An employment tribunal (ET) could make a ‘period’ costs award even when the claimants had entered into a damages-based agreement (DBA) under which they agreed to pay 10% of their damages to their solicitors, the Employment Appeal Tribunal has ruled.
In Swissport Ltd v Exley and Ors (Transfer of Undertakings)  UKEAT 0007_16_1306, Mrs Justice Slade was dealing with an unfair dismissal claim under TUPE involving nine workers at Manchester airport. The original tribunal awarded compensation to six of them.
They were also awarded costs under rule 76(1)(b) of ET rules on the basis that some of the defences put forward had no reasonable prospect of success. A ‘period’ award was made from receipt of the claim to the conclusion of a so-called Polkey hearing up to the maximum payable under the DBA.
One of the issues on appeal was whether a period award could be made when the claimants had entered a DBA.
The defendants argued that, under the DBA, the amount of the claimants’ liability to pay costs to their solicitors did not depend on the amount of time spent on their cases or the point at which they were concluded and so, in the context of a DBA, a period award did not work.
They pointed to the difference in the DBA Regulations 2013 between non-employment and employment matters. Regulation 4 provides that, in a non-employment matter, any costs paid or payable to a successful claimant from the paying party are to be set off against the percentage of damages agreed to be paid to the claimant’s solicitor under the DBA. There was no similar off-setting provision in regulation 7 dealing with employment matters.
Accordingly it was submitted that the ET was in error in making a ‘period’ costs award when the success or failure of the defendants on various issues had no effect on the sums the claimants were obliged to pay their solicitors.
Slade J noted that the tribunal did not make an order for a specified sum of costs under ET rule 78(1)(a). Rather, it was made under rule 78(1)(b), for payment of a specified part of the claimants’ costs after a detailed assessment to be carried out in accordance with the CPR.
CPR 44.18, she continued, provided that where costs were to be assessed in favour of a party who has entered into a DBA, the DBA would not affect the making of an order for costs which would otherwise be made in favour of that party, subject to the indemnity principle.
Slade J said the factors listed in CPR 44.2(4), (5) and (6) were relevant in considering whether the order was appropriate in these circumstances, adding that rule 44.2(6) – which allows for period orders – applied to costs orders in cases involving a DBA.
“In my judgment, the application of regulation 4 to such claims but not to employment claims does not affect the appropriateness of a ‘period’ costs order in the ET. Such an argument is not particular to a ‘period’ costs order but would apply generally to all costs orders made under ET rule 78(1) where the receiving party has entered a DBA.
“If the paying party has or will pay or be liable to pay the receiving party any expenses under agreement or other order, in exercise of their discretion there is nothing to prevent the ET making an order which would have a similar effect to regulation 4 between those parties up to the limit agreed to be paid by the claimant to their legal advisor under the DBA.
“Nor in my judgment can it be said that the ET erred in making a period costs award under which the maximum liability of the claimant under the DBA was met, notwithstanding that the claimants’ legal advisors would have incurred costs in the compensation part of the proceedings [which was not covered by the period order].”
Slade J concluded that the tribunal gave adequate reasons for making the ‘period’ award.
Pic credit: Terry Whalebone (cropped)