Appeal No. UKEAT/0439/04/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 9 March 2005

Before
HIS HONOUR JUDGE PETER CLARK
MR B R GIBBS
MR P A L PARKER CBE

ANNETTE POWER	APPELLANT

PANASONIC (UK) LIMITED	RESPONDENT

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR JOEL DONOVAN
(Of Counsel)
Bar Pro Bono Unit	
For the Respondent	MR DANIEL OUDKERK
(Of Counsel)
Instructed by:
Messrs Boyes Turner
Solicitors
Abbots House
Abbey Street
Reading
Berkshire
RG1 3BD

SUMMARY

Costs order.  Permissible option applying 2 stage exercise under R14(1) 2001 ET Rules.

HIS HONOUR JUDGE PETER CLARK

1.	Following a long and hard fought contest the Claimant, Ms Power won the battle, in that her complaints of direct discrimination, disability discrimination, unfair dismissal and breach of contract were upheld by the Reading Employment Tribunal and she was awarded compensation and interest totalling £5,855.11 by a decision with Extended Reasons promulgated on 2 December 2003, (the first decision), but lost the war when she was ordered to pay the Respondent’s costs in the sum of £10,000 by a costs order made by the same Employment Tribunal with Extended Reasons on 16 February 2004.  The Respondent is her employer Panasonic (UK) Limited.  Against the costs order she now appeals.

Liability
2.	The Claimant was employed by the Respondent as an Area Sales Manager (ASM) from 5 January 1990 until her dismissal on 4 November1998.  She presented her complaint to the Employment Tribunal on 1 February 1999.

3.	The Respondent disputed her claim to be disabled within the meaning of Section 1 of the Disability Discrimination Act 1995.  That Preliminary issue was heard by an Employment Tribunal on 24 January 2002.  That Employment Tribunal found that she was not disabled.  Against that finding she appealed.  The Employment Appeal Tribunal on 17 September 2002 allowed her appeal and remitted the point back to the Employment Tribunal.  Following a rehearing on 25 Febraury2003 the second Employment Tribunal found that she was disabled by a decision dated 21 March.

4.	The substantive liability and remedies hearing occupied a total of 6 days before an Employment Tribunal chaired by Mrs J Hill sitting to hear evidence on 3-6 November 2003 and thereafter submissions were heard on 2 separate days.  All heads of claim were initially in dispute, although during the hearing the Respondent conceded the breach of contract claim, that is failure to make a payment in lieu of notice on summary dismissal, following an indication given by the Employment Tribunal favourable to the Claimant’s case on that point.  The Employment Tribunal concluded:

(1)	that the Claimant’s dismissal by reason of capability, she had suffered ill-health, was procedurally unfair

(2)	that her claim of direct disability discrimination under Section 5(1) of the 1995 Act was made out.  Her claim under Section 5(2) failed

(3)	as to remedy, the Employment Tribunal awarded

(a)	notice pay in the sum of £2,095.88

(b)	in respect of unfair dismissal, a basic award reduced by 50 per cent due to her contributory conduct in failing to inform the Respondent that she had been banned from driving for 3 years due to driving with excess alcohol, it being a requirement of the ASM post that she had a valid driving licence, of £880.00.  The Employment Tribunal made no compensatory award on the basis that it was 100 per cent likely that she would have been fairly dismissed as a result of losing her licence on or before the actual date of dismissal in November 1998.

(c)	no compensation for loss of earnings arising from the direct disability discrimination.  The award for injury to feelings was assessed at £2,000.00 plus interest, a total of £2,879.23.

5.	The overall award totalled £5,855.11, as we have earlier observed.  That represented a substantial reduction in the sum claimed by the Claimant, which included lost earnings over a 5½ year period put at its highest at £150,000.00, and an award for injury to feelings and aggravated damages, the former in the bracket £15-25,000.00, that is the top end of the middle band suggested by Mummery LJ in Vento, the latter being put at £10,000.00.

Costs
6.	At the end of the first hearing the Claimant sought an order for 50 per cent of her costs to be paid by the Respondent.  The Employment Tribunal dealt with that application at paragraph 105 of their first Decision Reasons in this way:
“105.	The applicant sought 50% of her costs in this case.  The Tribunal did not consider costs to be appropriate.  The case was in fact very simple on its facts.  It had been hampered throughout its entire five year history by the failure on both sides to reduce the matter to its bare bones and to look at what actually happened, chronologically and dispassionately.”
The Respondent did not at that stage make an application for costs.

7.	Following promulgation of the Employment Tribunal’s first decision on 2 December 2003 the Respondent made an application, by letter dated 12 December for a contribution to its costs, put at £100,000.00 overall, limited to £10,000.00.

8.	The basis for the application relied heavily on an offer made by the Respondent to settle the proceedings in the sum of £10,000.00 without admission of liability by letter dated 16 December 2002.  The offer was left open for 21 days.  It was rejected by the Claimant as totally inadequate.  No counter-offer was put forward.  That offer lapsed.

9.	There was no further movement by the parties until after the Employment Tribunal had heard the evidence at the hearing in early November 2003.  On 10 November by letter the Respondent increased their earlier offer to £25,000.00.  That offer was also rejected.

10.	As appears from their reasons for making the costs order the Employment Tribunal focussed on the Respondent’s reasoning in their letter of 16 December 2002 and the Claimant’s response to it.  They considered the Employment Appeal Tribunal decision in Kopel v Safeway Stores Plc [2003] IRLR 753, found that the Schedule of loss put forward by the Claimant was ‘unrealistically optimistic’, given that the Claimant failed to acknowledge the weakness in her claim for lost earnings as a result of her drink driving conviction and loss of her driving licence, and that her approach to negotiations was ‘intransigent’, based on the observations of Mitting J in Kopel.  The Employment Tribunal repeated their assessment of the Claimant, articulated in their first decision reasons, as having a distorted way of looking at events.  In those circumstances they concluded that the Claimant had conducted the proceedings in an unreasonable manner within the meaning of Rule 14(1) of the Employment Tribunal Rules of Procedure 2001 applicable to this case and that the Respondent had put forward a realistic Schedule of Loss; that had the Claimant engaged in meaningful negotiations a 7 day hearing could have been avoided.  Accordingly she should contribute £10,000.00 to the Respondent’s costs.

Costs Orders
11.	Rule 14 of the Employment Tribunal Rules 2001 provides, so far is material:
“Where in the opinion of the tribunal, a party has in bringing the proceedings, or a party or a party’s representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or conducting of the proceedings by a party has been misconceived, the tribunal shall consider making, and if it so decides, may make –
(a)   an order containing an award against that party in respect of the costs incurred by another party;”

We are concerned in this case with unreasonable conduct.  

12.	Certain principles in deciding whether or not to make a costs order in Employment Tribunal proceedings, under a regime which differs from that in the ordinary Civil Courts, may be discerned from the authorities.  They include:

(1)	Costs orders in the Employment Tribunal remain the exception not the rule.  See Gee v Shell UK Ltd [2003] IRLR 82, paragraphs 22 per Scott Baker LJ and 34 Sedley LJ and Lodwick v London Borough of Southwark [2004] IRLR 554, paragraph 26 per Pill LJ.

However, that characterisation has been clearly explained by Burton P in Salinas v Bear Stearns (EAT/596/04.  21 October 2004, unreported).  Statistically, see paragraph 22.2 of the President’s judgment, the proportion of the Employment Tribunal contested cases in which costs orders are made remain low, some 5 per cent on the most recent figures, however, the question is not whether the case is exceptional, but whether the applicant for a costs orders brings himself within Rule 14(1).  In the majority of Employment Tribunal cases, the unsuccessfully party will not be ordered to pay the successful party’s costs.  See McPherson v BNP Paribas [2004] IRLR 558, paragraphs 2 and 25 per Mummery LJ.

However, even if an Employment Tribunal does not use words which have the effect of showing that it appreciates that costs orders are rare, provided it has applied the correct test, no error of law on appeal to this Employment Tribunal will arise – See Salinas paragraph 22).

(2)	Rule 14(1) imposes a 2 stage exercise, first, has the paying party acted unreasonably; if so the Employment Tribunal must ask itself whether to exercise its discretion in favour of awarding costs against that party.  Monaghan v Close Thornton (EAT/0003/01.  22 February 2002.  Unreported), paragraph 22 per Lindsay P.

(3)	Costs are compensatory, not punitive.

(4)	The rule in Calderbank v Calderbank has no place in the Employment Tribunal jurisdiction.  Monagham paragraph 25.  Kopel v Safeway Stores Plc [2003] IRLR 753, paragraphs 17-18, Mitting J.

(5)	The discretion of an Employment Tribunal under Rule 14(1) is not limited to those costs that are caused by or are attributable to the unreasonable conduct found.  See McPherson paragraphs 40-41.

(6)	Where a party has obstinently pressed for some unreasonably high award despite its excess being pointed out and despite a warning that costs might be asked for against that party if it were persisted in, the tribunal could in appropriate circumstances take the view that that party had conducted the proceedings unreasonably.  See Kopel paragraphs 17-18 citing the observations of Lindsay P in Monagham.

(7)	Where a costs order made by an Employment Tribunal is appealed the prospects of success are substantially reduced by the restriction of the right of appeal to questions of law and by the respect paid by appellate courts to the exercise of discretion by the tribunal below.  Unless the discretion has been exercised contrary to principle, in disregard of relevant factors or is just plain wrong, an appeal against a tribunal’s costs order will fail.  See McPherson paragraph 26.

(8)	An appeal court should read the reasoning of the tribunal as a whole and not scrutinise it for error line by line.  See again McPherson paragraph 36.

The Appeal
13.	Mr Donovan advances 16 separate grounds of appeal in his amended grounds on which this appeal was permitted to proceed at a preliminary hearing to this full hearing.

14.	The principal grounds may be summarised as follows:

(1)	The Employment Tribunal failed to take into account the Claimant’s right to seek a declaration as to her rights, regardless of the compensation sought or payable.  He cites Telephone Information Services Ltd v Wilkinson [1991] IRLR 148, where the Employment Appeal Tribunal, Tucker J – see paragraphs 21 and 23 – stated that it was not appropriate to strike out an unfair dismissal claim where the Respondent had offered maximum compensation provided for by law, in the absence of an admission of unfair dismissal by the Respondent employer.

We see the force of that submission in an appropriate case.  However, as Mr Oudkerk points out, it was never a condition imposed by or on behalf of the Claimant for any settlement of her claims that the Respondent admitted liability.  In these circumstances we think the Employment Tribunal was entitled to proceed on the basis that the issue was money, and nothing else.

(2)	The improved offer to £25,000.00 in November 2003.  Mr Donovan contends that the fact of an increased offer indicated the Claimant’s rejection of the original offer of £10,000.00 nearly 12 months earlier was vindicated.  That is one way in which the Employment Tribunal might have approached the matter.  However, see their costs reasons paragraph 19.  The Employment Tribunal in this case considered that the Claimant’s rejection of that offer out of hand merely went to confirm their view, arrived at after a hearing lasting in all 7 days, that the Claimant took an intransigent attitude towards negotiations, resonating with the observation of Mitting J in Kopel, paragraph 21, and Lindsay P in Monaghan, paragraphs 17-18.  In our judgment that was a view which was open to the Employment Tribunal.

(3)	It is further submitted that the Employment Tribunal misapplied the principles in Kopel, to which they were referred.  It is said that the Employment Tribunal looked at the offer of £10,000.00 made by the Respondent in December 2002 in isolation, as if applying the Calderbank principle.  They failed to take into account, on the other side of the scales, relevant factors including the fact that the Claimant had substantially won on liability; issues on which the Respondent had given no ground; her own attempts to initiate negotiations; her entitlement to pursue a declaration as to her rights, in the absence of concessions, to a tribunal hearing and the lack of any warning as to her costs risks from the Employment Tribunal.

We have carefully considered that submission but we reject it.  The Employment Tribunal was not in a position to give any warning to the Claimant as to costs.  They were unaware of the earlier offers before the costs hearing.  We have already stated our view that the Employment Tribunal was entitled to conclude that the Claimant was interested in money, not a declaration of her rights.  They specifically recalled – see Costs reasons, paragraph 7 – their observations at paragraph 105 of the first decision reasons.  They reminded themselves that she had been successful in principle in her claims – see Costs reasons, paragraph 15.  However, they took the view that she had simply failed to address the point that the loss of her licence and refusal to countenance lower paid work for the Respondent fatally undermined her claim for lost earnings, the principal part of her compensation claim.  She could not envisage closing the gap with a view to meaningful negotiations.

(4)	It is submitted that there was no evidence to support the finding – See Costs reasons, paragraph 20 - that meaningful negotiations would have taken place such that the need for a seven day hearing could be avoided.  We disagree.  There was evidence that the Respondent did increase their offer in November 2003 and there is the Employment Tribunal’s overall finding that the Claimant failed to engage in realistic negotiations, given her difficulty over her loss of earnings claim, pointed out by the Respondent’s solicitors in their letter of December 2002.

(5)	Mr Donovan argues that the Employment Tribunal failed to connect the unreasonable conduct as found to the size of the costs award.  We repeat the observations of Mummery LJ in McPherson, paragraphs 40-41, as to the lack of any causal requirement in the exercise of the Employment Tribunal’s discretion under Rule 14(1).  In any event, as Mr Oudkerk submits, the award of £10,000.00 costs was plainly proportionate to the overall Respondent’s costs of £55,000.00 incurred since their letter of December 2002.

15.	We dot propose to further burden this judgment by reference to each of the remaining grounds of appeal advanced Mr Donovan.  Suffice it to say that they do not cause us to alter our conclusion in this appeal which is that we are quite satisfied that the Employment Tribunal correctly applied the 2 stage test, reached a permissible finding that the Claimant was guilty of unreasonable conduct within the meaning of Rule 14(1) and then went on to exercise their discretion within proper limits, taking into account all relevant factors, in making the order for costs which they did.  In short, no error of law is made out.  Consequently the appeal fails and is dismissed.