Khan v Kirklees Metropolitan Borough Council

Under the Employment Tribunal's Regulations 2001, a costs decision involves two stages: first, deciding whether the party's conduct or proceedings meet the threshold for costs; secondly, deciding whether to exercise the discretion to make an order having regard to all relevant circumstances.

Costs remain discretionary. An appeal court should interfere only for an error of principle, failure to consider relevant matters, reliance on irrelevant matters, or a plainly wrong decision. Employment Tribunal costs do not ordinarily follow the event, but unreasonable conduct may justify a substantial award. Apparent bias is assessed by asking whether a fair-minded and informed observer would regard the relevant circumstance as a real and possible source of unfairness.

Mr Khan brought race and disability discrimination claims against Kirklees Metropolitan Borough Council arising from his employment as a teacher. The claims, initiated in 2001, were struck out after hearings extending over 49 days. The Employment Tribunal made a costs order of £3,000 and a further order requiring Mr Khan to pay 80 per cent of the Council's costs.

The Employment Appeal Tribunal dismissed his appeals on 19 March 2007. Permission to appeal was refused on the bias issue and initially adjourned on costs. Mr Khan renewed his application, challenging the costs discretion, consideration of his means, the adequacy of the reasons, the reference to the wrong Regulations, the size of the award and apparent bias.

1. The renewed application for permission to appeal was refused. There was no real prospect of success on either the costs or apparent-bias grounds.
2. Regulation 14 of the Employment Tribunal's Regulations 2001 requires a two-stage approach. The Tribunal must first decide whether the party bringing or conducting proceedings acted vexatiously, abusively, disruptively or otherwise unreasonably, or whether the proceedings were misconceived. If that threshold is met, it must decide whether to exercise its discretion to make a costs order, having regard to all relevant circumstances.
3. The discretion belongs primarily to the Tribunal conducting the trial. The Court of Appeal will not interfere merely because an order is unusual or because it would have made a different order. Intervention requires an error of principle, consideration of irrelevant matters, failure to consider relevant matters, or a decision that is plainly wrong.
4. There was no material difference between the 2001 and 2004 Regulations for the purposes of the orders. The Tribunal had adequate grounds for finding unreasonable conduct and was entitled, after considering the discretionary matters, to require payment of 80 per cent of the Council's costs. The fact that the sum was severe or outside ordinary Employment Tribunal practice did not establish an error of law.
5. Costs do not ordinarily follow the event in Employment Tribunals. That reflects the generally reasonable conduct of litigants, rather than a cost-free entitlement. Where conduct is unreasonable, the litigant may bear a substantial proportion of the other party's costs.
6. The apparent-bias test remains whether a fair-minded and informed observer would regard the objected-to circumstance as a real and possible source of unfairness. Lord Bingham's guidance in The Queen v Abdroikov & Another [2007] UKHL 37 did not materially alter the earlier principles, including those referred to in R v Bow Street Magistrates Court ex parte Pinochet Ugarte (No 2) [1999] 2 WLR 272 and Porter v McGill [2002] 2 WLR 37. The facts disclosed no real possibility of apparent bias.

1. Court of Appeal (Civil Division): On 2 November 2007, Mummery LJ refused the renewed application for permission to appeal. [2007] EWCA Civ 1342
2. Employment Appeal Tribunal: On 19 March 2007, dismissed Mr Khan's appeals against the £3,000 costs order and the order requiring payment of 80 per cent of the Council's costs.
3. Employment Tribunal: Struck out the discrimination claims after extensive hearings and made the costs orders.