Michael
Jabez Foster: From experience, I take issue with the hon.
Gentleman’s claim that the majority of claimants who fail are
vexatious. That is not the case. The majority who fail misunderstand
the situation. Some are vexatious, but as he rightly points out, the
rules already exist. For many reasons, I strongly oppose cost orders
being made against every losing litigant, which is what he is calling
for. Let
us be clear: tribunals are not courts of law. They may be becoming so
and that is unfortunate. The purpose of the tribunal system was that a
layman could go along and do his stuff. He could explain what happened
and the tribunal chair or others would assist. If anything is to be
done, and if I were advising the Minister, I would suggest throwing
away the tribunal rules and starting again.
The process
has become far too complex and that is why it has become so costly. The
figures given by the hon. Gentleman for the average cost of proceedings
are probably about right because of the complexities. Every time that
the rules are changed, they become more complex, more difficult and
simply not understandable to the average litigant. For that reason,
claims are often brought not because of vexatious behaviour, but
because people do not understand the situation properly. That would be
my plea. To penalise someone who believes that they have a reasonable
claim, of whatever nature, seems to be wrong in principle. It would
deter people who had genuine
grievances. I
am sympathetic to the small employer, and I realise that requirements
create a great burden. In the main part, most or many of them are
insured, but when that is not the case, it can be a problem. However,
the litigant or applicant, who may have lost a job through unfair
dismissal, will not have any resources, unless they can persuade the
citizens advice bureau to take on the case for them. Incidentally,
yesterday I wrongly took the lead from an Opposition Member in saying
that citizens advice bureaux do not assist employers. Citizens Advice
has written to me today to say that it is very happy to help small
employers, as well as employees, in seeking legal advice.
I very much
hope that the Minister will reject the proposal in all cases, although
I agree that, where there is genuine vexatious conduct by either party,
it should be properly
penalised.
John
Hemming: I echo the substance of what the hon. Gentleman
just said. When a lay person, who is on a low income and has not been
paid their wages, comes to a process, we do not want him to be
frightened by potential costs incurred on the other side. That does not
mean that costs should never be awarded, but perhaps we should, in
looking at this, take a lesson from the small claims court. It could be
argued that, if someone has initiated a claim at a lesser level, he
should feel invulnerable from costs, but at greater levels the issue
becomes much more complex.
One of the
things that substantially changed the nature of employment tribunals
was when the maximum was increased from £12,000. I do not think
that anyone is suggesting that we go back to that, but it did mean that
that was the maximum cost that anyone incurred. The question that has
to be asked is whether we should look at this from the point of view of
costs and the magnitude of the initial claim. If the magnitude of the
initial claim is not that great, it allows people to make a commercial
decision to concede the claim, rather than
to fight it, which is not necessarily ideal. Obviously, the
Government’s proposals to try and resolve things before they go
to tribunal is definitely a good one, but we would oppose introducing a
general “costs awarded every time”
approach. Mr.
Binley: I welcome the Government’s proposals to
deal with most of these matters at an earlier stage. That is absolutely
right and
proper. We
have, in part, created a blackmail culture. I shall explain what I mean
by that from personal experience. I have had the sad opportunity of
handling two industrial tribunals, both of which we won. In both of
them, the company that I had started was told that it was not at fault
and the recipients used lawyers provided by the citizens advice bureau,
although I am not saying that that should stop. In fact, we talked to
the citizens advice bureau. It was not very helpful. It felt, frankly,
that, as a business with 30 or 40 people, we were quite capable of
standing on our own. However, businesses that I classify as small,
developing ones, do not have human resources departments, and that is
where the problems fall hardest in many respects. I agree that, for
very small businesses, the citizens advice bureau is very helpful, but,
with those bigger businesses, there is a sort of cultural view that
they ought to be able to look after
themselves. We
were advised by many other business people to pay £2,000 and not
to bother with the tribunal, even though I was adamant that we were
right and had acted correctly. I felt that that particular blackmail
culture was unacceptable. Frankly, it is bad for our commercial and
industrial processes. I disregarded the advice, and we went ahead and
fought. I am glad that I did, because we won on both occasions.
However, we added up the costs of the preparation and of appearing at
the tribunal for two days with three witnesses who had to be there on
each occasion. The first one cost us £9,000, the second one
£14,000. That was a heavy blow to a business in which cash flow
was vital; we were not cash-rich, my house was backing the process and
we were struggling to grow, which we successfully
did. 3.30
pm
We need to
take note of two elements when considering the provision. The first is
the blackmail culture. Do not get me wrong, I am not saying that
everybody who goes to an industrial tribunal is a potential
blackmailer. That is not the point. Many people have genuine cases and
we should recognise that. I am not arguing that all the employers are
good and all employees are bad; that is far from the truth. However, we
need to recognise the blackmail culture among certain groups of people,
and take it into account.
The second
element to consider is that costs were not awarded to us. On both
occasions, the whole exercise was a sizable demand on our cash flow,
and the news that we had spent all that money was not well received by
the bank. I got the impression that it may have thought that we should
have paid £2,000 and not bothered with the tribunal.
I know that
the Minister does not want to want to generate that culture, but I ask
him to take that atmosphere into account. I will support the new
clause. I do not know whether the wording is correct. I do not know
whether there are other ways of doing it. However, I do
know that there is a problem, and we need to deal with it more
effectively than we are at the moment, hence my
support. Dr.
Palmer: If there is a problem with tribunals being too
generous to applicants, that should be addressed by looking at the way
in which they reach their conclusions rather than by a financial
penalty. The idea that 19 per cent. of applicants could be faced with a
bill of, on average, £9,000 when they have just been dismissed
is, frankly, terrifying. It is unprecedented in civil law for one to
face the prospect of being automatically landed with a huge legal bill
if one loses, without the court having any discretion over that.
Whether we intend it to or not, that will have an extremely
intimidatory effect. I urge hon. Members to reconsider the new
clause.
Mr.
McFadden: What strikes me about the new clause is that it
seeks to reform the current situation rather than the situation that
the Bill will create. The thrust of the part of the Bill that deals
with dispute resolution is based on a recognition that it has become
overly legalistic and over-costly. The figure of £9,000 per case
is accurate, as far as I am aware. I agree with my hon. Friend the
Member for Hastings and Rye when he says that there may have been a
trend for it to become more legalistic. That was not the original
intention of the tribunal system, but in some ways that has been the
case. However, it is certainly not universal; there are still plenty of
circumstances where people are unrepresented and argue their own
cases. The
clauses that we discussed earlier in our proceedings about earlier
dispute resolution, about removing the three-step procedures introduced
a few years ago and about increasing the role of ACAS, with Government
funding of up to £37 million over the next few years and the
lifting of the time limits on its interventions, will all have an
impact. The Government’s impact assessment says that this Bill
and those measures could save business up to £170 million or
more.
Mr.
Djanogly: Will the Minister set out how those measures
will have an impact on dealing with vexatious
claims?
Mr.
McFadden: There will be a greater opportunity to resolve
claims earlier. My problem with the new clause is that it strikes at an
access-to-justice point. It has been a long-standing belief of this
Government and previous Governments that individuals should have the
ability to enforce their rights through a system that provides access
to justice for all, regardless of status or background. The tribunal
system provides this access to justice, in part through the principle
that—other than in limited circumstances, which I will come
to—parties are responsible for their own costs. In this way,
those without the resources to afford costly legal representation can
still try to take action to enforce their rights.
As has been
commented on by my hon. Friends the Members for Broxtowe and for
Hastings and Rye, were we to abide by the new clause and award costs
automatically against the losing party, that would not only set
employment tribunals apart from other tribunals where such general
powers do not exist; more importantly, it could seriously deter
individuals from bringing claims to tribunal when
they may have a good case, for fear of being left with a very large bill
if they are unsuccessful. We must also consider how such a proposal
would have a disproportionate effect on people. The introduction of
costs against the unsuccessful party automatically is more likely to
deter claimants from pursuing action, rather than
respondents. I accept the
point made about small businesses not always having the greatest
resources. That is why the other measures in the Bill will be of
significant help to small businesses and address this situation.
However, if there was an automatic award of costs against a losing
party, employers could use that possibility as a tool to dissuade
employees from bringing a claim in the first place. There is an
important access-to-justice argument here.
The hon.
Member for Huntingdon asked me about vexatious claims. There are
measures in place to deal with those. There are already pre-tribunal
hearings where claims can be struck out, which happens in about 2 per
cent. of cases. One could argue that the 2 per cent. figure means that
there are fewer vexatious claims than we think, because the tribunals
are looking at them and striking that percentage out. Alternatively,
one could take the view that they should be striking out more, but
there is a process in place for striking out such
claims.
Mr.
Binley: Does the Minister recognise that a lot of these
claims do not even get to first base because it is felt that it is
easier and cheaper to pay a small amount of money out, rather than face
the problems of a tribunal and the whole ACAS process? Does the
Minister agree that that is an injustice, as
well?
Mr.
McFadden: I am not sure about the point that the hon.
Gentleman makes. The point that I am trying to make is that there is a
process in place to strike down vexatious claims before they get
further on in the procedure. There is also a process whereby a deposit
of £500 can be charged if the case is judged to be weak at first
glance, and costs awarded. In 2006-07, 343 cost awards were made, so it
does happen in some cases.
Michael
Jabez Foster: Is the problem not that for some small
businesses, the fear of an order for costs against them would create an
incentive to settle unnecessarily, because they would be fearful of
substantial costs as well as the
award?
Mr.
McFadden: That is a valid point. As I said, I agree with
the hon. Member for Northampton, South when he reminds us—as he
has done several times—that the resources available to small
businesses in terms of time, human resources and money are limited.
That is why the overall dispute resolution reforms in the Bill are
important and advantageous to business.
John
Hemming: Will the Minister look at the issue of a small
claims track? The costs need not be so great, because people know that
if they lose, they will not lose that much and they can do it for
themselves.
Mr.
McFadden: I think that the reference was to caps on
awards, and that is a more complicated picture. Costs of up to
£10,000 can be awarded if the judge or tribunal believe that the
claimant or representative has
acted vexatiously. The new clause on vexatious claims mentions a 25 per
cent. variation, but putting a value on a vexatious claim is
difficult—by its nature it is worthless, so how can we value it?
Not every claim will have a cost value. I imagine that the 25 per cent.
figure relates to the fact that earlier, we talked about varying the
awards up or down by 25 per cent. However, that is for when we have an
award. At this early stage we do not have an award, so concluding what
25 per cent. might be would be difficult in practice. There is no
requirement for claimants to give a statement of loss on their claim
form. If one is given, it is often judged not to be realistic. For
example, some discrimination claims have no value placed upon them; it
is simply alleged that the claimant has been discriminated
against.
Mr.
Djanogly: The figure is 25 per cent. of any claim, rather
than 25 per cent. of any
award.
Mr.
McFadden: That is my point. I did mention that that there
was no requirement for claimants to put a value on their claims. It is
difficult to say what there should be 25 per cent. of, and that makes
the measure difficult to implement in practice, were we to choose to do
so.
I acknowledge
that there are probably vexatious claims in the system, and it is
important to have a process to deal with them. We have a pre-tribunal
hearing process in place and if we can improve that, we should. It
would be an error—quite an important one—for us to agree
to a wholesale change in the way that the tribunal system has operated
for years under the governance of both parties, when the principle has
been for people to bear their own costs. It is possible to award costs
in some cases, but making that automatic would have implications for
access to justice. That would be wrong and would not take into account
the other changes that we make to dispute resolution. I therefore ask
my colleagues to oppose the new clause.
Mr.
Djanogly: As my hon. Friend the Member for Northampton,
South said, the number of cases grows more significant. The number of
vexatious cases is rising—of course, not all claims are
vexatious and I am sorry if I gave that impression during my earlier
remarks. As the Minister rightly said, there are powers to make cost
orders and to have deposits paid, but in reality the tribunals do not
use those powers to the extent that they should. The Minister says that
his reforms will clear up the problem. If they work, they may simplify
the system and hopefully that will reduce the level of cost. However, I
do not see how they will stop the vexatious claimant. This is a huge
area of concern for business, and from what the Minister says, I do not
feel that he has reflected on the frustrations felt by businesses about
what exists out there. I appreciate that the drafting of the new clause
may not be perfect, and I will withdraw it on the basis that I may
return to it at a later stage. I therefore beg to ask leave to withdraw
the
motion. Motion
and clause, by leave,
withdrawn.
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