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You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Vaughan v London Borough Of Lewisham & Ors (Practice and Procedure : Costs) [2013] UKEAT 0533_12_0606 (6 June 2013)
URL: http://www.bailii.org/uk/cases/UKEAT/2013/0533_12_0606.html
Cite as: [2013] UKEAT 0533_12_0606, [2013] IRLR 713

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Appeal No. UKEAT/0533/12/SM

 

 

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON, EC4Y 8JX

 

 

At the Tribunal

On 1 February 2013

Judgment handed down on 6 June 2013

 

 

Before

THE HONOURABLE MR JUSTICE UNDERHILL

MR B BEYNON

MR J R RIVERS CBE

 

 

 

 

 

MS A A VAUGHAN APPELLANT

 

 

 

 

 

 

(1) LONDON BOROUGH OF LEWISHAM

(2) BABCOCK EDUCATION AND SKILLS LTD

(3) CAREERS ENTERPRISE LTD RESPONDENTS

 

 

 

Transcript of Proceedings

 

JUDGMENT

 

 

 


 

 

 

 

 

 

 

APPEARANCES

 

 

 

 

 

For the Appellant

MS A A VAUGHAN

(The Appellant in Person)

For the Respondents

MR MARTIN PALMER

(of Counsel)

Instructed by:

Paris Smith LLP

1, London Road

Southampton

SO15 2AE

 

 


SUMMARY

 

PRACTICE AND PROCEDURE – Costs

 

 

Tribunal orders that Appellant should pay Respondents one-third of their costs (estimated prior to assessment at £260,000) on the basis that the claim was misconceived from the start.

 

Held, dismissing the appeal, that there was no error of law in the Tribunal’s approach – In particular, it was not wrong in principle to make a costs order even though no deposit order had been made and the Respondents had made a substantial offer of settlement (on an avowedly “commercial” basis) – Nor was it wrong in principle to make an award which the Appellant could not in her present financial circumstances afford to pay where the Tribunal had formed the view that she might be able to meet it in due course (Arrowsmith v Nottingham Trent University [2012] ICR 159 applied).

 

 


THE HONOURABLE MR JUSTICE UNDERHILL

 

1.            We heard on 1 February 2013 two appeals arising out of the same hearing before an Employment Tribunal sitting at London South on 19 April 2012.  We were able to give an ex tempore judgment on one (UKEAT/0534/12); but we reserved judgment on the other (UKEAT/0533/12), which concerned a costs order made against the Appellant.  This is the reserved judgement: we regret the delay in promulgating our decision.

 

2.            We need not repeat the procedural history given in the earlier judgment.  In bare outline, the order related to the costs of three sets of proceedings which culminated in a twenty-day hearing following which the entirety of the Appellant’s claims were dismissed.  The claims were of discrimination (including victimisation) and harassment on grounds of race and/or disability and of detriments suffered as a whistleblower, and were brought not only against the Council and the previous employer from whom she had transferred under TUPE but also against a number of individual colleagues; all the Respondents, however, had common representation.  The order was that the Appellant pay one-third of the Respondents’ costs, to be assessed in the County Court.  The Respondents claim to have incurred costs amounting to some £260,000.  The Appellant’s liability could thus in theory be as high as £87,000, though in practice on assessment the sum claimed will be reduced to a greater or lesser extent: purely in order to have a figure to work with, we will assume a reduction of roughly one-third, yielding an ultimate liability of £60,000.  (The reference in our earlier judgment to a “six-figure” sum was a slip of the tongue, or of our arithmetic.)

 

3.            The Appellant appeared before us in person, as she did before the Tribunal.  The Respondents were represented by Mr Palmer of counsel.

 

4.            The relevant provisions of the Employment Tribunal Rules governing the award of costs were at the material time as follows:

 

40     When a costs or expenses order may be made

(1)     ...

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

(3)     The circumstances referred to in paragraph (2) 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.

(4)-(5)  ...

41 The amount of a costs or expenses order

(1) The amount of a costs order against the paying party shall be determined in any of the following ways—

(a)     the tribunal may specify the sum which the paying party must pay to the receiving party, provided that sum does not exceed £20,000;

(b)     the parties may agree on a sum to be paid by the paying party to the receiving party and if they do so the costs order shall be for the sum so agreed;

(c)     the tribunal may order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party with the amount to be paid being determined by way of detailed assessment in a County Court in accordance with the Civil Procedure Rules 1998 ... .

(2)     The tribunal or Employment Judge 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.

42-46 …

47      Costs, expenses or preparation time orders when a deposit has been taken

(1)     When: -

(a)     a party has been ordered under rule 20 to pay a deposit as a condition of being permitted to continue to participate in proceedings relating to a matter;

(b)     in respect of that matter, the tribunal or Employment Judge has found against that party in its or his judgment; and

(c)     no award of costs ... has been made against that party arising out of the proceedings on the matter;

the tribunal or Employment Judge shall consider whether to make a costs ... order against that party on the ground that he conducted the proceedings relating to the matter unreasonably in persisting in having the matter determined; but the tribunal or Employment Judge shall not make a costs ... order on that ground unless it has considered the document recording the order under rule 20 and is of the opinion that the grounds which caused the tribunal or Employment Judge to find against the party in its judgment were substantially the same as the grounds recorded in that document for considering that the contentions of the party had little reasonable prospect of success.

(2)   ...

 

Rule 2 (1) provides that the term “misconceived”, which appears in rule 40 (3), “includes having no reasonable prospect of success”.

 

5.            Those rules have undergone a fair amount of judicial exegesis over the years, most recently in the decision of the Court of Appeal in Yerrakalva v Barnsley Metropolitan Borough Council [2012] ICR 159; but no new question of principle is raised by this appeal, and we will refer to the authorities which are relevant for our purposes in connection with the particular points to which they relate.  The only general point that we should make is that, as is pointed out in many of the cases, the structure of the rules in a case of the present kind requires a two-stage approach: the tribunal must first consider the threshold question of whether any of the circumstances identified in para. (3) of rule 40 applies, and, if so, must then consider separately as a matter of discretion whether to make an award and in what amount. 

 

6.            The Respondents made their application to the Tribunal by letter dated 20 March 2012 on the basis (a) that the Appellant’s claims “were misconceived from the outset” and (b) – though it is debatable whether this adds anything – that “the bringing and continuance of such unmeritorious claims constituted unreasonable conduct”.  They relied essentially on observations made by the Tribunal itself in its Reasons supporting the substantive decision, which they said demonstrated that the Appellant had advanced a discriminatory explanation for a series of acts which were self-evidently “reasonable, explicable and otherwise innocuous” and had shown “an ingrained unwillingness” to accept the possibility of an innocent, and in fact far more plausible, explanation for the acts of which she complained.  Those points were developed in written submissions by Mr Palmer, who emphasised that the Respondents did not say that the Appellant had put forward her claims dishonestly: they submitted simply that those claims were “unsustainable and unreasonably advanced”. 

 

7.            The Appellant in her turn lodged full and articulate written submissions with the Employment Tribunal.  The submissions are, with respect to her, rather diffuse; but, drawing together the threads, the points which she made can be summarised as follows:

 

(1) She denied as a matter of substance that her claims were misconceived, asserting that they were “totally consistent with the undisputed contemporaneous documentation” (para. 34 of her submissions). 

 

(2) She submitted that “a finding of unreasonableness requires consideration of a [party’s] thought processes [or] motivation”.  She had always presented her case intelligibly (para. 35) and had indeed been complimented at the PHRs for her careful analysis (para. 39). 

 

(3) She submitted that even if her claims were in fact misconceived it was a separate question whether she ought to have understood this from the outset, referring to Cartiers Superfoods Ltd v Laws [1978] IRLR 315 (para. 36).  In this connection she pointed out that she had never received a costs warning of any kind: that point was also developed separately – see below.  The Tribunal had expressly accepted that she genuinely believed in the merits of her case (para. 38).  She had not ever acted vexatiously. 

 

(4) Neither the Tribunal nor the Respondents had given any warning that her claim was regarded as misconceived or otherwise unreasonably advanced: see paras. 23, 37, 39-40 and 47 of her submissions.  In particular, no application had been made for a deposit order under rule 20, i.e. on the basis that the claim had “little reasonable prospect of success”.  That was significant in itself, but particularly so because such an order in practice operates as a costs warning – see rule 47 (1), which we have set out above.  The Appellant acknowledged that in a letter dated 8 November 2011 the Respondents’ solicitors had threatened to apply for costs if she proceeded with the claim and lost, but that was only two months before the start of the hearing and was in the context of settlement negotiations: there was no explicit reference to the weakness of her claims – rather, the implication was that costs would be sought on the basis that she had rejected a reasonable settlement offer.  The fact that no such application was made, nor any other form of costs warning given, was strong evidence that the claim was not “misconceived”, even though it had in the event failed.  But, even if it was, the failure to warn her was a reason for the Tribunal to decline to award costs as a matter of discretion, since it was reasonable for her to infer from it that her claim had a reasonable prospect of success. 

 

(5) Further, the Respondents had in fact between August 2010 and November 2011 made a number of offers to settle her claims, culminating in an offer of £95,000 to settle the three claims which gave rise to the present order, together with the two others then pending (paras. 47-48).  The same points were made as under (4) above – namely that those offers were strong evidence that her claim had merit and that in any event they reasonably reinforced her perception to that effect.  She also alleged that the Respondents had conducted themselves in bad faith in connection with the settlement negotiations (paras. 31-33). 

 

(6) She made a number of allegations of unfair or unreasonable conduct on the part of the Respondents in the course of the proceedings, which she said should go into the discretionary balance (paras. 25-29 and 49).

 

(7) She drew attention to the fact that she was unrepresented and suffered from depression (paras. 39, 42 and 50).

 

(8) She drew attention to the exceptional nature of costs orders in the Employment Tribunal and the need not to discourage unrepresented claimants from bringing legitimate claims (paras. 51-53).

 

(9) She said that she did not have the means to meet any substantial order for costs.  She referred to a witness statement setting out her means (para. 54). 

 

8.            The Tribunal began the relevant part of its Reasons by reminding itself of the provisions of rule 40 and that costs do not generally follow the event in the employment tribunal.  It also reminded itself, at para. 7, that costs orders are intended to be compensatory not punitive.  With regard to the reference at rule 40 (3) to a claim being “misconceived”, it referred at para. 8 to the statement by Sedley LJ in Scott v Commissioners of Inland Revenue [2004] ICR 1410 that the relevant question in considering whether the pursuit, or defence, of a claim was misconceived was not whether the party in question thought they were right but whether they had reasonable grounds for so thinking (see para. 46 of his judgment, at p. 1423).  It continued: 

 

“9.   In our Reserved Judgment, sent to the parties on 2 March 2012, we have preferred the Respondent’s evidence in relation to all of the disputed facts and found in a number of instances that the Claimant’s interpretation and perception of events was illogical or unreasonable.  As stated at paragraph 28 of our Reasons, the Claimant was not prepared to countenance the possibility of a non discriminatory explanation for any of the conduct of the Respondent even when common sense dictated that she should.  The Claimant was aware of the explanations of the Respondent long before the tribunal proceedings as they were provided to her in response to the various grievances that she raised concerning these matters and in their pleaded response to the claims.  The Claimant did not at any stage of the proceedings have an adequate response as to why the non discriminatory explanations of the Respondents were not acceptable.  Many of her complaint occurred after one off encounters or communications with individuals and she was not able to point to any previous dealings with those individuals that lead her to conclude that the treatment was discriminatory.  Instead she sought to tar everybody with the same brush on the basis of a mass conspiracy.  Pursuing an allegation of mass conspiracy with no evidence to substantiate it was in our view unreasonable.

10.   We consider that the claims were misconceived from the outset and that the Claimant acted unreasonably in continuing to pursue them, particularly in light of a costs warning letter sent by the Respondents’ representatives to the Claimant on 8 November 2011.  In support of our conclusion that the claim was misconceived, we refer, by way of example, on the following paragraphs of our findings of fact: 131, 136, 137, 139, 144, 150, 153, 160, 170 and 176.

11. We are therefore satisfied that this is a case where, in principle, a costs order should be made.

12. In considering whether a costs order should in fact be made, we have considered the Claimant’s means.  From the evidence presented, the Claimant appears to have limited means.  She is currently on benefits and has no savings or capital assets.  However in the case of Arrowsmith v Nottingham Trent University [2011] EWCA Civ 797, it was held that costs order do not need to be confined to sums the party could pay as it may well be that their circumstances improve in the future.

13. Although the Claimant is currently unemployed, this has only occurred very recently.  The Claimant, at age 36, is relatively young.  She has at least 15 years experience in the care sector and, although signed off sick at the moment, it is her intention, once she is fully fit, to seek re-employment in this field.  Up until recently, the Claimant was earning around £30,000 per year.  There is no reason to assume that she won’t return to her chosen career at this level at some point in the future.

14. The Respondents have incurred considerable costs in defending an unmeritorious claim.  Those costs have largely been borne by the first Respondent, a public body.  These are costs that the local authority can no doubt ill afford in these times of cost cutting and austerity measures.  In those circumstances, it cannot be just for the Claimant to walk away with no financial repercussion.

15. Taking all of the above matters into account, we have decided that the Claimant should pay a third of the Respondents’ costs.”

 

It will be noted that the Tribunal correctly followed a two-stage approach, deciding first that the threshold conditions under rule 40 (3) had been met (paras. 9-10) and then considering whether as a matter of discretion an award should be made (paras. 12-15).  So far as the latter exercise is concerned, it seems to have proceeded on the basis that an order ought to be made unless some reason to the contrary were shown; and in that connection the only factor which it expressly brought into the equation was the Appellant’s means. 

 

9.     We should note for completeness that Mr Palmer told us that the Respondents did not seek to rely in support of their application for costs on the fact that the Appellant had not accepted the substantial settlement offers made by them (see para. 7 (5) above), though they might have been entitled to seek to do so; and the Tribunal accordingly says nothing about this aspect.  (It was the Appellant who put the offers, and the related correspondence, in evidence.)

 

10.         By letter dated 21 April 2012, followed by an e-mail dated 25 April, the Appellant made an application for a review of the Tribunal’s costs decision.  By letter dated 28 May 2012 that application was rejected by Employment Judge Balogun on the basis that valid grounds for a review had not been shown. 

 

11.         The Appellant’s grounds of appeal are, like her written submissions to the Employment Tribunal, full and articulate but also rather diffuse.  The same goes for her skeleton argument.  Helpfully, however, in her oral submissions, she listed her grounds for submitting that the Tribunal erred in law under eleven headings as follows:

 

(a) no deposit order had been sought;

 

(b) the Tribunal had given insufficient weight to a number of important factors, namely (i) the Respondents’ bad faith in the settlement negotiations; (ii) her arguments of law; (iii) the fact-sensitivity of the underlying claims (relying on Anyanwu v South Bank Student Union [2001] ICR 391); and (iv) the fact that some of the matters on which the Tribunal relied in reaching its decision only emerged in the course of the hearing;

 

(c) the decision was inadequately reasoned (relying on Meek v City of Birmingham District Council [1987] IRLR 250);

 

(d) there had been no costs warning;

 

(e) the order made was punitive rather than compensatory;

 

(f) the Respondents’ witnesses had committed perjury;

 

(g) no account had been taken of her ill-health;

 

(h) no account had been taken of the fact that she was unrepresented;

 

(i) the decision on means was perverse;

 

(j) no account had been taken of the Respondents’ settlement offers;

 

(k) the Tribunal’s reasoning was inconsistent with reasons subsequently given by the Judge for refusing to make an order for costs in favour of one of the individual Respondents in the ongoing proceedings, Marina Waters, against whom her claim had been struck out.

 

12.         We take by way of preliminary head (c), the reasons challenge.  In our view there is some force in this.  It will be seen that several of the arguments advanced by the Appellant to the Tribunal, as summarised at para. 7 above, are not expressly addressed in the Reasons.  It is of course well established that a tribunal need not address individually every argument that a party advances.  But some at least of the Appellant’s points to which no reference was made do seem to us to have required to be specifically dealt with – in particular (though not necessarily only) her reliance on the absence of any costs warning or deposit order and the fact that the Respondents had made substantial settlement offers.  It is tempting for tribunals to treat costs orders as merely ancillary and as not requiring the same detailed reasons as decisions on more substantive issues; but in a case like the present, where the Appellant faces a liability of (say) £60,000, and where detailed reasoned submissions had been advanced, it was important to deal expressly with any point that was reasonably arguable.  However, it does not follow that the appeal should be allowed.  If we are satisfied that the Tribunal’s order was right, notwithstanding the failure to give full reasons, to remit the issue would achieve nothing.  We therefore proceed to consider the remainder of the Appellant’s grounds on their merits.

 

13.         The starting-point must be the Tribunal’s finding on the first-stage question, namely whether the conditions for the making of a costs order had been met.  The conditions on which it relied were that the Appellant’s claims were misconceived and – which, as we have observed, would seem to follow – that it was unreasonable of her to pursue them.  In our view its conclusion that those conditions were met was unimpeachable.  The Tribunal had heard the evidence and was well placed to judge whether there had ever been any reasonable grounds for the allegations made.  It gave particular reasons, cross-referred to its original findings, for its conclusion that the Appellant had unreasonably refused to accept non-discriminatory explanations for the acts of which she complained, when those explanations were plainly correct as a matter of common sense, instead preferring to advance a case of “mass conspiracy” unsupported by evidence.  We have read the Tribunal’s original Reasons, and its conclusions on this point were plainly open to it. 

 

14.         As for those parts of the Appellant’s grounds which are relevant to this aspect:

 

(1) We do not believe that the Respondents’ failure to seek a deposit order, or otherwise to issue any costs warning asserting that the claims were hopeless, is cogent evidence that those claims had in fact any reasonable prospect of success.  Respondents faced with what they believed to be weak claims do not always seek deposit orders.  It is sometimes thought that to do so risks the expenditure of further costs on a diversion which may not, if the judge is timid, succeed, or which may only conduce to further delay and appeals, or which in any event may not deter the claimant.  Such a view may be over-pessimistic – and indeed we regard deposit orders, properly used, as a valuable tool for averting weak claims.  Nevertheless, it is understandable; and that means that the failure to seek an order is not necessarily a recognition of the arguability of the claim.

 

(2) The same applies, but all the more so, to the fact that the Tribunal apparently never made any observations at the case management discussions or pre-hearing reviews to the effect that the claim appeared weak.  Employment Judges are increasingly encouraged to get parties to focus early on on the viability of their respective cases; but whether in a particular case to make observations about the weakness of the claim (or indeed the defence) or some part of it always involves an element of judgment and is often not a straightforward question (cf. Gee v Shell UK Ltd [2003] IRLR 82), and no conclusion can be drawn from an omission to take that course in a particular case.

 

(3) As regards the Respondents’ attempts to settle, it is, alas, notorious that the costs of defending a long claim against a persistent claimant can be such that, from a purely commercial point of view, it makes more sense to pay a substantial sum by way of settlement than to pay the lawyers.  The present case is a stark illustration.  The Respondents’ offer of £95,000 may seem extraordinary to settle a case on which they ultimately won so comprehensively (though NB that the offer covered also the two claims which remain outstanding); but it is dwarfed by the actual costs incurred, which, as noted above, are put at £260,000.  In a letter dated 13 June 2011 forming part of the settlement negotiations referred to above the Respondents’ solicitors said in terms that it was their view that there was no merit in these claims and that an offer was only being made “on a commercial basis” because of the prospect of a twenty-day hearing. 

 

(4) The fact that the claim depended on issues of fact about the motivation of the individual Respondents or other Council employees did not automatically mean that it was reasonable for the Appellant to believe that she had a good chance of success.  It depends on the facts and the allegations in the particular case.  If, as the Tribunal found, there was no evidence to support the interpretation put by the Appellant on the acts of which she complained, all of which had in fact more obvious innocent explanations, to assert that the claims were “fact-sensitive” is nothing to the point.  Nor does it make any difference that some questions were only finally resolved as a result of the evidence at the hearing.  That will generally be the case; but it does not mean that a reliable assessment of the prospects of success could not have been made at an earlier stage, as the Tribunal evidently believed was the case here.

 

(5) As for the assertion that the Respondents’ witnesses committed perjury, the Tribunal did not believe that that was the case.

 

(6) It is not the law, as the Appellant asserted before the Tribunal, that the issue of whether a claim is misconceived depends on whether the claimant genuinely believed in it.  It was no doubt in order to meet that point in the Appellant’s submissions (see paras. 7 (2) and (3) above) that the Tribunal referred to Scott (see para. 8 above).  It should also be noted that Cartiers, to which the Appellant attaches weight, is not authority for a subjective test.  It was not in fact concerned with the rule in its present form at all; but, in the context of whether a claim could be characterised as “frivolous”, this Tribunal said that it was necessary “to look and see what [the claimant] knew or ought to have known if he had gone about the matter sensibly” (per Phillips J, at para. 18 (p. 317) – our emphasis).

 

15.            The only criticism which we have of the Tribunal’s reasoning on this aspect is of its reference at para. 10 to the Respondents’ solicitors’ letter of 8 November 2011.  We agree with the Appellant that that letter was beside the point, for the reasons summarised at para. 7 (4) above.  But this has no impact on the reasoning in para. 9 of the Reasons or elsewhere in para. 10.

 

16.            We accordingly turn to the challenge to the second stage – that is, to the exercise of the Tribunal’s discretion.

 

17.            We start with the fact that the Respondents never applied for a deposit order and that neither they nor the Tribunal ever warned the Appellant that in their view the claim was misconceived or gave a costs warning.  We have already considered those facts from the point of view of what, if any, implication can be drawn from them about the arguability of the case; but the question here is whether the absence of any such warning made it unjust for the Tribunal to exercise its discretion to award costs.  (Theoretically it could also go to the quantum of the costs, but in practice this is an “all or nothing” point.) 

 

18.            We do not believe that as a matter of law an award of costs can only be made where the party in question has been put on notice, by the making of a deposit order or otherwise, that he or she is at risk as to costs.  Nor, however, do we believe that the absence of such notice, or warning, is necessarily irrelevant: indeed it was expressly relied on in a recent decision of Mr Recorder Luba QC as one of the reasons for not exercising a discretion to award costs under the cognate jurisdiction in this Tribunal – see Rogers v Dorothy Barley School (UKEAT/0013/12), at para. 9.  What, if any, weight it should be given in any particular case must be judged in the circumstances of that case; and it is, as we have already observed, regrettable that the Tribunal does not expressly address the question. 

 

19.            In our view the fact that the Appellant had not been put on notice was not in the present case a sufficient reason for withholding an order for costs which was otherwise justified.  In the first place, we do not believe that it would be just to deprive the Respondents of an award of costs because they had not sought a deposit order: there may, as discussed above, be good reasons why a party may prefer not to take that course.  If there is any criticism, it could only be that they did not write to her at an early stage setting out the weaknesses in her claims and warning that a costs order would be sought if they failed.  But what is significant is that the Appellant at no stage in her submissions to the Tribunal or before us asserts that if she had been given such a warning she would have discontinued her claim; and nor in any event does it seem to us that any such assertion would have been credible.  She was, as the Tribunal emphasises, convinced, albeit without any rational or evidential basis, that she was the victim of a conspiracy and of a serious injustice, and it seems to us highly unlikely that a letter from the Respondents, however well-crafted, would have caused the scales to fall from her eyes.

 

20.            In this connection, we should address head (k) in the Appellant’s grounds as summarised above.  Marina Waters was one of the individual respondents in the two claims which as at 19 April 2012 had yet to come to a hearing.  She is an occupational health consultant who had been asked by the Council to carry out a stress risk assessment on the Appellant.  At the hearing on that date Employment Judge Balogun dismissed the claim against her on the basis that it was misconceived: the point was that since she was neither an employee of the Council nor its agent there was no basis in law on which she could be individually liable.  An application was made for costs.  Judge Balogun invited written submissions on that application and in due course delivered a ruling, which was sent to the parties on 24 May 2012, refusing to make an order.  She said:

 

“5. In considering whether to exercise my discretion to make an award of costs, I have considered the extent to which the Claimant was warned of the potential for such an order if she continued to pursue her claim.  The original application of 30 September 2011 was based solely on the Claimant’s alleged vexatious conduct, which I have already rejected as a basis for an award.  The Claimant did not receive advance warning that the Fourth Respondent considered her claim to be misconceived or that an application for costs would be made on that basis.  In those circumstances, I do not consider that it would be just to make an award of costs and the application is therefore refused.”

 

The Appellant says that that reasoning applied equally to the claims in these three proceedings, and that the Judge’s approach was inconsistent.  We do not agree.  The circumstances were not the same.  The claim against Ms Waters was dismissed at an early stage on a discrete application based on a particular point of law.  The fact that she had no prior notice that that point would be taken against her was in those circumstances an entirely legitimate factor for the Judge to take into account.

 

21.            We turn to the settlement offers made by the Respondents.  Again, we are satisfied that the fact that an offer, even a substantial offer, has been made to settle a claim does not necessarily render it unjust for the respondent subsequently to contend that the claim was misconceived.  For the reasons already given, respondents may well wish to compromise even an unmeritorious claim for pragmatic reasons, and it would not be fair if that fact were then deployed against them as having encouraged the claimant to believe that his or her claim was stronger than it was.  Generally, the responsibility for assessing the strength of his or her case ought to lie with the party advancing it.  To treat the fact that a settlement offer has been made as a reason for withholding a costs order would also create an awkward tension with the established position that respondents may in some circumstances themselves rely on the unreasonable refusal of a settlement offer as a reason why the pursuit of a claim constitutes unreasonable conduct (though, as noted, that was not done in the present case): see Kopel v Safeway Stores plc [2003] IRLR 753.  We do not go to the opposite extreme: that is, we accept that there may be cases where a tribunal may properly withhold, or reduce, a costs award that might otherwise have been made wholly or partly because the claimant has been encouraged by a settlement offer to believe that his or her claim is stronger than it was.  But we do not believe that this was such a case.  The offers were, as already noted, made explicitly on a commercial basis, and the last of them was accompanied by a costs warning.  We think it highly unlikely that the making of the offers was in any way decisive in leading the Appellant to pursue her claim further. 

 

22.            The Appellant also alleged that the Respondents had acted in bad faith in the settlement negotiations.  What she objected to was the late introduction in the draft of a settlement agreement sent to her by the Respondents’ solicitors of a clause in which the Council reserved its right to make a “safeguarding referral”. The clause was taken out when she objected and a clause inserted making it clear that the Council was aware of no matters requiring such a referral but the covering letter pointed out that the Council could not contract out of its statutory responsibilities.  The Appellant relies on this episode as evincing an intention to threaten her.  We do not believe that it can reasonably be interpreted in this way.

 

23.            As for the Appellant’s head (e), she focuses on para. 14 of the Reasons and in particular on the Tribunal’s observations that in the current climate of austerity “it cannot be just for the Claimant to walk away with no financial repercussion”.  We do not believe that this demonstrates that the Tribunal was adopting a “punitive” approach.  We are bound to say that we do not think much of the point which the Tribunal appears to have been making: if the Appellant had caused the Respondents – in practice, the Council – to incur very large costs in defending a misconceived claim, the justice of requiring her to contribute to those costs is essentially the same whatever the financial climate.  But the fact that the Tribunal was tempted into this little piece of rhetoric does not mean that it was concerned with punishment rather than compensation: at most it was reinforcing the argument that justice requires compensation.

 

24.            As for head (g), although it was accepted throughout the proceedings that the Appellant suffered from depression to an extent that constituted a disability within the meaning of the 2010 Act, that would not as such be a reason for withholding an order for costs that would otherwise be just.  The Appellant in her submissions to the Tribunal did not identify any specific consequence of her ill-health that might have been relevant in this regard.  She was at all times responsible for her actions and decisions and in fact appears from the materials that we have seen to have been functioning well throughout the proceedings.

 

25.            As for head (h), it is established that the fact that a party is unrepresented is a relevant consideration in the exercise of the discretion under rule 40.  In AQ Ltd v Holden (UKEAT/0021/12) this Tribunal (HH Judge Richardson presiding) said, at para. 41:

 

“The threshold tests in r 40(3) are the same whether a litigant is or is not professionally represented. The application of those tests should, however, take into account whether a litigant is professionally represented. A tribunal cannot and should not judge a litigant in person by the standards of a professional representative. Lay people are entitled to represent themselves in tribunals; and, since legal aid is not available and they will not usually recover costs if they are successful, it is inevitable that many lay people will represent themselves. Justice requires that tribunals do not apply professional standards to lay people, who may be involved in legal proceedings for the only time in their life. As Mr Davies submitted, lay people are likely to lack the objectivity and knowledge of law and practice brought by a professional legal adviser. Tribunals must bear this in mind when assessing the threshold tests in r 40(3). Further, even if the threshold tests for an order for costs are met, the tribunal has discretion whether to make an order. This discretion will be exercised having regard to all the circumstances. It is not irrelevant that a lay person may have brought proceedings with little or no access to specialist help and advice.”

 

But Judge Richardson continued:

 

“This is not to say that lay people are immune from orders for costs: far from it, as the cases make clear. Some litigants in person are found to have behaved vexatiously or unreasonably even when proper allowance is made for their inexperience and lack of objectivity. ...”

 

We respectfully agree with what is said in both paragraphs.  In the present case the Tribunal was of course well aware that the Appellant had been unrepresented throughout, and there is no reason to suppose that it did not take that fact into account.  It is worth observing that the basis on which the costs threshold was crossed was not any conduct which could readily be attributed to the Appellant’s lack of experience as a litigant: it was her fundamentally unreasonable appreciation of the behaviour of her employers and colleagues.

 

26.            We come finally to the question of the Appellant’s means.  The Tribunal was not in fact obliged as a matter of law to have regard to her ability to pay at all: rule 41 (2) gave it a discretion.  However, it chose to do so (no doubt mindful of the decision in Jilley v Birmingham and Solihull Mental Health NHS Trust (UKEAT/0584/06)); and it has not been suggested that it was wrong in that regard.  As appears from paras. 12-13 of the Reasons, the Tribunal accepted that the Appellant was not at present in a position to make any substantial payment, but it took the view that there was a realistic prospect that she might be able to do so in due course, when her health improved and she was able to resume employment.  It referred to the judgment of Rimer LJ in Arrowsmith v Nottingham Trent University [2012] ICR 159, where he upheld an award of costs against a claimant who on the evidence was unable to pay them on the basis – in part at least – that “her circumstances may well improve”: see para. 37 (pp. 169-170).  The Appellant does not say that that approach was wrong; but she says that its application in the circumstances of the present was perverse.  She says that there is no realistic chance that she will ever be in a position to pay anything like the (say) £60,000 which the Tribunal’s order represents.  She referred in her written and oral submissions to her continuing mental ill-health; to the obstacle which the stigma of dismissal presents to her finding other employment; to her inevitable de-skilling the longer she is away from work; and to the present climate of cuts in the public sector.  She said that she told the Tribunal in evidence that even if she were eventually to get back into employment she could not expect to earn at the level that she was at at the time of her dismissal, i.e. around £30,000 p.a.

 

27.            This part of the Appellant’s submissions has given us some pause.  It is not hard to accept that she may face real difficulties getting back into employment in the foreseeable future, let alone at her pre-dismissal salary levels.  And even if she were in fact able to do so a liability of this size – representing, on our assumed figures, twice her pre-tax earnings at the date of her dismissal – would take very many years to pay off.  It is a serious matter to saddle an unsuccessful claimant with a liability of this kind.  In the end, however, we can see no error of law in the Tribunal’s decision.  Our reasons are as follows.

 

28.             The starting-point is that even though the Tribunal thought it right to “have regard to” the Appellant’s means that did not require it to make a firm finding as to the maximum that it believed she could pay, either forthwith or within some specified timescale, and to limit the award to that amount.  That is not what the rule says (and it would be particularly surprising if it were the case, given that there is no absolute obligation to have regard to means at all). If there was a realistic prospect that the Appellant might at some point in the future be able to afford to pay a substantial amount it was legitimate to make a costs order in that amount so that the Respondents would be able to make some recovery when and if that occurred.  That seems to us right in principle: there is no reason why the question of affordability has to be decided once and for all by reference to the party’s means as at the moment the order falls to be made.  And it is in any event the basis on which the Court of Appeal proceeded in Arrowsmith, albeit that the relevant reasoning is extremely shortly expressed.  It is necessary to remember that whatever order was made would have to be enforced through the County Court, which would itself take into account the Appellant’s means from time to time in deciding whether to require payment by instalments, and if so in what amount. 

 

29.            On that basis the question for the Tribunal – given, we repeat, that it thought it right to have regard to the Appellant’s means – was essentially whether there was indeed a reasonable prospect of her being able in due course to return to well-paid employment and thus to be in a position to make a payment of costs; and, if so, what limit ought nevertheless be placed on her liability to take account of her means in that scenario and, more generally, to take account of proportionality. As to the former question, views might legitimately differ as to the probabilities, but the Tribunal was well-placed – better than we are – to form a view that there was indeed a realistic prospect, and we see no basis on which that judgment can be said to be perverse.  As to the latter, we see the force of the argument that it would be pointless, and therefore not a proper exercise of discretion, to require the Appellant to pay more, even in the optimistic scenario envisaged, than she could realistically pay over a reasonable period; and we have been concerned whether the cap was simply set too high.  But those questions of what is realistic or reasonable are very open-ended, and we see nothing wrong in principle in the Tribunal setting the cap at a level which gives the Respondents the benefit of any doubt, even to a generous extent.  It must be recalled that affordability is not, as such, the sole criterion for the exercise of the discretion: accordingly a nice estimate of what can be afforded is not essential.  Approached in that way, we cannot in the end say that the limit of one-third of the Respondents’ costs – whether that comes to £60,000 or some other figure in the range – was perverse.  It was of course rough-and-ready, but there is in truth no means of arriving at a more precise figure.  We cannot conscientiously say that a proportion of, say, a quarter would have been right while a third was wrong.  The Respondents are the injured parties, and even if the order does indeed turn out to be recoverable in full at some point in the future, they will be out-of-pocket to the tune of two-thirds of their assessed costs: it is difficult to say in those circumstances that the award is disproportionate.  It is also worth bearing in mind that until the introduction of the current Rules in 2004 tribunals were positively prohibited from taking into account the means of the paying party (as is the case in ordinary civil litigation) – see Kovacs v Queen Mary & Westfield College [2002] ICR 919, esp. per Simon Brown LJ at para. 16; so there is nothing axiomatically unjust in such a state of affairs.  (We have considered whether it might not have been preferable for the Tribunal to express its cap as a specific sum rather than as a proportion of the costs, but the point was not argued before us; and we can in any event see nothing wrong in principle in the Tribunal taking the course it did even if the alternative of identifying a specific sum might have had advantages.)

 

30.            We should mention for completeness that we raised in the course of argument the question whether the Tribunal could or should have taken into account the possibility that the Appellant might recover substantial compensation in her remaining claims.  It might seem unjust if in that eventuality the Respondents could not recover out of any such compensation their costs incurred as a result of the present claims being misconceived.  Of course it would have been wrong for the Tribunal to attempt any kind of evaluation of the prospects of success in the outstanding claims; but the mere fact that they were outstanding might have been a relevant factor in the exercise of its discretion.  However, since the point was not taken before the Tribunal we do not think that we should attach any weight to it here. 

 

31.            We accordingly dismiss this appeal.


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