Capping a costs award

Background

Dr Al-Tarkait was employed as a medical specialist for Kuwait Oil Co (KOC) and was summarily dismissed in March 2016 for gross misconduct.

In June 2016, he brought a claim for disability discrimination, unfair dismissal and notice pay.

Employment Tribunal

The Employment Tribunal (ET) dismissed all of Dr Al-Tarkait’s claims except for the unfair dismissal claim, which was successful. However the ET found that “[h]ad a fair procedure been applied the Claimant would inevitably have been dismissed three months after the date of his dismissal”.

As such, Dr Al-Tarkait was entitled to the statutory maximum compensatory award. His basic award was reduced by 80% to reflect his contributory conduct. He was additionally awarded costs in respect of KOC’s failure to disclose all relevant documentation which lead to a decision to suspend Dr Al-Tarkait.

The ET awarded costs to KOC in relation to the discrimination and notice pay claims. This was awarded on the basis that the costs should be limited to “the sum of the compensation awarded to the Claimant and the costs awarded to the Claimant” on the grounds that: (1) KOC should not have incurred any costs in excess of that sum in dealing with the additional allegations raised by Dr Al-Tarkait; and (2) it was a reasonable level at which to set costs, considering Dr Al-Tarkait’s financial resources.

KOC claimed costs which were excessively higher than those claimed by Dr Al-Tarkait. The order effectively limited the costs which KOC could recover from Dr Al-Tarkait to ensure that he was not left out of pocket as a result of the proceedings, other than his own costs.

KOC appealed the ET’s decision arguing that the ET had wrongly assumed the jurisdiction that would be exercised on the assessment of costs by applying a cap on the amount of costs recoverable.

Employment Appeal Tribunal

The EAT dismissed KOC’s appeal and considered that the costs order made by the ET was sufficiently clear to meet the requirement that it must specify the part of KOC’s costs payable by Dr Al-Tarkait.

The EAT found that an employment tribunal is entitled, in the exercise of its discretion, to make a costs order which takes account of ability to pay in a case where, for example, a very large amount of costs had been incurred. It was found that an order which sets a cap on the amount of costs recoverable does not usurp the jurisdiction of a costs judge and an employment judge still has the “function of determining the amount to be paid”.

However, the EAT advised against encouraging orders of this type and highlighted how a cap specifying an exact amount is preferred in most cases.

Comment

This decision is useful guidance on the approach which courts may take in respect of awarding costs. Parties may seek to rely on this authority as a way to ensure they are not left out of pocket (save for their own costs). The costs order was allowed in this case, but the EAT advised that best practice is to ensure that a cap on a costs order states an exact figure. However, it should be noted that costs are still relatively rare in employment tribunals and, as such, this decision may have limited practical effect moving forward.

If you have any questions on the above and how it will affect you, please do not hesitate to get in touch with a member of our employment team.