Appeal No.UKEAT/0534/05/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 6 December 2005

Before
HIS HONOUR JUDGE ALTMAN
DR B V FITZGERALD MBE
MR D J JENKINS OBE

MRS R V BEAT	APPELLANT

DEVON COUNTY COUNCIL	RESPONDENT

WEST AND EAST PUTFORD PRIMARY SCHOOL	RESPONDENT

Transcript of Proceedings

JUDGMENT

		
	APPEARANCES

For the Appellant:	MR A T BEAT
Lay Representative	
For the Respondent:	MR ROGER HARPER
(of Counsel)
Instructed by:
Devon County Council Legal Services
County Hall
Topsham road
Exeter
EX2 4QD	

SUMMARY
Costs

In awarding costs for unreasonable conduct before the hearing and for the raising of misconceived issues during the hearing under Rule 40 of Schedule 1 of Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 it is not enough to identify the context complained of: the Employment Tribunal must then stand back and balance that with other aspects of case so as to ensure an award is proportionate.  Here the second stage was omitted and costs therefore were wrongly awarded, not as proper compensation. 

HIS HONOUR JUDGE ALTMAN

1.	This is an appeal from the Judgment of the Employment Tribunal sitting at Exeter on 16 June 2005 when the Claimant Appellant Mrs Beat was ordered to pay costs to the Respondent of £10,000 in relation to the previous applications before the Tribunal which had been dismissed.

2.	Whilst in the original Notice of Appeal there were some 11 grounds raised by the Appellant, the matter now proceeds after Preliminary Hearing simply on the matters set out in ground 10 which is expressed as follows:

“The Tribunal has erred by awarding costs on the basis that ‘the respondent is entitled to lay down a marker’ in paragraph 6 of the reasons.  At the costs hearing the chairman refused to allow the claimant’s representative to raise questions about the respondents’ schedule of costs, so that the claimant’s submission that these costs were excessive for the work necessary to defend the claim was not heard.  Announcing judgement at the costs hearing, the chairman said that the award was being made as ‘a warning to others’.  It is an error of law to make an award for reasons other than compensation for the costs incurred in defending a claim, whereas the tribunal’s actions and reasons clearly indicate both a punitive and deterrent basis.”

3.	The Tribunal, to deal with the application for costs, had a number of factors to take into account and the discretion to take into account the means of the Claimant, Mrs Beat but we have confined ourselves to the matters raised in that particular ground.  

4.	The Tribunal in their Judgment reminded themselves of the regulations to which we refer later on, and the regard to be had to the means of Mrs Beat and expressed their findings in paragraph 4 as follows:

“The tribunal finds that the claim was misconceived and in some areas conducted unreasonably within the meaning of Rule 40.  “

5.	Rule 40 of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 Schedule 1 provides in paragraph 2:

“A tribunal …shall consider making a costs order against a paying party where, in the opinion of the tribunal…any of the circumstances in paragraph (3) apply.  Having so considered, the tribunal…may make a costs order against a paying party if it… considers it appropriate to do so.

6.	Before coming to sub-paragraph 3 it is important, it seems to us, to recognise that the paragraph quoted appears to involve a 2-stage process.  The first is to form an opinion as to whether the circumstances in paragraph 3 apply.  The second is in those cases where they do apply to consider whether it is appropriate to make a costs order in the case.  This was helpfully expressed in the recent case of Criddle v Epcot Leisure Ltd UKEAT 0275/05 in which HH Judge Peter Clark at paragraph 20 said:

“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…”

7.	That followed the case of Lodwick v London Borough of Southwark [2004] IRLR 554 in which the Court of Appeal held:

“…the Tribunal made the order for costs on the basis that the hearing had been ‘considerably extended’ but did not quantify the extent to which the hearing had been extended.  Nor could that question be answered from the contents of the decision.  In the absence of such clarity, it could not be held that the Tribunal’s broad discretion to award costs had been correctly exercised.”

8.	Paragraph 3 (to which reference has been made) of the Regulations provides as follows:

“The circumstances referred to in paragraph (6) are 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 conducting of the proceedings by the paying party has been misconceived.”

9.	In paragraph 5 of the Judgment the Employment Tribunal specifically avoids agreeing with all the points set out in the Skeleton Argument of the Respondents, but then set out what they describe as “some areas” in which the Tribunal feels that the claim was misconceived or unreasonably conducted.  A large number of matters are set out which do not need to be repeated at this stage, but in paragraph 5.10 the Tribunal conclude as follows:

“The Tribunal finds the proceedings to have been unreasonably conducted in relation to disclosure and pre-hearing correspondence and very substantial parts of the claim to have been misconceived and wholly unrealistic given the extent of the claimant’s workload and the nature of that work at a school in crisis.”

10.	As Mr Harper for the Respondent has pointed out the Employment Tribunal go straight on in paragraph 6 to express themselves with the following sentence:

“The tribunal therefore makes an order for costs in the full sum of £10,000 sought by the respondent.”

11.	The costs of defending the claim before the Employment Tribunal was calculated by the Respondents to be something in the order of £23,000.  The Tribunal Procedures provide that a Summary Order can be made by a Tribunal up to a maximum of £10,000 but that anything over that should be subject to detailed assessment by the County Court.  

12.	In order to avoid the need for further assessments and no doubt being realistic about the means of the employee, Mrs Beat, the Respondents limited their claim to £10,000, so that their approach seems to have been to seek all the costs of defending the claim but set at £10,000 only so as to avoid the procedural niceties of detailed assessment.

13.	It is the following sentence that is really attacked by Mr Beat who has presented the case on behalf of his wife: 
“The fact that that order has been made [that is, the costs] is not necessarily an indication that the respondent will enforce it to that level but it is an award that has been made on the principles of misconception and unreasonable conduct of proceedings.  The respondent in the view of the Tribunal in the particular circumstances of this case is entitled to lay down a marker given the number of its employees that it will not shrink from an application in appropriate circumstances.  The tribunal hopes the respondents will take in to account the evidence given by Mrs Beat as to her financial situation which in broad terms the tribunal accepts namely that she survives by the operation of the small holding and self sufficiency and that the amount generated from that and her very occasional work and craft fairs and the selling of plants certainly does not amount to an income of more than £75 to £100 per week which would be considerably below the national wages average.  Accordingly there will be an order for £10,000 …”

14.	In the Grounds of Appeal enlarged by particulars and expanded a little before us by Mr Beat in his submissions to us, the following points are made.  First of all, reference is made to the written schedule of costs and its credibility, it is said, was undermined by the fact that at one stage it asserted 2,220 hours instead of 220 hours for solicitors’ work on the case.  That is a mistake and it does not seem to us to give rise to any available inference at all - mistakes do happen and this one was corrected.  Secondly, reference is made to the way in which this matter was raised during the course of the hearing and Mr Beat asserts that he was discouraged by being told there was no point in pursuing a question as to the detailed assertions on the costs schedule and this was accepted reluctantly by Mr Beat.  

15.	The Chairman is said to have said (and I do not think there is much contention about this) that it was impossible for a case lasting 7 days to have cost less than £10,000 or even (it may have been) £23,000 and because of that, it was said that Mr Beat had not had an opportunity to question the schedule and that had he had such an opportunity, he would have raised a number of matters: 220 hours, he would have said, was excessive; £60 an hour for a chargeable rate was excessive when work could have been done by more junior staff; that it was unnecessary for Counsel to be employed, so that if the Respondents chose to instruct Counsel that should not be a matter that Mrs Beat should have to pay for and, fourthly, that the witness Mr Smith would have obtained payment of personal expenses, so that cannot be included.

16.	The latter point is conceded, and Mr Beat relies on that as an example of what progress he may have made if he had made some submissions.  However, we do not, and are not in a position to, reopen as part of the final assessment of costs, the proper calculations, although it appears that the number of hours were in fact expended we have no opportunity to evaluate that in terms of proportionality.  £60 is probably a very modest rate, in fact, including within it not just the pay of the person concerned but the overheads of the organisation.  As for the employment of Counsel, this was a complicated case and there may well have been argument as to whether it was or was not appropriate.  However, the point being made in the context of ground 10 of the Notice of Appeal is that the inability to challenge those matters is support for Mr Beat’s argument that the Tribunal were not looking at detailed calculations but were looking overall at a global non-compensatory approach to the calculation of costs.

17.	In paragraph 10.5 Mr Beat refers to the fact that there were breaches of some procedures by the Respondents and there was some sharing of responsibility.  From that ground we infer that the argument of Mr Beat is that an approach which looked at the total costs could not be a compensatory approach, for a compensatory approach would, he would say, inevitably have taken into account that there was some responsibility to be accounted for on both sides.

18.	Mr Beat says that in announcing Judgment at the hearing that the amount for costs sought by the Respondent was made as a warning to others, this indicates a punitive and deterrent basis and not compensatory basis of the actual expense of defending the claim.  In a similar vein in 10.7 Mr Beat refers to paragraph 6 where he says, the Chairman asserted that the Respondent is entitled to lay down a marker.

19.	Mr Harper’s notes of what the Chairman said included the sentence:
“Respondent might not enforce to that level – intended to be warning to others as much as penalty against.”

Two points are made.  First, Mr Harper points out that that was contained in the oral decision and had been left out of the written decision and the written decision prevails.  That is, in itself, an unanswerable argument.  However, it seems to us also that, so far as we can tell, the way the phrase ‘intended to be warning to others’ is expressed, shows it is referring to the intent on the part of the Respondent rather than of the Tribunal; that is to the assertion by the Respondents that they were pursuing their claim with the motive that it might provide some warning to others who might bring cases equally misconceived or conducted in some part unreasonably.  However, it is, of course, the approach of the Tribunal with which we are concerned.  

20.	The same goes for the reference to the fact that the Tribunal recognised that the Respondents wished to lay down a marker, and they recognised that the Respondents were entitled to do so in order to avoid, no doubt, any impression that any employee would automatically have a free ride to the Tribunal.

21.	It is then said that the award of the maximum amount of £10,000 is so extraordinary as to emphasise the punitive and deterrent basis upon which the award was made.  It was the maximum available within the Tribunal without going for a detailed assessment.  Mr Harper points out that it is irrelevant to look in the text book Tolley at page 38 which Mr Beat produced, setting out the amounts awarded in a small number of cases but the point made by Mr Beat is that there is no reference to the exercise of discretion or to the reasons for the decision.  In paragraph 10.9 he goes on:

“It is an error of law to make an award for reasons other than compensation…” 
He asserts that the actions and reasons of the Tribunal clearly indicate that in this case costs were awarded solely on a punitive and deterrent basis without any examination of the true costs incurred.  

22.	To an extent we disagree with that in that the Tribunal accepted the assertion of the Respondents as to the true costs, no doubt, with his experience of claims the Tribunal Chairman came to a judgment about it.  However, it is certainly the experience of this Tribunal that £10,000 as an award against a former employee is exceptional and virtually unique and much higher than the general band of awards made in cases where comparable findings of misconception or unreasonableness are made; and awards are more normally associated with the means of the former employee.  

23.	In reaching our conclusion about this case there is an inference to be drawn, it seems to us, from the adoption by the Tribunal of the figure of £10,000 without further investigation.  Having found the areas of unreasonableness and misconception, a Tribunal, it seems to us, is bound to pause; to stand back and to look at all the factors that are to be taken into account when assessing the appropriate level of compensation.  This involves balancing the amount of costs incurred by the unreasonableness, or the misconceived part of the claim against other parts of the claim and by taking account of the need, if the Tribunal considers there is a need for some compensation and costs.  

24.	However, the Tribunal did not go through that process.  They stopped, effectively, at the end of stage 1; they showed that they did so at the beginning of paragraph 6 when they said “the Tribunal therefore makes an order for costs in the full sum sought by the Respondent”.  The word “therefore” demonstrates this approach.
25.	For those reasons it seems to us that the appeal succeeds to this extent, that although we do not accept that the Tribunal’s words in paragraph 6 of their Judgment was to expressly state that they were making a deterrent award, on the face of it the Tribunal did not go through a process which we can see in the decision, of exercising a discretion in assessing the overall compensation that was appropriate, but rather did so by way of jumping from their finding that there was misconceived raising of issues and unreasonable conduct to the making of the order.

26.	Having so concluded that, we have considered what best should be done in this case.  It is right to record that the Employment Tribunal had the best knowledge of what had gone on and had formed a judgment about the conduct of the proceedings, by and on behalf of Mrs Beat both before and during the hearing, and they came to an award which was very substantial indeed and well above the range that is normally experienced.  

27.	However, we are impressed by the detail in that Judgment in paragraph 5 of very wide-ranging criticism of the conduct of the case by the Claimant.   We would, it seems to us, be causing a great injustice to the findings of the Employment Tribunal if we were to quash the order for costs entirely, simply because the Employment Tribunal had failed to ask itself about the exercise of discretion and to weigh the factors.

28.	We are mindful of two matters.  The Respondents themselves have now been engaged in substantial litigation in this case, and Mr Beat has asked that we not remit this case to the same Employment Tribunal to reconsider their assessment in the light of the exercise of their discretion.  He, himself, on behalf of Mrs Beat, has raised a complaint and is no doubt dissatisfied with the handling of his wife’s case hitherto.  We do not endorse or contradict that view; we express no opinion about it but there is no doubt that, in those circumstances of an embryonic dissatisfaction with any future order of that Tribunal and the need to help the parties to bring this matter to a conclusion without the risk of further perpetuating further applications to the tribunal followed by possible appeals, are matters in this particular case of which we are mindful.

29.	Accordingly, although we know less about this case than the Employment Tribunal itself, we consider we have sufficient information with which to review the approach to costs and to substitute what appears to us to be the appropriate figure.

30.	We wish to emphasise that such award in this particular case is directed to its own particular circumstances and should not form any sort of benchmark or guide for any future parties seeking assistance as to the appropriate level of costs.  

31.	The starting point in this case was a very high award of some £10,000 and it seems to us that our approach is to seek not to start again and work out what we consider to be the appropriate figure, because we do not have all the necessary information, but to seek to adjust that figure in the light of the way in which we apprehend the Tribunal would do if taking account of all the different factors to which we have referred.  

32.	First of all, we have no doubt that, bearing in mind the seriousness of the findings of the Tribunal, they would properly find that it would be appropriate in the circumstances of the case to make an award.  In all the circumstances, bearing in mind that there was a case which even if it was to fail, was entitled to be heard before a Tribunal; bearing in mind that this is a litigant in person assisted by her husband who although a lay person was, so far as we have had the opportunity of judging by the submissions made to us today, very able to deal with many of the issues that arise in this sort of situation; bearing in mind that we were told this was originally set down as a 3-day hearing which was extended to 7 days because of the massive amount of material, it seems to us that all those factors can be best reflected by our reducing the award for costs to £5,000.

33.	Accordingly, the appeal will be allowed and the order for costs will be reduced to £5,000.