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Lord McIntosh of Haringey: My Lords, I am grateful to my noble friend for bringing our attention to the ruling in the Kovacs case which means that a tribunal cannot take into account a party's ability to pay when considering an award of costs. I agree with my noble friend Lord Wedderburn that this is an unhappy position and I am sympathetic to his amendment. We do not believe that it is right that a tribunal should be prevented from taking into account a party's means when awarding costs. On the face of it, the Kovacs judgment is a perfectly logical one.
Costs recovery operates in other courts, and if a party has overstepped the boundary of reasonable behaviour why should it not face costs? But as we have said on many occasions, we regard employment tribunals differently from other courts. We acknowledge that the body of tribunal users, in particular applicants, may be in a vulnerable position and may be severely financially disadvantaged as a result of the very circumstances that have led them to pursue a tribunal case.
That is not to say that we believe that parties should be able to act with impunity simply because they might be hard-up. It may be that a party has behaved so unreasonably or abused the system to such an extent that the tribunal considers it just and equitable to award full or partial costs without consideration of the party's financial circumstances. My noble friend's description of the Kovacs case leads me to believe that that may be the position there.
We would like to take away this amendment and consider it fully. We agree in principle that a tribunal should have a discretion to take into account a party's ability to pay costs and we will bring forward an amendment at Third Reading specifically enabling the tribunal regulations to provide for that.
Lord Wedderburn of Charlton: My Lords, I thank the Minister for his remarks and my noble friend for his practical support. We are happy to have reached the stage of one run for no wicket. We hope that that precedent will continue for the rest of the innings. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
12.15 p.m.
Baroness Miller of Hendon moved Amendment No. 9:
- Page 32, line 20, at end insert—
The noble Baroness said: My Lords, with the leave of the House I shall speak to Amendments Nos. 9 to 13 and 18 to 20. They all relate to the subject of costs and expenses before employment tribunals and appeal tribunals that are dealt with in Clauses 22 and 23. They all have a common theme and a common safeguard for litigants before a tribunal. I shall deal with them separately. The common theme is to discourage frivolous and vexatious litigation before a tribunal and to discourage nuisance claims and blackmailing claims brought in the hope of a payment, taking into account the nuisance value, and claims brought maliciously with the object of embarrassing or inconveniencing the employer.
In case it should be thought that that theme is a one-sided piece of employee bashing—I hope I said enough in Committee to show that I would never dream of doing that as I try to be fair—I point out that the theme is also intended to inhibit bullying, or delaying tactics before a tribunal by a powerful and financially well-heeled employer, designed to discourage or to wear down an employee with an arguable claim.
From an employer's point of view, the problem is that often the case of defending an unjustified claim can be out of all proportion to the amount that the tribunal may reasonably be likely to award. Costs also involve the expenditure of management time and the clerical cost of investigating the claim. There is also the risk that an employer has to take into account of the swingeing punitive damages that tribunals can, and sometimes do, award, again, sometimes out of all proportion to the loss or detriment suffered by the employee.
In summary, the common theme is to discourage frivolous or malicious or purely speculative claims and the raising of untenable defences by putting the litigant at the risk of having to pay at least some of the adverse costs to which their conduct has given rise. That is the usual consequence to an unsuccessful litigant in ordinary civil litigation. However, conversely, the safeguard that I mentioned also has to be taken into account. The safeguard is to ensure that the financially weaker party, who will usually be the employee, is not deterred from launching in good faith a genuine claim because of the fear of having to pay costs. Usually the employee will be the financially weaker party, but it could be the employer when the employee is backed by his or her union.
I now invite your Lordships to consider the amendments in the light of that theme and that safeguard. Amendment No. 9 is designed to allow a tribunal to award costs against an unsuccessful claimant who has not been awarded any part of his application, or against an unsuccessful respondent who has not succeeded in any part of his defence. A partially successful claimant or respondent will not suffer this detriment because partial success will be proof that the claim or defence had some reasonable basis. Similarly, I have inserted a further safeguard—if the totally unsuccessful litigant can demonstrate to the tribunal that he was acting on the advice of someone who was competent to give such advice. That does not necessarily mean from a qualified lawyer, a legal executive or a citizens advice bureau or some similar person. It could include, for example, a trade union representative experienced in dealing with such matters.
The description in the proposed clause of,
At this point I should like to refer to the intervention of the noble Baroness, Lady Turner of Camden, when this same amendment came before the Grand Committee. She said,
I stress "wholly failed" not partially, because a partial success precludes the clause from coming into effect. The noble Baroness said that she had never sat on tribunals although she said that she had appeared before them as a trade union representative. If she had, she might appreciate that those appointed to sit on all sorts of tribunals as well, for example, as magistrates, are trained to adjudicate on all the facts before them. I agree with the noble Baroness when she said,
I should like to reassure the noble Baroness that the adviser's track record, even if were known, would not be one of the criteria that a tribunal would apply in deciding the competence of the adviser. There is a saying among lawyers that "You can't win them all". I am sure that the many members of the legal professions who are also Members of your Lordships' House would say "Amen" to that.
Amendments Nos. 10 and 20 propose a modification of the new Clause 1A to be introduced into the Employment Tribunals Act 1996. This new clause allows the tribunal to penalise the representative of the party by disallowing part of his costs and expenses or to require him to pay all or part of the costs of the other party or of the tribunal itself. I believe that we can all agree that there could be circumstances where such a sanction was both necessary and appropriate. However, the use of that sanction should be sparing and limited to a serious malpractice by the representatives.
There already exists a system allowing for this type of penalty. It is found in rule 48.7 of the Civil Procedure Rules 1998. It is used very sparingly by judges and only in the most flagrant cases of abuse of the procedures of the court, or of time wasting or of sheer incompetence. It is not used by judges to mark their disapproval of one of the litigants or his lawyer or even of the nature of the case or other personal factors such as that.
These amendments accept the power of the tribunal to inflict a penalty on a party's representative in appropriate cases, but defines such an appropriate case as being one in which in similar cases the civil courts would have inflicted a penalty in the form of a wasted costs order. In other words, the amendments secure uniformity in the administration of justice as
Amendments Nos. 11, 12 and 13 are identical. The new Clause 1A, as I have just pointed out, enables the tribunal to impose financial sanctions on the representatives of the party coming before it. Apart from the qualification of that power that I am proposing in the previous amendment, I believe that it is necessary to make it clear that it should make no difference whether the representative is making any charge for his services. It would be incongruous if a representative could escape well-deserved sanctions for some sort of misconduct merely because he was not being paid for his services by his "client".
In fact, the clause does not say or imply that he cannot be sanctioned in that way even if he is not being paid. The purpose of this amendment is to make it clear beyond any possibility of argument whatever, both to representatives and to tribunals, that there is no escape from sanctions due to that particular situation.
Lastly, I turn to Amendment No. 18. It provides that where an employment tribunal has power to make an order for payment of costs and expenses by one of the parties, but decides not to do so, it should simply include in its written decision why it was declining to make that order.
I believe that the reason for the amendment is fairly self-explanatory. If the tribunal is going to deprive a successful party of what could amount to a substantial sum of money, then it should explain itself both so that the successful party should know the reason why and so that there can be no question of some arbitrary and capricious reason.
In the ordinary civil courts, up to and including your Lordships' House acting in its judicial capacity, judgments are always accompanied by detailed reasons. I do not believe that there is a reason why the tribunal should escape from that responsibility in this kind of matter. Giving reasons for judgment is one of the ways in which justice is seen to be done.
Amendment No. 19 deals, like the others, with the question of the award of costs, in this case to the successful party to an appeal. It is different in tenor to my Amendment No. 9 where I propose that a wholly unsuccessful party must pay the other party's coats unless it could be demonstrated that he or she had received competent advice that his or her case was a viable one and should be brought. In other words, as I said when I spoke to the earlier amendment, the loser had to convince the tribunal that the claim or defence was not a time waster.
When we come to an appeal, different considerations apply. One of the parties has already lost in the employment tribunal and that should give them reason to pause to consider whether possibly they may have been wrong. The other party, the respondent to the appeal, has already won once. That should encourage him to believe that he was probably right. Therefore, there can be no grounds for ruling that the winner, who is dragged willy-nilly before the
The wording of the Bill on this matter is extremely weak. It simply provides that the appeal tribunal's rules may make provision for the payment of costs and expenses. On the other hand, it may not. The contents of the rules are extremely vague. They could provide an unequal liability for costs as between an unsuccessful employer appellant and an unsuccessful employee appellant. I am certainly not going to take up your Lordships' time by giving other examples, but what I am proposing in this amendment is that the loser of the appeal should automatically be liable for the costs and expenses except—this exception is important—where the tribunal considers it would be unjust for that to occur.
I believe that that is a very wide exception and a very wide discretion for the appeal tribunal. For example, it could exercise it for a variety of reasons because, after all, somebody does have to lose in these circumstances. The tribunal could decide because the unsuccessful party had a very arguable case—I stress that and that is fine. It may also be because a novel point of law and procedure was involved, or because the winning party's case, although successful, really did not have any moral merit, or because the winning party conducted the case in some unsatisfactory way or other, including adding to the cost or time that the case took.
Once again, I acknowledge that this amendment may act as a deterrent to one or other party to appeal or to oppose an appeal. But again I remind your Lordships that costs almost inevitably follow the event in litigation before civil courts. Cases brought to employment or appeals tribunals are also just a form of civil litigation. There is no justification for different principles to apply, merely because to assist parties the procedure is less formal and, it is to be hoped, much speedier.
In the United States of America, an unsuccessful party does not pay costs. That is one of the main reasons there is so much purely speculative litigation there. The number of cases before our tribunals is increasing rapidly. It cannot be because there is more injustice to employees around. It is because, with the vast amounts that tribunals are now able to award—and sometimes do award in what many think are over-the-top rulings—there is the temptation to launch speculative proceedings in the hope of the equivalent perhaps of a small lottery win.
I certainly do not believe that we should deprive anyone of the right to have his day in court or publicly to air a grievance, or even to expose an injustice. I believe that a person should be able to do that. There is a maxim used in bookmaking circles that you cannot make a bet that you cannot lose. Especially before an appellate court, both parties, not just the appellant, should consider the implications of pursuing or defending an appeal.
Finally, in support of this entire group of amendments—I know that I have taken some time, but I have grouped them together in one lump—I quote from the remarks of the Minister for Employment and the Regions to the other place in relation to the procedures of employment tribunals. I think that this is quite important as regards the reason why I thought it necessary to table these amendments today. He said that,
So, my purpose in introducing this group of amendments is to achieve exactly those objectives that the Minister in the other place mentioned. I trust that on reflection the Minister will agree that my amendments are constructive improvements in the Bill. I beg to move.
Lord McIntosh of Haringey: My Lords, I shall deal with each amendment in turn. I am grateful to the noble Baroness, Lady Miller, for grouping them together, even though it means that I shall make a rather longer speech than I would have wanted. Amendment No. 9 provides for cost recovery where competent advice has not been sought by an applicant or a respondent. The noble Baroness, Lady Miller, made clear that that is in circumstances when no part of the application has been found meritorious. I do not believe that the amendment is right in principle and neither do I think that it can be made to work. It appears to move the employment tribunals nearer to a system of costs recovery. Indeed, the noble Baroness explicitly said that that was her intention. It would mean that in every case a losing applicant or respondent may face costs if he could not convince a tribunal that he has been advised by a competent adviser that the case had a reasonable prospect of success.
When the noble Baroness tabled the amendment in committee we said that it is a fundamental principle in employment tribunals that parties are free to choose how to conduct their cases, who to seek advice from, whether they use a representative or choose to conduct their case in person. That principle should be preserved. It recognises that applicants in particular may not be able to afford the services of a solicitor or a consultant. It takes account of the fact that some complaints to employment tribunals may be straightforward and parties may not require advice before making an application or lodging a defence.
My noble friend Lord Wedderburn made the point that the amendment would lean more heavily on the applicant. I agree. An applicant has more limited resources on the whole and may find it more difficult to seek out sources of competent advice. If we insist
Again, it may not be possible in every case for a party to obtain advice. Applicants rely heavily on free sources of advice. Are they to be penalised if they cannot get an appointment before the time limit has expired for lodging a complaint? I do not think that the idea would find favour with employers either. Small businesses may not have access to voluntary advice sources. They may not be members of a business organisation. Are we to expect them to pay out for legal advice without any choice, even if the complaint they are dealing with is not complex?
The noble Baroness, Lady Miller, has made clear her wide interpretation of "competent advice". She said that it could include not just a legal adviser but a lay adviser from a recognised source such as a CAB or a trade union representative. Despite her comment on what my noble friend Lady Turner said in Committee, it still must be the tribunal that decides whether the adviser is competent because it is the tribunal which has to make the decision in terms of costs. How will the tribunal determine which advisory bodies and their individual employees or volunteers are competent or not?
Finally, I do not think that the provision is needed. When I spoke against the amendment in Committee, I said that tribunals already have powers to deal with hopeless cases and the powers are strengthened by the Bill. They have a duty to consider whether a costs award should be made and whether the grounds for costs have been made out. In doing so, the tribunal may consider whether a party sought advice or ignored advice not to proceed with a case. But there is no need to add further deterrents or penalties to hopeless cases.
I can deal with Amendments Nos. 10 and 20 together because Amendment No. 20 refers to the appointment of appeal tribunals. They are about the role of tribunals as between tribunals and the civil courts. The noble Baroness, Lady Miller, quoted the Minister in another place. It is certainly true that we have looked at civil courts when drawing up the provisions for costs awards against representatives. It is also true that tribunals have become more complex with the growth in employment law, case law and European derived rights. But they still have their essential features. I am not inclined to import the language and procedures of the civil courts into employment tribunals.
It is not sensible to bind the tribunals to legislation which has been drawn up for another court. Changes could be made in future to the Civil Procedure Rules which would then automatically apply to tribunals without any consideration of whether those changes are appropriate for tribunals.
The tribunal regulations currently state that a party may be liable for costs where it or its representative has conducted proceedings in a way which is vexatious,
Most definitions of unacceptable behaviour used in employment tribunals have been there from the beginning. They are working perfectly well. Why have a different set of behaviours for wasted costs awards directly against representatives, which are used in the civil courts, alongside the existing criteria for costs awards against parties on their own account?
Tribunals have their own body of case law on which to rely, and I believe that chairmen are just as capable of exercising their powers wisely and reaching sensible decisions on costs as judges in the civil courts. Therefore, I am not clear what the amendment adds or why it is desirable to require tribunals to ape the civil courts.
I am also concerned that incorporating the court provisions into employment tribunals could limit the way that the wasted costs provisions would work in employment tribunals, because rule 48.7, which the noble Baroness, Lady Miller, mentioned, refers to legal representatives. Employment consultants are not legal representatives but we would want them to be captured by the wasted costs provisions. The same arguments apply to employment appeal tribunals.
Amendments Nos. 11 to 13 would establish that all representatives could face costs awards, regardless of whether or not the representative charges for his services.
We do not intend the provisions on wasted costs to apply to representatives who are not acting in pursuit of profit, such as trade union representatives or those working for voluntary or not-for-profit organisations. That is the basis on which we consulted and on which we are committed to implementing the provisions on wasted costs. The amendments would prevent the provisions on wasted costs from distinguishing between, for example, a large multi-national legal firm and a small voluntary advice centre or a local trade union official. We should not adopt such a blanket approach to all of those.
Of course, anyone can behave badly, but we must consider the nature of employment tribunals, their users and their representatives and adopt an approach that reflects this. The resources of organisations that gain financially from the provision of their services and those that do not are simply not comparable. Applying wasted costs to the not-for-profit sector could discourage voluntary advisers from offering their services or mean that an order against an
Amendment No. 18 requires that where a tribunal does not make an award of costs it should always give in writing its reasons why an award was not made. I must start by saying that, as awards of costs are made in fewer than 1 per cent of cases, we would be giving reasons in writing for 99 per cent of cases before tribunals. The regulations cover the matter. They set out the circumstances in which costs can be awarded. Either party can request a costs order or the tribunal can consider costs of its own volition. Where a party has requested costs, the tribunal is required to consider them.
If, in the opinion of a tribunal, a party or its representative has acted unreasonably or, in the case of the defence, had no reasonable prospect of success, the tribunal has a duty to consider making an award of costs. We introduced that change last year. It means that even where one of the parties has not requested costs, the tribunal will have to consider whether costs should be awarded if a party or its representative has acted in a particular way. In practice, costs will be considered in appropriate cases at the hearing or at a separate costs hearing where parties and their representatives are present. The tribunal is obliged to record its decisions which are then sent to the parties, so that is not a problem and the amendment is unnecessary.
I turn to the final amendment, Amendment No. 19, which concerns the Employment Appeal Tribunal. It was tabled in Committee and I am sorry to see it appear again. I had hoped that I had been clear enough—I do not know how I can be clearer. Despite what the noble Baroness, Lady Miller, said, we do not believe that a "general costs follow the event" rule is right for the employment tribunals or for the Employment Appeal Tribunal. I acknowledge that the amendment leaves room for discretion, but essentially it proposes costs recovery being the norm. In reality, that would mean that all parties could face costs and that would of course fall particularly hard on those of limited means.
I do not accept the argument that because a party has lost in the tribunal—after all, someone must lose because it is a zero sum game—he should face costs if he chooses to appeal. It would be a serious restriction of people's right to appeal procedures if we introduced general cost recovery. It does not operate for tribunals or appeal tribunals, except for misconduct or hopeless cases. That is because tribunal users are by nature likely to be more vulnerable because they have been dismissed, made redundant or suffered an unlawful deduction from their wages, or, on the other side, because they are small businesses which would find the costs of a case hard to meet on top of any award. Perhaps I should have made that point in our debate last night about small businesses.
In the vast majority of cases, appeals are launched in the genuine belief that there has been an injustice. I agree that there is no place for claims that are unfounded or vexatious, but there are powers to deal with that. An appeal to the Employment Appeal Tribunal must disclose an arguable point of law. If it does not, the tribunal has discretion to hold a preliminary hearing to determine whether there is a reasonably arguable point of law, so a vetting process exists before the appeal tribunal. Appeals are not common—last year, there were fewer than 2,000 out of 27,000 tribunal sittings. On the whole, parties who lose pause to think before launching an appeal.
I am sorry to be so negative about all the amendments in the group.
"( ) The regulations as to cost and expenses made hereunder shall include provision so as to ensure that—
(a) at the conclusion of a case before an employment tribunal—
(i) an applicant (if the tribunal has granted no part of that person's application) shall be required to demonstrate to the satisfaction of the tribunal that he has received advice from a person whom the tribunal considers competent to give such advice to the effect that the applicant's case has a reasonable prospect of success; and
(ii) a respondent (if the tribunal has refused no part of the applicant's application) shall be required to demonstrate to the satisfaction of the tribunal that he has received advice from a person whom the tribunal considers to be competent to give such advice to the effect that no part of the application has any reasonable prospect of success;
(b) if a tribunal is not satisfied that the conditions set out in paragraph (a)(i) and (ii), as the case may be, have been complied with, it shall award costs against the applicant or respondent respectively."
"a person whom the tribunal considers competent to give such advice"
is deliberately unspecific so as not to be over-prescriptive and to enable the tribunal to adopt a wholly flexible approach that I would think that the Government and the unions would welcome.
"How on earth the tribunal is expected to demonstrate competence, I have no idea".—[Official Report, 14/3/02; col. CWH 70.]
I have the greatest personal respect for the noble Baroness, but I believe that she may have misunderstood the point. It is not for the tribunal to demonstrate the competence of the adviser; it is for the litigant whose claim or defence, as the case may be, has wholly failed.
"It is not an indication of competence or otherwise if you have one or two cases that you have lost". [Official Report, 14/3/02; col. CWH 70.]
"I know that that is how the civil courts operate, and that is the proper benchmark for us to use".—[Official Report, Commons Standing Committee F; 6/12/01; col. 26.]
Five days later he told the same committee:
"We wished to mirror the civil courts; it would be strange to introduce a system for employment tribunals that was different from that in the civil courts".—[Official Report, Standing Committee F; 11/12/01; col. 77.]
12.32 p.m.
12.45 p.m.
Baroness Miller of Hendon: My Lords, I am sad that the Minister was disappointed that I tabled an amendment that I tabled in Committee. Like me, he should get used to it. I get used to him always turning down my amendments—although I am disappointed, I am used to it.
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