Unlike other courts, it is very unusual for employment tribunals to order the losing party to pay the other side's costs. But that's exactly what the tribunal did in McPherson v BNP Paribas, when it ordered Mr McPherson to pay almost £91,000. The Court of Appeal has just upheld this decision, but reduced the amount that he had to pay.

What was Mr McPherson's complaint?

Mr McPherson claimed unfair dismissal and breach of contract, but withdrew his claims several weeks before the date of the full hearing. He claimed he had been constructively dismissed from his £100,000 (plus bonus and other benefits) job on 29 September 2000.

What was the key issue?

The crucial question was whether, in all the circumstances of the case, the claimant had conducted the proceedings unreasonably. It was not whether the withdrawal of the claim was in itself unreasonable.

Mr McPherson's complaint, which was presented on 17 October 2000, was listed for hearing at the end of September 2001. On 21 August, his solicitor wrote to the solicitors for BNP Paribas to notify them that he was being treated for a potentially serious heart complaint and might need surgery, but that they did not intend to apply for an adjournment at this stage.

A month later, however, Mr McPherson applied to postpone the hearing and submitted two letters from his consultant cardiologist. The other side opposed the adjournment and said that if it were postponed, it would make an application for costs on the grounds of unreasonable conduct.

The company's solicitors argued that his condition was not life threatening and did not require an operation. In addition, they said, the bank had already incurred considerable costs. However, the adjournment was granted and the hearing was re-listed for the end of May 2002.

Was his conduct unreasonable?

At the directions hearing on 31 January 2002 Mr McPherson was ordered to disclose information about his new job. He failed to comply with that order as well as another directions order, and subsequently failed to supply information on his medical condition, requested in a number of letters from the solicitors for BNP Paribas. The company then made an application for costs.

On 9 May, Mr McPherson's solicitors wrote to the tribunal giving notice of his intention to withdraw his claim. The hearing of the costs application went ahead on 27 May.

Mr McPherson did not attend, but argued in a statement that he was not well enough to appear and produced a letter from his doctor dated 23 May 2002, which referred back to a consultation in December 2001 at which he had discussed, unknown to the tribunal or BNP Paribas, the option of withdrawing from the case.

What did the courts decide?

The tribunal ordered Mr McPherson to pay all BNP Paribas's costs of the proceedings (including the costs hearing). He appealed unsuccessfully to the EAT and subsequently to the Court of Appeal.

The latter said that it would be wrong if tribunals always took the approach that withdrawal constituted unreasonable conduct. Notice of withdrawal might in some cases be 'the dawn of sanity' and tribunals should therefore not discourage applicants.

Equally, however, tribunals should not follow a practice on costs that might encourage speculative claims, allowing applicants to pursue cases to the very end in the hope of receiving an offer, but then being able to drop the case without any sanction.

In this case, the court was satisfied that there was ample evidence to justify the tribunal's overall conclusion that Mr McPherson had acted unreasonably. As the unreasonable conduct started with the application for an adjournment in September 2001 on medical grounds, he was only liable to pay the costs incurred after that date.