When calculating the size of a costs order, tribunals do not necessarily have to take the paying party’s financial means into account. However, the EAT held in Ward v Dimensions UK Ltd that if a tribunal decides to take that person’s financial means into account, they have to clearly explain why they have done so.
Following an earlier decision in which the tribunal dismissed Mr Ward’s claims of ordinary and automatically unfair dismissal for blowing the whistle as well as detriment (disadvantage) as a result of having blown the whistle, his former employer applied for a costs order against him. This was on the basis that:
- He had acted unreasonably in bringing the proceedings in addition to the way in which he had conducted them
- His whistleblowing claims had no reasonable prospects of success; and
- He was in breach of an order to furnish further particulars of his claim for detriment and whistleblowing.
The tribunal dismissed the company’s application on grounds two and three but agreed that Mr Ward had conducted the proceedings unreasonably. Firstly, he had made multiple changes to his allegations which meant that the company had to keep producing revised versions of documentation which also resulted in witnesses having to be released. Secondly, he had been unreasonable in refusing an offer made “without prejudice save as to costs” of £18,500, representing a year’s net salary. Instead, he had claimed £1.7 million.
Although Mr Ward had provided a statement setting out his monthly expenditure at £1,245.28, the tribunal misinterpreted what he had provided and thought his expenditure was £690 per month. On that basis, it concluded that he should pay costs of £5,000.
Mr Ward appealed. The company argued that, although the tribunal had calculated costs on the basis of an incorrect figure, the error was not “material”. As such, the tribunal was entitled to award costs of £5,000, particularly as it had reduced the company’s costs from £20,000 to £5,000.
The EAT acknowledged that:
- Tribunals do not have to take the paying party’s financial means into account
- The limitation on that party’s financial means does not necessarily act as a cap; and that
- Financial means are not the sole criteria for the exercise of discretion.
However, if the tribunal in this case were to decide that whatever the limit on Mr Ward’s financial means, it was making the order regardless, it was incumbent on the tribunal to explain that clearly and provide its reasons why.
In this case, it had taken his financial means into account. Given that Mr Ward’s income was only £1,300, the difference between a monthly expenditure of £690 and £1,245.28 was very significant as his remaining disposable income was far smaller than the tribunal had calculated. In those circumstances, the EAT decided that the error was significant, and the tribunal’s conclusion was unsafe.
It remitted the matter to the original tribunal to consider whether costs should be awarded to the company and, if so, how much they should be.
Although the tribunal in this case made an award, it is worth remembering that costs awards in the employment tribunal are rare.