UK: Costs In Tribunals - What Employers Should Know

Costs awards in Employment Tribunals do not 'follow the event': a losing party will not automatically find themselves having to pay the other party's costs of the litigation. However, the Tribunal has discretion to order costs where a party, or their representative, has acted "vexatiously, abusively, disruptively, or otherwise unreasonably" in the bringing or conducting of the proceedings, or the claim had "no reasonable prospect of success" (Rule 77 of the Employment Tribunals Rules of Procedure 2013).

We take a look at some recent cases on this issue – some will reassure employers, but some may make them wonder if pursuing costs against an unreasonable Claimant is worth it...

So what is unreasonable conduct - does it include lying to the Tribunal?

Parties must be careful to conduct themselves during litigation in a reasonable manner to avoid costs being awarded against them: ensuring they comply with Tribunal directions, not putting unreasonable pressure on a litigant to settle, for example.

But what about lying to the Tribunal – does that constitute unreasonable behaviour?

This was considered by the EAT recently in Kapoor v the Governing Body of Barnhill Community High School, a case in which the Claimant was found to have presented false evidence in her discrimination claim. The Tribunal said that "to conduct a case by not telling the truth, is to conduct a case unreasonably, it is as simple as that...".

No doubt many employers would agree with these words, especially those who have ever had the misfortune to encounter a Claimant willing to do anything to succeed at Tribunal, even lie in the witness box.

But the EAT did not agree. It found that the Tribunal had not properly applied its discretion, and had instead jumped to conclusions that the false evidence automatically constituted unreasonable behaviour. This was not acceptable, and so the EAT allowed the Claimant's appeal against the costs award.

The costs application will therefore be heard by the Employment Tribunal again. Of course, that Tribunal might come to the same conclusions (that the Claimant's lies did in fact constitute unreasonable behaviour), but the case highlights that Tribunals must consider and apply their discretion properly in each case. Employers and their representatives should, by all means, make (and strongly pursue) costs applications where a Claimant has clearly lied – but to be sure to increase all chances of success in such applications, it is important to make very clear to the Tribunal why such behaviour is unreasonable.

What about Tribunal fees? Will they be included in a costs award?

In the recently reported case of Portnykh v Nomura International Plc, the EAT has considered the issue (seemingly for the first time), of reimbursement of Tribunal fees following an appeal.

Since July 2013, Claimants have had to pay fees to lodge a claim or appeal and for their case to be heard. The High Court has recently rejected a judicial review contesting the introduction of such fees, and so it looks like the regime is here to stay. In considering its decision, the High Court noted that the government's guidance on the fee regime makes clear that "the general position" in the Tribunals will be for losing respondents to reimburse successful claimants' fees – something employers should be aware of when entering into litigation.

Further, under the Employment Appeal Tribunals Rules of Procedure 2013, where an appeal is successful the EAT is able to make a costs order against the Respondent, requiring it to pay the cost of any appeal/hearing fees to the Appellant.

The EAT in Portnykh found that it was only necessary to take a 'broad' view of whether the appeal was 'successful' – whilst it is important to consider whether the appellant has succeeded on each individual point argued, what is more important is whether, overall, the arguments have been largely accepted. Employers facing an appeal from an individual should take note that, if the appellant is broadly successful (even if he or she loses on one or two minor points), it is likely that the employer will be required to reimburse their fees.

Because in this case the appeal was broadly successful (that is to say most, if not quite all, of Mr Portnykh's arguments were accepted by the EAT), it was held that the appeal fees should be paid by the employer. It did not matter that the employer could not be faulted for having defended the appeal, nor did it matter (in this case at least) how the Claimant had conducted his case prior to the appeal stage. The EAT looked at whether the employer could pay and, finding that it could, made the order for it to do so.

Given the wide interpretation in this case of what constitutes a 'successful' appeal, therefore, employers responding to appeals might be right to be worried about an increased risk of having to cover Tribunal fees. Although in theory at least, the principle works both ways (employers could find themselves appealing a judgment and seeking to recover fee costs from an individual), in practice the individual is of course much less likely to be able to pay (and so much less likely to be ordered to by the EAT).

The case did make clear that it would not be appropriate to award fee costs where a remission application is granted (and indeed the costs order was in this case made subject to the outcome of such application), but of course the remission process (reducing or waiving fees) applies only to individuals, and in any event (at least since the introduction of a two-stage test of income and assets in October 2013) the thresholds may be quite difficult to meet. It seems likely that most individuals will have to pay fees, and so most employers responding to an appeal are likely to face an increased risk of covering those fees if the appeal is successful.

Is there any good news for employers?

Yes – it is not all doom and gloom! Costs will always be assessed on their own facts, with Tribunals applying their discretion in each individual case. That does not mean, though, that they are not able to consider what previous Tribunals have done in similar cases, and there have been a few recent examples of robust cost awards being made against individuals, which are likely to be reassuring to employers.

Firstly, in Vaughan v London Borough of Lewisham, the EAT upheld a costs award of £87,000 against an unrepresented, unemployed Claimant, even though the Respondent did not previously send her a warning that it would pursue her for costs if she continued her claim. The EAT agreed with the Tribunal that the Claimant's discrimination and whistleblowing claims were misconceived, and found that the Claimant should have appreciated this.

Similarly, in Sud v London Borough of Ealing, the Court of Appeal upheld the Tribunal's order that the Claimant should pay 50% of the Respondent's costs (likely to be substantial). Even taking into account the relatively low earnings of the Claimant and her husband and the extent of their debts, the Court found that the costs order was appropriate in the circumstances (not least because the Claimant could ultimately re-mortgage her house and obtain capital).

Two surprising results, perhaps, which are very much dependent on the facts of each case, but certainly judgments which employers can take comfort from, and perhaps refer to when making their own costs applications against unreasonable and vexatious litigants.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.