Costs of unreasonable behaviour

Don’t be obstructive

Whilst it’s a scenario that you hopefully won’t ever have to deal with, defending a tribunal claim is an expensive exercise for any business, especially if you feel that the claim is without merit. If this happens, you may wish to be as obstructive as possible, but still hope to recoup some, or all of your costs from the claimant. However, were you aware that tribunals can not only refuse to award costs in your favour, but can even issue you with a costs order for your unreasonable behaviour? What’s the latest that you should be aware of?

Costs and the law

The Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 give a tribunal the power to make a costs order against you or the claimant in certain circumstances. These include; (1) withholding key information; (2) lying on oath; (3) putting up an unreasonable defence, e.g. trying to defend a non-payment of wages claim where the employee can prove that they did the work; (4) excessive delays, and; (5) making an appeal which has no prospect of success. Even though this sanction isn’t used that often, a common myth is that the maximum financial penalty is £10,000. This isn’t the case as Regulation 41(c) allows a tribunal to make an order for all or part of the costs incurred. If lawyers are involved, this could add up to a lot of money as one unlucky banker found out to her cost.

The Villalba case

In the sex discrimination case of Villalba v Merrill Lynch 2005, Villalba (V) had been sacked from her job as Head of European Private Banking. This was for poor performance. She brought a claim for sex discrimination, unfair dismissal and bullying, but was only successful on the unfair dismissal claim. As her original claim was for £7.5 million, a payout of around £56,000 was a very poor result.

Going for costs

As a damage limitation exercise, V claimed costs of £568,000 from the bank. This was on the basis that its four senior executives had lied under oath at the tribunal. As a result, her legal bill had greatly increased due to the extra costs involved in rebutting these lies. Unfortunately, whilst the tribunal accepted that their behaviour left much to be desired, it rejected her costs application. This was because both sides had behaved badly by engaging in confrontational correspondence. In doing so, it had made matters far worse and lengthened the proceedings unnecessarily. Whilst these costs are much greater than those which you would ever incur, the principle on conduct is the same.

Dealing with a claim

If you’re ever confronted with a tribunal claim, you need to take care in how you manage the entire process and not just the hearing itself.

Tip. Resist the temptation to stall or withhold key documentation from the claimant - delaying just for the sake of it is likely to be punished. Also bear in mind that tribunals like to see contemporaneous notes. However, if any of your rough notes are prejudicial, it’s easier to say that you no longer have them, instead of causing costly delays.