Costs orders

As a general rule, in the employment tribunal each party has to pay 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 still comparatively rare (they are awarded in around 0.5% of cases that proceed to a full hearing), the number of costs orders by tribunals is increasing alarmingly — up from 487 in 2009-10 to 612 in 2011-12. Eighty-one per cent of all costs orders were against claimants. Employers are more likely than claimants to incur very significant legal costs. There is also an increase in the number of tribunals referring costs “to be assessed” by the County Court (see page 40).

The sort of conduct that can lead to a costs order includes:

• making extensive and unfocused requests for the production of unnecessary documents;

• persisting at length with arguments that the tribunal has warned have no chance of success;

• withdrawing without justification just before the hearing;

• refusing to consider a reasonable settlement offer and insisting on an unreasonable sum;

• insisting on including large amounts of documentation in the bundles where that documentation is not used at the hearing;

• abandoning claims at the last moment;

• seeking last minute amendments;

• not following the tribunal’s guidance about expert medical evidence, resulting in wasted time;

• insisting on including inadmissible (without prejudice) material in the tribunal bundles;

• abusing tribunal members, representatives or the other side;

• intimidation;

• lying; and

• making covert recordings of private deliberations.

Unreasonably failing to issue a grievance, as required by the Acas Code, can lead to an order for costs because it represents a “lost opportunity” to settle the claim (Topic v Hollyland Pitta Bakery [2012] UKEAT 0523/11/1903).

A tribunal should warn an unrepresented claimant that they are at risk of a costs order if they carry on with offending behaviour, and only make the order if the warning is ignored.

An employer should warn an unrepresented claimant in advance that it plans to ask for costs (Rogers v Dorothy Barley School [2012] UKEAT0013/12/1403).

A tribunal can take into account a claimant’s honest belief that their claim had a good chance of success. However, once the tribunal has warned that their case is weak and that they are at risk of a costs order, this argument will be much harder to sustain.

A tribunal should take an individual’s means into account before making a costs order (Howman v Queen Elizabeth Hospital Kings Lynn [2013] UKEAT 0509/12/3004), and if it decides to ignore ability to pay, it must explain why (Doyle v North West London Hospitals NHS Trust [2012] UKEAT 0271/11/0404). One good basis for disregarding ability to pay is lying about means (Shields Automotive Limited v Grieg [2011] UKEAT 0024/10/1507).

A tribunal has the power to award costs up to a maximum of £20,000. Alternatively, it can refer the costs to be assessed either by an employment judge or a County Court. Where costs are assessed, they are not subject to a cap. Tribunals can decide to impose their own limit when making the referral, for example, by only ordering a party to pay the extra costs resulting from a particular example of unreasonable behaviour, or over a particular period of the claim.

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 represented 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.