Upheld costs award re-enforces the need for comprehensive and effective legal strategy in relation to employment disputes

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23 March, 2018

In the recent case of Sunuva Ltd v Martin, the Employment Appeal Tribunal (EAT) upheld an Employment Tribunal cost award to a claimant in respect of costs incurred before receipt of the ET3 on the grounds that the response had no reasonable prospect of success.

The claimant, Martin, was an international sales manager for the respondent company. When the company embarked on a restructuring exercise it decided that the claimant would be made redundant, documenting the proposal. However, it was then advised that it should implement a selection process using a pool and selection criteria, which it did, eventually dismissing the claimant in April 2016. Following the dismissal, the claimant instructed solicitors and began incurring legal costs. Her solicitors wrote a letter before action, asserting that the redundancy exercise had been a sham and went on to present a claim of unfair dismissal. The company subsequently filed and served an ET3 in October 2016, denying that the redundancy procedure was unfair and had been predetermined.

The tribunal found in favour of the claimant and made an award of legal costs to her, including costs predating receipt of the ET3, on the basis that the company's response to the claim of unfair dismissal had no reasonable prospect of success. The company appealed against the costs award, arguing that further to Health Development Agency v Parish, there must be a causal relationship between the conduct of a party in bringing or conducting proceedings and the costs which are awarded against that party. It argued that this meant that no costs could be awarded in respect of conduct prior to receipt of the ET3.

The EAT dismissed the appeal confirming that the tribunal's power to award costs for unreasonable conduct is not limited to costs that are caused by that conduct. It held that the Employment Tribunal (Constitution & Rules of Procedure) Regulations 2013 do not limit the scope of costs that may be awarded to those incurred after the proceedings have begun, and that the Court of Appeal decision in McPherson v BNP Paribas (confirming 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) remained good law. There was nothing in the Rules limiting cost orders to a particular stage so long as that party was legally represented or preparing for the claim themselves.

The EAT findings act as a sobering reminder to respondents that strategic advice is essential in any employment dispute, to optimise the outcome and to minimise costs exposure as far as possible. In the current climate of increasing claims, it can be costly for respondents to defend weak claims. Emma Swan, Partner in the Employment and HR team at Forbes Solicitors clarified that "Seeking professional legal advice, and doing so as quickly as possible, is imperative to reducing the risk of avoidable cost exposure. The failure of the appeal emphasises that it is not enough merely for respondents to actively participate in any proceedings brought against them. They must seek comprehensive advice as to the merits of their response, consider any likely exposure and formulate a tactical and strategic approach to the dispute in order to protect themselves from escalating cost exposure and achieve the best outcome for their business. It is not all bad news for respondents, however, as should a claimant bring a weak claim it is possible for respondents to seek to recover their own legal costs."

If you are looking for more information in relation to costs, employment disputes, tribunal proceedings or any of our services, please view our Employment & HR section. You can also contact our Employment and HR team by telephone on 0333 207 1135. Alternatively, send your enquiry to us through our online contact form.

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