HCA International Ltd v May-Bheemul

An Employment Tribunal must first consider a costs order where a circumstance in rule 40(3) applies. It then retains a discretion whether an order is appropriate.

The failure of a claim, including failure to prove a central allegation, does not itself require costs. A finding that a party lied may support a costs order, but the tribunal must assess the context and the nature, gravity and effect of the conduct. Refusal of a settlement offer is likewise a relevant factor, not an automatic costs consequence.

In exercising its discretion, the tribunal may take account of a claimant’s genuine belief and ill health. An appellate perversity challenge requires an overwhelming case.

The employer appealed from the London Central Employment Tribunal’s decision, promulgated on 5 July 2010, refusing its application for costs after the claimant’s protected-disclosure detriment and constructive-unfair-dismissal claims had been dismissed following a lengthy hearing.

The employer relied on a rejected settlement offer, the claimant’s allegations and evidence, reports to external bodies, the calling of witnesses, and observations made at an earlier pre-hearing review. It contended that the costs decision misstated the authorities, gave inadequate reasons, took irrelevant matters into account and was perverse.

The central issue was whether the Tribunal erred in concluding that the claimant had not conducted the proceedings unreasonably or brought misconceived proceedings, and in declining to exercise its discretion to award costs.

1. Appeal dismissed. The Employment Tribunal made no error of law and its refusal to award costs was not perverse.

2. Under rule 40 of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004, a tribunal must consider costs if a rule 40(3) circumstance is present. If it is, the tribunal has a separate discretion whether an order is appropriate. Costs do not follow the event in Employment Tribunal proceedings.

3. The authorities concerning false central allegations did not establish a general rule that costs must be awarded whenever a claimant fails to prove a central part of the claim. Those cases turned on findings of deliberate, blatant or central lies. A lie may support a costs application, but the tribunal must consider its context and its nature, gravity and effect.

4. Here there was no finding that the claimant had lied or knowingly pursued untrue allegations. Some disclosures were protected, while the claimant genuinely believed in other allegations although that belief was not objectively reasonable. Failure to establish the legal elements of the claim did not equate to unreasonable conduct of proceedings.

5. The Tribunal was entitled to treat refusal of the modest settlement offer as a relevant factor rather than an automatic basis for costs. It was also entitled to reject the complaints concerning external reports, the late supplementary statement and witnesses called by the claimant.

6. After finding no unreasonable conduct and no misconceived proceedings, the Tribunal could in any event consider the claimant’s undisputed ill health and genuine belief when deciding whether costs were appropriate. The reference to email security was a minor factual misdescription and did not vitiate that discretionary decision.

• Employment Appeal Tribunal: Appeal dismissed: [2011] UKEAT 0477_10_2303.

• London Central Employment Tribunal: On 5 July 2010, dismissed the employer’s application for costs following dismissal of the claimant’s substantive claims.