Unheard and contested matters dismissed at a pre-hearing should not be the subject of a costs award

The respondents' costs were in any case not credible

Dean & Dean (a firm) & Ors v Dionissiou -Moussaoui (Rev 1) [2011] EWCA Civ 1332

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The Court of Appeal (LORD JUSTICE MUMMERY LORD JUSTICE STANLEY BURNTON and LORD JUSTICE PATTEN) has decided an appeal against a decision by HHJ McMULLEN QC (UKEAT/0140/08ZT, BAILII: [2008] UKEAT 0140_08_1407).

• In Dean & Dean v Dionissiou-Moussaouin it was decided by the Court of Appeal that an ET's discretion in not awarding costs, even after previous warnings and where "scandalous and vexatious" claims were withdrawn or struck out at a PHR on jurisdictional grounds was to be upheld .
• The CA took into account that the claims were contested, the evidence had not been heard and that some of the costs incurred (such as the lawyers all taking opinions when the matters contested were mainly similar) were not reasonable.
• The judges referred to their recent decision in another appeal about costs in an employment tribunal (ET) in Barnsley MBC v. Yerrakalva [2011] EWCA Civ 1255.

The issue is whether the ET erred in the exercise of its discretion when it refused, for reasons stated in its decision sent to the parties on 1 October 2007, to make a costs order against the claimant in her proceedings for discrimination, sex harassment, unfair dismissal and related claims. The majority of the claims were either struck out on jurisdictional grounds or withdrawn, so that the ET never reached the substantive stage of investigating their factual or legal merits. The appeal

Ms Dionissiou-Moussaoui a solicitor was working for the Family Department of solicitors Dean & Dean. She resigned and claimed unfair constructive dismissal. Serious allegations of sex discrimination and harassment were also made against a Dr Mireskandari. In this case there were different actions such as Case No B2/2008/1146 regarding disputed commission arrangements.The Solicitors Regulation Authority also became involved over allegations of dishonesty by a respondent.

A Pre-Hearing Review (PHR) decided on issues of non-compliance by the claimant with grievance procedure requirements and statutory time limits dismissing the claims other than for holiday pay and for victimisation. When most of the claims had been struck out or withdrawn Dr Mireskandari and partners sought an order for costs against the claimant on the basis of her having been warned earlier that there were no grounds to succeed, and regarding alleged unreasonable conduct of the proceedings, and that the claims struck out on jurisdictional grounds were misconceived. The ET refused the costs application partly because the ET found it difficult to understand how lawyers needed separate legal advice. Also no unreasonable conduct was found by the claimant.

The Employment Judge had used his discretion to refuse the application for costs under rule 40(3) of the Employment Tribunal Rules of Procedure 2004. The Chairman noted that there had already been a warning at the case management discussion concerning the need to take into account the overriding objective (to do justice), and that the issues had been complicated.

On appeal the EAT held that the ET did not err in principle, or omit a relevant, or consider an irrelevant, factor when dismissing the applications for costs.

The CA ruled that HHJ McMullen QC said that the ET looked at the relevant rule 40(3) which conferred a discretion had noted that the claims would be contested, that the truth would never be known because there was no hearing and had decided that the issues were not easy especially in light of a succession of cases showing that the Dispute Resolution Regulations were not easy. HHJ McMullen QC had properly taken into account that the victimisation claim was going to a hearing that the claimant's ability to pay was not explored in the ET or in the EAT.

The respondent's Counsel accepted that it is rare for costs to be awarded in the ET and even rarer to appeal a refusal to the EAT but argued that this case was very different from an ordinary case as substantial costs were incurred dealing with 'scandalous and salacious allegations of sexual misconduct against Dr Mireskandari' (which had not been raised by the claimant at the time of the resignation, or in statutory procedures prior to putting in the ET1.

The respondent's complaint was that the ET had not taken into account the fact that the claimant had been warned early on that costs would be sought, that the ET had not considered the nature of the allegations and the way the allegations of sexual harassment were made without caring about the time limits and grievance procedures (and therefore unreasonable, vexatious, abusive and misconceived).

However the Court of Appeal found that there "was no error of legal principle by the ET", that the ET was fully aware of the nature of the discretion why it was exercised, and that the ET after a PHR lasting 2 days could not but be fully aware of the "nature and context of the claims, of the fact that most of them were struck out for being out of time or by reason of non-compliance with the Dispute Resolution Regulations and of the difficulties that claimants, tribunals and courts had encountered in the application of those complex, unsatisfactory and since repealed Regulations".

In dismissing the appeal the CA said that it was not "established that the ET's refusal to exercise its discretion to order the claimant to pay costs was contrary to legal principle, or failed to take account of all the relevant considerations factors, or was plainly wrong."

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