Mr M A Khan v MMBA Accountants Ltd T/a MMBA Chartered Certified Accounts and Registered Auditors: 2401596/2016
JUDGMENT
[1]ON COSTS The judgment of the Tribunal is that the claimant's application for costs against the respondent succeeds. The claimant is awarded and the respondent ordered to pay the sum of £5,112.00. JUDGMENT[2]The judgment of the Tribunal is that the claimant's application for costs succeeds, the claimant is awarded and the respondent ordered to pay £5,112.00.REASONS
[1]Following my judgment promulgated on the 14th November whereby the claimant succeeded in his claims of unfair dismissal for asserting a statutory right, for failure to be provided with written particulars of employment, for failure to be paid in accordance with the National Minimum Wage and for failure to pay notice pay.[2]The claimant applied on 15th December for costs. Claimant's Submissions[3]The claimant submitted that in the light of my findings of fact the respondent's conduct of the case had been wholly unreasonable in that his defence was based on an array of documents which I had found had been falsified and never sent to the claimant. These comprised of documents establishing that the claimant was on a fixed term contract which was brought to an end. Further, that the Tribunal had found Mr Baig's ( a director of the respondent business and its only witness) evidence utterly unconvincing, in particular in relation to the time sheets which he said were not signed by him and had not been prepared by him. That I described the documents as self-serving in my judgment, not contemporaneous and that Mr Baig tried to prevent a witness from giving evidence and that I had said he had sought to mislead the Tribunal.[4]In respect of the respondent's means the claimant submitted it was unconvincing, the evidence provided was limited, it showed a turnover of £65,000. There was considerable doubt as to where the payments out of that account went to, further the claimant had chosen to pay his barrister £1,800 to defend the claim at a point in time when the claim was only £4,000. In respect of the respondent's arguments his representation at the hearing had been defective, was not a matter the Tribunal should concern itself with. It was not something that the respondent raised on the day. Respondent's Submissions[5]The respondent submitted that the respondent was not saying that the findings of fact of the Tribunal should be challenged, but the respondent could not afford to apply for a reconsideration or appeal that decision that he had referred his Barrister to the Legal Services Ombudsman and had contacted the Bar Standards Authority as he felt that he had been considerably let down in the presentation of his defence by his Barrister. Further, that he was impecunious and he provided documentation evidence to that effect and finally, that the conduct was part of the cut and thrust of litigation.[6]There was some documentation attached to the respondent's witness statement.Evidence
[7]Mr Procter chose not to cross examine the respondent, I considered asking further questions myself but felt that the questions I had would require further documentation which would require a postponement of the hearing and therefore in that situation, the balance of hardship and in the light of the overriding objective it was more appropriate to proceed without further questioning of the witness.[8]The respondent submitted a witness statement stating that he believed he had lost his case because of poor representation by his barrister. He has made a complaint to the barrister’s chambers, to the Bar standards Board and to the Legal Services Ombudsman. He complains about my having to tell his counsel that he had asked a question already and should move on, and that he should not raise questions on remedy. Overall Mr Baig says that counsel failed to present the claim properly. The respondent also had solicitors who would have been even more involved in preparing the case but no reference was made to them.[9]He also set out reasons why I should not have believed the claimant and his witness. However the respondent had not appealed or asked for a reconsideration. He explained further the fixed term contract - that it was not a fixed period of time but was dependent on when the claimant finished his training. Again these matters had been considered at the first hearing as suggesting to me there was no such fixed term contract in practice or law.[10]Other matters were raised regarding the original judgment but I do not propose to set them out in detail as the respondent’s representative has made clear today that the respondent does not rely on challenging the judgment.[11]In addition the respondent said that he was a small business with a net turnover of £70222 and that gross salaries were £41620 . He had other costs ofcourse such as energy rent etc. He said his net profit for the whole year was £1286. He said he had taken a loan to pay off the award from the judgment and only took £823 salary a month gross. The accounts showed a number of payments to persons unknown. There was no reference in the witness statement to who these individuals were or what work they did for the respondent. Whilst the respondent said he was only paid £823 a month there was a payment to him of £944.04 on 2nd November and on the 7th November there was a payment to Mr Baig of £823 . This month also showed what I presume to be the £5000 loan but also a payment to the claimants solicitors of £6756.15 a surplus debit of £1756.15. The overall; net profit for the month of November was £1316.29 but if the surplus over the loan is included it is £3072.44. bank statements were not provided for other months although the end of year accounts were for 2015 to verify the annual profit referred to above. Obviously these were prepared by Mr Baig and submitted to the board of the respondent which comprises Mr Baig and a Mr Ahmed.[12]In addition he had agreed he had paid his barrister £1800 for the hearing when overall costs were then £4000. He had also told Mr Shah he would rather pay the legal costs than settle with the claimant.[13]The claimant claimed £5472 in costs comprising of - for the first hearing - 7.2 hours at a solicitors rate of £150, 5.5 hours at partner’s rate of £200 plus various letters and emails and £1250 for the hearing itself; for the costs hearing £450 .All plus VAT at 20%. Law[14]My findings are under Rule 75(1)(a) of the Employment Tribunals (Constitution and Rules of Procedure) 2013 combined with Rule 76 the Tribunal has the power to make a costs order against one party of the proceedings to pay the costs incurred by another party. Rule 75 states that:(a) a costs order is an order that a party (the paying party) make a payment to (another party) the receiving party in respect of the costs that the receiving party has incurred whilst legally represented or whilst represented by a lay representative;(b) the receiving party in respect of a Tribunal fee paid by the receiving party; or(c) another partner or witness in respect of expense incurred or to be incurred for the purpose of or in connection with an individual attendance as a witness at the Tribunal and Rule 76 when a costs order may or shall be made: (i) a Tribunal may make a costs order or preparation time order and shall consider whether to do so where it considers that (a) a party or that party's representatives has acted vexatiously, abusively, disruptively or otherwise unreasonable in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted …."[15]The ground pursued here for the costs order is that the conduct of the respondent was unreasonable 76(1)(a). If there is unreasonable conduct then potentially a costs award is justified although not axiomatic, I have to consider whether having decided there was unreasonable conduct that the making of an order is appropriate and that the amount claimed or awarded is appropriate. For example, although a party might have behaved unreasonably they might have a mental impairment which makes it inequitable to exercise my discretion to actually make what might otherwise be a justified costs order.[16]I have considered the case produced by Mr Procter which was Barnsley Metropolitan Borough Council -v- Yerrakalva, Court of Appeal 2011 which states that it is appropriate to make a costs order where there is unreasonable conduct but that the ET should have reference to the nature, gravity and effect of the unreasonable conduct and should weigh up the extent the unreasonable conduct affected the procedures looking at the whole picture, identifying the unreasonable conduct, what was unreasonable about it and the effect it had. Here the unreasonable conduct was the pursuing and conduct of a defence to the claim which I found was based on false documents and utterly unconvincing witness evidence.[17]Under Rule 84 I have to consider the ability to pay. Rule 84 says that "in deciding whether to make a preparation or wasted costs order and if so, in what amount the Tribunal may have regard to the paying party's ability to pay.”Conclusions
[18]In respect of the first step I find it is appropriate to make a costs award on the following basis based on my findings of fact in the original judgment. (Respondent did not appeal or seek a reconsideration of any of these findings):(1) the falsification of documents;(2) that in effect the main witness for the respondent and owner of the business Mr Baig was lying about the provenance of the letters, about the existence of a fixed term contract and about the time sheets;(3) that he had tried to prevent a witness from giving evidence. This was very serious unreasonable conduct.[19]I have gone on then to consider whether or not the factors put forward by the respondent meant that I should not make a costs award. I cannot accept the respondent's argument that he was so poorly represented that it was not his fault that the conduct was unreasonable. The conduct which led to the case failing was wholly the conduct of the Mr Baig acting as a Director of the respondent and not the conduct of his counsel. Insofar as it might have been matters suggested to him by his solicitors which would have been the time at which such conduct might have been suggested Mr Baig has not suggested this and indeed, had this been the case the solicitors would have been guilty of the gravest conduct which would have led to a striking off.[20]It is true that the respondent has complained about his Counsel to the Legal Services Ombudsman however there is no adjudication of that complaint and the matters he has complained of in his witness statement today are not matters so wholly unusual as to make me conclude that there was a serious failure of duty by the Counsel. For example the claimant has relied on Counsel being told by me at the first hearing that he has asked the question before and therefore that he should move on, and that he should not raise issues of remedy. Neither of those matters are so unusual as to suggest behaviour completely out of the ordinary. In any event I do agree with the claimant that this is a matter between the claimant and his legal advisors and any claims in respect of them he wishes to make.[21]In respect of the claimant's impecunious argument I am obliged to consider the paying party's means[22]The respondent says that he makes only a small profit under £2,000 or a loss in the past three years and that he may go out of business if costs of the orders ought (£5,400) are awarded. In respect of this although Mr Bague was not cross examined and I expressed clearly my reasons for not asking him questions above I still find his evidence unconvincing. Mr Proctor pointed out that the accounts provided show a gross profit before expenses of £65,000 which to my mind is a relatively healthy profit for a small business. The evidence is that most or more of that £65,000 was spent on administrative expenses in relation to the business and the claimant provided business accounts for November and no other months. There are payments here to a number of individuals who appear to be related to Mr Bague and I have no descriptions of what work they did, no wage slips, no evidence as to whether what they were paid if they were paid for work done, whether the work done was commensurate with the payments, their credit card bills paid which I do not know whether they comprise wholly business expenses or whether they include personal expenses, there are payments to other companies which may be rent but I do not know whether they are rent, there is no proof that they were rent.[23]In any event even on the evidence provided for November the claimant was still at least £1,300 in credit at the end of the month which again in my experience is a reasonable amount of credit after all expenses were paid. In addition the respondent has not provided convincing documentary proof that the business expenses were legitimately incurred and therefore I am not convinced the respondent is impecunious as he says.[24]Further I have borne in mind that he states that he borrowed the money last time and has been able to pay some of it back although he borrowed again to pay his Counsel. I have further borne in mind the fact that he has paid his representative £1,800 (not just incurred these costs the representative pointed out an account which appeared to show that the amount had actually been paid). When the amount the claimant was claiming in costs was £4,000 which is nearly half of the claim cost . Further I accepted Mr Shah's evidence at the original tribunal that Mr Baig had said to him in respect of the claimant's claim that he would rather pay a solicitor than pay the claimant.[25]Accordingly I am not dissuaded for making a costs award on the grounds put forward by the respondent.[26]The next question is is the respondent responsible for all of the costs. I find that he mainly is, he has run this defence from the start of the contact with the claimant's solicitors, he has submitted an ET3 in the same terms, relying on the idea of a fixed term contract, he did not in any of this time say he had letters to prove this, whilst he might have been expected to have referred to these letters in the ET3, he certainly would have been expected to have passed these letters on when the letter before action was sent by the claimant's solicitors. Had he done so at this early stage he could have “ knocked the claim on the head” as it were and avoided incurring any costs as had they been genuine they would have gone a long way to establishing an unassailable defence. However the fact that he did not refer to these letters was one of the reasons I found they were manufactured after the event.[27]Throughout the respondent has majored on there being a fixed term contract when there was no such signed contract to establish this but this is what the letters purported to support. Consequently I find the respondent's defence from the beginning was artificial and that is a starting point for considering what costs I should award. I see no reason not to award the majority of the claimant's costs, I do reduce them to some extent on the following grounds:(i) that even had the respondent conceded the claim there would have some initial costs in respect of the claimant obtaining legal advice, I put this as 1 hour of solicitor time £150.(ii) that the case in my opinion should not require as much work from a partner as is claimed and the partners work should have been limited to a small amount of supervision therefore I reduce the amount of partner time from 5 1/2 hours to 2 1/2 hours however that missing 3 hours would have been taken up by additional work by the solicitor therefore there is a difference of £50 before the charging amount for the solicitor and the partner (£150 an hour for the solicitor and £200 an hour for the partner). That again is an overall reduction of £150.(iii) in respect of VAT I have taken a broad brush approach and in Tribunal I was not told this was incorrect in calculating VAT as 20% of the £300 I have referred to above and therefore the total amount I have reduced the bill by is £360.[28]Consequently I award the claimant an order for the respondents to pay costs of £5,112.Conclusions
[1]That the Judge did not consider the following evidence and documents in reaching her decision.(i) the full evidence provided by the respondent was not considered because the Judge mentioned in paragraph 4 of her written judgment that the evidence was limited and unconvincing. Incorrect figures were mentioned in the judgment such as a turnover figure of £65,000 and the understanding of the financial statements including the profitability of the business was completely incorrect.(ii) the Judge stated there was considerable doubt as to where the payments out of that account went to, the respondent submitted the business statement of November 2016 gives description of any payment that was going out.(iii) the Judge mentioned the financial difficulty of the respondent and their decision not to appeal the original judgment. The respondents bank statement dated 30th November showed a balance of £13.08. (iii) the respondent had had to take a loan of £5,000 to pay off the claimant's judgment and a further loan on 9th February to fund the cost hearing.(iv) the Employment Judge mentioned that the respondent was not cross examined and this led to a lack of understanding about the respondent's financial position.(v) as a result the figures mentioned by the Employment Judge were incorrectly or wrongly calculated, in particular Mr Bague's salary.(vi) that the 2016 accounts were also provided on the day of the hearing and the Judge has completely ignored them. There was a reference to other bank statements not being provided for other months but November and March were provided. Further, the financial accounts of the year ending 30th June 2014 and 30th June 2015 were provided but no account was taken of those.(vii) that the witness statement was not read in full because it was suggested that the respondent had not said they would go out of business due to the Costs Order whereas in fact this is mentioned in paragraph 21 of the witness statement.(viii) the Judge did not find the respondent's financial statements gave a full picture of the financial strength of the business however this is a statutory document and should be accepted on the face of it and the Judge's ignore the current liabilities of the company including but not limited to the loan of £6,800 which was taken out on two occasions to pay off the original judgment and to fund the costs claim.(ix) it was clear that the business was left only with the balance of £13.08.(x) that the Judge has accepted the gross profit of the business as being healthy however that is not a relevant matter, the question is what's the net profit.(xi) that the Judge misunderstood how the accounts worked as she relied on there being an excess of £1,300 in the business bank account which was actually an insignificant amount.(xii) recent changes in the industry means that the respondents are losing a number of clients due to legislation as IR35 which will result in a loss of £20,000 of annual turnover.[2]Reconsideration of judgments is contained in rule 70 of schedule 1 to the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2013. It says that: “(70) A Tribunal may, either on its own initiative or on the replication of a party, reconsider any judgment where it is necessary in the interests of justice to do so. On reconsideration the decision may be confirmed, varied or revoked. If it is revoked it may be taken again. (71) Except where it is made in the course of a hearing, an application for reconsideration shall be presented in writing within 14 days of the date on which the written record or other written communication of the original decision was sent to the parties, or within 14 days of the date when the written reasons were sent out (if later) and shall set out why reconsideration of the original decision is necessary. Process (72) An Employment Judge shall consider any application made under rule 71:(i) If the Judge considers there is no reasonable prospect of the original decision being varied or revoked the application shall be refused and the Tribunal shall inform the parties of that refusal. Otherwise the Tribunal shall send a notice to the parties setting a time limit for any response to the application by the other parties and seeking the views of the parties on whether the application can be determined without a hearing. The notice may set out the Judge’s provisional views on the application.(ii) If the application has not been refused under paragraph (i) the original decision shall be reconsidered at a hearing unless the Employment Judge considers, having regard to any response to the notice provided under paragraph (i), that a hearing is not necessary in the interests of justice. If the reconsideration proceeds without a hearing the parties shall be given a reasonable opportunity to make further representations.(iii) Where practicable the consideration under paragraph (i) shall be by the Employment Judge who made the original decision or, as the case may be, chaired the full Tribunal which made it, and any reconsideration under paragraph (ii) shall be made by the Judge or, as the case may be, the full Tribunal which made the original which made the decision. Where that is not practicable the President, Vice President or Regional Employment Judge shall appoint another Employment Judge to deal with the application or, in the case of a decision of a full Tribunal, either shall direct that the reconsideration be by such members of the original Tribunal as remain available or reconstitute the Tribunal in whole or in part.” In relation to the original costs order Rule 84 Tribunal Rules 2013 refers to consideration of the ability to pay is also be taken into account. The EAT in Benjamin -v- Interlating Ribbon Limited EAT 2005 held that where a Tribunal has been asked to consider a party's means it should state in such reasons whether it is in fact done so and if it has, how this has been done.Conclusion
[3]I make this decision under regulation 72(1) of the above Regulations.[4]The overall ground of the respondent's application for a reconsideration of my judgment is that I have misunderstood their documentation and taken a view not substantiated by the documentation that the respondent is not impecunious.[5]In deciding whether to make a costs order an Employment Tribunal may have regard to the paying party's ability to pay, I find that there was sufficient evidence before me at the Costs Hearing to decide that the respondent was in a position to pay the modest costs being awarded of approximately £5,000.[6]The respondent's owner Mr Bague was paying his wife a reasonable amount of money per month and he had shown the capacity to borrow in the past. He had chosen to borrow money to contest the costs hearing rather than to settle the claim when the costs were £4,000 .[7]As I said in the costs hearing I took into consideration that Mr Bague had been heard to say that he would rather pay a solicitor than pay the claimant, I refer to paragraph 24 of my decision. This suggests he had the ability to pay the amount at issue at that stage. He paid the amount awarded to the claimant by borrowing the money. Therefore he has the capacity to borrow.[8]Even if the points made in the reconsideration request are correct there was still sufficient evidence as delineated above to find the respondent had the capacity to pay the costs award.[9]Accordingly I find that the claimant's application for a reconsideration has no reasonable prospect of success and I refuse it.