Appeal No.UKEAT/0511/04/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 3 November 2004

Before
HIS HONOUR JUDGE PROPHET
MR T HAYWOOD
MR H SINGH

MR ROY LAKE	APPELLANT

ARCO GRATING (UK) LIMITED	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR DAVID BROOK
(of Counsel)
Instructed by:
Messrs Brachers Solicitors
Somerfield House
59 London Road
Maidstone
Kent  
ME16 8JH	
For the Respondent	MR STEVEN LANGTON
(of Counsel)
Instructed by:
Messrs Stewart Law Solicitors
9 Apple Way
Great Baddow
Chelmsford
Essex  
CM2 9HX	

SUMMARY

Practice and Procedure

Costs award quashed because reasoning of Employment Tribunal defective.

HIS HONOUR JUDGE PROPHET

1.	In December 2003, Mr Lake, represented by solicitors, presented an application to the Employment Tribunal at London South against his former employers, complaining of unfair dismissal and wrongful dismissal.  These complaints were resisted, and in addition the respondent submitted a counterclaim in respect of alleged overclaiming of expenses.

2.	The case was heard over three days ie 31 March and 1 and 2 April 2004 at Ashford, Kent.  The Chairman was Mr Sutton and the lay members Mr Corke and Mr Oliver.  The Employment Tribunal found unanimously that both Mr Lake’s complaints failed, but that the counterclaim succeeded, with quantum in that respect assessed at £2,615.22.  The Employment Tribunal also awarded costs to be paid by Mr Lake to the respondent in the sum of £7,500.

3.	Mr Lake presented a Notice of Appeal in respect of the counterclaim and the award of costs.  By an Order dated 24 June 2004, Judge Birtles set the appeal down for a full hearing before the Employment Appeal Tribunal, but there was a subsequent Order by Judge Wakefield dated 21 September 2004 requesting the Employment Tribunal to provide further reasons as regards paragraphs 21-23 of the Extended Reasons.  Those paragraphs related to the counterclaim.

4.	The further reasons were provided as requested, but the Chairman, although not requested to do so, also gave some further reasons to those set out in paragraphs 24-27 of the Extended Reasons relating to the award of costs.

5.	Those paragraphs read as follows:

“24.	The Respondents have claimed costs against the Applicant under  Rule 14 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001.  They point out that the Respondent issued a cost warning to the Applicant on 18 March 2004 in which they offered not to pursue the Applicant for costs if he would withdraw his claim at that stage.  The offer was refused.  They have since incurred costs totalling £24.041.45.  This includes the various steps leading up to the three day hearing and the costs of the hearing itself.
25.	It is the Respondent's contention that the Applicant acted unreasonably in bringing the proceedings and that it was even more unreasonable to continue after 18 March, by which date it should have been apparent to him that the case against him  was overwhelming, and that he stood little or no chance of success.
26.	Having considered the Applicant's response, the Tribunal is of the view that the Applicant’s refusal to accept the “drop hands" offer on 18 March was unreasonable, and that accordingly he should be liable to the Respondent for costs.
27.	The Tribunal orders that the Applicant should pay the Respondent £7,500 costs.  Although this is a substantial sum, it represents a relatively small proportion of the costs which the Respondents were forced to incur by the Applicant's unreasonable pursuit of this case.”

6.	The further reasons read as follows:

“Costs:
4.	As to the costs the Tribunal had before it Rule l4 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001 in force at the time.  As stated in paragraph 24 of the extended reasons, the Tribunal considered that the Claimant had acted unreasonably in pursuing the case after 18 March 2004.  On that date (some two weeks before the hearing) the Respondents had made an offer not to pursue him for costs if he withdrew the unfair dismissal claim.  The offer was refused. The Respondents then incurred a further £24,041.45 costs as a result of this decision, details of the costs are set out in the attached schedule.  Rule14(3)(a) provides that where it thinks fit the Tribunal can make an order for one party to pay to the other a sum not exceeding £10,000.  In this case, in view of the sums involved, and the fact that by that stage it should have been abundantly clear to the Claimant and his advisers that the contemporary documents did not support his version of events which is likely to be disbelieved, the Tribunal was of the unanimous opinion that the claimant had acted unreasonably and that an order for payment of £7 ,500 costs by the Claimant to the Respondent was appropriate in the circumstances.”

7.	The appeal in respect of the counterclaim is no longer pursued, and that, by consent, is formally dismissed.

8.	Thus our full hearing today is confined to the costs order.  Mr Brook of Counsel represents Mr Lake and Mr Langton of Counsel represents the respondent.  We are grateful to both for the quality of their submissions, and for taking us to the authorities which bear on costs orders and the giving of adequate reasons.

9.	We have been correctly reminded by Mr Langton that we cannot lightly interfere with the exercise by an Employment Tribunal of its judicial discretion in respect of awarding costs.  It is, of course also correct that, unlike the civil courts, costs are not usually awarded in respect of employment tribunal cases.  (See e.g. the recent judgment of Mummery LJ in McPherson v BNP Paribas (London Branch) [2004] IRLR 558 (CA)).

10.	The Employment Tribunal in paragraph 24 of the Extended Reasons refer to Rule 14 of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2001, and although they do not specifically set out the Rule, can be presumed to be fully aware of the contents of it.

11.	It is in respect of the reasoning set out further in that and the next three paragraphs of their Reasons to which we must have most regard.  That reasoning makes it clear that the Employment Tribunal was awarding costs against Mr Lake for having acted unreasonably in pursuing the proceedings after the Respondent had offered, in a faxed letter dated 18 March 2004 to his solicitors, not to pursue costs against him (but not to withdraw the counterclaim) if he withdrew his claims within 24 hours.

12.	Despite the submissions to the contrary from Mr Langton, we find unanswerable Mr Brook’s criticism of that reasoning.  Bearing in mind the nature and contents of the offer in the 18 March letter, Mr Brook must be right in saying that a failure to accept it cannot in itself constitute unreasonable action in bringing or pursuing the proceedings.  Parties frequently make threats of costs applications prior to hearings.

13.	Even if the reasoning for awarding costs is supplemented by the unsolicited note, it is still unsatisfactory.  As Mr Brook says, the outcome of the unfair dismissal case had ultimately to be decided by the Employment Tribunal on the basis of hearing all the evidence, the availability of which had not been finalised by 18 March.  No witness statements had been exchanged by then.

14.	What Employment Tribunals usually need to consider in situations of this kind is whether at the conclusion of the case a party can be said to have had an arguable case in any respect (including for example procedural matters), even if they are ultimately unsuccessful.  The reasoning should therefore explain the Tribunal’s findings on that issue.  Although the Employment Tribunal found against Mr Lake, they did not accuse him of lying.  It frequently happens that Employment Tribunals find the totality of the evidence from one side preferable to that from the other side, without it triggering a costs order.

15.	Consequently we accept Mr Brook’s submission that the reasoning of the Employment Tribunal does not support a finding that Mr Lake acted unreasonably within the terms of Rule 14 (1) and accordingly the appeal is allowed, and the Order for costs is quashed.