Appeal No.  UKEAT/0275/05 & 0276/05/MAA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 24 June 2005

Before
HIS HONOUR JUDGE PETER CLARK
(SITTING ALONE)

MR S J CRIDDLE	APPELLANT

EPCOT LEISURE LTD	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MRS G PORTER
Citizens Advice Specialist
Support Unit	

For the Respondent	MR D ROBINSON-YOUNG
(Of Counsel)
Instructed by:
Messrs Askews Solicitors
Dunedin House
Columbia Drive
Thornaby
Cleveland TS17 6BJ	

SUMMARY

Practice and Procedure

2004 Employment Tribunal Rules – transitional provisions – interaction between old costs rule 
(R14.  2001 Rules) and sanction for non-payment of costs under R.13(2) 2004 Rules.  Two stage process for costs order under old R.14.

HIS HONOUR JUDGE PETER CLARK

1.	These appeals raise a question on the transitional provisions contained in Regulation 20 of the Employment Tribunals (Constitution, etc) Regulations 2004 (the 2004 Regulations).  The case has been proceeding in the Newcastle-upon-Tyne Employment Tribunal.  The parties are Mr Criddle, the Claimant and Epcot Leisure Ltd, the Respondent.  I shall so describe them in this judgment.  The appeals are brought by Mr Criddle, the Claimant, in a single Notice of Appeal, against (1) part of an order made by a Chairman, Mr J.R. Barton, sitting alone on 7 March 2005, whereby the Claimant was ordered to pay costs of £1,786.00 by 21 March 2005, failing which his claim would be struck out without more.  That order (the Costs Order) is dated 10 March 2005 and was sent to the parties on 14 March and, (2) a Judgment by the same Chairman, sitting alone, promulgated with reasons on 5 April 2004, striking-out the claim (“the strike-out order”).

Background

2.	The Claimant commenced employment with the Respondent as a sunbed assembler on 5 January 1998.  That employment continues.  In July 2004 he presented a complaint of unlawful disability discrimination to the Employment Tribunal.  The claim is resisted.

3.	On 21 September 2004 a Chairman, Mr PG Rennie, held a directions hearing at which the Claimant did not attend.  He was then representing himself.  The Respondent appeared through its Managing Director, Mr Kirton.  As appears from the Directions dated 23 September that Chairman:	
	(1)	required the Claimant to show cause under rule 15(2)(e) of the Employment Tribunal Rules and Procedure 2001 why his claim should not be struck-out for want of prosecution by virtue of his non-attendance at the hearing; 

	(2)	if he did so, gave directions for disclosure by the Claimant of his medical notes and to deliver further particulars of his case by 8 October;	

	(3)	ordered the Respondent to state its position on the issue of disability no later than 14 days after receipt of the medical notes and the medical report and the further particulars.

4.	The claim was not then struck out, a Chairman, Mr Garnon, concluding in a letter to the parties dated 29 October that a fair trial was still possible.  See Bolch v Chipman [2004] IRLR140.  Further directions were then given for the future conduct of the case at a Case Management Discussion before Mr Rennie held on 22 November

5.	I come now to the orders of Mr Barton under appeal.  At a Pre-Hearing Review held on 7 March 2005 that Chairman recorded a failure on the part of the Claimant, then represented by Mr Newton, a consultant, to comply with earlier directions given in the case.  However, he decided at that stage that a fair trial was still possible and declined to make a strike out order.  He did however, make the following orders, recorded at paragraphs 8 and 9 of his order dated 10 March and sent to the parties on 14 March:-
	“(8)	Pursuant to Rule 14(1) of the Employment Tribunals Rule of Procedure 2001, which apply by virtue of the transitional provisions contained in Rule 20 (sic) of the Employment Tribunals Rule of Procedure 2004, the claimant has acted unreasonably by failure to comply with the Tribunals directions and orders and by 21 March 2005, shall pay the costs of the respondent relating to the unreasonable conduct and for the pre hearing review held today in the sum of £1,786.00.	 

(9)	Unless the order to pay costs is complied with, then by virtue Rule 13(2) of the Employment Tribunals  Rules of Procedure 2004, the claim shall be struck out on the date of non compliance without further consideration of the proceedings or the need to give notice under Rule 19 or to hold a pre hearing review or a hearing.”
The Costs Order	
         
6.	The Claimant did not pay the costs ordered within time and by his Judgment dated 5 April the Chairman struck out the claim.  He made that order under Rule 13(2) and 18(7)(e) of the 2004 Rules (Schedule 1 to the 2004 Regulations).  His reasons for making that order were as follows:

“1	By order made at a pre-hearing review held on 7 March 2005 the claimant was found to have acted unreasonably and by 21 March 2005 was ordered to pay the costs of the respondent relating to the unreasonable conduct in the sum of £1,786.00.

2	It was ordered that unless the order to pay costs was complied with, then by virtue Rule 13(2) of the Employment Tribunals  Rules of Procedure 2004, the claim would be struck out on the date of non- compliance without further consideration of the proceedings or the need to give notice under Rule 19 or to hold a pre hearing review or a hearing.

3	By letter dated 22 March 2005, the respondent’s solicitor notified the Tribunal of the failure of the claimant to pay the costs award.

4	Accordingly, the claimant’s claim is struck out”

The Employment Tribunals Rules of Procedure

7.	This case concerns the transition from the old rules (the 2001 Rules; Schedule 1 to the 2001 Regulations) to the new rules (the 2004 Rules; Schedule 1 to the 2004 Regulations).  Regulation 20 of the 2004 Regulations provides; so far as is material: 

“(4)	In relation to proceedings described in paragraph 2 where a copy of the originating application was sent to the respondent prior to 1 October 2004, Schedules 1 and 2 to these Regulations shall apply with the exception of Rules 1 to 9, 21 to 24, 33 and 38 to 48 of Schedule 1.

(5)	In relation to proceedings described in paragraph 4 the following provisions of the old England and Wales Regulations… shall continue to apply:

		(a)		in Schedule 1
		(v) 		Rule 14 (Costs).”

8.	The Originating Application having been sent to the Respondent prior to 1 October 2004 in this case the following regime applies:
	“(1)	Rule 13 of the 2004 Rules provides:

		(1)	If a party does not comply with an order made under these Rules, under Rule 8 of schedule 3, Rule 7 of schedule 4 or a practice direction a Chairman or tribunal (a) may make an order in respect of costs, or preparation time under Rules 38-46 or (b) may, (subject to paragraph (2) and Rule 19) at a pre-hearing review, or a hearing make an order to strike out the whole or part of the claim or, as the case may be, the response and, where appropriate, order that a respondent be debarred from responding to the claim altogether;

		(2)	An order may also provide that unless the order is complied with, the claim or, as the case may be, the response shall be struck out on the date of non-compliance without further consideration of the proceedings or the need to give notice under Rule 19 or hold a pre-hearing review or hearing.

	(2)	By virtue of Regulation 20(4) of the 2004 Regulations, Rules 38-48 of the 2004 Rules do not apply.

	(3)	Rules 38-48 deal with Costs orders under the 2004 Rules.  In particular, Rule 40(4) provides that a:

		“Chairman… may make a costs order against a party who has not complied with an order…”

		Rule 42(2) provides:
		“The Tribunal or a Chairman may have regard to the paying party’s ability to pay when considering whether it or he shall make a costs order or how much that order should be.”

	(4)	Rule 14 of the 2001 Rules provides:
		(i)	where in the opinion of the tribunal, a party has in bringing the proceedings…acted…unreasonably…the tribunal shall consider making, and if it so decides, may make:  (a)	an order containing an award against that party in respect of the costs incurred by another party.

		By Rule 14(3)(a) costs may be assessed in a specified sum not exceeding £10,000.

	(5)	It is now settled law that in considering making a costs order under Rule 14 of the 2001 Rules the means of the paying party is an irrelevant consideration.  Kovacs v Queen Mary & Westfield College [2002] IRLR 414 (CA).  There is no provision in the 2001 Rules to strike out a claim for failure to pay under a costs order, save where a deposit ordered under Rule 7 is not paid within time.  See particularly Rules 7(7) and 15(2).

	(6)	Rule 18(7)(e) of the 2004 Rules, brought into effect by regulation 20(4) of the 2004 Regulations provides.

		Subject to paragraph (6) a Chairman…may make a judgment or order
		(e)	striking out a claim …for non-compliance with an order.”

By Rule 18(6), before a judgment or order listed in paragraph 7 of Rule 18 is made, notice must be given in accordance with Rule 19.  

Rule 19 provides that before a judgment or order is made under Rule 18(7), except where the order is one described in rule 13(2), notice of the order or judgment to be considered shall be given to the party against whom it is proposed to make the order.
The Appeals

9.	In these appeals Ms Porter, in addition to alleging that he strike-out judgment and costs order was perverse, submits that the Chairman, Mr Barton, erred in law in ordering the Claimant to pay £1,786 in costs incurred as a condition of proceeding with his claim.  She contends that such an order infringes his right of access to the Courts under Article 6(1) of the European Convention on Human Rights, scheduled to the Human Rights Act 1998.

10.	In order to examine those propositions it is first necessary to consider whether the Chairman had power and thus jurisdiction to make first the costs order and then the strike-out order under the transitional provisions.  

11.	In my judgment the focus falls on regulation 20(4) 2004 Regulations and rule 13 of the 2004 Rules.

12.	It is clear that rule 13 applies to this case.  It is not excluded by regulation 20(4).  However, Rule 13(1)(a) permits the Chairman to make an order for costs under rules 38 to 46.  But rules 38 to 46 do not apply by virtue of Regulation 20(4).  Thus it was not open to the Chairman to make an order under Rule 13(1)(a) in this case.

13.	He did not purport to do so.  By the costs order of 14 March, paragraph (8) he made a costs order under Rule 14(1) of the 2001 rules.  That rule was in force by virtue of regulation 20(5)(a)(v) of the 2004 Regulations, but regulation 14 does not allow of a strike out in default under the 2001 Rules, and it is a different regime from the Costs Rules 38-48, under the 2004 Rules, not in force for the purposes of this case.  In particular under Rule 14 there is no power to take into account the paying party’s means; under Rule 41(2) of the 2004 Rules there is.
14.	That gives rise to this construction issue.  Mrs Porter submits that Rule 13 of the 2004 Rules is concerned with orders made under those Rules.  Rule 13(1) begins:

	“If a party does not comply with an order made under these Rules…”

She submits that the costs order (paragraph 8 of 14 March Order) was made under the 2001 Rules.  Consequently the Rule 13(2) sanction could not be attached to the Rule 14 costs order made under the 2001 Rules.
	
15.	Mr Robinson-Young argues that the effect of Regulation 20(5)(a)(v) of the 2004 Regulations is to incorporate into the 2004 Rules Rule 14 of the 2001 Rules so that the Chairman’s costs order under Rule 14 was an order made under the 2004 Rules for present purposes.

16.	I prefer the construction advanced by Mrs Porter.  Regulation 20(5) refers to the following provisions of the old (England and Wales) regulations continuing to apply.  It therefore distinguishes between the old (2001) and new (2004) Rules.  I have therefore concluded that it was not open to the Chairman to make a new Rule 13(2) order as a sanction for non-compliance with an old Rule 14 costs order.

17.	Further, that is in my judgment, the sensible construction.  As Mrs Porter points out, the Rule 13(2) sanction is more draconian than the old costs rules provided for; the “trade-off”, in relation to costs, under the new rules, is that, when in force, new Rule 41(2) now permits a Chairman or Tribunal to take into account the proposed paying party’s means, an irrelevant factor under the old Rule 14.

18.	It follows, in my judgment, that the Chairman had no power to make the new Rule 13(2) order for non-compliance with his old Rule 14 costs order; consequently he had no power to make the strike-out order of 5 April.  The appeal against that order succeeds and the order is set aside.

19.	That leaves the appeal against the costs order.  There is no doubt that the Chairman had power to make an order under the old Rule 14.  He found that the Claimant had conducted the proceedings unreasonably in failing to comply with earlier orders and directions of the Tribunal.  However, what is missing from paragraph (8) of the 14 March order is any indication that the Chairman has then gone on to the second stage under Rule 14(1), that is to consider whether or not to exercise his discretion to make a costs order and to give reasons for the exercise of that discretion.  I have been referred to the judgment of Lord Justice Pill in Lodwick v London Borough of Southwark [2004] IRLR 554, paragraph 26.  The award of costs under the 2001 Rules is an exceptional course of action and the reasons for it should be specified clearly.

20.	Mr Robinson-Young properly accepts (a) that an award of costs under Rule 14 involves a 2-stage process, first a finding of unreasonable conduct and secondly and separately the exercise of discretion in making an order for costs and (b) that there is no indication on the face of the Chairman’s order, paragraph 8, that he carried out the second stage of that exercise.  In the absence of such indication I am not satisfied that the Chairman did separately conduct the second stage of the exercise.  Consequently, in my judgment, the costs order is flawed and, like the Court of Appeal in Lodwick, I shall set it aside.  It follows that both appeals succeed and both the costs order and strike-out order are set aside.

21.	Finally, I should make it clear that nothing I have said in this judgment should be taken by any party to Employment Tribunal litigation as comfort in the event that Employment Tribunal orders and directions are not complied with.  Under the new Rules they do so at their peril.