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Costs awards in the tribunal: the importance of a well-drafted costs warning letter

My recent experience in employment tribunals up and down the country has reinforced the importance of a well-drafted costs warning letter in persuading a tribunal to award costs to the winning party. I have found employment judges particularly receptive to costs applications where a costs warning letter:

  • Clearly sets out the factual basis for the claim or defence.
  • Succinctly explains the legal tests, and the reason(s) why the application of those tests will result in the claim succeeding or failing. Clarity is critical here, particularly if dealing with a litigant-in-person on the other side.
  • Corresponds with the tribunal’s reasons for reaching its decision. This means that a realistic assessment of the claim is important: hyperbole or stating the case too highly frequently alienates judges on a costs application, and leads to sympathy for the recipient who ignored or rejected the letter.
  • Explains why the tribunal will be entitled to award costs in those circumstances, by reference to the relevant rules.
  • Sets out an estimate of the costs that are likely to be incurred.
  • Is accompanied by an offer not to pursue the opponent for costs if they withdraw or accept liability within a specified timeframe. Or, even better, is accompanied by a financial offer open for acceptance within a specified timeframe, even if that offer is low.

In a recent case, I persuaded an employment judge who is notoriously averse to making costs awards to make a substantial award on the basis that a claim was misconceived and pursuing it was unreasonable because the claimant had received a costs-warning letter that complied with all of the above requirements.

On the other hand, I have seen many costs applications fail, even in cases where the claim was plainly misconceived, and/or the claimant had acted unreasonably, because cost warning letters either were not sent at all, or did not comply with some or all of the above requirements. Many judges now appear, in effect, to apply a requirement that a well-drafted costs warning letter is sent before they can be persuaded to award costs.

Some judges take the approach of seeking to dissuade (particularly respondent) parties from making costs applications by asking if it is really “proportionate” to make a costs application in light of the claimant’s means. In my experience, there are two effective ways of dealing with a judge throwing up such barriers:

  • The first is to remind the judge that, in Kovacs v Queen Mary and Westfield College and another [2002] IRLR 414, the Court of Appeal cited with approval the following principle:

    “It does not appear … that it was intended that poor litigants may misbehave with impunity and without fearing that any significant costs order will be made against them, whereas wealthy ones must behave themselves because otherwise an order will be made.”

    That can also be a persuasive point to make to the other side in correspondence.

  • The second is to say that the deterrent value of a costs award (even if it is a low one) is important in sending a message to the rest of the employer’s workforce.

The reality is that in recent years many, although certainly not all, judges have been more willing to award costs than has historically been the case. I suspect that, as judges become more used to considering whether the losing party should (re-)pay the tribunal fees at the end of the case, they will also become more receptive to wider costs applications under the rules. That, in turn, will increase the value, and importance, of a well-drafted costs warning letter. In my view, such letters should become a matter of routine for any well-advised party with a strong claim or defence.

 

Littleton Chambers Craig Rajgopaul

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