An employment tribunal has jurisdiction to place a cap on the potential award of costs that might be made when it makes an order for costs which are likely to exceed £20,000 and should therefore be sent for detailed assessment, the Court of Appeal has ruled.
Upholding the decision of both the employment tribunal and the Employment Appeal Tribunal, Lady Justice Simler said this was the first time the issue had been before the appeal court.
In Kuwait Oil Company v Al-Tarkait  EWCA Civ 1752, the claimant, Dr Al-Tarkait, succeeded with an unfair dismissal claim and was awarded £80,000, along with costs of £4,900.
The defendant/appellant claimed costs under a number of different heads, but the only one it succeeded on was in respect of its application for costs thrown away as a result of having had to deal with historic matters that were either withdrawn by consent or struck out by an earlier tribunal.
It sought £228,500, which the tribunal said was unreasonable, and, citing the claimant’s ability to pay as well, the tribunal awarded costs limited to the damages and costs awarded to the claimant.
The appellant argued that both the tribunal and the EAT erred in law in limiting the costs in this way. It said that, where an order is made under rule 78(1)(b) of the Employment Tribunal Rules for the whole or a specified part of a party’s costs to be paid, the amount payable can only be determined on a detailed assessment; it cannot be determined in advance by the tribunal applying a cap on the costs recoverable.
The Court of Appeal rejected this construction. Simler LJ said: “I consider that rules 78(1)(b) and 84 [which deals with ability to pay] read together, enable a tribunal to have regard to ability to pay as a reason for ordering a ‘specified part of the costs’ to be limited to a maximum fixed sum and for directing that the part of the costs so specified should be determined on detailed assessment subject to that maximum limit.
“There is no reason on the face of this costs scheme, to read rule 84 in the restricted way contended for by Mr Duggan; or to read rule 78(1)(b) as excluding consideration of ability to pay when deciding what the maximum amount of the specified part of the costs should be paid.”
This did not involve a tribunal impermissibly usurping the function of the detailed assessor in a case where costs exceed £20,000, she went on. A cap set a ceiling but did not determine a specific amount to be paid. “That is for the assessor to do in a different and separate exercise that requires detailed scrutiny of the actual costs incurred by reference to a range of factors set out in the CPR, which are well known but do not include ability to pay.
“Moreover, this approach has the advantage that, having dealt with the substantive issues in the case, the costs order under rule 78(1)(b) is made by the tribunal itself, which, having lived with the case, is likely to be in the best position to assess what is reasonable in the circumstances.”
Simler LJ added that there was no good reason why a tribunal should be able to take account of a paying party’s ability to pay in a case where costs do not exceed £20,000 but not where substantially larger sums are involved and ability to pay is likely to be even more important.
Michael Duggan QC (instructed by HFW) for the appellant. No attendance for the respondent.