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	United Kingdom Employment Appeal Tribunal
You are here: BAILII >> Databases >> United Kingdom Employment Appeal Tribunal >> Salinas v Bear Stearns International Holdings Inc & Anor [2004] UKEAT 0596_04_2110 (21 October 2004) URL: http://www.bailii.org/uk/cases/UKEAT/2004/0596_04_2110.html Cite as: [2004] UKEAT 0596_04_2110, [2004] UKEAT 596_4_2110

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APPEARANCES

 

For the Appellant	MR MICHAEL SUPPERSTONE QC (of Counsel) Instructed by Messrs David Cooper & Co, Fleet House 8/12 New Bridge Street, London EC4V 6AL
For the Respondents	MR ANDREW HOCHHAUSER QC (of Counsel) Instructed by: Messrs Herbert Smith, Exchange House Primrose Street, EC2A 2HS

SUMMARY Practice and Procedure Costs

Order for costs made by ET on grounds that proceedings (i) misconceived (ii) unreasonably conducted. No error of law. Question of whether costs order exceptional or unusual not significant, so long as proper tests applied: in any event ET did direct itself to rarity of costs order. On both grounds McPherson followed.


 


THE HONOURABLE MR JUSTICE BURTON (PRESIDENT)

1. This has been an appeal against the unanimous decision of the Employment Tribunal at Stratford, after a hearing on 16 September 2003, in a judgment handed down on 13 October 2003, that the bringing and conducting of proceedings by the Appellant had been misconceived and that she had acted unreasonably in conducting the proceedings and ordering her to pay the costs of both Respondents, to be assessed by way of detailed assessment in the County Court. This order was made by the same Tribunal as had just heard and unanimously dismissed, by Decision handed down on 29 August 2003, the Appellant's application for sex discrimination.
2. We understand that costs are claimed totalling some £120,000 in respect of a case which involved 324 pages of witness statements, seven of which witnesses were called orally, after a hearing of a preliminary issue, to which we will refer, on 20 September 2002, and a liability hearing lasting five days. We have no view as to whether such a sum would in fact be recoverable as a result of the assessment.
3. The Appellant's grounds of appeal alleged error of law by the Employment Tribunal in respect of both of the bases upon which it founded its Decision to order the Appellant to pay costs, namely (i) that the proceedings were misconceived and (ii) that she had conducted the proceedings unreasonably. The relevant Employment Tribunal rule, Rule 14, gives jurisdiction for such an order:

"1. Where, in the opinion of the tribunal, a party has in bringing the proceedings, or a party or a party's representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or conducting or the proceedings by a party has been misconceived, the tribunal shall consider making, and if it so decides, may make –

(a) an order containing an award against that party in respect of the costs incurred by another party …"

4. By paragraph 2(2) of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2001, to which the relevant Employment Tribunal Rules were Schedule I, it was provided, by way of interpretation section, that ""misconceived" includes having no reasonable prospect of success". The misconceived ground was added for the first time by the 2001 Regulations.
5. The Appellant was employed as a managing director at a substantial salary in the Fixed Income Sales Department of the Respondent investment bank. She was summarily dismissed, after a disciplinary hearing, a decision upheld after an internal appeal, for gross misconduct, set out in the dismissal letter and summarised as falsification of company records and/or attempting to gain a pecuniary advantage by deception. At the preliminary hearing on 20 September 2002, to which we have referred, her claim for unfair dismissal was ruled out of time, in a unanimous decision handed down on 14 October 2002. The Tribunal ruled however that it was just and equitable for her to proceed with her case of sex discrimination, based upon that dismissal. She was not permitted to pursue a case for sex discrimination based upon alleged earlier incidents prior to the dismissal, nor any post-dismissal matters. There was no appeal against that decision, and so far as sex discrimination is concerned, the nub of it is contained in paragraphs 5 to 9:

"5. The pleaded case on discrimination depends not only on an allegation that the dismissal on 7 December 2001 was discriminatory but also on a series of alleged incidents involving one of the two people who made the decision to dismiss. The Applicant alleges that Mr Jerome [C]amblain committed a series of acts of discrimination against her which culminated in a dismissal which was itself discriminatory. In the pleaded case (…) the further and better particulars of the Applicant's case, the pre-dismissal history of discrimination identifies a number of free standing allegations of discrimination which it is also said support a continuing policy of discrimination culminating in the dismissal of the Applicant. The culminating act of discrimination, on the Applicant's case, took place on 7 December 2001, three months and one day before the application complaining of that act was presented to the Tribunal. However, the earlier free standing incidents which are alleged to be discriminatory are all more than one day outside the three months limit and in some cases many months outside that limit.

6. No submission was made to us by the Applicant to the effect that any of these alleged incidents were the subject of any prior complaint, that is to say a complaint prior to the presentation of the application to the Tribunal in March this year … Mr Cooper for the Applicant contended that the discrimination claims were only one day out of time. No prejudice had been shown by the Respondents and it was therefore just and equitable to allow the claim to proceed. Mr Cooper conceded that the internal appeal had no bearing on the delay in presentation of the claim. Mr Hillier for the Respondents contended that the Applicant, through her advisors, was aware of the three months time limit, the Applicant must have been aware of all relevant facts and no grounds have been advanced why time should be extended.

7. In deciding whether or not it was just and equitable to extend time sufficient to permit the discrimination claims to proceed, the Tribunal has considered the absence of any clear allegation of gender bias in relation to the allegation that the dismissal was discriminatory. In the Tribunal's judgment the lack of particularity was unhelpful to the Applicant's contention that it was just and equitable to extend time. The delay in providing particulars of incidents of alleged discrimination already at least three months old at the date of first notification was a material consideration in deciding whether it was just and equitable to extend time.

8. On balance the Tribunal was persuaded that because the presentation of the claim complaining the dismissal was discriminatory was only one day out of time and notwithstanding the then and continuing lack of particularity in that allegation, it is just and equitable to extend time for one day so as to permit that claim to proceed. However, it is not just and equitable to extend time so as to permit any claim to be made in respect of the earlier free standing acts of alleged discrimination. Accordingly the claim for sex discrimination in the decision to dismiss will be allowed to proceed but the earlier acts of discrimination may not proceed as free standing claims although reference of course may still be made to them in the context of the extant claim as evidence of a continuing policy of discrimination.

9. At the invitation of the Respondents Mr Cooper for the Applicant has confirmed that post-dismissal events are not the subject of any allegation of sex discrimination and there is no longer any allegation that the appeal was discriminatory or a sham designed to uphold the original allegedly discriminatory decision to dismiss but the Tribunal is asked to make and does make an order directed against the Applicant to state by way of Further and Better Particulars all facts and matters relied on in support of her contention that the dismissal constituted an act of sex discrimination …"

6. Further and Better Particulars served by the Appellant in October 2002 purported to include alleged incidents of discrimination subsequent to the dismissal, for the first time, and contrary to the confirmation given by Mr Cooper recorded in paragraph 9 of the Decision set out above. An incident was alleged, among others, which had not been previously mentioned to the Respondent either on the internal appeal or at all, or in the Originating Application, or in the Further and Better Particulars served in July 2002, that immediately subsequent to her dismissal the Appellant was touched inappropriately. A letter of protest was sent by the Respondent's Solicitors dated 21 October 2002 complaining that:

"We are concerned that your client and indeed your firm are conducting these proceedings in a misconceived and vexatious manner which is forcing our Client to incur unnecessary time and costs. Specifically:

the Further and Better Particulars contain a new and serious allegation against the Third Respondent in particular which has never before been raised in almost 11 months and which is in direct contradiction to your confirmation to the Tribunal at the preliminary hearing that no post-dismissal acts formed part of your Client's claim;

the Further and Better Particulars contain further new allegations of which no details whatsoever have been given; and

you seek in the Further and Better Particulars to introduce a claim of victimisation without any particulars whatsoever and again in direct contradiction to your confirmation to the Tribunal at the preliminary hearing that no post-dismissal acts formed part of your Client's claim."

7. A separate letter was sent to the Employment Tribunal dated 7 November 2002, copied to the Appellant's solicitors, by which the Respondents indicated their wish formally to reserve their rights as regards seeking an order for costs against the Appellant in relation to their conduct of the proceedings. The Further and Better Particulars were re-served on 21 November 2002, omitting a number of the other new matters, but retaining the assertion of the alleged post-dismissal incident on 7 December 2001. A further post-dismissal claim was made in relation to the alleged conduct of a Mr Bartlett in a witness statement in reply served shortly before the hearing, but this was abandoned at the hearing.
8. So far as these post-dismissal incidents are concerned, the Tribunal in its Liability Decision made findings in paragraph 6:

"(xvi) The Applicant also alleges that there was an incident immediately after she was told of her dismissal which took place in the same room. Miss Carter and Mr Bartlett left the room and the Applicant asked Mr Camblain to remain with her so she could speak to him. She asked him whether it was final and he replied that it was and said that he was sorry. The Tribunal find that no further words were spoken of any importance during that brief time. The Applicant suggested (but not until October 2002) that during the course of this discussion, Mr Camblain had made statements and touched her inappropriately. She alleged that he had said something about not being able "to have women like you in this firm", about never "trusting" the Applicant and something like "the boys and I will manage just fine without you". This is completely denied by Mr Camblain. He says all that was said was that the Applicant asked something like "Is it finished?" and he said he was sorry but it was over. Mr Bartlett who saw the Applicant shortly thereafter noticed nothing different about her demeanour than when he had left the room. The Tribunal do not accept that this incident happened at all in the way as described by the Applicant. We take into account the fact that this was a very late allegation, made long after it was supposed to have happened. The Tribunal find it very difficult to believe that this incident could have happened or the Applicant would surely have raised it in her appeal or, if she did not want to make things difficult on the chance that she might be re-employed, immediately thereafter. Her application to the Employment Tribunal was submitted during early March and it was not mentioned in her IT1 or in two further sets of particulars. It was not raised until after the first Tribunal decision in September 2002 that the Applicant could not proceed with an unfair dismissal claim.

(xvii) The Applicant did suggest at the hearing that she was making an allegation of sex discrimination against Mr Bartlett because of the conversation he had with her after the dismissal hearing. This was with respect to the Financial Services Authority and the Applicant did not pursue this allegation. In any event, the Tribunal find that Mr Bartlett's comments to the Applicant were an attempt to help her in the future."

9. Prior to the hearing the Respondent's Solicitors wrote to the Applicant's Solicitors a letter dated 17 June 2003 as follows:

"As you are aware, the Tribunal determined in its decision at the preliminary hearing that, as confirmed by Mr Cooper:

"Post-dismissal events are not the subject of any allegation of sex discrimination and there is no longer any allegation that the appeal was discriminatory or a sham designed to uphold the original allegedly discriminatory decision to dismiss".

The appeal hearing was a re-hearing of all the evidence available at the disciplinary hearing … Thus, the basis on which your client's claim for sex discrimination has been permitted to proceed is that even if, which is strenuously denied, the original decision to dismiss was discriminatory, the effect of any such discrimination was cured by the appeal hearing."

10. The letter put the Appellant's Solicitors on notice that, in those circumstances, even if an award were made in the Appellant's favour the quantum of any loss would be at best limited to "injury to feelings in respect of the decision to dismiss and any loss during the period between the dismissal and the appeal hearing, approximately four months".
11. At the hearing, notwithstanding the fact that the Appellant was not entitled to rely on pre-dismissal events as freestanding claims, she was permitted, as adumbrated at the September 2002 hearing, to adduce evidence of them as part of the background to the allegedly discriminatory dismissal. In paragraph 6(i) to (x) findings were made by the Tribunal rejecting the Appellant's case in relation to all of them. One incident in particular caused the Tribunal specific concern, and led it to make unfavourable findings in regard to the Appellant:

"(v) The Tribunal heard considerable evidence about an incident where Mr Camblain commented on a necklace worn by the Applicant. We find that Mr Camblain did comment that the Applicant was wearing a nice necklace and she volunteered that she also had a bracelet and showed it to him. We do not accept that Mr Camblain touched the Applicant on the neck at that point. Mr Camblain cannot remember when the incident happened and though the Applicant seems to recall that it was in May, if it was close to Mr Camblain's birthday, as was alleged, it would need to be in April. The difficulty with this incident is that one of the Applicant's witnesses, Mrs Beauchamp, included reference to it in her witness statement. In her witness statement, she seemed to suggest that the Applicant had told her about this incident, including the fact that Mr Camblain had touched her on the neck in an "inappropriate manner", and, under cross examination, she said she thought she was told this at a consultation in March. Mrs Beauchamp gave her evidence, along with one of the Applicant's other witnesses, Mr Theologites, during the afternoon of 12 August. The Applicant had not completed her evidence and was therefore recalled on 13 August. During the course of her evidence that morning she suggested that she had suddenly remembered the date when she saw Mrs Beauchamp for a consultation as being 24 May. This was the first time that this date had been mentioned and Mr Hochhauser and the Chairman asked the Applicant a number of questions about her having this recollection. The Applicant gave a number of answers to questions about how she had recollected this. These included the fact that she had just remembered, that there was something in her electronic organiser and something written in a diary at home. The Tribunal looked at the Applicant's electronic organiser after the lunch adjournment and noted that for 24 May 2001 there was an entry which simply says '25'. The Applicant was therefore asked to bring her diary from home the following day. On Thursday 14 the Applicant brought with her two diaries. One of these diaries for 2001 had a paperclip with a small plastic remedy packet attached to 24 May although nothing was written on that date. The Tribunal was greatly disturbed by this evidence. It only went to the question of whether or not the Applicant had mentioned any 'touching on the neck' to her Homeopath at a consultation in March or later but it did appear to the Tribunal that the Applicant had gone to considerable lengths to ascertain a date but had not been honest with the Tribunal. This affected and influenced the Tribunal along with other contradictions in the Applicant's evidence. As far as it relates to the Tribunal deciding whether Mr Camblain did touch the Applicant's neck when he mentioned her necklace we do not accept there was any touching at any time in relation to this incident."

12. The Tribunal made findings in relation to the events leading to the Appellant's dismissal, which had arisen out of the Appellant making alterations with Tippex to certain memoranda relating to her commission entitlement. The Tribunal recorded the findings of the disciplinary hearing on 6 and 7 December 2001 and in paragraph 6(xv) recorded that "the Applicant makes no complaint about the appeal process".
13. The Tribunal set out its conclusions in relation to discrimination, in the light of its findings of fact. In paragraphs 9 and 10 it dealt with the earlier incidents, prior to dismissal, already rejected in relation to being out of time, and now disposed of by the Tribunal on the basis that, in any event, insofar as the incidents occurred at all there was no discriminatory conduct. So far as the material issue is concerned, namely whether the dismissal of the Appellant amounted to sex discrimination, the findings were contained in paragraphs 11 to 13:

"11. With respect to the dismissal, there is clearly a possibility that the Applicant might be able to show a difference in treatment at that stage. For these purposes, the Applicant identifies three employees and also suggests that a hypothetical man would have been treated differently. None of the three identified employees fall into circumstances which are the same or not materially different. These 'real' comparators are all in very different situations. Mr Leysen is a Manager whose only responsibility is to sign the document and agree the change. He stood to gain nothing financially from any alteration, and, indeed, did not see the memorandum again. The second comparator Mr Hamoud is one who, as far as we can tell, was not involved in any disciplinary matter whatsoever. His situation is completely different. Finally, Mr Chebli was a junior employee who assisted the Applicant. He may well have been responsible for faxing this particular document. However, it cannot be right to suggest that he should have been treated in the same way as the Applicant as, again, there would be no purpose in him changing the number. Any improved income which he might gain from any increased commission could only arrive with him at the discretion of the Applicant. He is not in the same or not materially different circumstances. Considering then whether the Applicant satisfied us that a hypothetical male employee would have been treated differently, we consider this male must be a senior employee who is responsible for a document which has been doctored potentially to increase commission earned by that employee. That senior employee would also have had to have written e-mails and had telephone conversations during the course of which no mention was made of the figure and, finally, would have had to be responsible for putting Tippex on the document. The Tribunal are in no doubt that such an employee, male or female, would have been treated in exactly the same way in the same circumstances.

12. What is more, the Applicant had a full rehearing of this matter and exactly the same outcome was reached. If she has no complaint on discrimination grounds with respect to that decision, it is difficult to see how can it be that this earlier decision was itself discriminatory. The other matter which we bear in mind is that the Applicant does not complain that Miss Carter acted in any way in a discriminatory fashion. Again, the decision to dismiss was a joint decision with Mr Camblain. It cannot therefore be at all possible that the decision to dismiss by only part of the team who dismissed amounts to less favourable treatment. The Applicant therefore falls on the first hurdle. She has either not satisfied us that things happened which she alleged did or she has not satisfied us that she has been less favourably treated than any real or hypothetical comparators at all.

13. We should add that, even if we had accepted the Applicant's case, with the exception of the dismissal, we would have been highly unlikely to find that there was any detriment whatsoever. All allegations with relation to remarks about clothing and about her age seem to the Tribunal to be a very long way from causing her any detriment whatsoever. Even on her case, at its highest, the Tribunal do not believe she would have been able to convince the Tribunal that there was any discrimination in relation to these incidents or any continuing act. Clearly this is not the case with the dismissal which was to her detriment but, as we have said earlier, she has not satisfied us that she has been less favourably treated at all. The Applicant's claim for sex discrimination fails and is hereby dismissed."

14. The application for costs made by the Respondents of course founded itself on the findings of the Tribunal, which we have recited, and, so far as the issue of unreasonableness is concerned, the conduct of the Appellant and her advisers, some of which has been referred to above. The conclusions of the Tribunal in respect of costs are set out in paragraphs 7 to 9 of its Decision as follows:

"7. The Tribunal considered this case with a great deal of care. First, we decide and find that this claim was indeed misconceived. It clearly had no reasonable prospects of success. This accords with our decision that many of the incidents about which the Applicant complained either did not happen at all or not in the way in which she alleged. Furthermore, we found no discriminatory element to the incidents that had happened, for instance the dismissal itself.

8. Secondly, we went on to consider whether there had been unreasonable conduct. We do find that there was such unreasonableness. The Tribunal have already found that the Applicant was not honest about one particular incident concerning a date and her recording it in her diary. In other matters we did not accept the Applicant's version of events. Whilst we have made no finding that there was any dishonesty intended, we bear in mind that the Applicant did use her own words in complaining about what was said to her rather than those of the person about whom the complaint was made. It may be that the Applicant's memory was at fault but it remains the fact that we have not accepted her version of many of the events about which she complained. We also believe that she has behaved unreasonably in calling a number of witnesses whose evidence was, at best, irrelevant, and at worst not helpful to her case at all. Finally, we are very concerned about the late allegation of the post dismissal incident which was not made until a very late stage of the proceedings. All these matters suggest strongly to the Tribunal that the Applicant has indeed behaved unreasonably.

9. This then takes us to the question of whether or not we should award costs. Rule 14 says that should we so decide we "may" make such an award. We bear in mind that we should not discourage people bringing discrimination, or indeed, any other claims before this Tribunal. Many of these claims are meritorious and whilst we accept that they are often difficult to prove, we certainly do not want to discourage such difficult claims from being raised in the Tribunals. We accept that not all unsuccessful discrimination claims should attract an award of costs and that it should be a difficult hurdle to convince the Tribunal that costs should be awarded in their favour even where there has been unreasonable conduct or the proceedings have been misconceived. However, in this case, the Applicant had adequate warning of the consequences of pursuing this claim in the way in which she did. We note that the solicitors acting for the Respondents put her on notice at an early stage that they considered this behaviour to be "scandalous and vexatious". Considerable time was taking up by unnecessary and irrelevant evidence and late allegations were pursued. Taking all this together this Tribunal has come to the view that this is one of those rare cases where we do indeed believe that an award of costs should be made. We order that it should be assessed by way of detail assessment and it will be so in the County Court in accordance with the Civil Procedure Rules 1998."

15. A number of preliminary matters must be said by way of summary in those circumstances, drawn from that Decision:

15.1 The Tribunal recorded that it had considered the matter with "a great deal of care" (paragraph 7).

15.2 The third sentence of paragraph 7 plainly refers to the pre-dismissal incidents dealt with in paragraphs 6(i) to (x) of the Liability Decision.

15.3 The "one particular incident" referred to in the second sentence of paragraph 8 of the Decision plainly refers to the necklace incident on which findings were made in paragraph 6(v) of the Liability Decision.

15.4 The late allegation of the post-dismissal incident in respect of which they were very concerned was plainly the matter dealt with in paragraph 6(xvi) of the Liability Decision, the subject matter of the October/November 2002 Further and Better Particulars.

16. Paragraph 9 contains an accumulation of different factors operating upon the mind of the Tribunal:

16.1 The second sentence plainly emphasises that there is a discretion to make a costs award (by Rule 14(1) the Tribunal shall consider making, and having considered may make, such an order).

16.2 In the third sentence the Tribunal had well in mind the deterrent effect of costs orders in an otherwise costs-free jurisdiction.

16.3 In the fifth sentence the Tribunal specifically reminded itself that "not all unsuccessful discrimination claims should attract an award of costs" and of the difficult hurdle that the applicant for costs had to surmount.

16.4 In that same sentence however, in defining the hurdle, its nature and its surmountability were very restrictively defined: "a difficult hurdle for a party to convince the Tribunal that costs should be awarded in their favour even where there has been unreasonable conduct or the proceedings have been misconceived" (our emboldening).

16.5 The sixth sentence records the existence of the warning to the Appellant's Solicitors, in the correspondence to which we have referred above.

16.6 Finally the Tribunal records that its order of costs in favour of the successful Respondent is to be "one of those rare cases where we do indeed believe that an award of costs should be made".



"Exceptional"

17. Mr Supperstone QC's overriding submission is that costs orders in the Employment Tribunals are exceptional, and that in making a costs order against the Appellant on either basis the Tribunal erred in the exercise of its jurisdiction. He points to the decision of the Court of Appeal in Lodwick v London Borough of Southwark [2004] IRLR 554. This was a case in which the Employment Appeal Tribunal had concluded that the Notice of Appeal before it, challenging the Tribunal Chairman's refusal to recuse himself on grounds of alleged bias and an order for costs made by the Tribunal, disclosed no question of law, such that it did not have jurisdiction to entertain the appeal. The Employment Appeal Tribunal apparently took the view that the case "did not have the beginnings of a bias appeal". The Court of Appeal (per Pill LJ) concluded that there was an arguable point of law. It also quashed the order for costs. Pill LJ, giving the only judgment, dealt with the issue of costs as follows:

"23. … Costs are rarely awarded in proceedings before an employment tribunal. [He then recited Rule 14, which we have set out above.] Costs remain exceptional (Gee v Shell UK Ltd … [2003] IRLR 82) and the aim is compensation of the party which has incurred expense in winning the case, not punishment of the losing party …

26. While referring to the weakness of the claims, the tribunal did not find that the proceedings were misconceived within the meaning of the rule. Moreover, as Sir Hugh Griffiths stated in ET Marler Ltd v Roberts [1974] ICR 72: "Ordinary experience in life frequently teaches us that that which is plain for all to see once the dust of battle has subsided was far from clear to the contestants when they took up arms". To order costs in the employment tribunal is an exceptional course of action, and the reason for, and the basis of, an order should be specified clearly, especially when a sum as substantial as £4000 is involved.

27. In the absence of such clarity, I am left with a real concern that a correct test has not been applied. I would quash the order for costs at this stage and allow the appeal to that extent. I acknowledge the broad discretion of tribunals in matters of costs but that discretion has not in my view been correctly exercised in this case. Having reached that conclusion, I do not find it necessary to decide whether the absence of a specific warning as to costs would have prevented the making of an order, though I am inclined to the view that in present circumstances it did not."

18. As can be seen Pill LJ made specific reference to Gee, in which an appeal against a decision by the Employment Appeal Tribunal on a full appeal was being considered (and was dismissed), in a case where the Employment Tribunal had given a costs warning, leading to the withdrawal of her claim by the applicant, and was found to have acted unfairly in so doing. The Tribunal hearing in that case was at a time before the amendment of the Employment Tribunal Rules in 2001 to include the misconceived ground. The first judgment was given by Scott Baker LJ. It was primarily dedicated, since this was the subject matter of the appeal, to the appropriateness of making a costs warning, but in that context the question of the making of costs orders inevitably arose and he said this:

"22. As Maurice Kay J [as he then was, being the judge in the Employment Appeal Tribunal below] pointed out, this is a jurisdiction where an order for costs is very much the exception rather than the rule. Parliament had set a high threshold for a costs order to be made … It is true that in 2001 amended regulations were introduced that reformulated the costs rule as follows … [what is now Rule 14, including the misconceived ground] … Also the maximum figure for summary costs was increased from £500 to £10,000.

23. This regulation therefore lowered the threshold by the addition of the criterion of the misconceived bringing or conducting of proceedings. This emphasises, in my judgment, the extreme unlikelihood of the tribunal making a costs order against Mrs Gee if she had proceeded with her claim and failed. We have of course to proceed on the basis of the regulation that was in force at the time."



19. Sedley LJ, agreeing, said this, at paragraph 35:

"35. … This case concerns the original costs threshold, adopted from the High Court's long-standing practice, of frivolous, vexatious or abusive initiation or conduct of proceedings, to which the 1993 Regulations added disruptive or otherwise unreasonable action … This case does not concern the ambit of the recent amendment to include 'misconceived' proceedings – again, not an easy concept even for lawyers. But the governing structure remains that of a cost-free user-friendly jurisdiction which the power to award costs is not so much an exception to as a means of protecting its essential character."

20. Simon Brown LJ (as he then was), giving the third judgment, did not deal with this point.
21. As is plain, nothing was expressly said by Pill LJ, in his judgment in Lodwick, in his reference to Gee, about the effect of the amendment of the Rules, which was expressly not addressed in Gee, or the consequential lowering of the threshold. It is also plain from paragraphs 26 to 27 of his judgment that he was influenced by the lack of clarity in the reasoning of the tribunal in that case, and his uncertainty that it had applied the right test. There can however be no doubt at all that the Employment Tribunal in this case recognised the limitations on its jurisdiction, and on the face of the Decision was applying the correct test. It did not use the word "exceptional", which of course does not appear in the Rules in any event, but it does use the word, which, in its adverbial form, Pill LJ himself used, at the outset of paragraph 23 of his judgment, namely "rare".
22. The question needs to be addressed as to the meaning and effect of the words of the Court of Appeal in these two cases, upon which Mr Supperstone QC relied:

22.1 They clearly cannot oust, nor purport to do so, the statutory requirement for the Tribunal to be satisfied that one or more of the grounds for the costs order exists, in which case it must then consider the making of an order and may so make one. At best, if this is what was intended, it would go to the exercise of the discretion, once the existence of the requirements for the making of an order was established.

22.2 What can be said is that the words amount to a statement of fact as to the exceptionalness or rarity of the making of such orders, consistent with the ordinarily costs-free jurisdiction. No figures for such orders were produced before either Court of Appeal. Figures have been produced by the parties for this appeal, in a letter to the Employment Appeal Tribunal from the Respondents' Solicitor dated 1 October 2004, containing figures obtained, at the suggestion of this Appeal Tribunal, as supplied by the Employment Tribunals Service, which have been agreed by the Appellant. The awards of costs in the employment tribunals in the last five years (in each case the year running from 1 April to 31 March) are as follows:

1999 to 2000 186

2000 to 2001 247

2001 to 2002 636

2002 to 2003 998

2003 to 2004 976

This is out of a total of what we understand to be some 20,000 hearings. It is clear that the incidence of orders for costs is rare, but in the last two years – no doubt as a result of the 2001 amendment – slightly less rare. This coincides with the understanding of the Lord Justices in Gee.

22.3 This statement of fact however cannot, as Mr Supperstone QC accepted, be dependent upon statistics alone. It might be the case that, in a given year, there could be a whole host of misconceived claims – perhaps arising out of one large industrial incident in one part of the country where perhaps a substantial number of such claims which were bound to fail were nevertheless brought – but that would not, notwithstanding such possible different figures in such year, mean that the order would not remain an exceptional order. This is ordinarily a costs-free jurisdiction and something special or exceptional is required before a costs order will be made, in whole or in part, and even if the necessary requirements of Rule 14 are established, there would still remain a discretion.

22.4 Mr Hochhauser QC, on behalf of the Respondents, drew our attention to another, and more recent, decision of the Court of Appeal, in which both Lodwick and Gee were considered, namely McPherson v BNP Paribas [2004] IRLR 558. The first judgment was given by Mummery LJ, who is of course an ex-President of the Employment Appeal Tribunal and has very substantial experience of the workings of employment law and practice. The decision was primarily, as will be seen, directed to what is necessary in order to justify a costs order based on unreasonable conduct. However he addressed the basis of the costs jurisdiction as follows:

"2. The costs order is unusual in three respects: first, in the majority of cases employment tribunals do not make costs orders at all (see, for example, the comments in the recent Court of Appeal cases of Gee … and Lodwick …) …

25. Although employment tribunals are under a duty to consider making an order for costs in the circumstances specified in regulation 14(1), in practice they do not normally make orders for costs against unsuccessful applicants."

These statements are, with respect, plainly right. Costs orders are indeed not made in the majority – indeed the substantial majority – of cases in the employment tribunals and in practice tribunals do not normally make them. However that is and remains simply a statement of fact. It is exceptional for a costs order to be made because it is the exception to the rule, because there is a high hurdle to be surmounted before such a cost order can be considered, i.e. satisfaction of the requirements of Rule 14, which are now somewhat easier to satisfy as a result of the 2001 Regulations. In our judgment, even if the Employment Tribunal had not used words which had the effect of showing that they appreciated that the costs order was exceptional or rare, provided that they had applied the correct test, no error of law would have arisen. In fact however, in this case, in a most careful analysis of the position, the Tribunal used language which puts beyond doubt that it well understood what was required of it, and we are satisfied that there is no basis whatsoever for any challenge in law to the Tribunal's Decision.

"Misconceived"

23. The Tribunal was satisfied in terms that "this claim was indeed misconceived. It clearly had no reasonable prospect of success" (paragraph 7 of its Decision). Mr Supperstone QC sought to persuade us that such a conclusion is either perverse or at any rate unreasoned. We are entirely unpersuaded. The Tribunal, which was of course in the best position to form a judgment on this matter, having only very recently delivered its Liability Decision, was entitled to have regard to its findings in that Decision; and Mr Supperstone QC accepted that this was the case, just as in a costs application in the High Court, made immediately after a judge has given judgment, the judge is entitled to pay regard to, and not repeat, the findings on liability. In particular paragraphs 11 and 12 of the Liability Decision are highly relevant:

23.1 The pre-dismissal incidents either did not occur, or did not occur in the way the Appellant described, and were in no way discriminatory. In any event, being out of time, they would have at best been background.

23.2 The dismissal was plainly on conduct grounds, and the Tribunal was in no doubt it was not discriminatory.

23.3 There was no complaint made against Miss Carter, who jointly dismissed.

23.4 There was no complaint on discriminatory grounds in relation to the appeal by way of rehearing.

24. Mr Supperstone QC submitted that the Employment Tribunal had not accepted, or at any rate had not repeated, the content of Mr Hochhauser QC's skeleton in support of his application for costs, which we have seen. However, having read that skeleton, we are not persuaded that such was the case. In relation to the two incidents of which Mr Hochhauser QC was most critical in his skeleton argument, the necklace and the inappropriate touching incidents, it seems to us that the Tribunal was indeed persuaded to be almost equally critical.
25. We are quite satisfied that after considering the case with a great deal of care,, by reference to its conclusions in both the Liability and Costs Decision, the Tribunal both had and expressed sufficient reasons to arrive at the conclusion it did.

"Unreasonably"

26. As Mr Supperstone QC accepts, if he is, as he has been, unsuccessful on the misconceived ground, on the basis of which he does not contest that the Tribunal would have been justified in making the award of costs that it did, the challenge to the Tribunal's alternative ground of unreasonably is moot. Nevertheless, in deference to the submissions we have heard, we deal with them.
27. Mr Supperstone QC points to Davidson v John Calder (Publishers) Ltd [1985] ICR 143 and Health Development Agency v Parish [2004] IRLR 550 in support of his proposition that the Tribunal must identify with particularity the causative link between the unreasonable conduct found and the costs ordered: he submitted that in paragraph 9 of the Decision, which we have set out in paragraph 14 above, the Tribunal failed in that regard.
28. We do not however agree that Davidson and Parish can be relied upon for such proposition. The conduct in Davidson, upon which the tribunal in that case founded itself for the award of costs, was the dismissal itself and not the conduct of the proceedings, as is clear from the judgment of Bristow J at 145H and 146C. The EAT per Bristow J made it plain at 146D that "it is the conduct in the course of the proceedings which alone has to be considered". In Parish, as appears from the headnote at 550, the applicant's Originating Application was presented on 15 January 2003, and the Notice of Appearance on 5 February. The applicant's application was for costs incurred after 2 December 2002, when the employers refused to comply with his request for written reasons. The tribunal chairman awarded costs in respect of the period after 2 December 2002, on the basis that the employers had acted unreasonably, forcing the applicant to instigate proceedings in the tribunal and incur additional costs. The EAT per Judge Richardson made it clear, at paragraph 21, that an employment tribunal had no jurisdiction to award costs in respect of the conduct of a party prior to proceedings or unrelated to proceedings, and it was "necessary for there to be a causal relationship between the conduct of a party in bringing or conducting proceedings and the costs which are awarded under Rule 14". Judge Richardson continued at paragraph 22 "It follows that the employment tribunal has no power to award costs against a party until the time the party is brought or, as the case may be, conducted proceedings". He concluded as follows:

"26. It is also clear, in our judgment, that the employment tribunal, having found that a party has conducted proceedings unreasonably, should award costs which are attributable to that unreasonable conduct …

27. An employment tribunal, having found fault in the conducting of proceedings, needs to examine carefully what loss is attributable to that conduct. It does not need to conduct a minute examination or make individual findings about every hour of a solicitor's time. It may make a broad assessment; but it cannot, once having found vexatious or unreasonable behaviour in the conduct of proceedings, back date its award to include costs which are not attributable to that conduct."

29. The whole of this passage was in the context of quashing, as the Employment Appeal Tribunal did, the order for costs in respect of the period prior to the issue of proceedings. There was separate consideration in relation to the costs after the Notice of Appearance, and the matter was remitted to decide what costs related to that period. In paragraph 44 Judge Richardson stated that "The Chairman will have to consider carefully what is attributable to the unreasonable conduct". But it is clear that that it is in the context of separating off the recoverable from the irrecoverable costs, and in any event of what Judge Richardson had already said in paragraph 27, quoted above.
30. However, in any event, whatever authority there may have been to be derived from those two decisions of the Employment Appeal Tribunal, the position has now been authoritatively canvassed in McPherson, referred to in paragraph 22.4 above. Mummery LJ referred to Davidson and Parish and also to the dictum of Simon Brown LJ, as he then was, in Kovacs v Queen Mary and Westfield College [2002] IRLR 414, at paragraph 35, which simply refers to "cases where the tribunal feels able to make a summary assessment; and is satisfied that a summary assessment in an amount which does not exceed the specified sum would compensate the other party for the costs attributable to the vexatious, abusive, disruptive or unreasonable conduct which has led the tribunal to decide … to make an order for costs". Mummery LJ, with whom the rest of the Court in McPherson agreed, said:

"39. [Counsel for the Applicant] submitted that her client's liability for the costs was limited, as a matter of the construction of r14, by a requirement that the costs in issue were 'attributable to' specific instances of unreasonable conduct by him. She argued that the tribunal had misconstrued the rule and wrongly ordered payment of all the costs, irrespective of whether they were 'attributable to' the unreasonable conduct in question or not. The costs awarded should be caused by, or at least be proportionate to, the particular conduct which has been identified as unreasonable.

40. In my judgment, r14(1) does not impose any such cause or requirement in the exercise of the discretion. The principle of relevance means that the tribunal must have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion, but that is not the same as requiring BNP Paribas to prove that specific unreasonable conduct by Mr McPherson caused particular costs to be incurred. As [Counsel for the Respondent] pointed out, there is a significant contrast between the language of r14(1), which deals with costs generally, and the language of r14(4) which deals with an order in respect of the costs incurred 'as a result of the postponement or adjournment'. Further the passages in the cases relied on by [Counsel for the Applicant] (Kovacs … at 35 …, Lodwick … at [23] – [27] and … Parish … at paras 26-27) are not authority for the proposition that r14(1) limits the tribunal's discretion to those costs that are caused by or attributable to the unreasonable conduct of the applicant.

41. … It is not … punitive and impermissible for a tribunal to order costs without confining them to the costs attributable to the unreasonable conduct. As I have explained, the unreasonable conduct is a precondition of the existence of the power to order costs and it is also a relevant factor to be taken into account in deciding whether to make an order for costs and the form of the order."

31. He applies this principle by concluding that there was an error of law by the tribunal in ordering the applicant to pay the costs of the whole of the proceedings because (paragraph 42) "there is no evidence that there was any unreasonable conduct on the part of Mr McPherson before his health was introduced as an issue affecting the conduct of the proceedings". Thus (paragraph 43) "No reasonable tribunal, properly directing itself under r14, would have ordered Mr McPherson to pay the costs of the whole of these proceedings without some evidence of the unreasonable conduct of them during the first eleven months that the proceedings had been in existence. The unreasonable conduct by Mr McPherson only began, on the findings of the employment tribunal, with the application for an adjournment in September 2001 on medical grounds, which did not justify the request for an adjournment, and continued as a history of procrastination, delay and lack of co-operation down to the notice of withdrawal". Hence he varied the costs order so as to cover the costs of the proceedings incurred after the date of such application to adjourn.
32. We are satisfied that the history of these proceedings, set out in paragraphs 5-13 above, well-known and understood by the Tribunal, more than justified the finding by the Tribunal, and that the matters expressed in paragraph 8 of the Tribunal's Decision, set out in paragraph 14 above, sufficiently explain the Tribunal's decision. There was in essence no part of the proceedings which the Employment Tribunal, fully seised of the case, was prepared to exempt from its categorisation of unreasonable conduct by the Appellant. It is certainly not in our view possible to say that the decision of the Tribunal was perverse, particularly given its parallel conclusion that the proceedings were misconceived. In any event it is clear that the Tribunal did, as Mummery LJ would have had it do, "have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion".
33. Mr Supperstone QC made a discrete complaint that there was no adequate costs warning. The Tribunal found that there was, by reference to the correspondence of October/November 2002. But in any event we are far from clear, as Pill LJ was not in Lodwick (paragraph 27, set out in paragraph 17 above), that a costs warning is a necessary or indeed desirable pre-condition. There was no such warning in Kovacs. The existence of the tribunal's costs warning in Gee caused real problems. It has been suggested in victimisation cases that a heavy-handed threat of costs by an employer may amount to an act of victimisation. We need express no further opinion at this stage: suffice it so that on the facts of this case the existence of the October/November 2002 correspondence was a matter that the Tribunal was entitled to take into account in the exercise of its discretion.
34. There was a suggestion made in the Applicant's skeleton argument, by reference to a dictum of Maurice Kay J (as he then was) in the Employment Appeal Tribunal in Gee, referred to by Scott Baker LJ at paragraph 20 of his judgment in Gee, that whether or not a deposit has been sought or ordered pursuant to Rule 7 of the Employment Tribunal Rules has some relevance. There may be some cases in which this might be so, particularly if there has been a pre-trial hearing at which such deposit has either not been sought or has been sought and not ordered, where the case remains the same at the end of the full hearing as it had been at a pre-trial hearing. But this was plainly not such a case. In a case like this, where evidence, not tested until the final hearing, and in the event disbelieved, was apparently available to support a case, it is only at and after the full hearing that the misconceived nature of the claim can be fully or at all appreciated.
35. We dismiss this appeal.