Appeal No. UKEAT/0299/06/RN

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 13 November 2006

Before
HIS HONOUR JUDGE RICHARDSON
(SITTING ALONE)

MR C J DUNCAN	APPELLANT

1) FAITHFUL & GOULD LTD	RESPONDENTS
2) ATKINS LTD

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MRS J KERR
(of Counsel)
Instructed by:
Pointone Services
19 Coleford Bridge Road
Mytchett
Camberley
GU16 6H	
For the Respondent	MR A BLAKE
(of Counsel)
Instructed by:
Messrs Travers Smith Solicitors
10 Snow Hill
London
EC1A 2AL	

SUMMARY
Practice and Procedure - Costs
The Chairman took into account, in deciding to award costs from 21 October, a factor for which there was no evidential basis. Remitted to him to reconsider his decisions on a correct factual basis.

HIS HONOUR JUDGE RICHARDSON

1.	This is an appeal by Mr C J Duncan against a Judgment of the Employment Tribunal, sitting by Chairman alone in London (Central) dated 7 March 2006, following a hearing on 17 January 2006. By its Judgment the Tribunal dismissed Mr Duncan’s claims and ordered him to pay a contribution towards costs in the sum of £6,500. Mr Duncan’s appeal was, for the most part, dismissed at a preliminary hearing of this appeal. Today I am concerned only with the order for costs. 

The rules about costs

2.	The statutory provisions governing an award of costs are set out in rules 38 to 41 of the Employment Tribunal Rules 2004. For the purposes of this appeal it is only necessary to set out rule 40, paragraphs 2 and 3, and rule 41, paragraphs 1 and 2:
“Rule 40
(2) A tribunal or chairman shall consider making a costs order against a paying party where, in the opinion of the Tribunal or chairman (as the case may be), any of the circumstances in paragraph (3) apply. Having so considered, the tribunal or chairman may make a cost order against the paying party if it or he considers it appropriate to do so.
(3) The circumstances referred to in paragraph (2) are 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.
Rule 41
(1) The amount of a costs order against the paying party shall be determined in any of the following ways-
(a) the tribunal may specify the sum which the paying party must pay to the receiving party, provided that sum does not exceed £10,000;
(b) the parties may agree on a sum to be paid by the paying party to the receiving party and if they do so the costs order shall be for the sum so agreed;
(c) the tribunal may order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party with the amount to be paid being determined by way of detailed assessment in a County Court in accordance with the Civil Procedure Rules 1998 or, in Scotland, as taxed according to such part of the table of fees prescribed for proceedings in the sheriff court as shall be directed by the order.
(2) The tribunal or chairman may have regard to the paying party’s ability to pay when considering whether it or he shall make a costs order or how much that order should be.”

The facts

3.	Mr Duncan was employed by Faithful & Gould Ltd from December 2004 until May 2005. He signed a written contract at the commencement of his employment. It was always envisaged that he would work on secondment to a joint venture company and from January 2005 he did so. Following his secondment to the joint venture company Mr Duncan wrote a letter dated 18 February 2006, in which he proposed variations to his terms and conditions of employment. His eventual claim to the Tribunal was based on those proposed variations. But Faithful & Gould said they had rejected the variations he had proposed, in particular at a meeting with Miss Munro on 24 February 2006. Miss Munro gave evidence and relied on a contemporaneous note of the meeting, which she had not sent to Mr Duncan at the time. The Tribunal Chairman accepted her evidence and placed some weight upon her contemporaneous note. 

4.	When the Tribunal Chairman announced the result an application for costs was made by the Respondents, who were Faithful & Gould Ltd and an associated company. The Chairman found that it was open to him under the rules to make an award of costs. His conclusion appears in paragraph 15 of his reasons. He said:
“I am satisfied that Counsel’s submission is well founded. In other words, without being able to assert in evidence that the Respondent had accepted the variations of the contract that he had proposed in his letter of 18 February 2005, the Claimant’s case had, in my judgment, no reasonable prospects of success. It was at best misconceived. In the light of the evidence disclosed to him on 21 October 2005 in the form of Miss Munro’s witness statement and the files notes that she made of the meeting that followed on 24 October 2005, the continued pursuit of this claim was, in my judgment, not just misconceived, it was unreasonable. In those circumstances, in my judgment, my discretion to make a costs order is engaged.”

5.	On the basis of his finding that the claim had no reasonable prospect of success, it would have been open to the Tribunal Chairman to make an award of costs for the whole of the proceedings, but it is plain from his reasons, taking paragraphs 11 to 17 as a whole, that this was not what he did or intended to do. The Chairman made an enquiry as to the amount of costs after 21 October. He found that the costs from that date onwards were £6,500. That was the figure he awarded.

6.	The date which the Chairman took, 21 October, is mentioned in his reasoning in two quite separate contexts: firstly it is mentioned as the date on which evidence was disclosed in the form of Miss Munro’s witness statement and file note (see the passage which I have quoted already); secondly, however, in an earlier paragraph of the Chairman’s reasoning it is mentioned as the expiry date of an offer made by the Respondents marked “without prejudice as to costs”, whereby the Respondent pointed out to Mr Duncan the difficulties in his case and offered him an opportunity to withdraw with no order as to costs. Against this background I turn to the two grounds of appeal. 

Mistake of fact

7.	The Chairman made a mistake of fact in believing that Miss Munro’s witness statement was exchanged on 21 October 2005. Her statement was actually exchanged on 18 November. On behalf of Mr Duncan it is submitted that the mistake went to an essential ground of the exercise of the Tribunal Chairman’s discretion. On behalf of the Respondent it is submitted that the mistake was not such as to vitiate the decision and the reasoning. The file note was served on 21 October. It is submitted the witness statement did not materially add to or alter the strength of the case, particularly where the Chairman found the Claim to have been misconceived from the outset. 

8.	My conclusions are as follows. The Chairman, having found that the claim was misconceived, had a discretionary power to award costs if he thought it was appropriate to do so. Although an order for costs is made in the exercise of discretion, the Appeal Tribunal has a limited role. The factors which a Tribunal takes into account and the weight it gives to them are generally a matter for the Tribunal and give rise to no question of law. But if a Tribunal leaves out of account an essential factor, or takes into account an irrelevant factor, or takes into account a factor for which there is no evidential basis, then the Tribunal errs in law and is liable to be corrected.

9.	In this case there is no doubt that the Chairman took into account, as he believed, that the statement had been served on 21 October. This may not have been his only reason for selecting that date but it was, I think, a part of his reasoning. I do not think I would do justice to his reasoning if I was to hold that it was immaterial. It is not absolutely plain from the Chairman’s reasoning what factors he took into account when deciding whether it was appropriate to award costs as he did from 21 October. It seems likely that he took into account the letter offering a settlement which would have expired on that date, but it also seems likely that he took into account the witness statement and the file note disclosed on that date. I think I would be doing less than justice to his reasoning if I said that the statement was immaterial.

10.	I would add this. The file note dated 24 February does not read like a minute of a meeting. It reads more like an aide-memoir or a position statement, setting out Miss Munro’s point of view. It would be when the file note is read with the statement of Miss Munro that it becomes plain that she was saying the file note reflected what actually occurred at the meeting. So it would not have been irrational of the Chairman in the exercise of his discretion to choose the date when Mr Duncan had both file note and statement. 

11.	In those circumstances it seems to me that the Chairman has taken into account a factor for which there was no evidential basis, that the appeal should be allowed and the matter should be remitted to the same Chairman to exercise his discretion on a correct factual basis.

The quantum of costs

12.	The second ground of appeal relates to a letter sent “without prejudice save as to costs” by solicitors for the Respondents sent 18 November, again offering Mr Duncan an opportunity to withdraw without any costs being awarded. In this matter the Solicitors said:
“To date our client’s legal fees are approximately £7,000 plus VAT and we estimate a further £1,500 plus VAT, which includes Counsel fees, will be incurred for the period up to and including the Tribunal hearing on 1 December 2005.”

13.	The solicitor’s bill was higher than can be reconciled with the figure of £1,500. But there is at least to substantial measure an explanation for the discrepancy. The hearing on 1 December 2005 could not take place; the parties went to the Tribunal, the case was not reached. It was adjourned to the date in January when the hearing took place and Counsel was paid a rereading fee and a refresher, which accounts, not entirely but in substantial measure, for the difference. 

14.	If therefore this had been the only ground of appeal I would have held that the Chairman had not been shown to make any error of law in his decision by failing expressly to refer to and deal with that particular letter. It is a common ground that the letter was before him but in the circumstances I do not think it called for particular attention. 

15.	I would only add this. Within rule 41 there are three means by which costs may be determined: the Tribunal may specify the sum itself, in which case the award must not exceed £10,000; the parties may agree the amount; the Tribunal may order a detailed assessment in a County Court in accordance with the Civil Procedure Rules 1998. If costs are assessed in the County Court then the reasonableness of the costs will always be an issue. Indeed if costs are agreed on a standard basis the award will only be for such amount as is proportionate and reasonable. If they are assessed on the indemnity basis the award will disallow such costs as were unreasonably incurred or unreasonable in amount. Where a Tribunal assesses costs pursuant to rule 41(1)(a) it cannot ignore such principles, even if, as may well be the case, it has indemnity costs in mind it must not order costs if it considers they were not reasonably incurred or reasonable in amount. 

16.	In this case, however, the Tribunal Chairman had information as to the costs. He had an explanation readily to hand for the difference between the amount eventually claimed and anything in the November letter. He was not actually choosing the November date as his starting point and in those circumstances it seems to me that the November letter did not call for any special consideration in the Tribunal Chairman’s reasons. 

17.	Therefore on the first ground of appeal the appeal will be allowed and the matter remitted to the Chairman to exercise his discretion afresh on a correct factual basis. The parties will, no doubt, in their submissions to him make allowance for the possibility that he might still choose 21 October, make allowance for the possibility that he might rather choose the date of 18 November and make such submissions as they wish to on the question of the costs which should be allowed depending on the date. I am minded to think that this is a matter that can sensibly be dealt with by written submissions to the Chairman on both sides. If so I would set out a timetable for those as part of this order but I will listen to Counsel on that point.