Kovacs v Queen Mary and Westfield College

When deciding whether to make a costs order for culpable conduct in employment tribunal proceedings, the tribunal must not take the paying party’s means into account. The statutory scheme makes the specified conduct threshold the relevant protection against routine costs liability. Once that threshold is crossed, inability to pay is neither an additional restriction nor a discretionary factor.

Means become relevant at the enforcement stage, when the county court may permit payment by instalments or stay enforcement. A prior refusal to strike out a claim does not prevent the tribunal, after a full hearing, from finding that the proceedings were vexatious, unreasonable or an abuse and awarding the whole of the receiving party’s assessed costs.

After a 13-day hearing, an employment tribunal dismissed Dr Kovacs’s discrimination claims against Queen Mary and Westfield College and the Royal Hospitals NHS Trust. It found her proceedings against the Trust entirely unmeritorious and a flagrant abuse of the purposes of litigation. Under rule 12 of the Industrial Tribunals (Constitution and Rules of Procedure) Regulations 1993, it ordered her to pay the Trust’s whole costs, to be taxed if not agreed.

The Employment Appeal Tribunal dismissed her appeal. With permission, she appealed to the Court of Appeal, arguing principally that the tribunal had been required to take her restricted means into account. She also challenged the unrestricted award, which was ultimately assessed at £62,000, particularly because an earlier application to strike out her claim had failed.

The central question was whether a party’s ability to pay is relevant when an employment tribunal decides whether to make a costs order for culpable conduct.

1. Appeal dismissed unanimously. Simon Brown LJ delivered the leading judgment. Chadwick LJ and Charles J agreed that ability to pay is not a factor which an employment tribunal may take into account when deciding whether to make a costs order under rule 12 of the Industrial Tribunals (Constitution and Rules of Procedure) Regulations 1993.

2. The costs regime protects access to employment tribunals by permitting an award only after the prescribed threshold of frivolous, vexatious, abusive, disruptive or otherwise unreasonable conduct has been crossed. Once it has been crossed, there is no reason to protect the party responsible from compensating an opponent for costs which should not have been incurred. Parliament had selected conduct as the restriction upon the costs power and had not imposed a further restriction based on ability to pay.

3. The statutory context confirmed that conclusion. Rule 12 contained neither a requirement nor machinery for investigating means. By contrast, rule 7(5) expressly required reasonable steps to ascertain ability to pay before a deposit order. Parliament had also made express provision elsewhere when it intended costs liability to be limited by ability to pay.

4. Means may become relevant when the order is enforced, rather than when it is made. Employment tribunal costs orders are registered and enforced through the county court. That court may order payment by instalments or stay enforcement where the debtor cannot pay. The earlier EAT authorities suggesting that means should, must or could be considered were therefore displaced. The reasoning in Beynon v Scadden concerning the absence of any requirement or machinery for a means inquiry was accepted, although its suggestion that such an inquiry would usually be desirable was rejected.

5. The unrestricted costs award was amply justified. The tribunal was entitled, following the full hearing, to find that the claim against the Trust had never been genuine, had formed part of a vendetta, and constituted a flagrant abuse. An earlier tribunal’s refusal to strike out the claim was not inconsistent with findings subsequently made on the complete evidence.

6. Chadwick LJ added, without expressing a concluded view, that the power to award a specified sum under rule 12(3)(a) appeared intended for cases suitable for summary assessment. It should compensate the receiving party for costs attributable to the culpable conduct. Other cases should proceed by agreement or detailed assessment.

1. Court of Appeal: Dismissed the appeal unanimously and affirmed the unrestricted costs order: [2002] EWCA Civ 352.
2. Employment Appeal Tribunal: On 1 December 2000, dismissed the appeal against the employment tribunal’s costs order.
3. Employment Tribunal: Dismissed the discrimination claims against the Royal Hospitals NHS Trust and ordered Dr Kovacs to pay the Trust’s whole costs, to be taxed if not agreed.