Recovering costs in Employment Tribunals

Thu, 08 Dec 2011

By Jack Feeny
In Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255, the Claimant had withdrawn a discrimination claim after a PHR on the issue of disability had been adjourned part-heard. It was said that evidence given by the claimant in the PHR had been shown to be dishonest, notwithstanding the fact the Tribunal had not reached a final judgment on the issue, and constituted unreasonable conduct. The Tribunal granted the respondent’s application and ordered the claimant to pay 100% of its costs (a “staggering” £92,500). 
The claimant appealed this decision and the EAT (Mr Justice Underhill sitting alone) allowed the appeal. Underhill J found that the Tribunal had made an error of law in its approach by failing to consider what effect the claimant’s dishonesty had on the respondent’s costs (the aim of an award of costs being compensatory rather than punitive). If it had done so, it would have been bound to find that there were no additional costs caused by the claimant’s unreasonable conduct. Underhill J interpreted Mummery LJ’s judgment in McPherson as a ruling that the Tribunal must look at the “nature, gravity and effect” of the conduct and although there does not have to be a precise causal relationship between conduct and costs identified the “award of costs must, at least broadly, reflect the effect of the conduct in question”.
Mummery LJ in the Court of Appeal lamented such a misinterpretation of his judgment in McPherson. He said his intention had been neither to suggest that “causation was irrelevant” nor that one had to identify a precise causal link. The rule is a general one that the Tribunal should look at the “whole picture” including identifying the conduct in question and what effects it had. The issue of causation should not be considered in isolation. 
Mummery LJ therefore overturned Underhill J’s decision to the extent that he did not agree that the Tribunal had erred in making any award at all. However, he reduced it to 50% to reflect the criticisms of the respondent’s conduct during the litigation and, as with McPherson, did not allow for any costs incurred prior to the unreasonable conduct arising.
This decision confirms that the Tribunal has a broad discretion when considering making an award of costs for unreasonable conduct and, although identifying the causal link is not determinative, the costs should be looked at within the context of the phase of proceedings during which the conduct arises.

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