Downey v Culture Company 2013 Limited [2014] NIIT 749

THE INDUSTRIAL TRIBUNALS

CASE REF: 749/13

CLAIMANT: Garbhan Downey

RESPONDENT: Culture Company 2013 Limited

DECISION ON COSTS

The decision of the tribunal is that the respondent’s application for costs is refused.

Constitution of Tribunal:

Employment Judge: Employment Judge Murray

Members: Mr D Hampton

Mr R Hanna

Appearances:

The claimant was represented by Mr G Grainger, Barrister-at-Law, instructed by Desmond J Doherty and Company Solicitors.

The respondent was represented by Mr C Hamill, Barrister-at-Law, instructed by Worthingtons Solicitors.

REASONS

1. By decision of this tribunal promulgated on 13 February 2014, the claimant’s claims were rejected in their entirety. The claimant had three claims before the tribunal firstly, that he was subjected to detriment on grounds of having made a protected disclosure; secondly that he was automatically unfairly dismissed because he had made a protected disclosure; and thirdly that he was unfairly dismissed on ordinary principles.

2. Mr Hamill relied on two grounds for the costs application firstly, that the claimant acted unreasonably in bringing and conducting the claims and secondly that the claims were misconceived (Rule 40(3)).

3. The respondent claimed the sum of £12,804.00 being counsel and solicitors’ fees excluding VAT from the date of the costs warning letter. As this exceeds the cap the respondent sought an award of up to £10,000.00. In the alternative the respondent sought an award of £3,382.95 being solicitors’ and counsel’s fees from day four of the hearing following the conclusion of the claimant’s cross examination.

THE LAW

4. The tribunal’s power to award costs is contained in the Rules. The general power is outlined at rule 38. The two specific rules invoked by the respondent were rule 40(2) and rule 40(3) which state as follows:-

“40(2) – a tribunal or Chairman shall consider making a costs order against a paying party where, in the opinion of the tribunal or Chairman (as the case may be), any of the circumstances in paragraph 3 applies. Having so considered, the tribunal or Chairman may make a costs order against the paying party if it or he considers it appropriate to do so.

40(3) – the circumstances referred to in paragraph 2 or where the paying party has, in bringing the proceedings, or he or his representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or the conducting of the proceedings by the paying party has been misconceived.”

“Misconceived” is defined at Regulation 2 as follows:-

“misconceived includes having no reasonable prospect of success”.

5. The tribunal’s jurisdiction in relation to costs is outlined in Harvey on Industrial Relations in Employment Law Division T Practice and Procedure at paragraphs 1026-1080. Harvey suggests that the test is more than a simple objective assessment of whether the claimant knew or ought to have known that his case lacked substance or merit. The tribunal must look at not just the proceedings themselves but the claimant’s conduct in bringing or conducting the proceedings and one potential factor can be the respondents’ failure to apply to strike out the claim or to apply for a deposit at an earlier stage.

6. Harvey states at paragraph 1047:-

“When considering whether to award costs in respect of a party’s conduct in bringing or pursuing a case that is subsequently held to have lacked merit, the type of conduct that will be considered unreasonable by a Tribunal will obviously depend on the facts of the individual case, and there can be no hard and fast principle applicable to every situation. In general, however, it would seem that the party must at least know or to be taken to have known that his case is unmeritorious (see Cartiers Superfoods Ltd v Laws [1978] IRLR 315).”

7. The relevant principles derived from the case law are set out below.

8. The tribunal must go through a two-stage process in determining whether to award costs. Firstly, a tribunal must determine whether the respondent in conducting the proceedings acted unreasonably. Secondly, the tribunal must decide whether or not it is appropriate to exercise its discretion to award costs in the particular circumstances of the case. (See Criddle v Epcot Ltd [UKEAT/0275/05] and Khan v Kirklees BC [2007] EWCA Civ 1342.)

9. Costs Orders are exceptional in nature in the tribunals where costs do not normally follow the event as in the Civil Courts. In Gee v Shell UK Ltd [2003] IRLR 82 Sedley LJ stated:

“It is nevertheless a very important feature of the employment jurisdiction that it is designed to be accessible to ordinary people without the need of lawyers, and that – in sharp distinction from ordinary litigation in the UK – losing does not ordinarily mean paying the other side’s costs”.

10. An Order for Costs must be compensatory and not punitive.

11. The tribunal must have regard to the overriding objective and to the comments of Girvan LJ in the case of Peifer v Castlederg High School and Western Education & Library Board & Another [2008] NICA 49 where Girvan LJ stated as follows:-

“Tribunals should be encouraged to use their increased costs powers set out in the Rules of Procedure to penalise time-wasting or the pursuit of cases in a way which unduly and unfairly increases the costs falling on opponents.”

12. In our view, the following observation is very important to bear in mind in this case:-

“The ordinary experience of life frequently teaches us that what is plain for all to see once the dust of battle has subsided is far from clear to the combatants when they took up arms.” (Per Sir Hugh Griffin in E T Marler Ltd v Robertson [1974] ICR 72).

13. The case of Jilley UK EAT/0584/06/DA emphasises the importance of taking account of the claimant’s means although a lack of means to pay is not a bar to a costs order being made.

14. One of the leading cases in relation to the exercise of the discretion is the Macpherson case where the Court of Appeal held that there was no necessity for a causal link between the party’s unreasonable behaviour and the costs incurred by the receiving party. The Court stated:

“In exercising its discretion to award costs, the tribunal must have regard to the nature, gravity and effect of the unreasonable conduct. However, the discretion is not limited to those costs that are caused by or attributable to the unreasonable conduct. The unreasonable conduct is a pre-condition of the existence of the power to order costs and it is also a relevant factor to be taken into account in deciding whether it makes an order for costs and the form of the order, but that is not the same as requiring a party to provide that specific unreasonable conduct caused the particular costs to be incurred.”

15. In the case of Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255, Mummery LJ reviewed the authorities in relation to the issue of costs and repeated that costs are in the discretion of the Employment Tribunal; the Employment Tribunal’s powers to order costs are more sparingly exercised and are more circumscribed by the Rules of Procedure than those of the ordinary Courts; and that an Employment Tribunal Costs Order is the exception rather than rule. He stated:

“The vital point in exercising the discretion to order costs is to look at the whole picture of what happened in the case and to ask whether there has been unreasonable conduct by a claimant in bringing and conducting the case and, in doing so, to identify the conduct, what was unreasonable about it and what effects it had.”

16. In a decision of the EAT in the case Peat & Others v Birmingham City Council [UKEAT/0503/11], Supperston J noted that for a party to succeed in arguing for costs on the basis of unreasonable conduct, it was not necessary to show that the other party had no reasonable prospect of success. He held that if the claimant’s solicitors had engaged with the issues and the costs warning letters they likely would have appreciated that the claimant’s reasonable prospects of success was so thin that it was not worth going to the hearing.

17. In the case of Arrowsmith v Nottingham Trent University [2011] EWCA Civ 797, ICR 159, the Court of Appeal held that lying in evidence can found an Order for costs as this is one of the factors the tribunal can take into account. Lying in evidence does not, however, of itself, mean that an Order for costs is inevitable if the lying party loses.

FINDINGS AND CONCLUSIONS

18. The respondent sent a costs warning letter to the claimant’s representative dated 22 October 2013 inviting him to withdraw his whistleblowing claim. There was no mention of his unfair dismissal claim.

19. Mr Hamill’s submissions can be summarised as follows:

(1) Throughout the tribunal decision findings were made relating to the unreasonableness of the claimant’s belief and this should have been apparent to the claimant at the outset of his claim;

(2) The protected disclosure and unfair dismissal claims were so intertwined, that if the whistleblowing case had been withdrawn this would have left no more than a hearing on the appropriateness of the penalty, and whether a Polkey deduction applied or whether there was contributory conduct involved. It was his submission that this would have shortened the hearing to a one-day hearing;

(3) That the claimant’s arguments on protected disclosure were unsustainable and his view was unreasonable and that this should have been apparent to him once the costs warning letter was sent. Alternatively, if it was not apparent to him at that stage, then it certainly was at the end of the cross-examination after he had resiled from certain allegations;

(4) That if the protected disclosure issue was out of the picture, there was no question that the claimant’s actions amounted to misconduct of a serious kind and probably gross misconduct warranting dismissal. It was therefore unreasonable of the claimant to pursue any unfair dismissal claim.

20. We are not persuaded that the threshold test has been met for unreasonable behaviour or that the claim was misconceived. Our principal reasons for so finding are set out below.

21. Whistleblowing cases are notoriously complex and require a detailed analysis of elements of different tests, of differing stringency, which derive from different legislative provisions. This requires an analysis of whether the claimant held a reasonable belief and whether he acted reasonably in all the circumstances. A finding of unreasonableness in relation to those tests does not mean that the claimant must be guilty of unreasonable conduct in bringing or conducting the proceedings. In this regard we are mindful of the following statement in Harvey which strikes a note of caution to tribunals in these circumstances:

“Otherwise parties could end up being penalised for not assessing the case at the outset in the same way as the tribunal may do following a hearing and evidence.” (Para 1084).

22. We note the statement in Blackstone’s Employment Law Practice 2009 as follows:

“The tribunal ought however to be wary of the dangers of hindsight. The fact that a party loses before the tribunal does not mean that the case was misconceived or vexatious. What becomes clear to the parties, for example after cross-examination, at the end of proceedings may not have been clear at the start”. Para 12.18.

23. We find that the fact that the claimant gave contradictory evidence and resiled from certain allegations during lengthy cross-examination does not in this case amount to unreasonable conduct in pursuing the case thereafter. In this regard we note that the Court of Appeal has held that, even if a party lies in his evidence (see the case of Arrowsmith cited above), this is no more than an element to be weighed up by the tribunal in assessing whether costs are payable on the grounds of unreasonable conduct. By analogy we regard the fact that the claimant resiled from some of his evidence as no more than one element in the balance and is not of itself determinative of the issue of unreasonable conduct.

24. In the tribunal decision there are three pages of findings and conclusions in relation to the ordinary unfair dismissal. This reflects the fact that there were issues to be determined by us after assessing all of the evidence. We are also not persuaded that it would have resulted in a shorter hearing if the claimant had withdrawn his protected disclosure claim. We do not accept that the hearing would have lasted one day in view of the fact that claims of Polkey deduction and, in particular, contributory conduct, would have required an analysis of the claimant’s behaviour which was said to have contributed to his dismissal.

25. We note that no application was made for a strike-out nor for a deposit hearing at any stage. This is a case in which there was a Case Management Discussion and at that, or at any stage, before the hearing there could have been an application for a deposit in relation to part or all of the claims.

26. It is not the case that the claimant failed on all points in his claim:

(1) Whilst the costs warning letter stated that the claimant must fail because he did not raise the issue first with his employer, this point appeared to fall away as, during the hearing, there was no evidence produced to counter the claimant’s assertion that he had raised issues with the Chief Executive
Ms McCarthy and with a Board Member Ms Leddy. (Paragraph 66 of the decision).

(2) In the costs warning letter it was stated that there was no relevant failure in issue. In the substantive hearing however the respondent conceded that failure to apply the funds for the correct purpose would have amounted to breach of a legal obligation as it would have been a breach of the funding conditions.

(3) The respondent failed to persuade us in its arguments on the good faith issue (paragraph 52 of the decision).

(4) The respondent failed to persuade us on the personal gain issue (paragraphs 53-54 of the decision).

27. The claimant essentially failed in his protected disclosure case firstly, because he did not demonstrate the necessary reasonable belief that the disclosure of information tended to show a relevant failure and, secondly, he failed to show reasonableness in his behaviour in all the circumstances in relation to making a disclosure to a third party.

28. The “ordinary” unfair dismissal claim related in summary, to issues of prejudgement and alleged inappropriate links between various key players in the process and with the council members. It was common case that there were links between several of the individuals involved but it was our finding that it was within the band of reasonable responses for the employer not to regard them as sufficiently close to taint the process. We rejected the prejudgement argument after a careful analysis of the evidence.

29. We are mindful that costs are the exception rather than the rule in the tribunals.

30. In relation to the misconceived issue the test is whether the claimant knew or ought to have known that he had no reasonable prospect of success or that his claim was without merit. In that regard, we note that in an unfair dismissal claim it is for the respondent to show the reason for dismissal.

31. The claimant had a claim for unfair dismissal on various grounds and it was reasonable for him to ask a tribunal to determine it. The fact that, after weighing up all the evidence, we did not agree with his case does not mean that it was unreasonable for him to pursue it to determination by a tribunal. For the same reason we do not find that it was misconceived for him to bring, or to continue with, his claims.

32. In deciding this issue of costs we bear in mind the comments of the Court in Yerrakalva. (paragraph 15 above) and we also bear in mind the dictum of
Sir Hugh Griffiths in the case of ET Marlour Ltd v Robertson (paragraph 12 above).

33. As we have decided that the claimant’s conduct was not unreasonable and it was not misconceived of him to bring or conduct the case, we do not have to reach findings of fact in relation to the claimant’s means and ability to pay. Any issues raised by the respondent in relation to the deficiencies in that evidence are no longer relevant and, in particular, any issue relating to credibility in that regard, has no bearing on our assessment of the reasonableness or otherwise of the claimant bringing or conducting the proceedings leading up to our decision.

34. The respondent’s application for costs is therefore refused.

Employment Judge:

Date and place of hearing: 30 July 2014, Belfast.

Date decision recorded in register and issued to parties:

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