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Newsletter – costs in employment tribunal cases

There was a useful reminder in the Employment Appeal Tribunal recently of the differences between tribunals and courts when it comes to awarding costs.

As is well known, the general rule in the Courts is that “costs follow the event” – in other words, the winner of a case is usually entitled to an order that the other party pays not only any damages awarded but also the winner’s reasonable legal costs of the winner.

Employment tribunals (and the EAT) work differently. The general rule has long been that they simply do not award costs at all. They have discretion to do so in some cases, notably where a party (or his representative conducting the proceedings) acted “vexatiously, abusively, disruptively or otherwise unreasonably, or that the bringing or conducting of proceedings was misconceived”. However traditionally this discretion has been rarely exercised and each party has generally had to pay its won costs regardless of who won.

In recent years tribunals have become more inclined to order costs than previously. The importance of the recent case mentioned here is that it is a reminder that the wording noted above means that a tribunal can, and sometimes does, award costs against the winner of a case. That is something which is almost unheard of in court cases.

In the case in point a Mr Nicolson won a claim of unfair dismissal but even so costs were awarded against him on the basis that it had been wholly unreasonable of him to bring his claim even though he won. What had happened was this:

Mr Nicolson was employed as a retail manager by Nicolson Highland Wear Ltd, a quasi-partnership between himself and a Mr Chalmers. In October 2008 Mr Chalmers visited the shop and found Mr Nicolson was running a competing business from the same premises. He found that Mr Nicolson had been passing off his own business as the company’s business and was diverting orders to it.

Mr Chalmers summoned Mr Nicolson to a disciplinary hearing on 28th October 2008. This ended in Mr Nicolson’s dismissal. He then brought an unfair dismissal claim in the Employment Tribunal. The tribunal held that the dismissal was automatically unfair because the employer had not complied with the statutory, compulsory, standard disciplinary procedure then in force (revoked/repealed in April 2009) but made a finding of 100% contributory fault against Mr Nicolson.

The company then applied for expenses (costs in English parlance – this was a Scottish case). The Tribunal refused essentially on the grounds that Mr Nicolson’s success in winning his unfair dismissal claim meant that it must have been reasonable for him to have brought it even if he got no compensation.
The company appealed to the EAT and has won. The EAT held that the original Tribunal had erred in holding that the finding of ‘technical’ unfair dismissal was a complete answer to the company’s contention that Mr Nicolson had behaved unreasonably by persevering with a claim in which he was unlikely to recover any compensation. The EAT judge said:

“I am … satisfied that the decision that [Mr Nicolson] did not act unreasonably was perverse. It was plainly wrong. It was reached on the basis of irrelevant considerations. It failed to take proper account of the context ….. The only conclusion open to the Employment Judge was that [Mr Nicolson] acted unreasonably in bringing the claim at all and, having brought it, by persisting with it once he had it spelt out to him that the [company] would be relying on fraud on his part and submitting that, on any view, he should receive no award of compensation. The unreasonableness was such as would have led any reasonable Employment Judge to conclude that an award of expenses ought to be made”.

Martin Malone

By Martin Malone

I'm a solicitor and the chief operating officer at Canter Levin & Berg. I was formerly head of the employment department.
I maintain this website so if you have any suggestions, criticisms or recommendations please email me at martinmalone@canter-law.co.uk.
Outside work my interests include national hunt horse racing, France and French wine and current affairs. I also design and maintain websites.