Howman v The Queen Elizabeth Hospital Kings Lynn (Practice and Procedure : Costs)

An employment tribunal may direct a detailed assessment of costs on the indemnity basis. In the employment tribunal context, that exceptional basis is appropriate only where the paying party’s conduct takes the case beyond the limited class in which a costs order is itself appropriate.

Where a tribunal elects to have regard to ability to pay, it must make and explain findings on means and balance compensation for unreasonable expense against the paying party’s means. It may cap, limit or otherwise tailor a costs award despite ordering detailed assessment. The tribunal must address the practical consequences of using capital, including a jointly owned family home, and available limiting alternatives.

The claimant’s unfair-dismissal claim against his former employer was dismissed by an employment tribunal. The tribunal then ordered him to pay the employer’s costs, to be assessed by the county court on the indemnity basis. The claim had been found misconceived and the claimant had persisted despite evidence which the tribunal considered overwhelming.

The claimant did not challenge the making of a costs order or the direction for detailed assessment. He appealed against the indemnity basis and contended that the tribunal had failed properly to take account of his ability to pay, particularly the likely effect on his jointly owned home and family.

The central issue was whether the terms of the costs order adequately reflected the claimant’s means and the tribunal’s discretionary balancing exercise.

1. Appeal allowed and remitted. The tribunal had power under rule 41(1)(c) to direct a county-court detailed assessment on the indemnity basis. An indemnity assessment does not improperly punish the paying party twice; costs are compensatory. In employment proceedings, however, it should be ordered only in the very rare case where conduct takes the matter beyond even the limited category in which a costs order is appropriate. On the tribunal’s findings, that threshold was open to it.

2. The error was not the choice of indemnity rather than standard assessment. A county court cannot consider ability to pay when assessing costs on either basis. The employment tribunal could nevertheless have ordered an indemnity assessment while capping the amount payable or otherwise limiting the order.

3. Under rule 41(2), a tribunal may decide whether to have regard to ability to pay. Once it does so, it must set out its findings on means, explain the impact on the decision to award costs or their amount, and conduct a balance between compensating the successful party and the paying party’s ability to pay. Means include capital, even where it is not immediately realisable.

4. The tribunal had summarised income, expenditure and capital but did not address the likely practical effect of a liability exceeding £40,000. The claimant’s modest savings and income meant that satisfying the order was likely to require realising his half-share in the jointly owned family home, with the potential to exhaust much of his life savings. Nor did the tribunal consider alternatives such as a percentage award, excluding a period of costs, or a financial cap.

5. Possible relief at the enforcement stage did not cure that omission. The county court would give weight to the tribunal’s order and might have limited scope to prevent its consequences. The tribunal’s failure to include those matters in the required balancing exercise fatally undermined its conclusion. The question of the terms of the costs order was remitted to the same tribunal; the existing costs order, detailed assessment and indemnity basis could not be reopened.

• Employment Appeal Tribunal: Allowed the appeal against the terms of the costs order and remitted that issue to the same employment tribunal.
• Employment Tribunal at Norwich: Dismissed the unfair-dismissal claim and ordered the claimant to pay the respondent’s costs, subject to county-court detailed assessment on the indemnity basis.