Tribunals: Dubious claimants could shoulder legal costs

October 12, 2011

This article was written for and first featured on Director of Finance online

Speculative claimants risk incurring huge costs repercussions: Smith v Pertemps.

One of the most frustrating aspects of tribunal litigation for employers is that employees who bring spurious claims do not usually have to pay the other side's legal fees if they lose unlike in High Court litigation.

Employers can therefore take heart at the news of a record £100,000 costs award being made against a claimant, Smith, who made false complaints of discrimination against her former employer, Pertemps.

Employers often threaten costs against a claimant in order to discourage them from pursuing a claim, but there is a sense that tribunals are reluctant to make costs awards. The general rule in tribunal litigation is that each side bears its own costs regardless of the outcome. Costs awards are the exception rather than the rule. The limited range of situations in which costs may be awarded include:

not complying with a direction of the tribunal or delaying a hearing;

acting abusively, vexatiously, disruptively or otherwise unreasonably; or
bringing a misconceived claim.

A claim is 'misconceived' if it is so weak that it has no reasonable prospect of success. A 'vexatious' claim is one where the claimant’s primary motive is money and they assume that the respondent would rather settle than spend time and money defending the claim.

In the Pertemps case, Ms Smith brought claims of victimisation, sexual harassment and direct discrimination. The claims for direct discrimination and victimisation were "not well-founded" and were dismissed. The claim for harassment was not brought in time and was struck-out.

In its judgment, the tribunal commented that Ms Smith was a "very poor witness" whose evidence was "exaggerated" and "inconsistent". On top of this, the tribunal found that Ms Smith had "re-written history" by fabricating various accusations levelled against her former boss. These damning findings gave Pertemps a strong basis to argue that Ms Smith pay substantial costs.

Tim Watts, the chairman of Pertemps was quoted saying, "Debbie Smith thought she could secure an easy bung. After all, most companies, even when they are in the right…settle such disputes because of the spiralling costs of fighting them". This is the problem many employers face; the sensible commercial decision is early settlement, but this might result in other disaffected employees trying their luck with vexatious or misconceived claims in the hope of a big pay-off.

The Government understands the need to balance the cost to employers with employees' rights. It recently completed a consultation on "Resolving Workplace Disputes" through which it is looking at options that maintain the ability of employees to sue when their employment rights are infringed, whilst ensuring that recruitment does not become less appealing to businesses.

In a survey conducted through by Fox Williams solicitors, over 60% of respondents felt increasing the amount of costs the employer can recover from an unsuccessful claimant would be likely to result in early settlement of claims. Will an employee bring a dubious claim if it will cost them tens of thousands of pounds if they lose?

Employers will be hoping that the Government’s consultation does result in changes which discourage unhappy employees from pursuing hopeless or vindictive claims, but until then we need more decisions like Pertemps.

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