The test to be applied for ordering deposits Spring v First Capital East Ltd UKEAT/0567/11/LA

Wed, 05 Jun 2013

By Russell Bailey
Although usually sought by employers, either party may apply to a tribunal for an order that the other party pay a deposit as a condition of continuing to argue a particular matter if the tribunal is satisfied that the contentions put forward by that party have “little reasonable prospects of success”: Rule 20(1) of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004. 
The maximum amount that can be ordered was increased from £500 to £1,000 for claims submitted on or after 6 April 2012 but it remains a requirement that the judge considers the ability of the party against whom an order is made to pay it: Rule 20(2). It is also possible that the introduction of fees to employment tribunal litigation may render a deposit order more difficult to achieve.
When making a deposit order, the judge is required to provide written grounds for making an order, in other words, an explanation as to why he considers that there are little reasonable prospects of success on that matter: Rule 20(3).  
The effect of a deposit order is that:
(1)    It is more likely that a costs order will be made at the end of the final hearing if the party against whom the order has been made fails on that matter for the reasons given by the judge: Rule 47.
(2)    The deposit paid stands as security for the costs of the party seeking the order.
However, for most employers, the reality is that the cost of making an application for a deposit will exceed the amount of any deposit ordered. On financial grounds alone, an application is only merited where a deposit order is likely to deter the employee from continuing with his claim at all, or from continuing with his claim on a particularly expensive or time consuming issue. Not only must the employee put up security to continue with his pursuit of an issue; he will also be given an early qualitative assessment of the merits of that issue by a judge. In the appropriate case, therefore, it can be a useful tool in the employer’s armoury.
Commonly, applications for a deposit order are made in tandem with applications to strike out under Rule 18(7). The statutory tests for those orders are different. A claim or response can only be struck out under Rule 18(7) if the judge is satisfied that any part of a claim or a response has “no reasonable prospect of success”.
In Sharma v New College Nottingham UKEAT/0287/11 Wilkie J appeared to indicate that those tests involved the same approach and overturned the judge’s decision to order a deposit on the ground that factual disputes should only be determined at a full hearing. He said:
“In my judgment, it would be illogical to require an employment judge to have a different approach, depending on whether he is considering striking out, or making an order for a deposit as either order is, on any view, a serious, potentially fatal, order.“
That caused some concerns amongst practitioners which were succinctly expressed in an article entitled “The decline of the deposit order” written for the Employment Lawyers Association which can be found (for subscribers) at: 
However in Spring v First Capital East Ltd UKEAT/0567/11/LA Supperstone J rejected the approach taken by Wilkie J in Sharma and re-affirmed the approach set out be Elias J (as he then was) in Van Rensburg v Royal Borough of Kingston-upon-Thames UKEAT/0096/07.
Supperstone J said:
“In Sharma Wilkie J concluded that the approach to be adopted on disputed facts is the same for a striking out as for an order for a deposit. The decision in Van Rensburg does not appear to have been brought to the attention of the Tribunal in Sharma. In any event, the decision in Sharma provides, in my view, no support for the submission that the test in a strike out claim is the same as that in an application for an order for a deposit. The test on a deposit application is as set out in rule 2(1).”
An ex parte application by Mr Spring for permission to appeal to the Court of Appeal was rejected by Underhill LJ on 26 April 2013.
Therefore it is now clear that the tests for a deposit order and for a striking out are markedly different. The closest analogy is the application for summary judgment under CPR Part 24 where a court may give judgment for either party where there is no sufficient argument to permit the matter to proceed to a full hearing or make a conditional order less than giving judgment where the contentions advanced by one party are improbable. 
Russell Bailey was counsel for First Capital East Ltd at the tribunal and in the EAT.
Please click here to view the profile for Russell Bailey

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