Employment tribunals: Costs orders

Published 13 abril 2018

The EAT has confirmed that costs orders can be awarded in respect of costs incurred before the claimant received the ET3.

The facts

Mrs Martin was employed by Sunuva Limited before she was made redundant. She instructed solicitors and began to incur legal costs. Her solicitors wrote a letter asserting unfair dismissal and sex discrimination raising the point that the redundancy exercise had been a sham.

Mrs Martin brought her claim about three months later, alleging (among other claims) unfair dismissal. Sunuva’s ET3 denied that the dismissal and the redundancy process had been unfair, and stated that the relevant witness, Ms Stokes, had decided to compose the selection pool of four people, subsequently reduced to three. The Grounds of Resistance included a denial that there was a “predetermined outcome” to the redundancy selection exercise.

On the fourth day of the hearing, Ms Stokes conceded that, despite the creation of a pool and the trappings of a fair procedure, there was never any prospect that anyone other than Mrs Martin would be selected for dismissal. It had been decided at the outset that she would be dismissed. Sunuva conceded that the dismissal was unfair.

A costs application was made on behalf of Mrs Martin at the end of the hearing. The application was put on the basis that the defence to the claim of unfair dismissal had no reasonable prospects of success. Sunuva accepted that this was the case, and the tribunal said that, from the outset, Sunuva should have admitted liability. Had it admitted liability for unfair dismissal, the likelihood was that there would have been no hearing, with only limited costs incurred by Mrs Martin, or that there would have been a much shorter hearing. Mrs Sunuva was awarded around £17,000, which was two thirds of the costs she had requested. Nearly £5,000 of this related to work done before the ET3 was received.

Sunuva appealed to the EAT, arguing that costs in respect of work done before receipt of the ET3 from the employer should not have been included. The EAT dismissed the appeal, saying that the Employment Tribunals Rules of Procedure, which provide for costs orders, does not limit the definition of “costs” to costs incurred at a particular stage of the proceedings. The rules specifically provide for the situation where a claim has no prospect of success, as was the case here. It did, however, point out that a party could not recover costs incurred while not legally represented.

What does this mean for employers?

Employers who are considering whether to defend a claim or to admit liability should factor into their decision making the risk of a costs award which may take account of the claimant’s costs at any stage of the process.

Sunuva Limited v Mrs C Martin