Vaughan v London Borough Of Lewisham & Ors

Under Employment Tribunal Rules, a costs jurisdiction requires a two-stage approach. The tribunal must first decide whether the claim was misconceived or the proceedings were conducted unreasonably. It must then exercise its discretion separately as to whether, and in what amount, costs should be awarded.

A claimant’s genuine belief in the claim is not decisive. The question is whether there were reasonable grounds for that belief. A deposit order, costs warning, or settlement offer is not a precondition to a costs award, although their absence or effect may be relevant in the discretionary exercise.

Where the tribunal elects to consider means, it need not limit costs to present affordability. It may make a substantial award where there is a realistic prospect of future payment, subject to enforcement through the County Court.

The appellant had brought discrimination, victimisation, harassment and whistleblowing detriment claims against the Council, former employers and colleagues. Following a twenty-day hearing, all claims were dismissed.

The Employment Tribunal held that the claims had been misconceived from the outset and ordered the appellant to pay one-third of the respondents’ costs, to be assessed in the County Court. The respondents’ estimated costs were £260,000. The Tribunal later refused a review of that costs decision.

The appellant challenged the costs order on grounds including the absence of a deposit order or adequate warning, settlement offers, inadequate reasons, her unrepresented status, ill-health and inability to pay. The central issue was whether the Tribunal had erred in applying and exercising its costs jurisdiction.

1. Appeal dismissed. The Tribunal’s finding that the claims were misconceived and unreasonably pursued was open to it. The appellant had persisted in unsupported allegations of a mass conspiracy while rejecting plainly available non-discriminatory explanations. The relevant inquiry was objective: whether she had reasonable grounds for believing in the claims, rather than whether she genuinely believed them.

2. The Tribunal correctly approached rule 40 in two stages: first, whether a threshold circumstance in rule 40(3) was established; secondly, whether it was appropriate to award costs and in what amount. Its reasons did not expressly address all material submissions, particularly the absence of warnings and the settlement offers. In a case involving substantial potential liability, such points should ordinarily be addressed. However, remittal would serve no purpose because the order was legally correct on the merits.

3. A deposit order or costs warning is not a legal precondition to a costs award. Their absence may be relevant to discretion, but carried insufficient weight here. The appellant did not contend credibly that an earlier warning would have caused her to discontinue. A substantial settlement offer, especially one made expressly for commercial reasons, likewise does not establish that a claim had reasonable prospects or make a later costs order unjust. Exceptionally, an offer may have encouraged a claimant to overestimate the claim’s strength; this was not such a case.

4. An unrepresented party must not be judged by professional standards, and self-representation is relevant at both stages. It does not confer immunity from costs. The appellant’s threshold conduct concerned her unreasonable assessment of the evidence, not inexperience in litigation. Her disability and depression did not require costs to be withheld where no relevant effect on her conduct or decisions was identified.

5. Rule 41(2) gave the Tribunal a discretion, not a duty, to consider ability to pay. Having considered it, the Tribunal was not required to fix a maximum presently affordable sum. It could award a substantial proportion of costs where there was a realistic prospect of future employment and payment. The County Court would take means into account on enforcement. The one-third cap was not perverse or disproportionate.

• Employment Appeal Tribunal: dismissed the appeal against the costs order: [2013] UKEAT 0533_12_0606.
• Employment Tribunal, London South: dismissed all substantive claims after a twenty-day hearing and ordered the appellant to pay one-third of the respondents’ costs, to be assessed in the County Court. A subsequent review application was refused.