MR P P SHARMA v LONDON BOROUGH OF EALING [2006] UKEAT 0399_05_0501

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2006] UKEAT 0399_05_0501Case No Appeal No. UKEAT/0399/05Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR P P SHARMAAPPELLANTLONDON BOROUGH OF EALINGRESPONDENT
Before
His Honour Judge J BurkeDate 5 January 2006
[1]APPEARANCES For the Appellant MR MOHINDERPAL SETHI (Of Counsel) Instructed by: Shah Solicitors 168 Greenford Road Sudbury Hill Middlesex HA1 3QZ For the Respondent MR SMAIR SOOR (Of Counsel) Instructed by: London Borough of Ealing Director of Legal & Democratic Services Perceval House 4-16 Uxbridge Road Ealing London W5 2HL SUMMARY Order for costs of failed unfair dismissal claims/discrimination claims by senior employee found by Tribunal to have been untruthful; he found guilty of gross misconduct. Costs were to be assessed by the County Court; the Respondent's bill before assessment was £130,000. Were Tribunal's reasons for costs order sufficient and compliant with the new requirements of Rule 30(6) of Schedule 1 to 2004 Regulations? Answer – yes, appeal dismissed. HIS HONOUR JUDGE J BURKE QC The History of This Appeal The Appellant, Mr Sharma, was employed by the London Borough of Ealing from 1989 as a Principal Housing Officer. He was dismissed when his fixed term contract ended on 31 March 2004. In January 2004 he issued proceedings in the Employment Tribunal against the Borough and fourteen named individuals who were alleged to have been guilty of racial discrimination and victimization on grounds of race and sex discrimination. At an interlocutory hearing on 30 April 2004, eight of the individual Respondents were discharged, leaving as Respondents the Borough and six individuals. On the same day, Mr Sharma issued a second Employment Tribunal claim alleging unfair dismissal and breach of contract, his contract of employment having by then been terminated. The two claims were consolidated and heard together by the Employment Tribunal, sitting at Watford and chaired by Mr Mahoney. The hearing took up 2 Tribunal reading days, 13 hearing days and 2 days of consideration by the Tribunal before, on 14 November, the Tribunal gave an oral judgment in full with lengthy and detailed reasons which were promulgated in writing on 28 January 2005. After the two reading days, when the hearing commenced Counsel for Mr Sharma withdrew all claims against the remaining individual Respondents; and on the penultimate day of the Tribunal hearing Mr Sharma's claims of race discrimination and victimization were also withdrawn.[2]The Tribunal dismissed all of Mr Sharma's remaining claims against the Borough. After the Tribunal had finished giving their judgment, Mr Soor of Counsel, who had represented all the Respondents, made an application for costs. Both Mr Soor and Mr Tresman, Counsel for Mr Sharma, made submissions upon that application. The Tribunal decided that Mr Sharma should pay the whole of the costs incurred by the Respondents; their formal order to that effect was promulgated in writing on 25 November 2004.[3]Mr Sharma appealed against the Tribunal's conclusions, asserting errors of law on the part of the Tribunal on the substantive issues and in relation to the award of costs. At the preliminary sift stage the President dismissed all substantive Grounds of Appeal on the basis that they had no reasonable prospect of success. As for Ground 5 of the Notice of Appeal, which was directed at the Tribunal's costs order, the appeal on that Ground was stayed; and the Tribunal were ordered to set out the basis upon which the application for costs was made and the reasons for granting it. That was, no doubt, because the Tribunal had not in or at the time of their Order given any reasons for their decision as to costs.[4]The Chairman of the Tribunal wrote to the Employment Appeal Tribunal on 26 April 2005 in response to the President's Order. In the light of the Chairman's letter the appeal was referred back to the President who concluded that there was no arguable Ground of Appeal against the Tribunal's decision as to costs and that the stay on Ground 5 of the Notice of Appeal should be lifted but that no further action should be taken upon that ground; that decision was notified to the parties by letter dated 23 May 2005; that letter, as such letters always do, drew the attention of the parties to the provisions of Rules 3(8) and (10) of the Employment Appeal Tribunal Rules 1993 (as amended) which gave Mr Sharma a right, his appeal having been rejected under Rule 3(7), to serve a fresh Notice of Appeal within 28 days from the date of the Registrar's notification of that rejection (Rule 3(8)) and to seek a hearing before a Judge of the Employment Appeal Tribunal (Rule 3(10)). No Rule 3(10) application was made; but on 6 June, i.e. within the 28 days period permitted by Rule 3(8), Mr Sharma's solicitors put in a new Notice and grounds of appeal in which they put forward three grounds namely that:-(1) in paragraph 3 that the Tribunal had failed to give adequate reasons as to why they believed that Mr Sharma had acted vexatiously, abusively, disruptively or otherwise unreasonably in bringing the claim or that the claim was misconceived(2) in paragraph 4 that the Tribunal had failed to consider Mr Sharma's ability to pay a costs order(3) the Tribunal had relied on the case of Kovacs v Queen Mary & Westfield College [2002] IRLR 414 at paragraph 4 of their written reasons as authority for the proposition that ability to pay was not a material factor when Kovacs was no longer good law.[5]The new grounds were reviewed at the sift stage by Silber J who permitted them to be set down for a full hearing.[6]Mr Sharma's solicitors subsequently made an application to adduce fresh evidence and for an order for the Chairman's notes. These notes were not ordered; and no new evidence has been put before us.[7]We have said earlier that Mr Soor appeared at the Tribunal hearing for all Respondents; he was instructed by the Borough's in-house legal department who were acting on behalf of the Borough and all the individual Respondents; we have been assured that no separate costs were incurred in representing the individual Respondents; and we will proceed on the basis of that assurance.[8]Of the new Grounds of Appeal, only the first is now relevant. Mr Sethi, who appeared before us on behalf of Mr Sharma, accepted that the Tribunal were right to take the view that Rule 14 of Schedule 1 to the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2001 and not the costs provisions of the new 2004 Regulations which replaced those of 2001 applied and that, therefore, the Tribunal had correctly concluded that the means of the paying party were irrelevant, pursuant to the decision of the Court of Appeal in Kovacs ; he formally reserved the position so as to enable a challenge to the correctness of Kovacs to be made at a higher level but conceded that Kovacs was binding on the Employment Tribunal and on the Employment Appeal Tribunal. Accordingly, the only issue which we have to decide upon the new grounds of appeal is whether the Tribunal, by the Chairman's letter of 26 April 2005, have given sufficient reasons for their conclusion that Mr Sharma should pay Ealing's costs of the whole proceedings. The Tribunal's Decisions[9]In that letter the Tribunal's reasons are set out in these terms (omitting irrelevant parts):
"As the Claimant knew the allegations that he had made in the case were false or alternatively without obvious merit, costs should follow as the claims were misconceived… The determination of the Tribunal, having heard submissions from the Respondent's Counsel and the Claimant's Counsel, was that the bringing of the first proceedings was vexatious. It was a claim brought by the Claimant for an improper motive, namely to attempt to deliberately delay the disciplinary proceedings which were about to take place and to avoid the Respondent dismissing the Claimant prior to the agreed termination date of his employment. The second claim was also misconceived and had no reasonable prospect of success. These determinations followed from the adverse findings of fact made by the Tribunal against the Claimant. These were claims brought by a dishonest and deceitful Claimant which involved the Respondent in very substantial costs. In those circumstances the Tribunal thought it appropriate that an award of costs should be made. A detailed assessment was requested by the Respondent and this was felt appropriate by the Tribunal."
[10]In order to understand what the Tribunal were saying in that letter and in those reasons, it is necessary to summarize, briefly, the nature of the issues which the Tribunal had to resolve in considering the merits of Mr Sharma's claims. In March 2003 two junior employees of the Borough complained that Mr Sharma had solicited and assisted their applications for employment and had then, seemingly in return, obtained their assistance in his political activities – which were, of course, wholly outside his work for the Borough. Mr Sharma was suspended; and an internal investigation was undertaken which resulted, after five months, in a report consisting of 518 pages, 51 pages being of text and the remainder being documents seen by the investigation. As a result, disciplinary proceedings were commenced against Mr Sharma in which he faced five charges namely that:(1) he had solicited the two employees to apply for their posts and had improperly assisted their applications(2) in consideration of the assistance he had given them he persuaded them to help in his political affairs to further his political ambition(3) when the employees indicated that they no longer wished to assist him in that way he bullied and threatened them(4) he permitted political work to be carried out during Council time and using Council resources and;(5) he authorized misuse of Council funds.[11]The disciplinary proceedings were held in Mr Sharma's absence; he was in India; the Tribunal found that he knew of the date of the hearing and that, if he was absent, the hearing would proceed in his absence. The senior manager who conducted the disciplinary proceedings concluded that Mr Sharma was guilty of all five charges and that all charges, save charge 4, involved gross misconduct. Mr Sharma was dismissed. He appealed to an Appeal Committee; he attended this Committee; his appeal was dismissed; and his dismissal stood.[12]The unfair dismissal claim arose, of course, from those decisions. The breach of contract claims gave rise to different issues; see paragraph 6.4 of the Tribunal's judgment. The sex discrimination complaints, as they were at the end of the hearing, were based on the alleged failures of the Borough to suspend one of the employees who had made the initial complaint and upon the disciplinary process, which was said to amount to a continuing act of discrimination. The race discrimination claims were based on Mr Sharma's alleged treatment throughout the process leading to his dismissal. The Tribunal drew attention to the fact that whether Mr Sharma was guilty as charged was not the issue in the unfair dismissal proceedings but was an issue in the discrimination claims because the Tribunal needed, for the purposes of those claims – or at least the sex discrimination claims which remained live at the end of the hearing – to make findings as to what had actually occurred.[13]The Tribunal expressly found on the facts, at paragraph 40 of their judgment, that the first four charges brought against Mr Sharma were proved but that the fifth, unauthorized expenditure of Council funds, was not At paragraph 41 to 44 the Tribunal set out specifically individual findings against Mr Sharma in respect of each of the first four charges. At paragraph 47.1-5 the Tribunal set out detailed reasons for their conclusion that they did not accept Mr Sharma as a credible witness on those matters where there had been a dispute with other witnesses.[14]It is clear to us that the Tribunal, in their extensive judgment after a long hearing with evidence from a very large number of witnesses, concluded that the claims which Mr Sharma had made were based on untruths and that the truth was that Mr Sharma had been guilty of serious misconduct and had not been unfairly dismissed or the victim of any form of discrimination as he alleged.[15]In the Chairman's letter in answer to the President's order, which we shall hereafter call "the reasons letter", the Tribunal specifically drew attention to paragraphs 40 to 44 and 47 to 47.5 of the Tribunal's judgment on the merits. Those are the paragraphs in which, in much more detail then has appeared in our summary of the Tribunal's findings of fact, the Tribunal set out their findings that Mr Sharma was guilty of four of the five charges and that his evidence was not credible and gave detailed reasons for those conclusions. We see no basis on which it could be argued or argued successfully – and indeed Mr Sethi has not sought to argue – that the Tribunal had not incorporated or was not entitled to incorporate those reasons into their response to the President's order. In our view they form an integral part of the Tribunal's reasons, as set out in the letter, for the order they made as to costs. The Appellant's Submissions and our Conclusions[16]Mr Sethi introduced his submissions by reminding us that the Tribunal, until ordered to do so by the Employment Appeal Tribunal, had given no reasons for their costs decision; he suggested that the EAT's jurisdiction to require reasons from a Tribunal (the existence of which has been confirmed by the Court of Appeal in Barke v SEETEC [2005] ICR 1373 ) was restricted to requiring further reasons where some reasons were given by the Employment Tribunal; but this point was not raised in the new grounds of appeal; and Mr Sethi, recognizing that he could not now raise it, did not pursue it. He asked us, however, to bear in mind as part of the background to this appeal that the Tribunal originally gave no reasons; although the reasons letter points out that no request for written reasons of the costs decision was made on behalf of Mr Sharma, we have borne the absence of reasons in mind as asked; but if the EAT was correct in requiring the Tribunal to provide reasons where there were none – as we believe and, at least for the purposes of this Appeal, assume to have been the case - once the Tribunal has provided reasons pursuant to that request it is those reasons which, if and in so far as they are challenged, fall to be scrutinized.[17]After this introductory point Mr Sethi took us first to Rule 30(6) of Schedule 1 to the 2004 Regulations which provides as follows:
"Written reasons for a judgment shall include the following information- (a) the issues which the tribunal or chairman has identified as being relevant to the claim; (b) if some identified issues were not determined, what those issues were and why they were not determined; (c) findings of fact relevant to the issues which have been determined; (d) a concise statement of the applicable law; (e) how the relevant findings of fact and applicable law have been applied in order to determine the issues; and (f) where the judgment includes an award of compensation or a determination that one party make a payment to the other, a table showing how the amount or sum has been calculated or a description of the manner in which it has been calculated."
[18]Although the costs rules in paragraphs 38 to 41 of that Schedule do not apply in the present case, as opposed to the costs rules in Schedule 1 to the 2001 Regulations, by reason of the transitional provisions, Rule 30 is one of the parts of Schedule 1 to the 2004 Regulations which does apply in the present case - see Regulation 20(1) to (4) of the 2004 Regulations.[19]It is not in dispute that the Tribunal's costs decision is a judgment to which Rule 30(6) applies; see Rule 28(1)(a) of Schedule 1 to the 2004 Regulations. Mr Sethi submits that the reasons given by the Tribunal for their costs decision in the reasons letter fail to comply with the requirements of Rule 30(6) in that they do not satisfy sub-rules (f), (a), (c), (d) and (e) (in the order in which Mr Sethi placed his submissions) of that sub-rule. Mr Sethi further submitted that the leading authorities as to the adequacy of a Tribunal's reasons apply after the introduction of Rule 30(6) as before and provide guidance as to how a Tribunal should comply with the requirements of Rule 30(6) and as to how any contention that the Tribunal has failed so to comply should be considered. We are aware that another division of the Employment Appeal Tribunal, in Fisher v Hoopoe [2005] UKEAT/0043/05/LA,13 April 2005, has expressed the view that the requirements of the new Rule 30(6) might be thought to supplant the requirements set out in pre-existing authorities. We heard no argument as to that; and without anyway expressing disagreement with the decision in Hoopoe we are content for the purposes of this Appeal to proceed on the basis that the pre-existing authorities continue to apply unless they are inconsistent with the provisions of Rule 30(6); and we have taken into account in reaching our conclusions on this Appeal the following well-known dicta to which Mr Sethi directed our attention: (1) In English v Emery Rheinbold [2003] IRLR 710 the Court of Appeal said, as to the requirements of the common law for a judicial body to give reasons, at paragraph 16 of the judgment of the Court:
"We would put the matter at its simplest by saying justice will not be done if it is not apparent to the parties why one has one and the other has lost."
And at paragraph 19:
"… the Judgment must enable the Appellate court to understand why the Judge reached his decision. This does not mean that every factor which weighed with the Judge in his appraisal of the evidence has to be identified and explained. But the issues, the resolution of which was vital to the Judge's conclusion, should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy Judgment. It does require the Judge to identify and record those matters which were critical to his decision…"
And further, at paragraph 21:
"…the essential requirement is that the terms of the Judgment should enable the parties in any Appellant Tribunal readily to analyse the reasoning that was essential to the Judge's decision." (2) In Meek v City of Birmingham District Council [1987] IRLR 250 , Bingham LJ at paragraph 8, said: "
It has on a number of occasions been made plain that the decision of an industrial tribunal is not required to be an elaborate formalistic product of refined legal draughtsmanship but it must contain an outline of the story which has given rise to the complaint and a summary of the Tribunal's basic factual conclusions and a statement of the reasons which have led them to reach the conclusion which they do on those basic facts. The parties are entitled to be told why they have won or lost. There should be a sufficient account of the facts and of the reasoning to enable the EAT or, on further appeal, this Court to see whether any question of law arises…" (3) In Tran v Greenwich Vietnam Community [2002] IRLR 735 Sedley LJ said:
"No Employment Tribunal and no advocate or representative practicing in the employment field should imagine that a decision as short on reasoning as the present one complies with the legal obligation, if asked, to explain how the Tribunal has got from its finding of fact to its conclusion. It may be done economically but simply to recite the background and the parties' contention and then to announce a conclusion is not to do it at all; and an opaque reference to the evidence which has been given does not save it.."
[20]Mr Sethi further submits that the Tribunal erred in reaching factual conclusions on the costs issue without hearing any evidence as to that issue when Ealing's assertion that the first Originating Application was vexatious and the second Originating Application was misconceived and the factual basis for those assertions had not been put to Mr Sharma in cross examination. Mr Sharma had, therefore, not had the opportunity to rebut the allegations against him on which the costs application was based. Mr Sethi showed us evidential material, in the form of letters written by Mr Sharma's solicitors to what we take to be a legal expenses insurance company and to Mr Sharma from which, he said, Mr Sharma was entitled to believe that he had reasonable prospects of success. Had evidence been taken on the costs issue, he submitted, those letters could have been put before the Tribunal.[21]We will address this last argument first; it is of a different nature from the others because it is not a criticism of the Tribunal's reasons for their decision as to costs but a criticism of the procedure by which they came to their decision; and as such the argument does not, in our judgment, fall within the only extant ground of appeal, i.e. paragraph 3 of the replacement grounds dated 6 June 2005. However, if it does, our conclusion is that the argument is unsound. Mr Sharma was represented by counsel when the costs application was made; although we are told that counsel asked for an adjournment to seek instructions as to Mr Sharma's means – and was granted such an adjournment – there is no suggestion that, on hearing the basis on which the application for costs was put, Counsel asserted that Mr Sharma should have asked that he might give evidence, either in chief or so that the factual allegations upon which Ealing relied could be put to him. Nor is it suggested that anyone sought to put before the Tribunal the letters to which we were referred. It seems to us to be clear that it was open to Mr Sharma, through his representatives, to seek to call evidence, to put himself forward for cross-examination and to put before the Tribunal any material, such as the letters, which it was thought might assist his case as to costs. No attempt to do so was made. It is perhaps not difficult to see why that was so; the Tribunal had just read out a lengthy and detailed judgment which was obviously critical and indeed condemnatory of Mr Sharma; for the reasons they set out the Tribunal had disbelieved his evidence and had found him guilty of grave misconduct in the face of his refutation of the allegations made against him. It is hardly surprising that, in those circumstances, no attempt was made to ask the Tribunal to hear further evidence from him; any assessment of his prospects of success on the costs issue, if further evidence were to be taken, would inevitably have been seen in the light of the Tribunal's conclusions as to the truthfulness of Mr Sharma's evidence on the issues which they had already decided. In any event, whatever the reasons for the absence of any attempt by or on behalf of Mr Sharma to adduce further evidence on the costs issue, the fact is that no such attempt was made although there was clearly opportunity to do so. In those circumstances we cannot see how the Tribunal can properly be criticized for proceeding to make their costs decision on the basis of the material which had been before them over many days and in the light of which they had reached a detailed judgment which had, shortly before, been read out to the parties.[22]It is convenient next to refer to a further submission of Mr Sethi that Mr Sharma should have been given notice of the costs application. This point does not involve a criticism of the Tribunal's reasons and is not raised by the Notice of Appeal; but in the light of the root and branch attack on his credibility in the course of the liability hearing and his piecemeal withdrawal of various aspects of his claim as the case proceeded, Mr Sharma or his representatives could hardly have been surprised by the fact that a costs application was made, albeit that this was not a case in which a specific costs warning had been given; we repeat that no request for an adjournment, short or long (otherwise than for the purpose of taking instructions as to means), was sought in response to the costs application. Notice of an application of costs is not required, by law or otherwise, before a costs order may be made.[23]We return, therefore, to Mr Sethi's criticisms of the Tribunal's reasons. Before addressing the specifics of those criticisms we need to make some general comments. We have not been taken to any decision of the Employment Appeal Tribunal or of the Court of Appeal as to whether the requirements of Rule 30(6) are mandatory or as to what a Tribunal must do in order to comply with those requirements (other than in terms of the general principles from the pre-existing authorities which we have already set out). We are not critical of that; this is a costs appeal, albeit an appeal which on any review is likely to involve a very substantial sum; and there may well have been as yet no such authority in any event; but we will approach the arguments, without so deciding, on the basis that the requirements of Rule 30(6) are mandatory. However in our judgment it seems to us that it is not necessary for a Tribunal, in giving their reasons for any judgment, to set out under separate headings how and on what basis they are seeking to comply with those requirements. Many judgments of the Tribunal are set out in such a way as to show, under a separate heading, their conclusions and their reasons for their conclusions under each relevant requirement of Rule 30(6); perhaps it is preferable that they should be; but as long as a judgment, as a whole, contains material which satisfies the requirements to the extent set out in the authorities to which we have earlier referred, that judgment should not properly be open to criticism. We intend to apply these general principles in addressing Mr Sethi's specific criticisms.[24]Mr Sethi set out first, if not foremost, his criticism of the Tribunal's failures in respect of the size or likely size of the costs order. He pointed out that, in the reasons letter there was set out neither a table "showing how the amount or sum has been calculated" or "a description of the manner in which it has calculated". Furthermore, he said, the Tribunal did not appear to have any idea how much the costs which Ealing sought would be. It was common ground that they would amount to more than £10,000; but beyond this no fixed figure or even "ballpark" figure was put to the Tribunal; and the Tribunal therefore had no alternative but to order that Ealing's costs be the subject of a detailed assessment pursuant to Rule 14(3)(c) of Schedule 1 to the 2001 Regulations without knowing how much, as a result, they were ordering Mr Sharma to pay. They therefore had no idea and could not know whether the costs which Mr Sharma, if so ordered, had to pay to Ealing were commensurate with or proportional to what he had done to attract a costs order at all.[25]We do not accept these submissions. Mr Soor on behalf of Ealing accepts that he did not put any calculated or ballpark figure before the Tribunal. The bill of costs for the detailed assessment, which is now available, claims approximately £113,000; but it is subject to a substantial number of points of dispute, the proper resolution of which we cannot anticipate. The bill had not been drawn up at the date of the hearing before the Tribunal; but it does not seem that Counsel for Mr Sharma sought any kind of figure from Ealing or protested that the Tribunal was so unaware of the likely effects of a costs order that they should not make such an order; and it is, in our judgment, likely, if not inevitable, in any case of this type that the Tribunal will not have and will not be given any clear or ballpark figure when they are invited to make a costs order in a sum to be assessed by way of detailed assessment. It is not an essential prerequisite of the making of such an order that the Tribunal should have a clear idea of the eventual sum. In this case the Tribunal demonstrated, by the use of the words "very substantial costs" in the reasons letter that the eventual sum was going to be just that, very substantial. They must have known from the nature and length of the proceedings, involving 17 days of the Tribunal's time and 13 days of hearing, with between 20 and 30 witnesses, that the costs would inevitably amount to many tens of thousands of pounds; it would not have been realistic to think in any other terms. The Tribunal must be taken, therefore, to have had broad knowledge of the likely effect of their costs order; and it is clear from their reference to "very substantial costs" in the reasons letter that they had that knowledge and took it into account in reaching their decision as to costs.[26]To return to the specific words of Rule 30(6)(f), the Tribunal's judgment did not contain a table showing how the amount of costs was calculated or a description of the manner in which it was calculated; there were, in our judgment, very good reasons for that. The Tribunal did not make an award of compensation or of an amount of costs; there was no possibility of the Tribunal's setting out a table showing how the amount was calculated or describing the manner in which it was calculated because the sum had not been calculated at all; it was to be calculated by way of a detailed assessment. All that the Tribunal could do was to make an order for costs in an uncalculated amount, that amount to be determined on a detailed assessment. Once the detailed assessment had taken place, carrying with it - as it would necessarily have done – material showing or describing how the assessed sum had been calculated – that material would be expected to supply what was necessary to fulfil any outstanding requirements. In our judgment the Tribunal did not fail to comply with Rule 30(6)(f).[27]It is true that in the reasons letter the Tribunal did not expressly refer to any separate consideration of whether the order was commensurate or proportional. We are unaware of any requirement in any statute, the European Convention of Human Rights or otherwise which expressly requires that such an order be commensurate. As to proportionality, Mr Sethi referred us to the overriding objective, set out for the first time in the context of Employment Tribunals in Regulation 3 of the 2004 Regulations; we make three points about that reference, namely:(1) we doubt whether any failure to refer to proportionality is a defect in the Tribunal's reasons, particularly in the absence of any suggestion that the Tribunal were invited to consider proportionality; but in any event;(2) pursuant to the transitional provisions in Rule 20 of the 2004 Regulations Regulation 3 does not apply to proceedings which were commenced before 1 October 2004 – as was the case here;(3) Regulation 3(2)(b) requires the Tribunal to deal with cases "in ways which are proportionate to the complexity or importance of the issues". These words appear to refer to substantive orders and to procedural steps; but the Tribunal can be seen from their costs letter to have taken into account, in general terms, the potential size of the order which they were asked to make; they were fully aware of the importance and complexity of the issues with which they had just dealt in considerable detail; they did not need, in our judgment, expressly to spell out that the result of the Costs Application fell within the objective of proportionality.[28]We turn next to the criticism of the Tribunal's reasons in terms of Rule 30(6)(a),(c),(d) and (e), ((b) admittedly having no application in this case); in our view those criticisms can appropriately be taken together. As to Rule 30(6)(a) although the Tribunal did not specifically identify the issues which they had to resolve as to costs separately from their resolution of those issues, we regard the letter as sufficiently identifying what the issues raised by the costs application were i.e. in relation to the first claim was it vexatious (or, no doubt, something less than vexatious but still falling within Rule 14(1) of Schedule 1 to the 2001 Regulations – to which alternatives the Tribunal did not need to go), and in relation to the second claim was it misconceived and, if the Tribunal determined those issues in favour of Ealing, should they in the exercise of their discretion make the order as to costs sought; see the second and third paragraph of the extracts from the reasons letter which we have set out earlier in this judgment. It was not, we conclude, necessary for the issues to be identified in any more formulaistic or detailed manner.[29]As to Rule 30(6)(d) we agree that the Tribunal did not expressly set out in a separate paragraph or under a separate heading a statement of the applicable law: but it was in our judgment unnecessary to do so. The reasons letter demonstrates that they had directed themselves correctly as to the law which was, so far as we are aware, in any event not in dispute before them. Thus, in relation to the first claim, they can be seen to have directed themselves correctly that, for the proceedings to be vexatious, they needed to find or it was sufficient to find that the proceedings had been brought for an improper motive; in relation to the second claim they can be seen to have directed themselves that for the proceedings to be categorized as misconceived, they needed to find or it was sufficient to find that the proceedings had no reasonable prospects of success. Mr Sethi submitted that they should have set out an express self-direction to the above effect; but their self direction appears with sufficient clarity from the reasons letter, as does their further self-direction, once they had arrived at their factual decisions as to the claim, that they should then exercise their discretion as to whether or not it was appropriate to make a costs order.[30]We come, therefore, to what appears to us to have Mr Sethi's leading criticisms, in terms of Rule 30(6); they are, in summary form, that the reasons expressed in the Costs letter, incorporating by reference the Tribunal's findings of fact in their liability judgment and specifically paragraphs 40 to 44.2 and 47 to 47.5 of that judgment, did not satisfy the requirements of, in particular Rule 30(6)(c) and (e) or the principles in the authorities because those findings did not encompass or resolve any issue as to whether the first claim was brought for an improper motive or whether the second claim had no reasonable prospect of success, which issues did not arise in the course of the liability hearing, and do not explain, so as to comply with the principles set out in the authorities, why on those issues Mr Sharma lost or Ealing won and do not give adequate and intelligible reasons for the Tribunal's resolution of those issues. Mr Sethi submitted that the liability decision was not very different from any other such decision where issues of fact had to be resolved and that the resolution of the factual issues in the course of the judgment did not justify the Tribunal's conclusions on the costs issue; the Tribunal should not have leapt from those resolutions to the much more serious finding that Mr Sharma had commenced the first claim for improper motives and the second claim without any prospect of success; for the Tribunal to deal so briefly in their reasons with issues of such importance in the face of what on any view was a large claim for costs was insufficient. That was particularly so when the Tribunal had only found Mr Sharma not to be telling the truth on the basis of a small number of individual aspects of the evidence as a whole, as set out in paragraphs 47.1 to 47.5 of their judgment.[31]Mr Sethi further argued, that even if the liability judgment were to be taken as justifying the finding that the proceedings were in some respect vexatious or misconceived, they do not justify a finding that they were so throughout and that the Tribunal ought to have considered making an order for only part of the costs, either from a specific date or on the basis of a specific issue. He pointed out that the Tribunal had, at paragraph 40 and 46 of their judgment, found that they were not satisfied as to the fifth of the allegations of misconduct made against Mr Sharma and that Mr Sharma had successfully exposed shortcomings in Ealing's disciplinary process, in particular in that Mr Sharma had not been allowed to be accompanied at the investigatory interview by his chosen Union representative, Mr Chapman, that he was not given a clear explanation of the reasons for his suspension, that Ealing failed to pass on to Miss Fiore, who conducted the first level disciplinary hearing, that Mr Sharma would not be attending and that Miss Fiore would not allow cross examination at that hearing; see paragraphs 12, 13, 21 and 32.2 of the Tribunal's judgment. These were all points, it was argued, which Mr Sharma was entitled to make and could not make without bringing proceedings.[32]Lastly Mr Sethi made the further point that the Tribunal had not, in the reasons letter, demonstrated that they had exercised their discretion in the context of and directing themselves as to the principle that, in the Employment Tribunal's jurisdiction, costs are the exception rather than the rule; he submitted that if a Tribunal is to depart from that principle and make a rare Order for Costs they must set out that they have expressly considered that important principle.[33]Mr Soor submitted that this was not the type of case in which the employee's initiation of proceedings could be explained by any difficulty in understanding why he had been dismissed or had been treated as he had; this, he submitted, was an example of a very different type of case in which positive and direct allegations were made by the applicant and similar allegations were made against him. Mr Sharma had set out a positive case in his Originating Application and had firmly refuted the allegations of misconduct put forward by Ealing; but he was found to have been a liar; the findings demonstrated that he had brought the proceedings on the basis of assertions of fact which the Tribunal found to have been to a large extent untrue and which he must have known were untrue. So far as improper motive was concerned, the Tribunal had seen and heard Mr Sharma and the other witnesses in the case over many days and had reached very clear findings of fact; and as a result they were entitled to use those findings as the basis for their conclusion that the first claim was brought for the improper motive which they specifically identified. Mr Soor said that he had put that improper motive specifically to Mr Sharma in cross-examination; Mr Sethi, who had not been present at the trial, was not in a position to contest that assertion; but in any event the Tribunal's conclusion was sufficiently based on their findings of fact. As a specific example Mr Soor referred to the Tribunal's findings of fact that, after the disciplinary hearing had been postponed as set out in paragraphs 20.1 to 20.3 of the Tribunal's decision, Mr Sharma did not attend the disciplinary hearing in the circumstances set out in paragraphs 23 to 26. Another clear example was the fact that Mr Sharma commenced the second claim when he must have known that he had committed the serious misconduct which the Tribunal found to have been committed. As a whole the findings of fact revealed the true lack of merit in the second claim.[34]Mr Soor further submitted that the Tribunal had not found any important shortcomings in the disciplinary process; no point had been made at the hearing as to any prejudice suffered by Mr Sharma as a result of the change of representative at the interview stage; the Tribunal was not critical of the absence of cross-examination at the disciplinary hearing or of the other matters mentioned by Mr Sethi which were, at best, small procedural matters which had no real impact in the wider context of the issues between the parties and their resolution.[35]Thus, he submitted, the Tribunal had asked themselves the correct questions in their approach to the costs application and had reached permissible answers to those questions with sufficient reasons to comply with the requirements of Rule 30(6) and with the principles set out in the authorities.[36]As to an order for costs based on separate issues or from a specific date or involving separate treatment of the Respondents, Mr Soor pointed out that no such order had been suggested to the Tribunal on behalf of Mr Sharma and, indeed, that no point as to any such order was taken in the Notice of Appeal and that the overall order made by the Tribunal was fully justified by their findings. We have already referred to his assurance that the total costs bill had not been increased at all by the joinder of the individual Respondents in addition to Ealing.[37]As to the absence in the reasons letter of any reference to the principle that an order for costs in the Employment Tribunal is an exception and not the rule, Mr Soor referred to the decision of the EAT, presided over by Burton P, in the case of Salinas v Bear Stearns International Holdings Inc (21 October 2004 EAT/0596/04); this authority was introduced at a late stage in the argument; Mr Sethi did not have a copy of that decision; nor did we; and we were unable to consider its terms there and then. We made copies for ourselves and Counsel at the conclusion of the hearing. We then thought it right, before reaching our conclusion, to give the parties an opportunity to make submissions upon that decision. We therefore wrote to both Counsel inviting them to do so; we received a written submission from Mr Sethi in response which we have, of course taken into account in the conclusions expressed in this judgment.[38]In considering these rival submissions, it is important to start from the correct point of departure. In McPherson vBNP Paribas [2004] IRLR 558 Mummery LJ said this as to the role of an appellant court in the context of a costs appeal:
"26 When a costs order made by an employment tribunal is appealed to the Employment Appeal Tribunal or to this court the prospects of success are substantially reduced by the restriction of the right of appeal to questions of law and by the respect properly paid by appellate courts to the exercise of discretion by lower courts and tribunals in accordance with legal principle and relevant considerations. Unless the discretion has been exercised contrary to principle, in disregard of the principle of relevance or is just plainly wrong, an appeal against a tribunal's costs order will fail. If, however, the appeal succeeds, the appellate body may substitute a different order or, if it is necessary to find further facts, the matter may be remitted to the tribunal for a fresh hearing of the costs application."
He further said, at paragraphs 39 to 41; "39 (Counsel for the Applicant) submitted that her client's liability for the costs was limited, as a matter of the construction of Rule 14, by requirement that the costs in issue were attributable to specific instances of unreasonable conduct by him. She argued that the Tribunal had misconstrued the rule and wrongly ordered payment of all the costs, irrespective of whether they were attributable to the unreasonable conduct in question or not. The costs awarded should be caused by or at least be proportionate to the particular conduct which has been identified as unreasonable. 40 In my judgment, Rule 14(1) does not impose any such cause or requirement in the exercise of the discretion. The principle of relevance means that the Tribunal must have regard to the nature, gravity and effect of the unreasonable conduct as factors relevant to the exercise of the discretion, but that is not the same as requiring BNP Paribas to prove that specific unreasonable conduct by Mr McPherson caused particular costs to be incurred. As in (Counsel for the Respondent) pointed out, there is a significant contrast between the language of Rule 14(1), which deals with costs generally and the language of Rule 14(4) which deals with an order in respect of the costs incurred "as a result of the postponement or adjournment". Further the passages in the cases relied on by Counsel for the applicant…are not authority for the proposition that Rule 14(1) limits the Tribunal's discretion to those costs that are caused by or attributable to the unreasonable conduct of the Applicant. 41. …It is not … punitive and impermissible for a Tribunal to order Costs without confining him to the Costs attributable to the unreasonable conduct. As I have explained, the unreasonable conduct is a pre-condition of the existing power to order Costs and it is also a relevant factor to be taken into account in deciding whether to make an Order for Costs and the form of the Order."[39]In our judgment these principles apply where the basis for an order for costs is that the proceedings were commenced vexatiously or without reasonable prospects of success.[40]Bearing in mind the above principles, we prefer the submissions of Mr Soor. We are satisfied that the findings of fact reached by the Tribunal, after a lengthy hearing and expressed by the Tribunal in considerable detail, justified the Tribunal's findings on the costs issue. As in Salinas , so in this case the Tribunal were fully seized upon the facts; they found that Mr Sharma had been guilty of four of the five allegations of misconduct; there could have been no question of mistake or confusion; either Mr Sharma had or had not committed the relevant acts. If he had, he must have known that he had; and the Tribunal's factual conclusions inevitably meant that he was not telling the truth about the central cause of the disciplinary process and about the matters which lay at the heart of his complaints of discrimination and victimization.[41]It was open to the Tribunal, on those findings of fact, to reach the conclusion that Mr Sharma had brought the first claim for an improper motive, which they specifically identified and which was not suggested to have been inconsistent with their findings of fact. We do not see that the finding that one of the five allegations of misconduct was not proved amounts to any indication that the Tribunal reached a conclusion, on the basis of their overall findings of fact, which was not a permissible option or was not one which a reasonable Tribunal, properly directed, could reach. Nor do we agree that such procedural shortcomings on the part of Ealing as were identified by the Tribunal, which Mr Soor justifiably described as minor, undermine the Tribunal's conclusions as to improper motive in relation to the first claim.[42]We take the same view about the finding that the second claim had no reasonable prospect of success. On the basis of the Tribunal's findings of fact and their knowledge of the case, that was a conclusion which it was, in our judgment, open to them to reach despite the matters argued before us by Mr Sethi.[43]Were the reasons sufficient? If the reasons letter had stood alone without any reference to the Tribunal's liability decision, that question would have had to have been answered in the negative; but the position, as we see it, is very different when the clear incorporation within the Tribunal's reasons for their costs decision of their findings of fact and in particular the findings of fact which we have already identified is put into the balance. If the subject matter of those references had been set out again in the reasons letter, the Tribunal's reasons would, in our view, have amply satisfied the requirements of Rule 30(6)(a)(c) and (e) and the principles set out in the authorities. It was not inappropriate for the Tribunal, rather then taking a longer and repetitious course to incorporate the important parts of their liability judgment by reference as they did; and we conclude that, when the reasons letter and the judgment are read as a whole, the basis on which Mr Sharma lost and Ealing won the costs application and the reasons why the Tribunal reached the conclusions that they did upon that application adequately and sufficiently appear.[44]As to a lesser order for part of the costs in terms of separate issues, separate Respondents or in terms of time, the Tribunal were not invited to consider any such order and did not need to set out why they did not make such an Order. The reasons letter and the incorporated findings of fact amply support the order which they did make.[45]Finally, we must address Mr Sethi's point that the Tribunal did not set out expressly the principle that an order for costs is the exception and not the rule. We take the view that, by looking to see if the first claim had been based on improper motive and the second claim had been brought without reasonable prospects of success, the Tribunal were in effect directing themselves to that principle of which they were, of course, reminded in the course of Counsel's submissions. Furthermore in Salinas at paragraph 22.4 of the judgment the EAT said:
"Costs orders are indeed not made in the majority – indeed the substantial majority – of cases in the Employment Tribunals and in practice Tribunals do not normally make them. However, that is and remains simply a statement of fact. It is exceptional for a Costs Order to be made because it is the exception to the rule, because there is a high hurdle to be surmounted before such a Costs Order can be considered, i.e. satisfaction of the requirements of Rule 14, which are now somewhat easier to satisfy as a result of the 2001 Regulations. In our judgment, even if the Employment Tribunal had not used words which had the effect of showing that they appreciated that the Costs Order was exceptional or rare, provided that they applied the correct test, no error of law would have arisen. In fact, however, in this case in a most careful analysis of the position, the Tribunal used language which put beyond doubt that it well understood what was required of it, and we are satisfied that there is no basis whatsoever for any challenge to the Tribunal's decision."
[46]There are, of course, differences between the circumstances of Salinas and those of the present case; and we have carefully considered Mr Sethi's written submissions on Salinas ; it could be said that the sentence in paragraph 22.4 of the EAT's judgment in Salinas starting "in our judgment" is obiter dicta; and in any event we are not bound by the decision of another division of the EAT. However, we respectfully agree with what was said in the passage we have cited. It is, in our judgment, not necessary for a Tribunal to set out specifically their awareness of the principle that a costs order is the exception rather than the rule; providing that the Tribunal have applied the correct test, no error of law will arise. We take the view that, throughout, this Tribunal applied the right tests, reached conclusions which were open to them and that no error of law in their conclusions had been made out. The Result[47]For these reasons we dismiss this Appeal.