Tribunal costs orders – claimants beware

8 July 2020

In recent months we have seen exceptionally high Employment Tribunal (ET) costs orders against unsuccessful claimants. We consider two reported cases below, with important lessons for ET claimants, particularly regulated professionals.
 

In ET cases the general rule is that each party is responsible for its own legal costs. Costs orders are the exception, not the rule. However, the ET has wide discretionary powers to award costs in various circumstances, including where a party has acted ‘vexatiously, abusively, disruptively or otherwise unreasonably’ in the proceedings; or if any claim or response had no reasonable prospect of success.

Radia

Last year we reported on the Employment Appeal Tribunal (EAT) decision in Radia v Jefferies International. The EAT confirmed that a financial services company was entitled to dismiss a senior employee for not being “fit and proper”. The FCA’s fit and proper test requires annual assessment of honesty, integrity and reputation, with one relevant factor in the FCA Handbook being whether a person has been censured or criticised by a court or tribunal (for further details see here). During his employment the Claimant had brought ET claims of disability discrimination which failed on all counts. The judgement included critical findings on the credibility and evasiveness of the Claimant as a witness, and found that the Claimant had misled the Tribunal.

It has now emerged from a 2nd EAT judgement that the consequent ramifications for the Claimant did not end with termination of employment for not being fit and proper.  They also included a costs order against him in respect of the employer’s costs in his unsuccessful disability discrimination claim. Those costs were due to be assessed but the 2nd EAT judgement indicates that they were in the region of £700,000 (although the employer was prepared to cap its claim against the Claimant at £550,000). 

The basis of the ET’s costs order – upheld by the EAT – was that the claims had no reasonable prospect of success and that the Claimant knew (or ought reasonably to have known) that.  In reaching this conclusion the ET held that:

  • The Claimant unreasonably conducted the claim by deliberately giving misleading and/or untrue evidence in relation to certain central issues (for example: stating that he weighed 50-60kg on leaving hospital after treatment for leukaemia when the evidence showed that he in fact weighed over 80kg at that time; and alleging that he had been forced to miss most of a family holiday when he had not);
  • the complaints as a whole had no reasonable prospect of success on their merits and the Claimant knew (or should have known) this from the outset (as evidenced by his lack of credibility as a witness and the fact he first raised complaints of disability discrimination –going back five years – during severance discussions with a view to bolstering his bargaining position);
  • the Claimant behaved unreasonably in continuing with his claims after he received a costs warning letter from the respondent (which he did not respond to); and
  • the fact that the Claimant’s legal expenses insurance had been maintained throughout the litigation did not mean that costs could not be awarded against him since the insurer could only base its decision on whether to maintain cover on what it was being told by the Claimant and his advisers.

 

Brooks

This case involved a consultant surgeon who brought whistleblowing claims against his employer and lost.  He claimed he made 18 protected whistleblowing disclosures resulting in 40 detriments.  However, his claim failed because he was unable to establish that any of the alleged detriments occurred because he made those disclosures. 

The respondent applied for a costs order and the Tribunal held that the claimant had presented a case which had no reasonable prospect of success and acted unreasonably in pursuing that case over a very lengthy hearing (27 days).  It therefore concluded that the claimant should be liable for the respondent’s costs, which were estimated to be in the region of £170,000.  Mr Brooks appealed this decision to the EAT and lost.

The Tribunal’s decision was based on its findings that:

  • the claimant was not an impressive witness and he sought to “embellish his evidence” in both his witness statement and in cross examination;
  • the claimant was shown to be distorting the truth in relation to a central theme of his evidence;
  • although not being deliberately untruthful or dishonest, the claimant had a distorted perception about what in fact happened and why; and
  • many of his allegations were very weak and had no reasonable prospect of success.

The EAT reiterated the well-established principle that since a decision on costs involves the exercise of discretion, it will rarely interfere on appeal (and it refused to do so in this case).

 

The key lessons

In both these cases, the claims not only failed, there were serious adverse findings against the Claimant. This shows that such findings not only threaten to cause long lasting career and reputation damage, but can also result in substantial costs awards. It is therefore particularly important for those working in regulated professions (such as medicine, finance and law) to take real care in the conduct of litigation.

These cases also demonstrate that, although costs awards remain the exception not the rule, Tribunals will not refrain from making significant costs orders against claimants where they find that proceedings have been brought or conducted unreasonably and/or in circumstances where the claims have no reasonable prospect of success.

Further information

If you would like any further information or advice about the issues  explored in this blog, please contact Andreas or another member of our employment law team.

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