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When should the merits of a case be assessed for costs purposes?

As long ago as 1974 a benevolent approach to the assessment of the merits of a case was adopted in the Employment Tribunal (ET). Sir High Griffiths sitting in the NIRC, when addressing an application for costs, stated the following:

“Ordinary experience of life frequently teaches us that that which is plain for all to see once the dust of battle has subsided was far from clear to the combatants when they took up arms. We do not therefore attach undue weight to the fact that at the end of a skilful cross-examination on the last day of the hearing the employee was forced to concede that in the circumstances as they had emerged the employers had acted reasonably in dismissing him.” (E. T. Marler Ltd v Robertson [1974] ICR 72.)

Such an approach of recognising that the merits of a case are to be assessed on the basis of what the litigant reasonably knew pervades a series of EAT decisions culminating in the judgment of Underhill J (as he then was) in Vaughan-v-Lewisham LBC [2013] IRLR 713.

A criticism advanced by the Appellant against the ET’s judgment was that instead of assessing the various arguments at the point of pleading it had assessed the same through the prism of its findings after disclosure, evidence and full argument. The Appellant contended that this was incorrect on the basis of inter alia the decision of the NIRC in Marler.

The EAT in Swissport v Exley and others UKEAT/0007/16 rejected that submission and contended that the time for assessment was at the conclusion of the case and, in so doing, relied on a comparison of the wording of Rule 37 of the ET Rules (strike out) and the relevant costs provisions.

Slade J stated as follows:

“…In my judgment this passage clearly shows that in considering the differently worded predecessor to Rule 76 of the current ET Rules the EAT proceeded on the basis that whether a claim was misconceived and whether there had ever been any reasonable grounds for the allegations made was to be judged on all the information available to the Employment Tribunal at the time of making that decision. In Vaughan the Employment Tribunal took their decision on costs after a twenty day hearing following which the Claimant lost her claim.  The EAT at paragraph 13 held that the approach of the Employment Tribunal which included taking into evidence given at that Liability Hearing, was unimpeachable.

  1. “…In my judgment this passage clearly shows that in considering the differently worded predecessor to Rule 76 of the current ET Rules the EAT proceeded on the basis that whether a claim was misconceived and whether there had ever been any reasonable grounds for the allegations made was to be judged on all the information available to the Employment Tribunal at the time of making that decision. In Vaughan the Employment Tribunal took their decision on costs after a twenty day hearing following which the Claimant lost her claim.  The EAT at paragraph 13 held that the approach of the Employment Tribunal which included taking into evidence given at that Liability Hearing, was unimpeachable.
  2. In my judgment the ET did not err in assessing whether the grounds of resistance on which [the Appellant] relied had a reasonable prospect of success on the basis of all the material before them by the time the costs application was made. That included evidence given and argument advanced at all three hearings.”

The EAT’s approach had much more in common with the approach taken in the civil courts which is unconcerned with the reasonableness of the raising of an argument and is much more concerned with the binary issue of its success or failure.

This approach is illustrated by the observations of the EAT when addressing an argument as regards the effect of a failed strike out on the issue of costs where it said:

  1. “The ET decided whether to make a Costs Order acts on the material before them at that time.  The reasonable prospect of success of a claim or defence can diminish or improve after the lodging of pleadings.  A document or witness statement may shed light on a relevant issue and improve or diminish prospects of success.  The ET at the Costs Hearing in this case decided whether the ETO defence had a reasonable prospect of success on all the material before them including the changing basis upon which that defence was advanced….”

Conclusion

I would suggest that the effect of Swissport is to undermine the more liberal approach adopted by the NIRC in Marler and subsequent decisions and replace the same with a CPR-derived approach where an ET is permitted to be much more searching as to the merits of a contention raised by a party when addressing any application for costs. Indeed, the wording of the EAT suggests that a shift in evidence can justify an award of costs against a party from inception, despite it being possible that such a shift was utterly unforeseeable. The consistency of that approach with Marler and Vaughan will perhaps be for consideration on another occasion.

Littleton Nicholas Siddall

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