AQ LTD v HOLDEN

An Employment Tribunal’s costs jurisdiction under rule 40 is discretionary and costs remain exceptional. The threshold tests apply equally to represented parties and litigants in person. However, when deciding whether conduct was vexatious, unreasonable or misconceived, the Tribunal must fairly take account of a lay party’s lack of legal knowledge, objectivity and specialist advice.

An appeal against a costs decision will ordinarily fail unless it reveals an error of law, reliance on irrelevant circumstances, or a conclusion that was obviously wrong. The appellate court should respect the Tribunal’s broad, fact-sensitive assessment of the proceedings as a whole.

The Employment Tribunal dismissed Mr Holden’s constructive unfair dismissal claim against AQ Ltd. AQ then sought more than £20,000 in costs, alleging that the claim and its conduct were misconceived, unreasonable or vexatious. The Tribunal refused the application.

AQ appealed, alleging inadequate reasons, misdirection about an unrepresented litigant, failure to consider settlement offers and other relevant matters, and errors concerning the applicable costs rules and the amount recoverable. The central issue was whether the Tribunal’s refusal of costs disclosed an error of law.

1. Appeal dismissed. The Employment Tribunal’s refusal to order costs was free from error of law.

2. Applying the appellate guidance in [2012] IRLR 78, costs decisions are discretionary, fact-sensitive assessments. An appellate tribunal should not interfere merely by re-evaluating individual features of the case. Intervention requires an error of legal principle, reliance on irrelevant circumstances, or a decision that is obviously wrong.

3. The Tribunal had correctly directed itself to rules 40(2) and 40(3) of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004. Its reference to rule 40(1) was plainly a slip. It had addressed AQ’s allegations of unreasonable and vexatious conduct, particularly the possible stigma-damages claim and its withdrawal.

4. The rule 40(3) threshold tests do not change because a party is unrepresented. Their application must nevertheless take account of that party’s lack of professional knowledge, objectivity and advice. A litigant in person is not immune from costs, but the Tribunal was entitled to treat Mr Holden’s status as relevant both to the threshold assessment and to its residual discretion.

5. The absence of an application for a pre-hearing review, strike-out or deposit order was a relevant, though non-decisive, circumstance when assessing whether the proceedings had been truly misconceived or vexatious. The Tribunal could also disregard the short-lived settlement offer and the advice given in April 2010. Its finding that the claimant’s conduct was misguided did not require a finding that it was vexatious or unreasonable.

6. The Tribunal’s orally delivered reasons were not required to address every available argument or display refined legal drafting. It was also plain that the Tribunal knew it could award less than the full costs claimed under rule 41.

• Employment Appeal Tribunal: AQ Ltd’s appeal was dismissed. The Tribunal’s refusal of costs was upheld.
• Employment Tribunal, Leeds: By a judgment dated 17 August 2011, the Tribunal dismissed the constructive unfair dismissal claim and refused AQ Ltd’s application for costs.