Anderson v Cheltenham & Gloucester Plc (Practice and Procedure : Costs)

A rejected Calderbank-type settlement offer may be relevant to whether a party has conducted Employment Tribunal proceedings unreasonably for the purposes of a costs order. Failure to obtain more than the offer does not, without more, justify costs. The tribunal must consider all relevant circumstances, including whether unsuccessful claims were nevertheless properly brought, whether a claimant had a legitimate interest in obtaining a declaration, and uncertainty in the assessment of remedy.

The civil courts’ power to set off costs against damages does not automatically apply in the Employment Tribunal jurisdiction.

The Claimant brought complaints of sex and race discrimination, unfair dismissal and wrongful dismissal. She rejected the Respondent’s pre-liability offer of £25,000. Her discrimination claims later failed, but her unfair dismissal complaint succeeded subject to a two-thirds deduction for contributory conduct.

At the remedy hearing she recovered £18,073.75. The Employment Tribunal held that her rejection of the earlier offer had been unreasonable and made a costs order of £10,000, setting it off against the compensation award. The Claimant appealed against the costs order. The central issue was whether the Tribunal had properly applied the principles governing costs after rejection of a Calderbank-type offer.

1. Appeal allowed. The Employment Tribunal’s reasons did not justify its conclusion that the Claimant had acted unreasonably so as to warrant a costs order. It had effectively relied on her rejection of the £25,000 offer and the size of her £1.2 million schedule of loss, without addressing other material matters.

2. Rejection of a Calderbank-type offer can be relevant to the threshold for costs under rule 40(3) of the Employment Tribunal Rules 2004. It is not, however, determinative. A claimant’s failure to beat such an offer does not itself establish unreasonable conduct or justify costs.

3. The omitted factors were material. There was no finding that the failed discrimination claims were misconceived. The Claimant had a legal entitlement to pursue a declaration of unfair dismissal where the Respondent made no admission, and such a finding could assist her job search. Further, the eventual two-thirds deduction for contributory conduct was difficult to predict.

4. Exercising its power under section 35 of the Employment Tribunals Act 1996, the Appeal Tribunal resolved the issue rather than remitting it. On the facts, no costs order should have been made. The costs order was set aside and the Claimant remained entitled to £18,073.75 compensation.

5. Obiter, the Tribunal was not persuaded that the civil-jurisdiction power to set off costs against damages could simply be transposed to Employment Tribunal proceedings. Separate compensation and costs orders might nevertheless have enabled the Respondent, in practical terms, to pay only the net balance.

• Employment Appeal Tribunal: appeal allowed; the Employment Tribunal’s £10,000 costs order was set aside.
• Employment Tribunal: discrimination claims dismissed; unfair dismissal upheld subject to a two-thirds contributory-conduct deduction. At remedy, compensation of £18,073.75 was awarded and a £10,000 costs order was made against the Claimant.