Cost awards in the Employment Tribunal

Yerrakalva v Barnsley Metropolitan Borough Council

In the recent case of Yerrakalva v Barnsley Metropolitan Borough Council the Court of Appeal (CofA) has determined that the claimant’s unreasonable conduct warranted a cost order being made against her but the earlier ET cost award of 100% of the Respondent’s costs was inappropriate and reduced in scope and value due to the Respondent’s conduct in the case.

Background

Unlike the civil courts, in the ET parties bear their own costs (i.e. the unsuccessful party does not automatically pay a proportion of the winning party’s legal costs).  However, the ET has the power to make an award for costs where, in the ET’s opinion, a party or their representative in bringing or conducting proceedings has acted vexatiously, abusively, disruptively or otherwise unreasonably or that the bringing or conducting of proceedings has been misconceived and it is appropriate to make the award.  Cost awards are rarely granted though.  According to the 2011 Tribunal statistics they were awarded in less than 1% of cases.

Case summary

Ms Yerrakalva was a teacher who brought multiple claims of race, sex and disability discrimination against her employer Barnsley Metropolitan Council. The first claim was brought in August 2005. After protracted proceedings, including applications, case management discussions and a part heard 3 day Pre Hearing Review (PHR) in August 2007, Ms Yerrakalva withdrew her claims, citing that she felt worn down by conducting the case in person. She also complained about the oppressive and unreasonable conduct of the Council’s representative and the complexity of the case. The Tribunal dismissed the final part of her withdrawn claim in April 2009.

By that stage, the Council had incurred approximately £92,500 in legal costs but there were no findings of fact against Ms Yerrakalva (the common basis for a costs application), as the case had not gone to a full hearing.  However, the Council applied for costs based on the fact that the Claimant had not been truthful about the extent of her disabilities, the existence of a personal injury claim and had lied about her financial means.

The ET found that Ms Yerrakalva’s conduct was unreasonable and exercised its discretion to award a cost order for all of the Respondent’s costs from September 2005 to April 2009. Despite that finding the ET was critical of the Council, describing it as being heavy-handed in its approach to the case.

The EAT overturned the cost award decision and held that although there was evidence the Claimant had lied and that this was unreasonable, it was hard to see how the lies told at the PHR caused the Council any loss at all or for which it was entitled to be compensated. The EAT overturned the decision and quashed the ET’s cost order. The Council appealed.

Conclusion

The CofA reinstated the cost order against Ms Yerrakalva but limited it to the Council’s costs incurred preparing for the PHR (when the Council incurred costs challenging the Claimant’s assertions regarding her disability) and the cost hearing.  Further it reduced the level of award to 50% due to the Council’s heavy handed approach in the proceedings.

In reaching its decision the CofA noted that “a familiar feature of all litigation is that experienced judges may sensibly differ on how…a costs discretion should be exercised” and warned of “the dangers of adopting an over-analytical approach to the exercise of a broad discretion” the ET can adopt.

The CofA also commented that it is the ET who is in the best position to decide on a cost award (rather than the EAT) as it spends more time overseeing the progress of the case through its preparatory stages and gains insight into how those involved are conducting proceedings.

Comment

This decision on the ET’s broad discretion when making cost awards provides helpful guidance to employers considering whether to seek costs from unreasonable litigants.   However, the CofA’s limitation and reduction of the costs awarded in this case to those “reasonably and necessarily” incurred in relation to the PHR and cost hearing should serve as a warning to employers to review their conduct in proceedings to ascertain the merits of making a costs application, as this is likely to be taken into account by the ET and could reduce the size of any award.