Raggett v John Lewis plc

When an Employment Tribunal has decided that a costs order is appropriate under rule 40(3), it should assess the amount by looking at the whole picture and identifying the effects of the paying party’s conduct. A precise causal link between particular conduct and particular costs is unnecessary. The receiving party’s litigation conduct may be relevant, but must be supported by findings of fact. Rejection of a Calderbank-type offer is relevant only if the rejection was found to be unreasonable. The general indemnity principles applied in civil litigation inform the Employment Tribunal costs regime, although the detailed Civil Procedure Rules do not apply directly. Recoverable VAT must not be included in an Employment Tribunal costs order.

The Claimant appealed against the amount of costs awarded to John Lewis plc after the Employment Tribunal dismissed her constructive unfair dismissal claim. The Tribunal had found the claim misconceived and ordered her to pay £2,655.72, comprising counsel’s fees, travel expenses and VAT.

The appeal challenged the assessment of the amount of costs, including the treatment of the successful contractual claims, the settlement offer and the Respondent’s litigation conduct. It also challenged the inclusion of VAT which the Respondent could recover as input tax.

1. First ground dismissed. Applying Barnsley Metropolitan Borough Council v Yerrakalva [2011] EWCA Civ 1255, an Employment Tribunal exercising the broad discretion under rule 40(3) is not required to identify particular costs caused by particular conduct. It must consider the whole picture, the unreasonable conduct, and its effects on the proceedings and costs.
2. The receiving party’s litigation conduct may be taken into account in fixing the amount of costs, but findings of fact must support any reduction on that basis. No such findings were made against the Respondent.
3. Under Kopel v Safeway Stores plc [2003] IRLR 753, rejection of a Calderbank-type offer may be considered only if the Employment Tribunal finds that the rejection was unreasonable. The Tribunal’s observation that rejecting the offer was unwise was made when deciding whether to make a costs order, and was not relied on when fixing its amount.
4. The two-day hearing was caused by the misconceived unfair dismissal claim. The Tribunal was therefore entitled to award the Respondent’s two-day brief fee rather than only the fee for the second day.
5. Second ground allowed. The detailed provisions of the Civil Procedure Rules do not apply directly, but the general civil costs principles apply: Neary v St Albans Girls’ School [2010] ICR 473. Costs are compensatory, not punitive. Where VAT is recoverable as input tax, it is not expenditure incurred by the receiving party and must not be included in an Employment Tribunal costs order.
6. The order for £2,655.72 was set aside and replaced with an order for £2,213.10.

• Employment Tribunal: The Claimant’s constructive unfair dismissal claim was dismissed. The Tribunal found it misconceived, made a costs order under rule 40(3), and ordered payment of £2,655.72.
• Employment Appeal Tribunal: The challenge to the substantive costs assessment was dismissed, but the appeal succeeded in relation to recoverable VAT. The order was reduced to £2,213.10.