Mardner v Gardner & Anor

Once the threshold for an Employment Tribunal costs order has been met, the decision whether to award costs remains discretionary. An appellate court may interfere only for an error of legal principle or reliance on irrelevant circumstances.

The voluntary status of trustees of an unfunded charity may, in a particular case, be relevant to whether a costs order is appropriate. It is not an automatic immunity from personal costs liability. By contrast, a receiving party’s legal-expenses insurance is ordinarily irrelevant. A party whose conduct justifies costs should not obtain the benefit of insurance prudently obtained by the other party. An error founded on that consideration requires remission where the appellate tribunal cannot determine the only lawful result.

The Claimant, formerly director of an unincorporated charitable body, brought Employment Tribunal proceedings against members of its volunteer management committee after the charity ran out of funds and his employment ended. The proceedings were settled by consent order.

The Employment Judge found that the Respondents had maintained a misconceived defence unreasonably, so that the threshold for costs under the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 was engaged. She nevertheless refused costs because the Respondents were volunteer trustees who were personally liable for the substantive settlement and because the Claimant had legal-expenses insurance.

The Claimant appealed the refusal. The central issue was whether either consideration could properly inform the discretionary decision on the appropriateness of a costs award.

1. Appeal allowed and matter remitted. The Employment Appeal Tribunal held that the Employment Judge was entitled to treat the Respondents’ position as volunteer trustees of an unfunded charity as a factor relevant to appropriateness. The reasoning did not impose a general rule exempting volunteer trustees from costs. It left the issue to the fact-sensitive discretion of the tribunal.

2. The Employment Judge erred by taking account of the Claimant’s legal-expenses insurance. Under Rule 38, costs may include expenses incurred on behalf of a party. The rules do not make the receiving party’s means a generally relevant consideration once the conduct threshold has been crossed.

3. Costs are compensatory, not punitive. A party should not escape the costs consequences of its misconceived defence and unreasonable conduct because the other party prudently purchased insurance. Although the jurisdiction arose under the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004, the relevant public-policy principle was materially the same as that approved in Parry v Cleaver [1970] AC 1.

4. The insurance consideration formed a material part of the Employment Judge’s reasoning. The EAT could not conclude either that the error was immaterial or that only one lawful outcome was possible. Applying Jafri v Lincoln College [2014] EWCA Civ 499, the question of appropriateness, and any relevant issue of means, was remitted to the same Employment Judge if practicable.

5. The EAT also ordered the Respondents jointly and severally to pay the successful Claimant’s appeal fees of £1,600 under Rule 34A(2)(a) of the Employment Tribunal Rules 1993.

• Employment Appeal Tribunal: Allowed the Claimant’s appeal, set aside the refusal of costs to the extent it relied on legal-expenses insurance, and remitted the discretionary costs question for fresh consideration.
• East London Employment Tribunal: Employment Judge Corrigan, sitting alone on 11 February 2013, with judgment sent on 4 July 2013, found the costs threshold engaged but declined to make a costs order.