Appeal No. UKEAT/0461/07/LA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 22 February 2008
Judgment handed down on 14 April 2008

Before

THE HONOURABLE MR JUSTICE BEATSON

MR D CHADWICK
MR M CLANCY

MR J KOTECHA								            APPELLANT

1) INSURETY PLC T/A CAPITAL HEALTH CARE 
2) MR D ABINGDON 
3) MR C BELL 
4) MR P SMITH 
5) MR D RILEY	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MS A MIZZI
(Solicitor)
Messrs Lewis Silkin LLP Solicitors
Employment Dept)
5 Chancery lane
Cliffords Inn
London 
EC4A 1BL
	
For the Respondent	MR K J O’DONOVAN
(of Counsel)
Instructed by:
Insurety Plc
15 Apex Court
Almondsbury
Bristol 
BS32 4JJ	

SUMMARY
Practice and Procedure	-	Costs
Race discrimination	-	Burden of proof

Position of costs order made by Tribunal because of conduct where the ground upon which an appeal is allowed is independent of and unrelated to the reasons for which the Tribunal made the costs order.

THE HONOURABLE MR JUSTICE BEATSON

1.	On 22 February 2008 we allowed the Appellant’s appeal on the ground that the Employment Tribunal had misdirected itself in law in relation to the application of the burden of proof to the allegations of race discrimination and gave a judgment with our reasons for so doing. There was also an appeal before us from the Order of the Tribunal that the Appellant pay costs in the sum of £10,000 on the ground that he had acted vexatiously in the conduct of the proceedings, and had not been open, frank and honest with the Tribunal. We made no decision on the costs appeal but invited the parties to make further submissions in writing. 

2.	The costs appeal did not concern the finding that the Appellant acted vexatiously and had not been honest with the Tribunal. Ms Mizzi on behalf of the Appellant recognised that such an appeal could not realistically have been pursued in the light of the decision at the preliminary hearing refusing to allow a challenge to the Tribunal’s findings as to the Appellant’s credibility and the fairness of the proceedings to proceed to a full hearing.  She, however, submitted that the Tribunal erred in deciding to make a costs order because it went straight from finding that the Appellant had been vexatious and unreasonable to awarding the order without going through the second stage of the procedure set out in rule 14 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 and considering whether such a costs order was appropriate, in the light of all the circumstances of the case. 

3.	Ms Mizzi submitted that the Tribunal did not properly consider the second stage and did not take into account the fact that the Appellant was unrepresented, his ability to pay, and that he had established a prima facie case of discrimination so that the claim had not been struck out. She submitted that the Tribunal failed to give proper consideration to the fact the Appellant was unrepresented, to his ability to pay, and that his discrimination case had not been struck out. She, however, relied in particular on the fact that the Tribunal did not appear to have carried out an assessment of to what extent the Respondents’ costs were attributable to the Appellant’s vexatious conduct of the proceedings or to what extent the Respondent was responsible for the amount of costs it incurred. She submitted that the Tribunal’s approach was essentially punitive rather than compensatory. She relied on the decision of Lodwick v Southwark LBC (2004) IRLR 554 and, in relation to the two stage test, the decision of this Tribunal presided over by Mr Justice Lindsey in Monaghan v Close Thornton Solicitors (2001) UKEAT/0003. In Lodwick v Southwark LBC Pill LJ stated (at paragraph 23) that “costs remain exceptional… and the aim is compensation of the party which has incurred expense in winning the case, not punishment of the losing party”. His Lordship also stated (at paragraph 26) 
“to order costs in the Employment Tribunal is an exceptional course of action and the reason for, and the basis of, an order should be specified clearly, especially when a sum as substantial as £4,000 [the sum in that case] is involved”. 

Pill LJ regarded the fact that the Tribunal had not quantified the extent to which the hearing had been extended as a failing although he noted that in that case that question could not be answered from the contents of the decision: see paragraph 25. 

4.	The ground upon which the appeal was allowed was independent of and unrelated to the reasons for which the Tribunal made the costs order. We invited further submissions from the parties as to whether, in these circumstances, it necessarily followed that allowing the substantive appeal meant that the costs order had to be set aside on this question. We deal with those below. We first address Ms Mizzi’s submissions as to the adequacy of the Tribunal’s approach to costs because, if that approach erred in law and was outwith the discretion a Tribunal has in respect of costs, the costs order must be set aside. 

5.	In the circumstances of this case we do not consider that the Tribunal’s reasons for making its costs order were erroneous in law. The Tribunal was fully aware that the Appellant was unrepresented before it: see paragraph 2. The decision was made under the 2001 Rules under which (unlike rule 41(2) of the current Rules) it did not need to have regard to the means of a party: see Kovacs v Queen Mary and Westfield College (2002) ICR 919 (CA) and Harvey, Volume 5 Division T paragraph 1033. With regard to the point based on the decision in Lodwick, the Tribunal had found:
“The claimant has, throughout these proceedings, attempted to blow out of all proportion any perceived failing on the parts of the respondent; has been opportunistic; has flagrantly disregarded Tribunal’s directions; not told the whole truth on several occasions and has from time to time attempted to mislead the Tribunal.” (paragraph 11)

6.	The Tribunal’s assessment of the Claimant’s conduct in the section on the evidence in paragraphs 3-12 of its decision shows the pervasive effect of his conduct on the hearing. Pill LJ in Lodwick v Southwark LBC acknowledged that Tribunals have broad discretion in the matter of costs. In that case it appears from Pill LJ’s judgment that the Tribunal had not recognise that costs are rarely awarded in proceedings before an Employment Tribunal and remain exceptional.  In the present case the Tribunal stated that it recognised “that the award of costs is a comparatively rare event”. Moreover, in Salinas v Bear Stearns International Holdings Inc (2005) ICR 1117 this Tribunal, presided over by Burton JP, held that a Tribunal did not have to identify any causative link between the unreasonable conduct found and the costs ordered: paragraph 28.  The Employment Appeal Tribunal considered and referred to the decision in Lodwick v Southwark LBC: see paragraphs 17-21. 

7.	We are satisfied that the history of these proceedings, which we have set out in our main judgment and the Tribunal set out in paragraphs 3-16 of its decision, sufficiently explains the Tribunal’s decision. It is not in our view possible to say that the decision of the Tribunal on the matter of costs erred in law or was perverse. 
8.	We turn to the second question; the effect of our decision on the substantive grounds on the costs order. It is submitted on behalf of the Appellant that the award of costs cannot stand in the light of the error of law made by the Tribunal in applying the burden of proof. Ms Mizzi submitted that the error was a fundamental one going to the heart of the Tribunal’s view of the credibility of the Appellant’s claim because the its perception of his conduct would have been influenced to some extent by its perception of the merits of the Appellant’s case. She submitted that, had the Tribunal applied the law correctly, it may have upheld all or part of the Appellant’s claim and may well therefore have exercised its discretion differently in the matter of costs. 

9.	We do not accept these submissions. The error into which the Tribunal fell related to the burden of proof. The Tribunal’s perception of the Appellant’s conduct was not affected by this. In these circumstances we do not consider that it is realistic to suggest that it might have exercised its discretion differently in the matter of costs.

10.	This is not a case where there is a connection between the error of law made by the Tribunal and the conduct which has given rise to the costs order. The appeal in relation to costs is separate and unrelated to our conclusions on the Tribunal’s approach to the burden of proof. For the reasons we have given we do not consider that the Tribunal fell into error in its approach to costs or that the remission of the matter to another Tribunal because of the misdirection in relation to the application of the burden of proof affects the Tribunal’s decision in relation to costs.