment recorded at paragraph P15 that all three counsel agreed that no purpose would be served by enquiring into the ETO defence once the ordinary unfair dismissal claim had been struck out.  The contention relied upon by Mr Siddall at the Costs Hearing to show that it was reasonable to raise an ETO defence was that a reduction in the working hours required of night shift ramp staff amounted to an ETO reason for dismissing the Claimant ramp staff who had been on longer hours with Servisair.

 

75.              It is not suggested by Mr Siddall that Swissport adduced evidence before the ET to show that the ramp staff were dismissed because they no longer needed ramp staff to work for 39 hours per week but required them to work for 37.5 hours.  Accordingly there is no basis for contending that if the ET had considered whether Swissport reasonably believed at the time of lodging their ET3 that they had an ETO defence to the claims they would have come to a different conclusion.  Such an assertion would be in any event difficult to maintain in light of the statement in their ET3 that the Claimants were not dismissed by them.

 

76.              It is not asserted that evidence was adduced to show that Swissport at any stage reasonably believed that there was a reduction in the requirements for employees to do the work upon which the Claimants had been engaged.  Although this had been asserted in their Particulars no material was put before the ET to show that this was what Swissport reasonably believed at the time of the Claimants’ dismissals, or at the time of serving the ET3.

 

77.              Swissport assert that the ET failed to recognise the factual and legal overlap between the various arguments raised by Swissport, for example the factual basis for the ETO defence, the Polkey arguments and the assessment of remedy.  This contention would be sustainable only if and to the extent that the ET erred in holding that the ETO and Polkey grounds of resistance to the claims had no reasonable prospect of success.  Whilst some facts relied upon in the ETO defence may have a bearing on the Polkey defence and facts relating to both may be relevant to remedy that does not lead to a conclusion that the ET erred in concluding that one or more of the defences had no reasonable prospect of success.

 

78.              Save and to the extent that a defence was wrongly held by the ET to have no reasonable prospect of success in my judgment the ET did not err in the respects alleged in ground 2.

 

 

Ground 3

79.              Swissport contended that the ET erred in accepting that the assignment issue was not the subject of determination.  Additionally they did not know the evidence before Swissport at the time of pleading the ET3 but then perversely concluded that any such evidence could not have supported the pleading.

 

80.              Mr Siddall referred to paragraph C9 of the Costs Judgment in which the ET observed that they had very little information as to the basis upon which the assignment point was pleaded in the response.  They did not know what evidence Swissport or their legal advisers relied upon.  Counsel contended that it did not follow that as Swissport later conceded the assignment issue it could never reasonably have been raised in the ET3.

 

81.              Mrs Mankau replied that if Swissport had wished to place evidence before the ET to show the factual basis upon which they pleaded that the Claimants were not assigned to the part of the undertaking transferred, they could have done so.  Mrs Mankau observed that Swissport’s counsel did not ask for an adjournment in order to obtain the evidence to support the contention that the assignment defence was reasonably raised.  Mrs Mankau also pointed out that the concession email of 22 April 2014 referred to “potential witness evidence that could support” the contention that the Claimants were not assigned to the business transferred.  However that evidence was not produced.

 

Ground 3: Discussion and Conclusion

82.              In my judgment the ET did not err in not relying on Swissport’s belief, which was contrary to that of Servisair, that there was no transfer of an undertaking.  The reasonableness of that belief is to be assessed at the time a decision on costs is taken.  In my judgment on the material before them it cannot be said that the ET erred in deciding that there was no reasonable prospect of success of the assignment defence.  No evidence was placed before them to support a contention that it was reasonable for Swissport to raise the defence that the Claimants were not assigned to the undertaking or part of the undertaking which was transferred.  The ET did not err in having regard to the email of 22 April 2014 in which assignment was conceded.  Given the absence of any evidence supporting a contention that at an earlier stage Swissport had reasonable grounds to advance the assignment defence the ET did not err in concluding that there was no reasonable prospect of that defence succeeding.  In the circumstances on the material before them it was reasonable for them to proceed on the basis that this conclusion applied continuously from the date of the ET3 to the date of the concession.

 

Ground 4

83.              Counsel for Swissport contended that the ET erred in their approach to the merits of the ETO defence.  Mr Siddall asserted that the ET had concluded that a reduction in hours worked could never found an ETO defence (C19) and that they erred in so finding.  Mr Siddall referred to Packman v Fauchon [2012] IRLR 721 in which Mr Justice Langstaff and members held that the dismissal of an employee was for redundancy because the amount of work available had reduced although the requirement for numbers of employees has not.

 

84.              Further Mr Siddall submitted that the ET erred in concluding that no ETO defence could properly be raised notwithstanding their findings that the ramp team was reduced in size (P10), their roles were offered on a seasonal as opposed to a permanent basis and that the airport suffered a seasonal surge each year.

 

85.              Mr Siddall contended that in finding that the ETO defence had no reasonable prospect of success the ET failed to take into account that the defence had not been struck out by EJ Slater.

 

86.              Mrs Mankau did not accept that at paragraph C19 the ET held that a reduction in hours worked could never found an ETO defence.  Her contention was that this is not what the paragraph says.

 

87.              As for paragraph 4(ii) of the grounds of appeal, Mrs Mankau referred to the reasons given by the ET as to why the Claimants’ dismissals could not have been fair under ERA section 98(4).  Accordingly even if the ET had erred in considering that a reduction in hours could not give rise to an ETO defence they would have considered that no such defence could reasonably have been raised.  In any event Mrs Mankau submitted that in the absence of a reduced headcount there was no reduction in the workforce as required in establishing an ETO defence.

 

88.              Mrs Mankau submitted that the fact that EJ Slater had failed to strike out the ETO defence does not undermine the later finding of the ET that it had no reasonable prospect of success.  EJ Slater had heard no evidence.  The ET on the costs application heard evidence from Mr Baxter for Swissport.  Further, the position of Swissport had changed from the Particulars which were before EJ Slater as observed by the ET in the Costs Judgment at C18.

 

Ground 4: Discussion and Conclusion

89.              In paragraph C18 the ET held that there was no reduction in the workforce.  They held “At best, there was a marginal reduction in contractual hours”.  They referred to the argument advanced by Mr Siddall that “on the basis of recent case law, that could amount to an ETO defence”.  The case law referred to was Packman v Fauchon [2012] IRLR 721 in which Mr Justice Langstaff and members held that if the amount of work available for the same number of employees is reduced a dismissal of an employee wholly or mainly for that reason is a dismissal for redundancy.

 

90.              The ET recorded that:

“18. … The original pleaded particulars (contained in a letter to the Tribunal dated 6 October 2014) contended, so far as relevant, that there was a reduction from eight rostered full-time ramp agents employed by the first respondent and working a total of 312 hours to six full-time night shift employees, working 37.5 hours each (as against 39 hours each) so that [the] number of hours required was 225 in total.  That letter dated 13 November 2014 contended that there were five full-time such employees working a total of 187.5 hours …”

 

At the Costs Hearing Mr Baxter accepted that there was no reduction in headcount as the eight employees referred to in the Particulars included the two allocators.

 

91.              On a fair reading of the decision of the ET they did not hold that a reduction in hours could never found an ETO defence.  They are to be taken as holding that on the facts of this case the reduction in hours was so minor, 1.5 hours, that it did not amount to an ETO defence.  The ET did not rule out a reduction in hours with no reduction in headcount as a possible ETO reason for dismissal.  The reference to the reduction in hours, 1.5 being minor not giving rise to an ETO defence, on a fair reading suggests that a greater reduction in hours could give rise to such a defence.

 

92.              In my judgment reliance cannot be placed by Mr Siddall on paragraph P10 of the Polkey Judgment to show that the ET found that there was a reduced size of the ramp team.  At paragraph P10 the ET mentioned (their term) that before the transfer the vast majority of the Thomson flights were serviced by groups of five ramp agents and after the transfer by smaller groups of four or five when necessary in respect of larger flights.  The numbers of ramp agents allocated to particular flights does not establish that there was a reduced size of the ramp team.  It was not Swissport’s case, nor the finding of the ET, that the numbers of ramp agents allocated to deal with particular flights represented the total number of agents employed.  If this were so the number of ramp agent Claimants, six, would be more than the number, four or five, allocated to a flight whether before or after the transfer.

 

93.              The other matters referred to in ground 4(ii), that roles offered on the ramp by Swissport were on a seasonal not a permanent basis and that the airport suffered a seasonal surge each year, do not support a suggestion that there was no longer a need for permanent ramp staff.  This was not the ETO relied upon in the Costs Hearing and does not support a challenge to that decision.

 

94.              The threshold for making a Costs Order against a Respondent under ET Rule 76(1)(b) is that a response had no reasonable prospect of success.  EJ Slater was not prepared to conclude on the material then before her that the ETO defence had no reasonable prospect of success.  Had the position of Swissport in relation to the ETO defence weakened after the hearing before EJ Slater?  It is not entirely clear whether it was before or after that hearing that Swissport abandoned their position of asserting a reduction in headcount of ramp operatives.

 

95.              On the material before the ET at the Costs Hearing Swissport had originally asserted that ramp staff had been dismissed for an ETO reason as there was a reduction in requirement for such staff from eight to six.  By the time of the Costs Hearing it was agreed by Swissport that there was no such reduction in requirement for ramp staff but a reduction in their hours from thirty nine hours to thirty seven and a half hours a week.

 

96.              In my judgment it was open to the ET to assess whether there was no reasonable prospect of success of the ETO defence on the basis advanced before them at the Costs Hearing.  The original basis for it did not withstand Swissport’s scrutiny let alone that on behalf of the Claimants.  The sole basis of the ETO defence advanced at the Costs Hearing was that relying on the judgment of the EAT in Packman.  Mr Siddall maintained that it could not be said that on that basis the ETO defence had no reasonable prospect of success.  I disagree.  The ET considered that a reduction in working hours of one and a half was minimal and that such a minimal reduction did not support an ETO reason for dismissal.  In Packman, relied upon by Mr Siddall, “The employer sought to persuade the claimant to reduce her hours significantly per week” [2].  In my judgment the ET did not err in holding that the principle in Packman relating to redundancy did not apply to the minor reduction in working hours in considering whether an argument that the ramp staff were dismissed for an ETO reason had no reasonable prospect of success.

 

97.              Accordingly in my judgment the ET did not err in deciding that the ETO defence had no reasonable prospect of success in respect of the ramp operative Claimants.

 

98.              Ground 4 does not challenge any conclusion of the ET in relation to the ETO defence relating to the two allocator Claimants.

 

99.              As for ground 4(iii) EJ Slater decided not to strike out the ETO defence on the material then before her.  The ET deciding whether to make a Costs Order acts on the material before them at that time.  The reasonable prospect of success of a claim or defence can diminish or improve after the lodging of pleadings.  A document or witness statement may shed light on a relevant issue and improve or diminish prospects of success.  The ET at the Costs Hearing in this case decided whether the ETO defence had a reasonable prospect of success on all the material before them including the changing basis upon which that defence was advanced.  Although not expressly referred to it is not sufficient that in theory an ETO defence may exist.  In order for that defence to succeed a respondent must establish that the particular ETO was the reason for the dismissal.  That would be difficult in this case where different ETOs were advanced at different times.

 

100.          In my judgment the fact that EJ Slater did not strike out the ETO defence does not undermine the later conclusion of the ET at the Costs Hearing that it had no reasonable prospect of success.

 

Ground 5

101.          Mr Siddall contended that the ET adopted an erroneous approach to the question of whether the Polkey argument raised by Swissport had no reasonable prospect of success.

 

102.          By ground 5(i) Mr Siddall contended that the ET erred by failing to recognise that in the absence of a dismissal, a Polkey argument can also address the permanence or otherwise of continued employment with a respondent and the terms of that employment with consequential effect on the value of the claim.  Counsel contended that the ET erred in reasoning at C25 that as, in their judgment, there was no redundancy situation in relation to the ramp agents there could not be a potentially fair dismissal even if a fair procedure had been followed (C25).  Mr Siddall contended that the ET erred by failing to have regard to the effect that Polkey and related arguments can have on compensation even if no conclusion is reached that if a fair procedure had been adopted the Claimants would in any event have been dismissed when they were.  Before the ET Mr Siddall relied upon the judgment of Mr Justice Elias (as he then was) in Software 2000 Ltd v Andrews [2007] IRLR 568 in which the relevant legal principles emerging from Polkey and subsequent cases were set out.  These include consideration of the question of whether the claimant would have continued in employment indefinitely (Software 2000 paragraph 54(2)-(6)) and if so on what terms.

 

103.          Mr Siddall contended in advancing ground 5(ii) that the ET erred in holding at paragraph C26 in respect of the allocators that as, in their judgment, Swissport had made no attempt to follow the standards of fairness and reasonableness in the past there was no basis upon which the argument in Polkey could succeed in relation either to the allocators or ramp staff.  Counsel submitted that the ET erred in concluding that no Polkey deduction could be made from compensation when there had been a previous failure to follow a fair procedure in the past.

 

104.          Mrs Mankau stated that Mr Siddall made no submissions on the issues now raised in ground 5.  Counsel referred to paragraph P37 of the Polkey Judgment in which the ET considered Software 2000 and concluded, addressing the issue set out in paragraph 54(7)(d) of that case, that the evidence that the employment of the ramp assistants would have terminated early was so scant that it could effectively be ignored.

 

105.          Mrs Mankau referred to paragraph P38 of the Polkey Judgment in which the ET concluded that it was more than likely to the point of discounting any alternative possibility that the allocators would have accepted alternative employment with Swissport.  Bearing in mind their intention to continue to work indefinitely at the airport the allocators would not have been dismissed.  Mrs Mankau therefore submitted that the ET did not err in holding that the Polkey argument had no reasonable prospect of success.

 

Ground 5: Discussion and Conclusion

106.          Whilst the ET referred to Software 2000 in deciding whether a Polkey reduction should be made, when it came to assessing in the Costs Judgment whether the Polkey argument had no reasonable prospect of success so as to attract a Costs Order they used a different approach.  The decision of the ET in paragraph C25 that the Polkey argument in respect of the ramp staff had no reasonable prospect of success was based on reasoning that because, in their judgment, there was no redundancy situation there could not be a potentially fair dismissal even if a fair procedure had been used.  Similarly in considering whether the Polkey argument had a reasonable prospect of success in respect of the allocators, the ET based their decision on their conclusion that even if a fair procedure had been followed the dismissals of the allocators would have been unfair because there was no evidence that Swissport made in the past “any attempt whatsoever to follow the standards of fairness and reasonableness”.

 

107.          In my judgment the ET erred in their approach to the question of whether Swissport’s Polkey argument had no reasonable prospect of success.  The Polkey arguments advanced by Mr Siddall on behalf of Swissport included that set out in paragraph 54(2) of Software 2000 that the Claimants would not have continued in employment indefinitely.  In Software 2000 Mr Justice Elias observed that it is for the employer to adduce such evidence however the ET must have regard to all the evidence including any evidence from the employee himself.  Mr Justice Elias cautioned at paragraph 54(7)(d) that a decision that employment would have continued indefinitely, that reached in this case, should be reached only where the evidence that it might have been terminated earlier is so scant that it can effectively be ignored.

 

108.          When deciding for the purposes of a Costs Order whether the Polkey argument had no reasonable prospect of success the ET erred in failing to consider Swissport’s argument that the Claimants’ employment would not have continued indefinitely in any event.  This failure is relevant to the period for which compensation is awarded and the loss of earnings on which it is based.

 

The Remedy Judgment

109.          The principal paragraphs of the Remedy Judgment relevant to the appeal are paragraphs R15.1.5 and R15.1.6 relating to Mr Exley.  Having observed that Mr Exley’s claim for future loss of earnings for five years was excessive, the ET held:

“15.1.5. … Now that the uncertainty of this claim has been removed, and that he can concentrate fully upon efforts to find any such alternative work, we consider that, with reasonable endeavours, Mr Exley should be able to find work paying an equivalent sum to that earned before the dismissal, within a period of two years. … In particular, we rely upon the fact that Mr Exley is presently paid £314 per week net (a figure which we note is greater than many of these claimants) and that, as a worker at the airport, he is likely to have connections which might enable him to obtain more highly-paid work at that airport.  He is relatively young [51 at date of termination] by comparison to some other claimants.

15.1.6. Taking all of those factors into account, we would make an award of future loss for a period of 104 weeks. …”

 

110.          The ET awarded the same period of two years for future loss of earnings for the reasons which applied to Mr Exley, to Mr Henderson (R15.2.5), Mr Yates (R15.4.5), Mr Buckley (R15.6.4), Mr Rowson (R15.8.6) and Mr Breeze (R15.9.5).  The ET allowed two years’ loss of future earnings for Mrs Exley in R15.3.7.4 which they considered reasonable in all the circumstances:

“… bearing in mind the claimant’s personal circumstances, her age and the other factors she gave in evidence. …”

The Remedy Appeal

Ground 6

111.          Mr Siddall contended that the ET erred in applying the award of two years’ future loss of earnings to Mrs Exley (R15.3.7.4), Mr Henderson (R15.2.5), Mr Yates (R15.4.5), Mr Buckley (R15.6.4), Mr Rowson (R15.8.6) and Mr Breeze (R15.9.5) without considering or adequately explaining why the same two year award for future loss of earnings was considered appropriate in the particular circumstances of each Claimant.

 

112.          Mr Siddall also contended that the ET erred in awarding two years’ future loss of earnings to Mr Exley on the basis of reasons which he had not advanced.

 

113.          Mr Siddall submitted that the uncertainty of his ET claim referred to by the ET in R15.1.5 was not a factor which was relied upon by Mr Exley as interfering with his efforts to obtain work. 

 

114.          All counsel, including Mr Henry for Mr Breeze, agreed that the ET would have erred if they had applied a tariff of two years for future loss of earnings without considering the individual circumstances of each Claimant.  Mr Siddall contended that the ET did not consider their individual circumstances in awarding each of them the same period of two years for future loss of earnings.

 

115.          Mr Siddall referred to the reasons given by the ET for awarding Mr Exley two years’ future loss of earnings which were set out in R15.1.5.  Mr Siddall highlighted factors which the ET relied upon to award two years’ future loss of earnings which do not apply to other Claimants.  Mr Exley was 51 years of age at the date of termination of his employment which the ET observed was “relatively young by comparison to some other claimants”.  Mr Henderson was 33 years of age at the date of termination of his employment as was Mr Buckley.  In deciding upon the period for future loss for Mr Exley the ET relied in particular on his then current earnings which they noted was greater than many of the Claimants and on the fact that he was currently working at the airport which may give him opportunities to find new work.  These factors did not apply to most or any of the other Claimants.  Further the ET took into account a factor which was not relied upon in Mr Exley’s statement, that now that his ET claim had been heard he could concentrate on efforts to find alternative work.  In addition to this factor not having been relied upon by Mr Exley, none of the other Claimants relied upon it.

 

116.          Mr Siddall contended that the ET failed to consider the individual circumstances of each Claimant when deciding on the period for future loss but simply applied the two year tariff awarded to Mr Exley.  Their decisions on future loss in relation to the Claimants referred to in the grounds of appeal apart from Mr Exley were unreasoned.  They were not Meek (Meek v City of Birmingham District Council [1987] IRLR 250) compliant.

 

117.          Mrs Mankau rightly recognised that the reasons given by the ET for awarding two years’ loss of future earnings to each of the Claimants were not as explicit as they could have been.  She referred to general findings made by the ET in paragraph R11 about the lack of transferable skills of all of the Claimants and that similar work to that upon which they had been engaged for Servisair would not be available within a reasonable travelling distance of Manchester.

 

118.          Counsel referred to the consideration given by the ET to the individual circumstances of each of the Claimants.

119.          Mrs Mankau suggested that if the reasons of the ET for awarding two years’ future loss of earnings were deficient the cases could be sent back to them for reasons to be given.

 

120.          Mr Henry contended that it was easy to see why the ET awarded Mr Breeze, whom he represented, two years’ future loss of earnings.

 

Ground 6: Discussion and Conclusion

121.          In my judgment the ET failed to consider the individual circumstances of each Claimant when deciding to award each of them two years’ future loss of earnings.  The factors which led to the two year award for Mr Exley, his age, his then current earnings and that he was working at the airport, did not apply to most or any of the other Claimants.  The ET awarded to 33 year old Mr Henderson two years’ future loss of earnings “for the same reasons” as awarding that period to Mr Exley despite there being no similarity in the factors which the ET took into account in paragraph 15.1.5.

 

122.          At paragraph 15.3.7.4 the ET stated that they took into account Mrs Exley’s personal circumstances, her age and the other factors she gave in evidence, in awarding her two years’ future loss of earnings.  The ET failed to say what those “other factors” were and why they supported an award of two years’ future loss of earnings.  The ET stated they were awarding two years’ future loss of earnings to Mr Yates “for similar reasons as apply to earlier claimants” (R15.4.5).  The only reason for the award of two years’ future loss of earnings for Mr Buckley was that it was “the one used by the Tribunal in making all of its calculations for … future loss” (R15.6.4).  In relation to Mr Rowson the ET held “Again, we consider that a period of 104 weeks is appropriate” for future loss (R15.8.6).  For Mr Breeze the ET held at R15.9.5:

“15.9.5. So far as future loss is concerned, we take the view that a period of two years is appropriate for this claimant, as it is for the majority of the others and for similar reasons. …”

No further reasons were given.

 

123.          In my judgment no or no adequate reasons were given by the ET for the award of two years’ future loss of earnings to Mrs Exley, Mr Henderson, Mr Yates, Mr Buckley, Mr Rowson and Mr Breeze.  As for Mr Exley, the ET erred by taking into account in reaching their decision to award him two years’ future loss of earnings a factor, that he had previously but no longer been inhibited from searching for a job with higher earnings by uncertainty over his claim before the ET, which he had not relied upon.

 

124.          The ET impermissibly applied a tariff of two years for future loss of earnings.  This is a significant defect which cannot be remedied by asking the ET to provide further reasons for their decision.

 

Conclusion

125.           

(1) The ET did not err in holding that a ‘period’ costs award may be made when a Claimant has entered into a Damages Based Agreement.

(2) Whether a ground of resistance to a claim had no reasonable prospect of success is to be determined at the conclusion of proceedings but a costs award may take into account the reasonableness of initially raising and maintaining a defence which is ultimately found to have had no reasonable prospect of success.

(3) The ET did not err in deciding that the ETO defence had no reasonable prospect of success.

(4) The ET erred in failing to have regard to the defence that continued employment for an indefinite period was highly unlikely when holding that the Polkey argument had no reasonable prospect of success.

(5) The ET erred in failing to consider their individual cases or give reasons, for awarding two years’ future loss of earnings to Messrs Henderson, Yates, Buckley, Rowson and Breeze and Mrs Exley.  The ET erred in awarding two years’ future loss of earnings to Mr Exley on a basis which included a factor not relied upon by him.

 

Disposal

126.          The following decisions of the Employment Tribunal are set aside:

(1) the award of costs against Swissport;

(2) the awards of compensation for future loss to Messrs Exley, Henderson, Yates, Buckley, Rowson and Breeze and Mrs Exley.

 

127.          The claims are remitted to a differently constituted Employment Tribunal for rehearing and determination of:

(1) the period of future loss for all Claimants listed in paragraph 125(5) above and in the light of such findings and the undisturbed findings of other loss, the remedy to be awarded to each such Claimant;

(2) the application by the Prolegal Claimants for costs under Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 Rule 76(1)(b).