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What the costs statistics tell us about cost threats

Statistics are a dangerous way of looking at legal issues. While they tell us a lot about claims in general, they don’t tell us anything about an individual case. Since we are almost always concerned with a particular case this means they are often misleading.

For example, say that two claimants, Adrian and Ben, look at the 07/08 statistics on unfair dismissal awards. They both see that the average award is £4,000 (in this case the median is more useful than the mode). Adrian is being offered £2,000; Ben is being offered £7,000. On the basis of the statistics, Adrian decides his offer is much too low; while Ben decides to accept his. What the statistics can’t tell them is that Adrian’s case is weak and worth almost nothing, while Ben’s is strong and worth a lot. Adrian should jump at his offer, while Ben should hold out for more. The statistics obscure this.

Bearing this warning in mind, the statistics can be revealing.

One area that they are interesting is in relation to costs, in particular costs threats. A costs threat is a letter, usually from a respondent, that says something like “Your case is rubbish. If you don’t withdraw it, we will apply for costs”. These letters try to do two things. Firstly, they set up an application for costs later, since the Respondent can say “We told him his case was no good and we were going to apply for costs.” Secondly, they put pressure on the Claimant to withdraw or settle for less than they want. Normally, the latter is the main point of the letter.

There is nothing wrong with this in principle. It is perfectly normal to put pressure on a party to settle and, if a claim is weak, a costs threat is a good way of doing this. But such threats are often abused. Some respondents (and their solicitors) will send out a costs threat regardless of the strength of their case. These letters try to suggest that costs awards are both common and large.

The statistics tell us that neither of these things is true.

Costs awards against claimants are not common; they are rare. 327 were made between 1st April 2007 and 31st March 2008. During the same period 189,303 claims were brought to the tribunal. The two statistics do not quite match up. Some of the costs awards will have been made in cases that started before 1st April 2007; and some of the claims started during the relevant period will have costs orders made after 31st March 2008. Nonetheless, the statistics suggest that costs are awarded against a claimant in about 0.2% of cases brought.

During the same time period, 35,210 claims were dealt with in a hearing (i.e. they were not withdrawn, settled, struck out without a hearing or subject to a default judgment). This suggests that just under 1% of cases that go to hearing lead to costs against the claimant. Just how unusual this is can be seen in the graphic below:

oneinhundred

This does not mean that there is a 1% chance of costs being awarded in any particular case. If you have a reasonable case and run it properly, the chances of costs is infinitesimal. If your case is misconceived and you run it unreasonably, the chances are much higher than 1%. But the common implication from respondents that cost awards are routine is simply not true.

If costs are awarded, how much will you have to pay? Costs threats normally imply that will be £10,000 or only slightly less. In fact, the majority of costs awards against claimants are £1,000 or under. And if you look at costs awards between £1 and £1,000, many are at the low end of that range.

costs

low-costs

Again, these statistics will not help you if you run up vast costs for the other side by acting unreasonably, particularly if you are in a position to pay them. But they do show that, in most cases, any costs order will be much less than the respondent would like you to think.

4 comments

  1. Jenny Shulter

    This is just not true. You should be advising people that Employment Tribunals are more than happy to award costs to respondents without giving a second thought as to whether the claimant can actually pay or not, or if it is indeed justified. I actually think the Employment Tribunal system is one of the most corrupt I have ever come across, and completely amateurish in its approach. Please do not give people false hope – because from my experience it is not something I would ever advise anyone to undertake – however good their case is. There is no law.

  2. Naomi

    We’re grateful for this comment, because it says something important more convincingly than we could.

    We both stand by Michael’s original post. It contains generalisations, and it is in the nature of generalisations that they don’t apply to all cases. But in general, we think the chances of a costs order in a reasonable case properly run are very small indeed.

    What we haven’t said – and don’t mean – is that costs are never awarded against a claimant in such circumstances. Long odds do come up from time to time, and occasionally a claimant who had a perfectly respectable case and ran it in a reasonable way will nevertheless face a costs order. We don’t say this can’t happen – just that it doesn’t happen very often. We know nothing about Jenny Shulter’s circumstances of course, but it is perfectly possible that she was unlucky in this way.

    But it is important to recognise that a lot of claimants do come away from employment tribunal proceedings with a strong sense of injustice. It’s a process that can right wrongs, and sometimes does – but it is also imperfect, and when it fails it generally doesn’t just fail to make things better – it makes them much worse. No claimant should start a claim without first making a clear-eyed assessment of all the risks. We say more about this in Chapter 1 of the book (which you can download from this blog) under the heading ‘Whether to bring a claim.’

  3. Sam

    My firm was awarded £3000 in costs following a clearly misconceived claim which was handled in a highly vexatious manner. However we do not feel like we are true ‘winners’ because the costs claimed for were £8500, and then you factor in all the time spent on it, and basically it wasted everyone’s time. Ironically we’d even offered the claimant £1000 to settle early even though we knew he had no real basis for his claim, and he rejected it! Some people are just driven by greed and stupidity.

    What I would like to know is, what time frame or year do those graphs cover that show amounts awarded?

    • Michael

      The graphs (and all the statistics) are from the Employment Tribunal Report 2007-08. So they cover the year from 1st April 2007 to 31st March 2008.

      You can find all the annual reports on the tribunal website

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