Costs orders

As a rule, each party has to meet its own legal costs, but there are circumstances in which costs may be awarded.

In limited circumstances, a tribunal has the power to issue an order for costs against a party (in Scotland they are called expenses). The power can be exercised where that party or its representative has acted “vexatiously, abusively, disruptively or otherwise unreasonably”, or where the proceedings were “misconceived” (interpreted as having no reasonable prospect of success). Although relatively rare, over the past two years costs orders have become more common, rising from 487 in 2009-10 to 612 in 2011-12.

An employer should always give advance warning if it plans to ask for an order that the claimant be made to contribute to its costs (Rogers v Dorothy Barley School [2012] UKEAT0013/12/1403). A tribunal should take into account the “nature, gravity and effect” of conduct (such as lying, for example) when deciding the size of any costs order (Yerrakalva v Barnsley MBC [2010] UKEAT0231).

Failure to accept an offer of settlement by an employer, which turns out to be at least as much as the sum awarded may lead to a costs order (G4S Security Services (UK) v Rondeau UKEAT/0207/09).

A tribunal is obliged to consider whether or not to take an individual’s means into account before making a costs order. If it decides to disregard someone’s ability to pay, it must explain why (Doyle v North West London Hospitals NHS Trust UKEAT/0271/11/RN). One reason for disregarding evidence of ability to pay could be because the claimant has lied about their means (Shields Automotive Limited v Grieg UKEATS/0024/10/B1).

A wasted costs order can be made against a legal or any other representative who has caused another party, including their own client, to incur costs through their “improper, unreasonable or negligent act or omission”. This only applies where costs have actually been incurred.

Preparation time orders can be awarded in favour of a party who has not incurred any legal costs. This means that unrepresented parties or those presented by voluntary or not-for-profit sector representatives can recover costs for their time spent preparing. These are made in the same circumstances as other costs orders.

Since April 2012, the amount of costs that can be ordered (as well as through preparation time orders) by a tribunal judge without sending the costs to be assessed by a county court judge is up to £20,000. There is no cap on the amount of costs a county court judge can award. In general, employers are far more likely to be awarded costs orders than claimants. In 2011-12, 81% of costs orders were made to employers. In practice, employers are also far more likely than claimants to incur very significant sums of legal costs.

From 2014, the government intends to give tribunals the power to levy an additional financial penalty on employers where it is shown that they are in breach of employment rights. These proposals appear in the Enterprise and Regulatory Reform Act 2013. This penalty will not be paid to the claimant.