McPherson v BNP Paribas (London Branch) (1)

Withdrawal of an employment tribunal claim does not itself amount to unreasonable conduct or create a general liability for costs. The tribunal must consider whether the claimant conducted the proceedings unreasonably in all the circumstances.

Under rule 14(1), a costs award need not be confined to costs caused by particular instances of unreasonable conduct. The tribunal must nevertheless consider the nature, gravity and effect of that conduct when deciding whether to award costs and in what amount. It cannot award costs for a period during which there is no evidence of unreasonable conduct.

After withdrawing claims for unfair dismissal and breach of contract against his former employer shortly before the full merits hearing, the appellant was ordered by the employment tribunal to pay the employer's costs of the whole proceedings. The tribunal found that he had conducted the proceedings unreasonably, including through delay, non-compliance and his handling of health-related matters.

The Employment Appeal Tribunal dismissed his appeal. The Court of Appeal considered whether the tribunal had correctly identified unreasonable conduct and whether rule 14 permitted an award of all costs, including costs incurred before that conduct began.

1. Appeal allowed in part and costs order varied. Mummery LJ, with whom Bennett J agreed, held that the appellant had conducted the proceedings unreasonably. The tribunal was entitled to rely on his non-compliance with orders, reluctance to disclose documents, lack of co-operation and failure to warn the tribunal or employer that he had been considering withdrawal on health grounds for several months.

2. Withdrawal of a claim is not inherently unreasonable. The correct question under rule 14(1) of the Employment Tribunal Rules of Procedure 2001 is whether, in all the circumstances, the claimant conducted the proceedings unreasonably. Treating withdrawal as automatically attracting costs by analogy with the Civil Procedure Rules would risk deterring sensible withdrawals that save costs.

3. An appellate court may interfere with a tribunal's costs discretion only where it was exercised contrary to principle, in disregard of relevant considerations, or was plainly wrong. If further findings are unnecessary, the appellate court may substitute or vary the order.

4. Rule 14(1) contains no requirement that each item of costs must have been caused by, or be attributable to, a particular instance of unreasonable conduct. The tribunal must, however, consider the nature, gravity and effect of the conduct when deciding whether to award costs and the proper form of the award. The indemnity principle prevents punishment, but an award is not punitive merely because it extends beyond costs directly caused by the misconduct.

5. The tribunal erred by awarding the costs of the whole proceedings. There was no evidence of unreasonable conduct during their first eleven months. By the majority's reasoning, the appellant's liability was therefore limited to costs incurred after his application to adjourn the September 2001 hearing on medical grounds.

6. Thorpe LJ agreed that the order should be varied, but would have fixed the commencement of liability at the later failure to provide information about the appellant's subsequent employment. He considered that the medical report accompanying the adjournment application prevented the misleading solicitors' letters from justifying an earlier commencement date.

1. Court of Appeal (Civil Division): The appeal was allowed in part and the order was varied so that the appellant was liable only for costs incurred after the application to adjourn the September 2001 hearing.
2. Employment Appeal Tribunal: The appeal against the employment tribunal's costs order was dismissed on 22 July 2003.
3. Employment tribunal: Following withdrawal of the substantive claims, the tribunal ordered the appellant to pay the employer's costs of the whole proceedings, including the costs hearing, on the standard basis subject to detailed assessment if not agreed.