Tagged: costs

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Add tribunal fees to your claim

If you win your case in the employment tribunal, you should ask for an award of costs to cover any tribunal fees you’ve had to pay. There’s a general post about how to do that here. This is just a small additional suggestion on the same subject.

Include your application for costs in your claim.

That’s it, really. Section 9.2 of the ET1 form asks ‘What compensation or remedy are you seeking?’ Claimants don’t often write very much there – and it won’t be your last chance to say how much money you think you should be awarded, and why. But it’s a good idea to use that space to set out the main kinds of loss you think you ought to be compensated for – and at the same time, it’s worth mentioning that you’ll be looking for a costs order under 76(4) to cover your tribunal fees. It’ll help you to remember to claim it at the end of the case; and if your employer doesn’t defend the claim and you get a default judgment, it should prompt the tribunal to include a costs order in that.

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Costs and Capital

When a tribunal considers making a costs order, or the amount of a costs order, they may have regard to the party’s ability to pay (rule 41(2)). In other words, in general, a poor party is less likely to have costs awarded against them than a rich party.

Normally, this means looking at the party’s income and expenditure. But in Shields Automotive Ltd v Ronald Greig the EAT considered whether capital assets — in this case £135k equity in a house — should also be taken into account.

They concluded that they should.

This means that, if you are facing a costs application, you need to be prepared to discuss any capital you have.

As well as the amount of capital, you should also address its liquidity. £10k in cash is very different to £10k in house equity. Cash is easy to access, and therefore easy to use to pay any costs. House equity, however, can usually only be accessed by selling the house or borrowing against the equity. If there are practical difficulties in doing this, you need to tell the tribunal.

The EAT concluded that inaccessible capital was still relevant. But the fact that something is relevant, does not mean that it will persuade the tribunal. The harder it will be to change capital into funds that could be used pay a costs order the less likely the tribunal is to make one.

The case also dealt with the tribunal’s approach to the claimant’s lies about payments to his estranged wife. Suffice it to say that, if you do get caught deceiving the tribunal about your finances, they are likely to ignore them altogether, on the basis that you have prevented them getting an accurate picture.

Thanks to Daniel Barnett for the bulletin that drew this to my attention.

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‘Without prejudice save as to costs’

Solicitors for employers quite often write letters with this heading. It means the letter – because it is an attempt to settle the claim – can’t be shown to the tribunal before or during the main part of the hearing. But the ‘save as to costs’ bit means that if you refuse the offer and then either lose, or get awarded less than they have offered, they may show the tribunal the letter in support of an application for costs at the end of the case. Their argument will be that your refusal of the offer amounted to unreasonable conduct of your case.

This is a tactic claimants can use, too – though they do so much less often.

If you think your employer has no reasonably arguable defence to your claim, you can try writing a letter headed ‘without prejudice save as to costs’ that offers to settle the claim, and warns them that if they don’t agree, you may apply for costs against them if you win and get what you’ve asked for.

This works best if the value of your claim is clear, and doesn’t involve much crystal-ball gazing. If you were unfairly dismissed and you’re claiming a long period of future loss, there will be altogether too much wiggle-room in estimating the value of your claim, even if the unfairness is obvious. But if you’re claiming a definite sum – say, for example, you’re claiming £652.24 in unpaid expenses, or you were only out of work for 2 months after an unfair dismissal before getting another job that paid just as well as the old one, so your loss is exactly quantifiable as your basic award plus 2 months’ net earnings – and the respondent has no sensible defence, it’s a tactic worth trying. There’s a sample letter at page 175 of Employment Tribunal Claims, 3rd edition (or you can download an earlier version from the first edition here).

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Employment Appeal Tribunal case on costs

In Yerrakalva v Barnsley MBC, the EAT has given a helpful judgment on costs in the employment tribunals.

The claimant had complained of disability discrimination. There had been a pre-hearing review on the disability issue which had been adjourned part-heard after 3 days. After the adjournment, the employment judge had fallen ill, and it had eventually been decided that the hearing would have to be started afresh. Then, before that could happen, the claimant wrote to the tribunal withdrawing her claim.

The respondent applied for its costs, which it said amounted to over £90,000. The employment judge who considered the costs application considered the amount excessive, but awarded costs in favour of the respondent subject to a detailed assessment in the county court. That meant that the claimant was going to have to pay however much of the respondent’s costs the county court thought was reasonably incurred.

Under paragraph 40 of the Employment Tribunals Rules of Procedure, a tribunal can make a costs order where:

the paying party has in bringing the proceedings, or he or his representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or conducting of the proceedings by the paying party has been misconceived

In other words, you may be made to pay costs if (a) your claim is so weak that you should never have brought it at all; or (b) you’ve brought it for improper purposes – e.g. just to harass your employer; or (c) even if your case is strong, you’ve behaved really badly in the way in which you have conducted it.

The reason given by the employment judge in Yerrakalva was that the claimant had told two lies in the course of the PHR. The EAT (President Underhill presiding) set aside the costs order: the lies amounted to unreasonable conduct of the proceedings, but were not particularly important, and it could not be said that the respondent incurred any extra costs because of them. Underhill P says at ¶17:

While there does not have to be a precise causal relationship between the unreasonable conduct and the costs claimed, any award of costs must, at least broadly, reflect the effect of the conduct in question.

The judgment also emphasises usefully in passing that withdrawing a claim does not in itself indicate that it is misconceived and should never have been brought:

It is worth emphasising, albeit in passing, that the Judge did not treat the fact that the Appellant had withdrawn as constituting, or tantamount to, an acknowledgment that her case was misconceived or otherwise as in itself giving grounds for an award of costs. While such a conclusion may well be appropriate in the circumstances of a particular case, it is important that there should be no general rule to this effect, not least because such a rule would be a powerful disincentive to parties in an appropriate case taking a sensible and responsible decision to withdraw.

If you want to withdraw and you think the respondent might try for costs, it is safest to try to settle the case either for a notional payment, or else just for a promise not to go after you for costs. If you can’t get that agreement, Yerrakalva may help you head off a costs order.

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Costs in the Court of Appeal

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.

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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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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.

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Employment tribunal statistics: headlines

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).

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What will my hearing cost?

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.

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Costs in pro bono cases

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.