The Manchester College v Hazel & Anor

A condition preventing an appellant from recovering its costs may be imposed retrospectively under CPR rule 52.9, but only where there is a compelling reason. CPR rule 52.3(7) permits conditions only when permission to appeal is initially granted.

A compelling reason may arise cumulatively where employees of modest means, who succeeded in a no-costs tribunal and the EAT, would otherwise abandon a viable case because of an unaffordable adverse-costs risk. The court may take account of reciprocal protection, the parties’ respective means, and the limited practical purpose of removing protection shortly before a new access-to-justice costs rule takes effect.

Two employees transferred to the college under Transfer of Undertakings (Protection of Employment) Regulations 2006 and were required to accept new contracts with substantial salary reductions. They brought unfair-dismissal claims after accepting the contracts under threat of dismissal.

The Employment Tribunal upheld their claims and ordered re-engagement at their former salaries. The Employment Appeal Tribunal dismissed the college’s appeal. The college obtained permission to bring a second appeal to the Court of Appeal.

After an order by Elias LJ that the college could not seek its Court of Appeal costs if successful, the college applied to set that order aside. The issue was whether the condition could and should be upheld under the CPR.

1. Application refused. The costs-protection condition imposed by Elias LJ remained in force. The college could pursue its substantive appeal only on condition that, if successful, it would not apply for its Court of Appeal costs.

2. CPR rule 52.3(7) did not authorise the retrospective imposition of a condition after permission to appeal had been granted. That power could be exercised only when permission was initially given. The relevant power was instead CPR rule 52.9, under which a condition may be imposed or varied only for a compelling reason.

3. There was such a reason on the cumulative facts. The employees had a respectable claim, having succeeded before both the Employment Tribunal and the EAT. They would not continue unless protected from adverse costs. A potential liability of up to £20,000 was not one they could reasonably be expected to assume, notwithstanding that they remained employed by the college.

4. The possibility that a later court might make a merciful costs order did not provide adequate protection. The employees’ undertaking not to seek costs if successful created a level position. The college’s financial difficulties did not place it in a position comparable to employees for whom an adverse Court of Appeal costs order would be disastrous.

5. Unison v Kelly [2012] EWCA Civ 1148 had special features and was not mechanically transferable. Its result was nevertheless consistent with the fact-sensitive exercise required here. The imminent commencement of CPR rule 52.9A was also material: a fresh application under that rule would be bound to succeed, so setting aside the existing order would serve no useful purpose.

• Court of Appeal (Civil Division): In this interlocutory decision, the court refused the employer’s application to set aside the costs-protection condition imposed following permission to appeal: [2013] EWCA Civ 281.
• Employment Appeal Tribunal: Dismissed the college’s appeal against the finding of unfair dismissal on 3 September 2012. No citation was stated in the judgment.
• Employment Tribunal, Ashford: By a majority, upheld the employees’ unfair-dismissal claims and later ordered re-engagement at their previous salaries, with reimbursement of lost salary and pension contributions.