The Scope of Costs in Employment Tribunal Proceedings: A Consideration of Sunuva Ltd v Martin [2017] UKEAT/01/0174/17

Tue 24th Apr 2018

In the case of Sunuva Ltd v Martin, the EAT held that the Employment Tribunal did not err in awarding costs to the claimant, Mrs Martin, including an award in respect of costs incurred for work done while legally represented before the claim had started.

Mrs Martin was employed by Sunuva Ltd as an International Sales Manager from September 2012 until April 2016. Sunuva is a seller of ‘fashion swimwear’. In January 2016, Sunuva decided it must restructure and notified Mrs Martin in a document dated 11th January 2016 that she would be made redundant.  Sunuva, having been advised that it must undertake a selection process for redundancy with a pool and selection criteria, devised and operated such a process. Mrs Martin’s employment was terminated after being selected for redundancy and an unsuccessful appeal.

On 18th May 2016, Mrs Martin’s solicitors wrote a letter before claim asserting that she had been unfairly dismissed and complaining of sex discrimination. It raised the allegation that the redundancy exercise had been a sham.

Mrs Martin then issued proceedings in the Employment Tribunal alleging unfair dismissal, unlawful deduction from wages, sex discrimination and victimisation. By its ET3 filed and served on or about 7th October 2016, Sunuva denied that the redundancy procedure was unfair. It alleged that the relevant witness for such an issue was Ms Stokes and that it was she who had decided to compose the pool of four people and subsequently reduce it to three. In effect, therefore, the ET3 denied predetermination. In the course of giving evidence (on day 4 of 5), Ms Stokes conceded that despite the creation of a pool and the trappings of a fair procedure there was “never any prospect of anyone other than the Claimant being selected for dismissal. It had been decided at the outset that she would be dismissed”. The Tribunal upheld Mrs Martin’s complaint of unfair dismissal. Of the remaining claims, only her deduction from wages claim was successful.

Mrs Martin made a costs application at the end of the hearing. The costs schedule was for £25,705. The application was made on the basis that the defence to the claim for unfair dismissal had no reasonable prospects of success: liability should have been admitted from the outset. That was conceded by Sunuva. Therefore the threshold for costs had been passed. The Tribunal considered that the real question was “what was the consequence of the Respondent not having admitted the unfair dismissal at the outset”. The Tribunal went on to consider that there were additional claims of sex discrimination and victimisation but such award made from those claims would have been in respect of injury to feelings only (as the other losses would have followed from the unfair dismissal). The Tribunal considered “with an admission of liability there is a possibility of the discrimination claim continuing, but we consider that the greater likelihood is that there would have either been no hearing with only limited costs incurred by the Claimant, or there would have been a much shorter hearing”. Accordingly, the Tribunal awarded two thirds of the sums Mrs Martin applied for.

Sunuva appealed.

On behalf of Sunuva, the appellant before the EAT, it was argued that the case of Health Development Agency v Parish [2004] IRLR remained good law, in particular paragraph 21 of Judge Richardson’s decision which demonstrated that there has to be a causal relationship between the conduct of a party in bringing or conducting proceedings and the costs which are awarded against that party. That case was decided under Rule 14(1) of the Rules in the Schedule to the then Employment Tribunals (Constitution and rules of Procedure) Regulations 2001 which provided: “Where, in the opinion of the tribunal, a party has in bringing the proceedings, or a party or a party’s representative has in conducting the proceedings, acted vexatiously, abusively, disruptively or otherwise unreasonably, or the bringing or the conducting of the proceedings by a party has been misconceived, the tribunal shall consider making…”.

It was further argued by Sunuva that until the employer sees the case pleaded against it, it does not know the case it has to answer and therefore to award costs against it for such period is punitive in nature. It was argued that costs incurred in consequence of an employer’s conduct cannot as a matter of logic predate that conduct and therefore in the vast majority of cases cannot predate the ET1.

On behalf of Mrs Martin, it was argued that Parish cannot stand with the Court of Appeal case of McPherson v BNP Paribas (London Branch) [2004] ICR 1398 which held that Rule 14 “does not impose any such causal requirement in the exercise of the discretion”. It was submitted that once the trigger for costs was met, an award for costs becomes “at large” without any requirement of a causal link between the conduct in question and the incurring costs awarded.

The EAT dismissed the appeal. Rules 74-76 of the relevant Schedule to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013 do not, on the face, limit the scope of costs to costs incurred for work done before receipt of the ET3. The EAT noted that the limit on a costs order stated in Rule 75(1)(a) is that it must be an order in respect of costs incurred “while legally represented”: Nothing limits such costs to costs incurred after proceedings have begun.

In the EAT’s view, the law remains as per the judgment in McPherson v BNP Paribas to the effect that the Tribunal’s discretion to award costs is not limited to costs that are caused by or attributable to the unreasonable conduct in question. The new wording of the ‘costs provisions’ under the 2013 Rules did not alter the position. Accordingly there was no error in the Tribunal’s decision and the appeal was dismissed.

Adam Willoughby


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