If someone acts unreasonably in the way that they bring or conduct proceedings in an employment tribunal, they run the risk of having a costs order made against them.

In Iron and Steel Trades Confederation v ASW Ltd (IRLR 2004, 926), the employment appeal tribunal (EAT) has clarified that a costs order will not be made against a party just because their case was unlikely to succeed.

What was the history to the case?

The Iron and Steel Trades Confederation (ISTC) made an application for a protective award on behalf of 170 of its members who had been made redundant by ASW Ltd. The application was delayed by the fact that the company went into liquidation.

Because the claim was presented four months out of time, the tribunal dismissed the application on the basis that it had still been reasonably practical for the union to have lodged it within the time limit. The union appealed against that decision.

In accordance with new practice directions, the union's appeal was sifted before it was heard by the EAT. It survived that stage, but was dismissed by the EAT at the full hearing, which said that the union's case had no chance of success. An application for costs was then made.

What were the arguments at the EAT?

The union relied on an unreported decision - Coots v John Lewis plc, 2001 - which said that the EAT does not usually award costs if the appeal survives a preliminary stage.

This particular appeal tribunal said that because the new practice directions required all cases to be sifted, there was now inevitably some kind of preliminary process to go through. It dismissed the suggestion, therefore, that costs would only be awarded in exceptional circumstances once a case had been sifted.

The fact that this case survived a sift would, therefore, only be a factor in the court's consideration. The other factor to be considered was whether the proceedings had been brought or conducted unreasonably.

What did the EAT decide?

The EAT decided that although the union had little or no hope of success in bringing its claim, it had not conducted the proceedings unreasonably. Under the present rules (which may change as a result of new proposals), there is no provision to award costs if proceedings are 'misconceived' - in other words, if they have no reasonable prospect of success.

The EAT also dismissed the union's argument that the employer should have indicated that it would seek costs against them.

It emphasised that it did not 'encourage, indeed we would not welcome, a situation in which threats of costs are fired across the bows as a matter of course between the parties. 'There are many cases in which this will be seen almost to amount to emotional or financial blackmail, and certainly in any sort of race or sex discrimination cases it could be said, and has been, I think, in some cases said, that a threat of costs could amount to victimisation.'

The EAT concluded, therefore, that claimants who bring cases which do not have much chance of success will be at risk 'as to costs, and should not feel comforted by the existence of a sift order, or even a preliminary hearing order, entitling them to go ahead.' It warned such appellants 'to consider their position very carefully' before lodging their appeal.

Despite the appeal tribunal's views on the strength of the case brought by ISTC, it decided that it had not acted unreasonably in bringing or conducting the proceedings and made no order for costs against it.