Costs News

19 March 2020
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EAT upholds decision of tribunal to cap party’s recoverable costs

An employment tribunal was justified in making a costs order in favour of a defendant that was capped at the maximum the claimant recovered in damages and costs, the Employment Appeal Tribunal (EAT) has ruled.

In Kuwait Oil Company (K.S.C) v Al-Tarkait (PRACTICE AND PROCEDURE –- Costs) [2019] the claimant's claims for disability discrimination and wrongful dismissal failed, but his unfair dismissal claim succeeded with a substantial Polkey reduction and an 80% reduction of his basic award, for contributory fault. He was awarded compensation of nearly £80,000, with payment stayed.

Mr Justice Kerr recorded that, because of the way the proceedings were conducted, there were costs applications by both parties and both partially succeeded. No fixed amounts of costs were awarded, but the parties were given leave to apply for an assessment of costs if needed.

The claimant was awarded costs in respect of the respondent's failure to disclose documentation for a particular period, which it estimated to be around £5,000. Otherwise, the application was dismissed.

The respondent was awarded its costs incurred by reason of the claimant raising the matters that were dismissed by consent or by a tribunal decision. They were limited to the maximum sum of the compensation awarded to the claimant added to the costs awarded to the claimant.

Kerr J observed: “The likely practical outcome was that the main financial winners would be the parties' lawyers. In saying that, I am not intending in any way to disparage the parties' lawyers. They will have contributed to the substantive outcome and saved their respective clients from a result less favourable to their respective clients.”

Since the amount of the respondent's costs liability to the claimant was not yet known, the cap was similarly unknown. The issue in the appeal was whether the costs order in the respondent's favour was lawfully made. The respondent said it was not and should have been uncapped; its costs schedule was for £233,000.

The original tribunal said: “Pursuant to rule 78 [of the Employment Tribunal Rules 2013], we can award costs in a sum not exceeding £20,000 or to order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party. We consider that provision is drawn widely enough that we may apply a costs limit even if the costs are above the £20,000 limit [and] so would require taxation.”

It capped the costs because the amount claimed for dealing with the issues in question were “way out of proportion”. Further, taking account of the claimant's financial resources, per rule 84, it considered the cap “a reasonable level at which to set costs”.

Kerr J ruled that an employment tribunal may have regard to ability to pay under rule 84 when making a non-fixed sum award under rule 78(1)(b), as well as when making a fixed sum award of £20,000 or less under rule 78(1)(a).

He continued that, provided the costs order made under rule 78(1)(b) met the requirement that the order is to pay “a specified part” of the receiving party's costs, the order was within the power of the tribunal and not limited to £20,000.

The judge noted another case where a cap on costs was imposed to avoid any risk of breach of the indemnity principle. He said he could see no reason why it should not be imposed for other purposes too, “such as those cited by the tribunal here: to reflect its assessment of the maximum reasonable level of costs incurred and the paying party's ability to pay them”.

The final question was whether limiting costs by reference to an unascertained figure failed to meet the requirement that the cap must adequately identify the "specified part" of the receiving party's costs.

“Although the amount would not be known until any detailed assessment, the employment tribunal knew that the amount claimed by the claimant under that head of his costs application was estimated at £4,900,” Kerr J said. “Since parties rarely underestimate their claimed costs, it was therefore very unlikely that the assessed amount would exceed £4,900; though it might well be less than that figure.

“It can therefore be deduced that the amount of the cap, though not precisely known, is approximately known; it is approximately the sum of those two figures, which would be about £84,624.20 or less, but not so much less as to fall below £79,724.20. For practical purposes, the amount of the cap is known to lie in a range from £79,724.20 to £84,624.20.

“To pinpoint the precise amount of the cap, a limited assessment would be needed of the costs recoverable by the claimant, but not of the respondent's costs of dealing with the excluded matters.

“On balance, I have concluded that the order made was sufficiently clear to meet the requirement that it must specify the part of the respondent's costs payable by the claimant. It was not too uncertain to meet that requirement.”

But Kerr J stressed that orders like this were “not to be encouraged” – a cap consisting of an exact amount “is much better”. An exact amount of £84,624 could “easily” have been stated here.

Michael Duggan (instructed by Holman Fenwick Willan) for the appellant; the respondent did not appear and was not represented.

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