The Court of Appeal has handed down a short decision in St Albans’ Girl School v Neary declining to award costs against a claimant who lost in the employment tribunal, won in the EAT, and then lost when his employer appealed to the Court of Appeal.

The decision is a bit surprising, because the normal rule in the Court of Appeal is that costs ‘follow the event’ – that is, if you lose, you pay the other side’s costs. But in Neary Lady Justice Smith said:

Mr Neary began proceedings in a cost-free jurisdiction. He lost. On the state of authority in the EAT, he was justified in bringing an appeal. Again, he was in a cost-free jurisdiction. He won. Because St Albans (reasonably) wished to overturn that line of authority, the case came to the Court of Appeal. There Mr Neary was pitched against his will into a cost-bearing jurisdiction. It would have been very hard on him if he had had to cave in so as to avoid the risk of costs. In the event he lost but only because St Albans was able to persuade us that the line of EAT authority had developed wrongly.

If you have won in the EAT, and you then face an appeal by your employer, you can take some comfort from this. Even if you lose in the Court of Appeal, you may not have to pay your employer’s costs.

But note that it is still only only ‘may not.’ Just because the Court of Appeal has refused to award costs in favour of the successful party in one case, it doesn’t follow that you can’t be made to pay your employer’s costs if you lose. The risk that you will have to is still real, so you will have to think hard about whether you can afford to take it. Mr Neary was lucky: he didn’t in fact have to pay costs. But on the information available to him when his employer appealed, he was taking a serious risk. Many people in those circumstances would indeed have caved in.

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

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:

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.

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.

Claimants in person

The number of individuals representing themselves in the employment tribunals has remained fairly constant over the last 3 years: 30,195 in 05/06; 31,694 in 06/07 and 31,780 in 07/08

Maximum and median awards

The median award for unfair dismissal was £4,000; the medians for race, sex and disability discrimination were £8,120; £5,200 and £8,363 respectively. The highest award for unfair dismissal (including basic award) was £76,536; and the highest for race, sex and disability discrimination were £68,991, £131,466 and £227,208.

Costs

The costs figures are badly explained in the published statistics, but costs seem to have been awarded against claimants in 327 cases (out of a total of 189,303: that is, in 0.17% of cases) and against employers in 134 cases. The median award was £1,000, and the maximum was £17,775.

These figures would seem to exclude those – very rare – cases in which costs in excess of the limit of £10,000 are sought, and the costs question sent to the county court for assessment.

Appeals

There were 671 appeals to the Employment Appeal Tribunal, of which 303 were dismissed at either a full or a preliminary hearing 235 were allowed (in full or in part) and 133 were withdrawn.

These numbers do not include those that were dismissed on the papers under rule 3(7) and either not taken to an oral hearing, or dismissed at an oral hearing under rule 3(10).

There are two quite separate questions here. You may want to know what it will cost you to get legal representation for your hearing. In that case, you should probably start by reading Getting Advice.

The other reason why it is good to know a bit about the scale of legal costs involved is that this information is relevant to your former employer’s calculations about whether they should fight the case or try to settle it. Understanding something about what they are likely to be spending – and when – will help you make rational decisions about negotiations.

Legal advice and representation is not cheap. Costs can vary widely, so don’t rely on the figures given here as anything but a very rough guide.

Solicitors almost always charge by the hour. Few employment specialists will charge less than £80 or £100 per hour; some will charge as much as £200 or £300 – or even more. In general, more junior lawyers will charge less than their more experienced colleagues; and the larger and more prestigious firms will charge more than smaller, less well-known establishments. As a rule, when both sides are paying for their representation, the chances are that the employer will be paying more than the employee. (This is partly because it is quite difficult for non-lawyers to make well-informed judgements about how good lawyers are: the result is that those who can afford more often pay more on the basis of an assumption that the better lawyers charge more.)

Barristers usually charge by the hour for advisory work, and similar considerations apply: a Silk will charge a lot more than a junior barrister a couple of years out of Bar School. Hourly rates for barristers are generally a bit lower than for solicitors of comparable experience, because barristers’ overheads are lower. But barristers are normally only instructed by solicitors, so in general where there is a barrister involved, there will be a solicitor as well.

Hearings are traditionally priced by barristers on the basis of a ‘brief fee’ plus daily ‘refreshers.’ The brief fee is what their preparation for the hearing will cost (that is, the work they will do getting to know the hearing bundle, researching the law, preparing cross-examination etc.), and includes a fee for the first hearing day; a refresher is incurred for each day that the hearing continues after the first. A brief fee for a 5 day hearing might be anything between £2,000 and £15,000 depending on the complexity of the case and the seniority of the barrister; daily refreshers might be as little as £500 or as much as £3,000. Those numbers would give barrister’s fees for the whole hearing of between £5,000 and £23,000. If a solicitor is present throughout, add their hourly rate for 7 or 8 hours a day: maybe a further £5,000 or £10,000.

The brief fee is traditionally incurred when the papers are delivered to the barrister. How long that is before the hearing will depend on how much preparation the barrister is going to need to do: a very rough rule of thumb is one day of preparation per two hearing days. So if your case is listed for two weeks, your employer will probably incur their brief fee about a week before the hearing begins. It is important to know this, because once they have committed to paying their barrister a brief fee of – say – £15,000, that’s £15,000 they won’t be able to spend on settling your claim. This means that if you receive an offer of settlement to expire a few days (or in a longer case a week or two) before the hearing begins, there is probably good reason for the deadline: this is the point at which they will incur their barrister’s brief fee, and the pot of money available to settle your claim will shrink sharply.

Costs orders are rare in the employment tribunals and the EAT: each side pays its own costs, unless one side or the other has behaved conspicuously badly. (That’s not exactly what the rules say, but it is more-or-less what they mean.) That means that as long as you’re not paying anything for legal representation, the financial risks of suing your employer in the employment tribunal and/or appealing to the EAT are modest.

Employment tribunal cases occasionally get appealed to the Court of Appeal. At this point, the risks change radically: in the Court of Appeal, the normal rule is that the losing side pays the winner’s costs. If your employer is being expensively represented by specialist lawyers, that could represent a risk of several thousand pounds at least.

Until recently, in a case where the claimant was being represented for free (or pro bono as it’s still often called), the risk was one-sided: the claimant faced a risk of paying the respondent’s substantial costs if she lost, but the respondent couldn’t be made to pay the claimant’s costs because the claimant hadn’t incurred any. That could put you at a serious tactical disadvantage.

The good news

This has now changed. Under section 194 of the Legal Services Act 2007, the Court of Appeal (and the other ordinary civil courts – but not the ETs or the EAT, which have their own rules) can now make a ‘costs’ order against the losing party even where the winner has been represented pro bono. The money goes to a legal charity.

The bad news

Unfortunately, instead of giving judges power to do the obvious thing and award the money to the charity that has represented you or arranged for your representation, or to some other suitable charity, a new charity called the Access to Justice Foundation has been set up especially for the purpose of receiving and distributing money generated by these costs orders. It will distribute the money among seven separate of ‘Regional Legal Support Trusts’ (yet to be set up), which will pass the money on, according to criteria (yet to be formulated) to legal advice charities.

It’s clear from the Foundation’s website that a lot of organisations and high-powered individuals have been involved already in the meetings, steering groups, sub-committees, consultations, Press announcement, drafting of constitutions and policy papers etc etc. that this exercise has demanded; and that there is much work yet to do.

There is no possible doubt about the good will of those involved. But it is hard not to think wistfully about the individual wrongs that might be righted the were to devote their time, and their formidable energy and abilities, to pro bono casework instead. It is even more grieving to think of the time that hard-pressed voluntary sector lawyers will in due course have to take away from their casework to study the Foundation’s grant-making criteria and then write applications tailored to those criteria.

Most of this blog (and the book it supports) is written for people who are either representing a client in the employment tribunal, or are representing themselves. The underlying assumption is that if you are a claimant in an employment tribunal case who has an adviser, you can leave running the case to them.

That assumption is not completely right of course. If you are getting free advice, the time your adviser can spend on your case will be limited by the other demands on her time – and demand for free legal advice vastly outstrips supply, so the chances are she’s rushed off her feet. If she’s representing you by way of Legal Help, she will be operating under grossly unrealistic time limits imposed by the Legal Services Commission. And if you’re paying for legal advice, the time your lawyer can spend on your case will be limited by your budget: lawyers charge by the hour.

Any which way, there will be a limit, and probably quite a tight one. Case preparation consumes time at a frightening rate, so if you do everything in your power to limit the time your adviser has to spend on non-essential tasks, or tasks that she is no better qualified than you to do, you will maximise the time she has available for the more difficult stuff.

Present the papers in the most helpful way you can

Read the advice on coping with a large pile of papers. Taking letters out of envelopes, removing staples and paperclips, sorting papers into chronological order, weeding out duplicates, photocopying and hole-punching are all easy tasks – but time-consuming. You’d think it mad to pay anyone £100 or more an hour to sort your laundry, but it is surprising how many people are prepared to pay their lawyers to put papers into chronological order.

Answer questions succinctly

Be as focused as possible in the information you give to your adviser, and the way you answer her questions. In ordinary conversation, a question is very often not so much a request for specific information as a polite cue whose purpose is to make space for you to talk for a bit. If it was your habit to behave in social situations like the ideal witness – just giving a succinct factual answer focused precisely on the question you were asked, and then stopping to wait for the next question – you’d soon stop getting invitations. But your lawyer’s questions are best treated in precisely that way.

Don’t ask your adviser for information you can easily find elsewhere

There are many sources of free information for people going through employment tribunal claims, so try to get the answers to your basic questions that way before paying your lawyer to tell you. A good start is to make full use of this blog – don’t just read the most recent posts: explore the index, have a look at the resources page and the glossary, visit the websites that we link to. You could also ask your local library to get a copy of the book (ask for Tamara Lewis’s Employment Law: an adviser’s handbook too, while you’re about it).

Do some of the work yourself

If you are trying to keep your legal costs down, don’t be shy to ask ‘Is that something I could do myself?’ or ‘Will it save time if I do a first draft?’ when your lawyer tells you that a particular piece of work needs doing. You will certainly save quite a lot of your adviser’s time if you write a good first draft of your witness statement.

If you lose your job or get into a dispute with your employer, checking the small print of your household or car insurance may not be among the first things you think of doing. It probably should be, because you may well have insurance that would cover the cost of legal advice, but you could lose the benefit if you don’t get in touch with your insurer promptly.

The Employment Lawyers Association and the authors have kindly given us permission to reproduce this useful article on legal costs insurance by Camilla Palmer and Joanna Wade, published in the ELA Briefing (June 2008).

Respondents’ lawyers often say that they will apply for costs in the employment tribunal if the claim is not withdrawn or settled. Sometimes they say that they will apply for ‘up to £10,000,’ and sometimes they threaten even larger sums. If you are not a lawyer and don’t have access to specialist advice, it can be hard to know how seriously to take these threats.

The first thing to note is that the usual rule in the employment tribunals is that each side pays its own costs, win or lose. You don’t have to pay the other side’s costs just because you have lost the case. In general, the employment tribunal only awards costs if the conduct of one side has been “vexatious, abusive, disruptive or otherwise unreasonable” or if the claim was “misconceived.”

The “vexatious, abusive, disruptive or otherwise unreasonable” part of this is relatively straightforward. It basically means that you have to fight the case in a reasonably civilised and co-operative manner. If you try to ambush the respondent with new factual allegations or documents they haven’t seen before at the last minute, or send them pages and pages of detailed questions on irrelevant matters, or repeatedly fail to comply with the procedural timetable set by the tribunal, or fail to turn up to the hearing without a good excuse, or telephone their witnesses and shout at them (and so on), then you may well face a costs application on this basis.

“Misconceived” is much trickier. Your claim is misconceived if it has ‘no reasonable prospect of success.’ Some claims are so weak that anyone ought to be able to tell at a hundred paces that they are hopeless. If you are an airline pilot who arrived for work drunk, and you were dismissed after a disciplinary hearing and an appeal, at both of which you were represented by your trade union, then your unfair dismissal claim is hopeless, and you shouldn’t need a lawyer to tell you so.

But often when the respondent’s lawyers tell you that your claim is misconceived, they will be relying on some legal technicality: you are a ‘worker’ but not an ‘employee,’ so you don’t have a right not to be unfairly dismissed; you were a student, and not a ‘worker,’ so your discrimination claim must be brought if at all in the county court not the employment tribunal; your claim was presented too late, or too early, or had not been preceded by a valid grievance. Or they will simply be saying that the claim looks weak on the basis of the way it has been put in your ET1 and/or witness statements.

These things are much harder to judge if you are not a lawyer. If your claim is listed for several days or even some weeks, and the respondent’s lawyers are telling you that it is misconceived and threatening to apply for £10,000 or £50,000 or even £100,000 in costs, you are likely to feel thoroughly intimidated. If you can’t afford your own legal advice, the chances are you simply do not have this kind of money. A costs order on this scale might mean losing your home, or bankruptcy.

One tactic you can try in these circumstances is to treat the tribunal itself as a source of legal advice. Write a letter explaining that the respondent is threatening you with costs, and ask for a pre-hearing review to consider the question whether your claim has any reasonable prospect of success.

Here is a sample letter showing how you might put an application like this.

Suppose that in the course of the hearing your client realises that an important answer given by one of the respondent’s witnesses can be proved wrong by a document that she has at home, but that she has not previously shown you or mentioned. She goes home and looks out the document and brings it the next day. When you look at it, you think it is extremely helpful to her case.

What do you do? Can you use this document?

The first thing to note is that if the document is relevant, it ought to have been disclosed to the other side before the hearing began and included in the bundle. It has to be disclosed now, so give a copy to the other side’s representative, with apologies for not having disclosed it earlier, at the first opportunity. Don’t make excuses at this point, but find out from your client why the document was overlooked previously so that you can be ready with your explanation for late disclosure in case the tribunal asks you.

The next thing is to decide how to deal with the new document in evidence. If the witness in question is still giving evidence, you should just be able to show him a copy of the document and ask him questions about it.

If the witness in question has finished his evidence, you may wish to have him recalled so that you can ask some further questions. Tread carefully at this point, though, and be ready for a tussle with the tribunal: the Chairman will not be keen to bring witnesses back after their evidence has apparently finished. You are on the moral low ground to the extent that the document should have been disclosed earlier. If there is any risk that recalling the witness will extend the hearing so that it needs an additional day, think hard about how important it is to be able to ask him about this document. Can another of the respondent’s witnesses sensibly be asked to confirm that, in light of this document, his evidence must have been mistaken? If the hearing is extended because you insist on recalling a witness to deal with a document that your side should really have disclosed earlier, you are likely to face a costs application.

Similar considerations apply if your client produces a document that she says proves she is right on an issue she was given a hard time about in cross-examination. You may want to recall her after the end of her evidence to explain the document, but avoid this if you can: you may be able to make your point about the document just as well, if the respondent’s evidence is yet to come, by cross-examining one of their witnesses about it.