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Daleside Nursing Home Ltd v Mathew

Daleside is a recent EAT decision on costs.

Mrs Mathew brought a direct race discrimination case, along with claims for unfair dismissal and wages. The key part of the race discrimination claim was an allegation that a manager had called her a ‘black bitch.’ The manager denied it, and the tribunal believed her.

Daleside applied unsuccessfully for its costs, and appealed to the EAT.

The EAT held that the race discrimination claim had been based on a ‘deliberate and cynical lie’. This was not explicitly stated by the tribunal, but was inescapable given their findings. It was impossible for Ms Mathew to have mistaken what her manager had said. The inevitable conclusion was that she had made up a serious allegation of racial abuse. The EAT decided that the tribunal had been wrong to refuse costs, since bringing a claim based on a lie was unreasonable conduct.

This is a difficult decision, because it highlights a paradox in the costs regime in the employment tribunals. One of the advantages of the employment tribunal is that it is an accessible forum in which costs are rarely awarded. This is important to provide employees with access to justice. If costs were routinely awarded to the winning party, claimants who couldn’t afford to risk having to pay their employers’ legal costs would be deterred from enforcing their rights.

On the other hand, the EAT’s logic is difficult to attack. To bring a claim based on assertions that you know to be untrue must be unreasonable. It’s hard to imagine what else it could be.

Of course, not all cases involve deciding that one party is lying. Tribunal cases can be broadly divided into two types. The first type are those where the basic facts are agreed and the argument is about motives, reasonableness and consequences. Many unfair dismissal claim fall into this group. The parties agree that the the claimant was in a fight and that the employer dismissed him. There may be considerable dispute about the details (the employee says that he was provoked, the employer denies this) but most of the case will be about whether it was reasonable to dismiss in these circumstances.

The second type of cases are those where the basic facts of the claim are disputed. A lot of harassment claims (including Daleside) fall into this category. The employee says he was bullied; the employer says that he was not. Their accounts are mutually exclusive and the tribunal has to decide what happened.

In the first type of case the tribunal rarely has to decide that one party is lying – and tribunals will normally avoid making such a finding unless it is necessary. But in the second, they have to. So in this type of cases, when a claimant loses, he may face a costs application on the basis that his claim was founded on lies.

Logically this makes sense. But real cases are rarely so cut and dried. They are decided on the balance of probabilities and, often, it can be difficult to find the truth. Tribunals probably get it right more often than they get it wrong, but nobody believes they are perfect. Even if they are right 95% of the time, a 5% error rate potentially means a lot of unjustified costs orders.

It is difficult to tell whether Daleside will result in a significant change to the tribunals’ approach to costs. I suspect that it will not. The idea that costs are unusual is well entrenched. Practice is likely to change slowly, if at all. But applications on a similar basis to Daleside are likely to become more common.

If you face an application like this, how do you resist it?

The decision on costs is a two stage one. The tribunal must first consider whether they have jurisdiction to award costs. In this context this means they must decided whether the case was brought unreasonably. Then they must decide whether to award costs. This second stage was not explored in Daleside and may even have been overlooked.

The first argument against a cost order relies on the principle that costs orders should be rare and that tribunals should not award them unless they can be reasonably sure that a claim was not brought in good faith. This can be put in two ways.

At the first stage, the tribunal should recognise that their approach to costs should be different to their approach to liability. On liability they are asking: has the Claimant proved his case? In relation to costs they are asking: can the Respondent show that the Claimant has acted unreasonably? At the costs stage the respondent should therefore be able to point to some clear evidence of wrongdoing, rather than merely relying on the Claimant’s failure to prove his case. A failure to prove one thing does not necessarily prove the reverse.

A similar argument can be advanced at the second stage. At this point the argument is essentially a policy one. It is that, since it is important that tribunals remain open to claimants without much money, costs orders should be rare. The tribunal should therefore to exercise its discretion to award costs with restraint, in the absence of clear evidence of wrongdoing. The desirability of punishing a lying party and recompensing the other side should be balanced against danger of hampering access to justice by discouraging other claimants.

It is important to realise that neither of these arguments is straightforward. Like many clever legal arguments, they are likely to work best where the tribunal is already convinced of the underlying merits of your position.

Therefore, you should be ready to fall back on the final argument. This is the more conventional one based on means. Many claimants are simply not in a position to pay a costs order if one is made, and the tribunal may take means into account both when deciding whether to make an order and when setting the amount. In any case where costs might be sought, and means are an issue, employees should be ready to present the tribunal with their financial position.

Daleside Nursing Home Ltd v Mathew

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