Hammond v Secretary of State for Work and Pensions

Crossing the threshold for an Employment Tribunal costs jurisdiction does not require an award. The decision remains discretionary. Under rule 41(2) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations, the paying party’s ability to pay may be relevant both to whether costs should be ordered and to their amount. It need not be taken into account, and an award need not be limited to what the party can pay. However, where means are a potentially relevant consideration, the Tribunal should state whether it considered them and, if not, why. An unexplained failure to show that the issue was considered may constitute an error of law.

The Claimant appealed against an Employment Tribunal costs order of £2,551.37 made after his claim had been dismissed as misconceived and having no reasonable prospect of success. The Employment Judge considered that the threshold for costs jurisdiction had been crossed and that an award was appropriate, but gave no indication whether the Claimant’s means had been considered.

The appeal was limited to whether the Employment Judge had failed to explain whether the Claimant’s ability to pay had been taken into account. The central issue was the proper approach to means under rule 41(2) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations.

1. Appeal allowed. The costs decision was set aside as unsafe and remitted to the same Employment Judge for fresh consideration.
2. Even where the threshold for the Employment Tribunal’s costs jurisdiction has been crossed, the making of a costs order remains a matter of judicial discretion. Employment Tribunal proceedings remain essentially a no-costs jurisdiction, and costs do not follow the event automatically.
3. Rule 41(2) expressly permits regard to be had to the paying party’s ability to pay. Means may be relevant both when deciding whether to make an order and when determining its amount. The rule creates no obligation to consider means in every case, and inability to pay does not require the Tribunal either to refuse an award or to limit it to an immediately affordable sum.
4. Following the approach stated in Jilley v Birmingham and Solihull Mental Health NHS Trust UKEAT/0584/06, a Tribunal which does not take ability to pay into account should state why. If it does take it into account, it should record its findings, explain its effect on the decision, and give succinct reasons.
5. The EAT should not interfere with a discretionary costs decision unless it was plainly wrong, irrelevant matters were considered, or a relevant matter was omitted. Here the reasons did not show whether the Claimant’s means had been considered, although they were potentially relevant. That omission amounted to an error of law.
6. The Employment Judge remained free on remittal to make the same award, vary the amount, and decide whether an oral hearing was proportionate.

• Employment Appeal Tribunal: Appeal allowed. The costs issue was remitted to the same Employment Judge for fresh consideration.
• Watford Employment Tribunal: The Claimant’s claim was dismissed at a pre-hearing review, followed by a costs order of £2,551.37.