RESPONDENT CAN STILL RAISE ISSUES ON DAMAGES AFTER LIABILITY IS DETERMINED: IMPORTANT POINT ON PROTECTING AN APPLICANT AS TO COSTS

The Court of Appeal decision in Office Equipment Systems Ltd v Hughes [2018] EWCA Civ 1842 is in relation to procedure in the Employment Tribunal.  However there are two points in the judgment that are of general importance to civil practitioners.  Firstly in relation to the issues open to a defendant/respondent when a judgment on liability has been obtained. Secondly on the need to make an application under CPR 52.19 promptly.

“It is most unfortunate that an application was not made in this case as soon as Ms Hughes’ solicitors received this letter. If such an application had been made at that stage I consider it highly probable that an order under CPR 52.19 would have been made which might have limited the recoverable costs to the court fees, or even directed that no costs were to be recoverable at all. But since the application was not made as soon as practicable CPR 52.19 is simply not available.”

THE CASE

The respondent to a case in the Employment Tribunal did not respond in time.  The respondent’s application for an extension of time was refused, in effect the applicant had a judgment in default on the issue of liability.  The tribunal subsequently refused to allow the respondent an extension of time.

The tribunal then refused to allow the respondent to participate in the remedies stage.   It was held that the failure to respond meant the respondent was debarred from participating on the issue of remedies.  An award of £75,000 was made. The respondent’s appeal to the Employment Appeal Tribunal was refused.  The respondent appealed to the Court of Appeal.

THE COURT OF APPEAL DECISION:  RESPONDENT SHOULD BE ALLOWED TO PARTICIPATE IN REMEDIES HEARING

The Court of Appeal allowed the respondent’s appeal.  There were some straightforward claims where it would be inappropriate to allow a respondent to participate in the damages hearing (for instance where there was a liquidated claim for non-payment of wages). However in more complex claims the principles in Lunnun -v- Singh appled.

THE JUDGMENT ON THIS ISSUE

1. 1. As I have noted, the liability judgment is now conclusive between the parties as to the issues it decides. But, subject to the effect of the debarring order to which I shall come in a moment, “the underlying principle is that on an assessment of damages all issues are open to a defendant save to the extent that they are inconsistent with the earlier determination of the issue of liability, whether such determination takes the form of a judgment following s full hearing on the facts or a default judgment” (per Jonathan Parker J in Lunnun v Singh, 1 July 1999, CA, unrep. but cited in Workman v Forrester [2017] EWCA Civ 73 at paragraph 34). That is the position in the civil courts, and I see no reason why it should not be the same in the employment tribunals.

   2. In D & H Travel Ltd v Foster [2006] ICR 1537 the respondents to a sex discrimination claim failed to enter a response within the time limit prescribed by the rules and judgment in default with regard to liability was entered. The claim had been made against the employers and their senior manager, a Mr Henderson. The manager attended the subsequent remedies hearing and sought to take part in it but was not allowed to do so. The EAT, Elias J presiding, held that the chairman had been correct to decide that there had been no valid application to review the default judgment on liability but had been wrong to assume that unless the default judgment was set aside the respondents could play no further part in the proceedings. Given that the respondent manager was present at the hearing and could have cross-examined the claimant and made submissions it would have been proportionate and in accordance with the over-riding objective of dealing with cases justly, to have allowed him to participate in the remedies hearing. That would have involved no prejudice to the claimant whereas there was obvious prejudice to the respondents in denying them the right to participate. The EAT said at paragraph 61:

“We bear in mind the observations of Burton J in NSM Music Ltd v Leefe [2006] ICR 450 that it will sometimes be proportional to allow a party to participate in a remedies hearing albeit that liability has been determined against him. All of us consider that this is plainly such a case. Mr Henderson was present; he could have cross-examined the claimant and made submissions. Whereas the chairman understandably did not think it right to re-open liability, with all the delays thereby involved, that very fundamental concern did not apply to the more limited participation in the remedies hearing. Had Mr Henderson sought an adjournment to produce witnesses or further documents there would have been every good reason to refuse it. But that was not suggested. He wanted to be able to make observations and submissions with respect to remedies, even if he could not put his side of the story with respect to liability. To exclude him in the circumstances seems to us simply a punishment for failing to comply with the Rules.”

1. I agree entirely with the approach taken by the EAT in the D&H Travel case, and although the 2013 Rules differ in some respects from the 2004 Rules which were then applicable I do not consider that this should lead to a different result.

2. There is no absolute rule that a respondent who has been debarred from defending an employment tribunal claim on liability is always entitled to participate in the determination of remedy. At the lower end of the scale of cases employment tribunals routinely deal with claims for small liquidated sums, such as under Part 2 of the Employment Rights Act 1996 (still commonly called the “Wages Act” jurisdiction) where liability and remedy are dealt with in a single hearing. In such a case, a respondent who has been debarred from defending under Rule 21 could have no legitimate complaint if the employment tribunal proceeds to hear the case on the scheduled date, determines liability and makes an award. Even in that type of case it would generally be wrong for the tribunal to refuse to read any written representations or submissions as regards remedy sent to it by the defaulting respondent in good time, but proportionality and the overriding objective do not entitle the respondent to a further hearing.

3. But in a case which is sufficiently substantial or complex to require the separate assessment of remedy after judgment has been given on liability, only an exceptional case would justify excluding the respondent from participating in any oral hearing; and it should be rarer still for a tribunal to refuse to allow the respondent to make written representations on remedy.

4. This was not an exceptional case, and the draft award of compensation was of just under £75,000 (indeed Ms Hughes’ solicitors argued that it should be increased to a figure in the region of £100,000 after grossing-up for tax). There was no reason why the company should have been precluded from making submissions on the quantum of Ms Hughes’ claim following the judgment on liability. An appropriate course would have been to invite the company to make such submissions by a specified date and for an employment judge then to consider whether an oral hearing was required. It is unfortunate that this was not done: with the result that, through no fault of Ms Hughes or her solicitors, the resolution of her case has now been held up for two years.

5. I would therefore allow the appeal, set aside the draft decision on remedy of EJ Beard and remit the case to EJ Beard (or such other judge as the Regional Employment Judge shall nominate) to consider the issue of remedy.

COSTS

The judgment also contains an important warning in relation to costs.  An application under CPR 52.19 must be made promptly.

THE JUDGMENT ON COSTS

1. 1. The company applied for costs in this court. A schedule was served shortly before the hearing in this court claiming costs of £33,900 comprising solicitors’ fees and expenses of £18,173, counsel’s fees of £14,000 and court fees of £1,727. The response from Mr Mark Forman of the Claimant’s solicitors, by email of 17 July 2018, was as follows:

“As you know, my client will not be in attendance at the appeal hearing tomorrow.

My client has not participated in the appeal process due to a lack of funds and has taken a neutral position simply seeking to rely upon the finding of the employment tribunal and employment appeal tribunal.

My client does not have the ability to pay costs amounting to some £33,000, nor should she have to pay such costs given the extended history of these proceedings and previous failed appeals of the appellant.

The court should exercise its discretion to award no costs whatsoever.

If costs were awarded against my client then the effect will be to stifle justice as employees with feel obliged to cave in to any appeals brought by an employer for fear of being made bankrupt due to penal costs awards.

The court is asked to proceed by way of CPR 52.19 and the notes in the White Book 2018 in respect of that rule and to exclude the appellant from recovering its costs.

I should be grateful if this note can be given to the judges on the issue of costs.”

1. 1. CPR 52.19, referred to in this letter, provides:-

“(1) Subject to rule 52.19A [Aarhus Convention claims], in any proceedings in which costs recovery is normally limited or excluded at first instance, an appeal court may make an order that the recoverable costs of an appeal will be limited to the extent which the court specifies.

(2) In making such an order the court will have regard to—

(a) the means of both parties;

(b) all the circumstances of the case; and

(c) the need to facilitate access to justice.

(3) If the appeal raises an issue of principle or practice upon which substantial sums may turn, it may not be appropriate to make an order under paragraph (1).

(4) An application for such an order must be made as soon as practicable and will be determined without a hearing unless the court orders otherwise.”

1. 1. It is important to note that subparagraph (4) of this Rule requires that an application for an order must be made as soon as practicable: see JJ Food Services Ltd v Zulhayir [2013] EWCA Civ 1304 paragraphs 5-6 (per Rimer LJ) and Kuznetsov v Royal Bank of Scotland plc (per Elias LJ). This was emphasised in the “Listing Window Notification Letter” sent by the Civil Appeals Office to the solicitors for each party on 27 May 2017 following the grant of permission to appeal five days earlier. Paragraph 5, headed “Order to limit the costs you may be ordered to pay“, read:

“In the tribunals from which this is an appeal orders are not normally made for one party to pay the other’s legal costs. Please note that in the Court of Appeal the position is different: usually the losing party is ordered to pay the costs of the successful party. However, the court can be asked by either party to make an order in advance that the recoverable costs of the appeal will be limited to such extent as the court specifies: see CPR 52.19. An application for such an order must made as soon as practicable, so if you wish to make one you should not delay. If the application is included in the appellant’s notice or respondent’s notice, no separate fee is charged; but otherwise it must be made by application notice (form N244) accompanied by a fee of £528 or a fee remission certificate. Any such application will be determined without a hearing unless the court orders otherwise. The application should specify what limit on the costs recoverable by either party is asked for and the reasons it is said such a limit should be imposed.”

1. It is most unfortunate that an application was not made in this case as soon as Ms Hughes’ solicitors received this letter. If such an application had been made at that stage I consider it highly probable that an order under CPR 52.19 would have been made which might have limited the recoverable costs to the court fees, or even directed that no costs were to be recoverable at all. But since the application was not made as soon as practicable CPR 52.19 is simply not available.

2. Nevertheless, this court does have a wide discretion in the award of costs. I bear in mind that this is a case in which all previous proceedings have taken place in the no costs jurisdictions of the employment tribunal and the EAT. It would be disproportionate to require Ms Hughes to pay the costs of instructing leading counsel; and an award of costs of £33,000 would in any event be disproportionate to the amount likely to be in dispute at the remitted hearing

3. We were asked to assess costs summarily. I would order Ms Hughes to pay £12,500 towards the company’s legal costs in this court plus the court fee of £1,727, making a total of £14,227. Mr Reade QC accepted, after taking instructions, that it would be right for us to grant a stay on enforcement of the award for costs until the employment tribunal has assessed the amount of compensation payable to Ms Hughes and issued its determination of remedy; and I would so order.