Afolayan v MRCS Ltd & Anor

Costs in employment tribunal litigation do not automatically follow the event. Under rule 34A(1) of the EAT Rules 1993, an order requires specified improper, vexatious, misconceived or unreasonable conduct. An appellate court must not substitute its own view for the EAT’s discretionary decision unless there was an error of legal principle or the decision was plainly wrong. A finding that a dismissal was procedurally unfair does not, without more, establish bad faith or improper conduct. A respondent is entitled to resist an appeal seeking to preserve a favourable contributory-fault finding where that resistance cannot properly be characterised as unreasonable or misconceived.

The appellant, a residential social worker, succeeded before the Employment Tribunal in establishing that his dismissal was procedurally unfair. The tribunal nevertheless found that he had contributed 100% to his dismissal. The Employment Appeal Tribunal allowed his substantive appeal on errors concerning the reason for dismissal, the effect of the procedural defects and contributory fault, and remitted remedy and contribution issues to a fresh tribunal. It refused his application for costs against the employer. He appealed to the Court of Appeal, alleging bad faith in the disciplinary process and in the defence of his claim. The central issue was whether the EAT had erred in law or acted plainly wrongly in refusing costs.

Disposition. Lord Justice Mummery delivered the judgment. Lord Justice Moses and Lord Justice Etherton agreed. The appeal was dismissed.

1. The EAT’s decision on costs was discretionary. The Court of Appeal could not substitute its own view unless the EAT had erred in legal principle or its refusal to make a costs order was plainly wrong.
2. Under rule 34A(1) of the EAT Rules 1993, costs were available only in specified circumstances, including unnecessary, improper, vexatious or misconceived proceedings, unreasonable delay or other unreasonable conduct. Success on an appeal did not itself create an entitlement to costs.
3. The reference to proceedings in rule 34A(1) primarily concerned proceedings before the EAT. It did not extend to ordinary court proceedings, even where they arose from the same facts and were governed by the Civil Procedure Rules. The specific examples in rule 34A(2) did not restrict the general discretion, in light of rule 34A(3).
4. The EAT was entitled to conclude that the employer’s resistance to the substantive appeal did not satisfy rule 34A(1). The employer was seeking to uphold the favourable finding that the appellant’s contributory fault was 100%, and its resistance to an appeal on questions of law could not reasonably be characterised as unnecessary, improper, vexatious, misconceived or unreasonable.
5. The Court was prepared to assume, without deciding, that the EAT could take account of conduct in the disciplinary process and in the Employment Tribunal. However, the tribunal’s finding of procedural unfairness was based on identified procedural errors and was not a finding of bad faith. There were no findings by either tribunal supporting allegations of bad faith or improper conduct. The costs appeal therefore failed on that ground alone. The wider question concerning conduct outside the EAT was left open.

1. Court of Appeal (Civil Division): In [2009] EWCA Civ 796, the court dismissed the appeal against the EAT’s refusal to make a costs order.
2. Employment Appeal Tribunal: In UKEAT/0553/07/DM, the EAT allowed the substantive appeal on errors concerning dismissal, procedural fairness and contributory fault, remitted remedy and contribution issues, and dismissed the subsequent costs application.
3. Employment Tribunal: The tribunal found the dismissal procedurally unfair but assessed contributory fault at 100%. It also dismissed the race discrimination claim and allowed the unlawful deduction of wages claim.