Wasted costs - Employment Appeal Tribunal

Godfrey Morgan Solicitors Ltd v Cobalt Systems Ltd: Employment Appeal Tribunal (Mr Justice Underhill): 25 May 2011

The employee was involved in a dispute with his employer, in which he alleged he had been unfairly dismissed. He engaged the appellant solicitors' (the solicitors) firm to represent him in the matter. In May 2009, the claim was listed for a two-day hearing on 17 and 18 August 2009. At that point, the solicitors informed the employee that it would be necessary for him to pay to instruct counsel. The employee stated that he was unable to afford to do so, and informed the solicitors that he could not continue with the claim.

The deadlines for agreeing a bundle and lodging witness statements subsequently went by unmet, and on 13 August 2009 the solicitors informed the employer's solicitors that the claim was withdrawn. The employer's solicitors applied for an order for costs against the employee and, alternatively, wasted costs against the solicitors. The judge found that the solicitors had failed to advise the employee timeously that there was no prospect of settlement, and that when the employee had instructed it to withdraw the claim, the solicitors had failed to implement those instructions until they were repeated a few days before the hearing. The solicitors appealed.

The solicitors submitted: (i) the judge had erred in refusing to allow them to produce their file for the first time at the wasted costs hearing; (ii) the judge had erred in allowing the employer to make submissions and to cross examine; and (iii) the judge had misdirected himself as to the applicable principles. The appeal would be dismissed.

(1) On the facts, the judge had been entitled to refuse to allow the file to be put in evidence. He had acted within his discretion, and an order for disclosure of documents had already been made some months previously. The solicitors had known that the documents were relevant, and, further, there was a real risk of prejudice to the other parties were they to be admitted. It also had to be borne in mind that the employee had been unrepresented. In the circumstances, it had been entirely the fault of the solicitors that the documents were not put before the judge in good time (see [22], [23] of the judgment).

(2) In a wasted costs application, the procedure needed to be as summary as would be consistent with fairness, and in that context the use of elaborate procedures needed to be deprecated. Whether or not it would have been appropriate to grant it, no application had been made to the judge that he ought not to hear oral evidence at all, and the parties had proceeded on the basis that an oral hearing with live evidence was required. In the circumstances there was nothing wrong in the evidence being tested in cross-examination (see [27] of the judgment). Ratcliffe Duce and Gammer v Binns UKEAT/100/08 applied; Ridehalgh v Horsefield [1994] 3 All ER 848 considered; Mitchells v Funkwerk Information Technologies York Ltd UKEAT/541/07 considered; Medcalf v Mardell [2002] 3 All ER 721 considered.

(3) The conduct found by the judge had amounted to a breach of duty to the tribunal. It was plainly an abuse of process for a claim to be proceeded which the claimant no longer wished to pursue, and the judge had reasonably found that to be the fault of the solicitors. In the circumstances, the judge had not misdirected himself (see [29]-[35] of the judgment). The judge's conclusions and reasoning had been sound, and, on the facts, he had been entitled to find as he had done (see [35] of the judgment).

Per curiam: Wasted costs orders too often generate arguable grounds of appeal. Problems in recent cases have arisen from: (1) Reference to authority. Save in the most straightforward case it will always be wise for the tribunal to be reminded, and where there is no professional representation to remind itself, not only of the terms of rule 48 but also of the guidance given by the Court of Appeal at pp 226 – 239 of the judgment in Ridehalgh... 

(2) Three-stage test. One particular aspect of the guidance in Ridehalgh which it is always good to follow explicitly is the approach endorsed at p 231F-G, namely... (3) Procedure. As the Court of Appeal emphasised in Ridehalgh (p 238B-D and G), the right procedure for determining claims for wasted costs will depend on the circumstances of the particular case. Proportionality is an important consideration. The only essential is that the representative has a reasonable opportunity to make representations as to whether an order should be made ...

(4) Privilege. In any case where privilege has not been waived the tribunal must give full weight to the warnings in Ridehalgh at pp 236-7 and ought always to make clear that it has done so. However, it will not always be necessary for a tribunal to consider privileged material in order to decide whether a representative is at fault (cf Wilsons (above)). 

(5) Reasons. The amount of detail required in the written reasons in relation to a wasted costs order (which are mandatory if sought in time - see rule 48(9)) will of course vary enormously. But the issues will sometimes be important and will not always be straightforward, and in such cases thorough treatment will be required. Wasted costs orders are also disproportionately likely to generate appeals, so that the Employment Appeal Tribunal will need to have a clear account of the tribunal's reasoning.

Murray Grant (instructed by GMS Law) for the appellant. The respondent was not instructed and did not appear.