Herry v Dudley Metropolitan Council

Where an Employment Tribunal decides to have regard to a paying party’s ability to pay, it must assess the party’s means and reflect them in the amount ordered. It may consider future earning capacity, but must explain why the resulting award is reasonable and proportionate. Where appropriate, it should consider a cap or a proportion of the costs.

A tribunal is not required to explain separately why it has rejected a partial costs order where its findings justify the whole award and show that it exercised its discretion. A prolonged absence certified as stress does not, without more, establish a mental impairment or disability. A reaction to adverse circumstances may become entrenched while remaining a reaction rather than a mental impairment.

Two appeals arose from separate Employment Tribunal proceedings involving the same claimant and Dudley Metropolitan Council. In the costs proceedings, the tribunal found that the claimant had brought and pursued extensive claims unreasonably and ordered him to pay the respondents’ whole costs. It found him impecunious but relied on his possible future return to teaching. The costs were later assessed at £110,111.89.

The claimant appealed the costs order and a separate finding that he was not disabled during the material period in 2014. The central issues were whether the costs tribunal sufficiently considered the possibility of a partial or capped award having regard to means, and whether the disability tribunal erred in treating certified work-related stress as a reaction to life events rather than a mental impairment.

1. Costs threshold and extent of award. The tribunal sufficiently explained why the claimant’s unreasonable conduct justified an order for the respondents’ whole costs. It was not required to conduct a separate checklist exercise addressing every possible partial order. Where unreasonable conduct is extensive and the opposing party has acted reasonably, a full award may be justified. The first costs ground therefore failed, applying Barnsley Metropolitan Borough Council v Yerrakalva [2012] IRLR 78 and Vaughan v London Borough of Lewisham and others [2013] IRLR 713.
2. Ability to pay. Rule 84 gives the tribunal a discretion whether to have regard to ability to pay. If it chooses to do so, it must assess means and reflect them in the amount ordered. It may consider the prospect of improved means or future earning capacity, but must explain why the award is realistic, reasonable and proportionate. A tribunal should consider whether a cap or proportion is appropriate. The tribunal’s finding that the claimant was impecunious, followed by an unexplained award exceeding £100,000, did not satisfy that obligation. The costs appeal was allowed in part on this ground. The finding that the claimant’s conduct justified liability for the whole costs was upheld, but the Rule 84 issues were remitted to the same tribunal for reconsideration.
3. Bankruptcy and future earning capacity. The court observed that costs incurred in proceedings issued before bankruptcy are bankruptcy debts and may be released on discharge. A party relying on future earning capacity in support of a costs application should disclose any intention shortly to serve a statutory demand or commence bankruptcy proceedings.
4. Disability. The disability appeal was dismissed. The Employment Judge was entitled to find that there was little evidence of any substantial adverse effect on normal day-to-day activities and that the claimant’s stress was largely a reaction to perceived unfair treatment. The guidance in J v DLA Piper UK [2010] ICR 1052 did not impose a mandatory sequence of inquiry. Long-term absence from work, even when certified as stress, is not conclusive of mental impairment or disability.

• Employment Appeal Tribunal: The costs appeal was allowed in part. The liability finding, subject to ability to pay, was upheld, and the Rule 84 issues were remitted to the same Employment Tribunal. The appeal against the disability Judgment was dismissed.
• Employment Tribunal: One tribunal ordered the claimant to pay the respondents’ whole costs. Another found that he was not a disabled person during the material period.