Case No: A1/2000/0061
Neutral Citation Number: [2001] EWCA Civ 497
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM EMPLOYMENT APPEAL TRIBUNAL

Royal Courts of Justice
Strand, London, WC2A 2LL

Friday 6th April 2001

B e f o r e :

LORD JUSTICE WARD
LORD JUSTICE SEDLEY
and
LORD JUSTICE JONATHAN PARKER

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	CERBERUS SOFTWARE LTD.	Appellant	
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	JOHN ANTHONY ROWLEY	Respondent	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
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Mr M.L. Dineen (instructed by Blatch & Co. for the Appellant)
Mr J.A. Rowley (In Person)

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Judgment
Lord Justice Ward : 

Having received the written submissions of both parties we now give this ruling on the costs of the appeal.
1.	Section 51 of the Supreme Court Act provides as follows:-
	“(1)	Subject to the provisions of this or any other enactment and to the Rules of Court, the costs of and incidental to all proceedings in -
(a)	The Civil Division of the Court of Appeal .. shall be in the discretion of the court.”
2.	Rules have been made and Part 44.3 of the Civil Procedure Rules 1998 apply.  That provides as follows:-
	“44.3-(1)	The court has discretion as to -
	(a)	Whether costs are payable by one party to another;
(b)	The amount of those costs; and
(c)	When they are to be paid.
(2)	If the court decides to make an order about costs - 
(a)	The general rule is that the unsuccessful party will be ordered to pay the costs of the successful party;  but
(b)	The court may make a different order ...
(4)	In deciding what order (if any) to make about costs, the court must have regard to all the circumstances including -
(a)	The conduct of all the parties;
(b)	Whether a party has succeeded on part of his case, even if he has not been wholly successful;  ...
(5)	The conduct of the parties includes -
(a)	Conduct before, as well as during, the proceedings, and in particular the extent to which the parties followed any relevant pre-action protocol;
(b)	Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c)	The manner in which a party has pursued or defended his case or a particular allegation or issue;
(d)	Whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.”
3.	Mr Dineen on the appellant’s behalf submits that having succeeded on the only issue argued in the appeal, the appellant should have its costs.  A schedule of costs submitted shows that the solicitors are seeking a profit cost inclusive of V.A.T. in a sum just short of £10,000 and counsel’s fees including V.A.T. amount to approximately £16,500.  The claim is in fact for £16,618.93. 
4.	Mr Rowley objects strongly to the application for costs.  He submits that he was unfairly and wrongfully dismissed causing substantial financial difficulties and stress for himself and his family.  Those are not matters which we can properly take into account.  He also submits, however, that:-
	“... despite (Mr Warburg knowing of my financial commitments to my children at university and my mother in a nursing home with advanced multiple sclerosis) and despite my very successful business performance, he dismissed me in what can only be described as a conspiratorial and inhuman way.”
In other words he is submitting that the appellant’s conduct should deprive them of their costs.
Mr Dineen submits, powerfully, that the discretion to depart from the general rule that costs follow the event should be exercised judicially, not on irrational or on unpredictable principles.  Costs should be awarded on a compensatory basis and should not be withheld on a penal basis.  Thus conduct must be causally linked to the issue in other words conduct must be material to the costs which have been incurred.  He relies on a number of old cases to support the submission that the court should not exercise its costs discretion to impose on a party the performance of what the court may, perhaps rightly, perceive as a moral obligation to confer a gratuitous benefit on the other party.  He relies upon the fact that the Employment Tribunal held:-
	“With regard to the applicant’s claim for costs, the Tribunal is not satisfied that the respondent has conducted these proceedings unreasonably.”
He points out that when the respondent unsuccessfully applied to reverse the stay of execution imposed by the single Lord Justice when granting permission to appeal, the costs of that application were costs in the appeal.  That is by way of summary of his submissions much more fully set out in his written argument, all of which we have taken into account.
5.	The dispute about costs arises out of observations I made at the end of my judgment expressing a hope that the appellant would not seek its costs.  I did so because I regarded the appellant’s treatment of Mr Rowley as “a travesty of good industrial relations”.  Mr Warburg, the appellant’s Managing Director, was found by the Tribunal to be “somewhat autocratic” but more importantly, was held to have sought to defend his summary dismissal of the respondent on grounds which “were neither justified nor made in good faith in that neither Mr Henley (the Company Secretary) nor Mr Warburg believed that the misconduct alleged had actually occurred”.  Let us put a more  realistic characterisation of the conduct of that defence:  it was a pack of lies and it was an attempt to pervert the court of justice.
The rules which now assist in the exercise of our discretion permit the court to take into account conduct “before as well as during the proceedings”.  Whilst, therefore, we accept that the issue before the Court of Appeal was a pure issue of law, the conduct before the proceedings heard by us is not excluded by the rules.  The conduct of the parties includes whether it was reasonable to raise, pursue or contest a particular allegation or issue.  Mr Dineen submits that if the Tribunal held that the conduct was reasonable, it is not for us to go behind that finding.  We do not.  We give due weight to their finding and we cannot and we do not make any attempt to vary the order they made.  That does not, however, prevent us from taking a different view with regard to the costs of the appeal before us.  In our judgment this is conduct which justifies the court expresses its disapproval of the way the litigation has been conducted.
6.	Although we are not unmindful of the approach taken under the old rules as applied in the authorities to which Mr Dineen has made reference, we are equally mindful that the old authorities may frequently be of limited value, as we find them to be in this case given that we are operating under a completely different regime:  see the judgment of Lord Woolf M.R. in Biguzzi v Rank Leisure plc [1999] 1 W.L.R. 1926.
7.	There is another circumstance of this case to bear in mind.  It is one thing for an unsuccessful litigant in the (virtually) cost-free jurisdiction of the Employment Tribunal to appeal to the Court of Appeal.  In that event he is knowingly taking the other side into a forum where ordinarily costs are awarded to the successful party so that if he wins he will expect his costs and if he loses, he cannot complain if he has to pay the other side.  It may, however,  be different for the successful litigant in the cost-free jurisdiction to be taken unwillingly on appeal.  We bear this in mind without in any way elevating it into a rule of general application.  It is simply one of the circumstances to which we are entitled to have regard.
At the heart of this decision lies an application of the overriding objective of the new Rules to which we must give effect in exercising our power to award or to withhold an award of costs.  That requires that we must deal with cases justly.  We consider in the present circumstances that the justice of the case has been met by the appellant succeeding on appeal but that it will not be met by requiring the respondent to pay for that success.  The overall demands of justice in this case require that there be no order for costs of this appeal and that is the order we make.

COSTS ORDER: Appeal allowed; no order for costs, leave to appeal refused.

(Order does not form part of approved Judgment)