Abaya v Leeds Teaching Hospital NHS Trust (Practice and Procedure : Costs)

An Employment Tribunal's finding that a claim had no reasonable prospect of success engages, but does not determine, its costs jurisdiction under Rule 76(1) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013. The Tribunal must separately decide whether it is appropriate to exercise its discretion to award costs, before assessing quantum.

A costs award must be supported by adequate reasons. Where the Tribunal takes account of ability to pay, it may investigate third-party resources, but must address their actual effect on the paying party's own ability to pay.

The claimant's claims for constructive unfair dismissal, race discrimination and victimisation were dismissed by the Employment Tribunal. On the respondent's costs application, the Tribunal held that the discrimination and victimisation claims had had no reasonable prospect of success from the outset, but that the constructive dismissal claim had not. It awarded the respondent £5,000 costs.

The claimant appealed the costs order. He contended that the Tribunal had failed to exercise its discretion whether to award costs, had given inadequate reasons for the amount, and had wrongly relied on his wife's income without considering its effect on his own ability to pay.

1. Appeal allowed. The costs issue was remitted to the same Employment Tribunal for reconsideration.

2. Rule 76(1) of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 required a three-stage exercise. First, the Tribunal had to decide whether the jurisdictional condition was met, here whether a claim had no reasonable prospect of success. That condition was necessary but not sufficient. Secondly, it had to decide whether it was appropriate to exercise its discretion to make a costs order. Only if it did so could it assess the amount.

3. The Tribunal erred by moving directly from its finding that parts of the claim had no reasonable prospect of success to assessment of quantum. Its reference to exercising discretion concerned the amount of costs, not the prior and distinct question whether any award should be made.

4. The Tribunal also gave inadequate reasons for selecting £5,000. Although reasons need not be elaborate in every discretionary costs decision, they must enable the parties to understand how the amount was reached. It had not explained the effect on quantum of its finding that the constructive dismissal claim had a reasonable prospect of success, including what costs may have been incurred in any event.

5. Under Rule 84, the Tribunal could consider a third party's financial position. The relevant inquiry, however, was the impact, if any, of that position on the claimant's own ability to pay. The Tribunal had relied on a joint monthly surplus without identifying what part was available to the claimant. That error could have affected the amount awarded.

• Employment Appeal Tribunal: allowed the appeal and remitted the costs issue to the same Employment Tribunal: [2017] UKEAT 0258_16_0103.
• Employment Tribunal, Leeds: dismissed the substantive claims, refused reconsideration, and later awarded the respondent £5,000 costs.