KEW COLLEGE LIMITED v MRS J PARSLEY [2007] UKEAT 0565_06_1406

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2007] UKEAT 0565_06_1406Case No Appeal No. UKEAT/0565/06Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
KEW COLLEGE LIMITEDAPPELLANTMRS J PARSLEYRESPONDENT
Before
His Honour Judge Birtles Mr A E R Manners Dr K MohantyDate 14 June 2007
[1]APPEARANCES For the Appellant Mr Jonathan Cohen (of Counsel) Instructed by: Finers Stephens Innocent Solicitors 179 Great Portland Street London W1W 5LS For the Respondent Mr Gavin Millar (One of Her Majesty's Counsel) Instructed by: Scott Fowler Solicitors Old Church Chambers 23-24 Sandhill Road St James Northampton NN5 5LH SUMMARY Practice and Procedure - Costs Appeal against an indemnity costs order for the whole of the Claimant's costs. Various grounds of appeal by Appellant employer dismissed including a complaint that the Employment Tribunal applied a subjective rather than an objective test to Rule 40(3) Schedule 1 2004 Rules. HIS HONOUR JUDGE BIRTLES Introduction This is an appeal from the judgment with reasons of an Employment Tribunal sitting at London (South) on 3 April 2006. The judgment was entered in the Register and sent to the parties on 12 April 2006. The Employment Tribunal awarded costs in favour of the Respondent against the Appellant on the grounds that the Appellant's response to the proceedings was misconceived and the Appellant acted unreasonably in resisting the claim. The costs were to be the whole of the costs incurred by the Respondent in bringing the claim up to and including the finding on liability and were to be assessed on the higher County Court scale on a full indemnity basis.[2]Against that judgment and reasons Kew College Limited appeals to the Employment Appeal Tribunal. The Appellant has been represented by Mr Jonathan Cohen of Counsel and the Respondent by Mr Gavin Millar QC of Counsel. We are grateful to both of them for their skeleton arguments and oral submissions. Employment Tribunal judgment and reasons: the merits hearing[3]By a claim presented at the Employment Tribunal on 17 November 2004 the Respondent complained that she had been unfairly constructively dismissed by her former employer, Kew College Limited. The Appellant denied conduct on its part which entitled the Respondent to resign from her position as a teacher and Head of Early Years or that she had been unfairly dismissed. The Appellant relied on the fact that the Respondent had resigned. The Appellant did not plead in the alternative.[4]The liability hearing took place on 1-2;27-28 and 30 June 2005 and on 29 June 2005 (in chambers). The reserved judgment of the Employment Tribunal ran to 32 pages and is at pages 50-81 of the Employment Appeal Tribunal bundle. It contains a careful and thorough analysis of the facts as found by the Employment Tribunal: Employment Tribunal Reasons EAT bundle pages 51-76.[5]The Employment Tribunal's decision is at paragraphs 8-21 of its reasons: the Employment Tribunal said this:
"The Tribunal's Decision 8 At the time the Claimant terminated her employment she was a teacher in Kindergarten Blue, was Head of Early Years, was a member of the senior management team. The Claimant had been responsible for Health & Safety and had been Chairman of the Kew College Council, the Parent School Liaison Committee until those last two responsibilities have been removed in July 2004. The Claimant had joined the Respondent in September 1987 initially part time becoming full time in 1995, the Claimant had acquired a reputation as a skilled and Committed teacher for 4/5 year old children. 9 The Claimant's reputation had been gained by her past record and experience, she had no formal qualifications. The Health and Safety representative and Chair of Council were normally the responsibility of Deputy Head – the Claimant throughout her time at the College had never been the subject of disciplinary proceedings, nor had she had an occasion to enter a grievance until 30 June 2004. The Claimant enjoyed her work up to the Spring of 2004. 10 In September 2003 C had bit another child and was dealt with by the Claimant in accordance with the then current "
Behaviour Policy" dated 23 March 1994, pages 29-31 in the bundle (C1), by being taken into another class and made to sit there. Unfortunately the Head had not been aware of the existence of the Education Independent Schools Standards (England) Regulations 2003, and Schedule 1 thereof which laid down standards for the school to meet which included requirements to (a) maintain a written policy for promoting good behaviour amongst pupils and setting out sanctions to be adopted in the event of pupils misbehaviour (para. 3(2)(a) - (b) assess the suitability of Proprietor/Chair of Governors/staff; (c) provide information to prospective parents about the good behaviour policy (para.6(2)(h) and to have a written parental complaint policy, meeting with detailed requirements of para.7. 11 Paragraph 7 implies requirement that a written record be kept of all complaints even if they are resolved at a preliminary stage. When C's parents complained in September 2003 the school did not have a Parental Complaint Policy/Procedure in place, and no written record of the complaint was kept. The Head did not at that time take the obvious and sensible precaution of confirming the Claimant's account of the incident with the witnesses, namely the staff in the Kindergarten Green classroom into which C was taken, (Michele Pile and Jessica Comerford). The Head should have carried out a fully documented investigation — had she have done so the complaints from Mr & Mrs D would have been capable of being handled properly. Neither has that enquiry been made since. It is against this background that the employers conduct namely the Head and Deputy Head during the period May to August 2004 and its effect on the Claimant has to be considered. 12. Had a proper investigation have been made back in September 2003 then the school would have been in a strong position to have disposed of the parents complaints; instead of them continuing over a period. 13. We now move on to look at that conduct in detail. First of all the job offer to Katie Mabbett; we prefer the Claimant's evidence of what occurred during that period between 10 and 13 May 2004, the Claimant had made contemporaneous notes in the bundle at pages 397-405. We are satisfied beyond all doubt that the Head and Deputy Head had initially offered to Katie Mabbett a job, and indeed the job of a Kindergarten teacher the Head endeavoured to persuade the Claimant that Katie Mabbett was actually capable of taking on the teaching role. This offer was made without consulting the Claimant who was Head of Early Years. Whilst the Tribunal accepts that the Claimant could not veto any appointment of staff good industrial practice did require at least the Head to discuss with and consult with the Claimant before offering the position of teacher to a young unqualified, inexperienced former classroom assistant to be a teacher responsible for Kindergarten Green. The Head's reaction to the Claimant when the Claimant raised the matter was similarly unprofessional. 14. This action by the Head and Deputy Head could only be seen by any objective observer as an undermining of the Claimant's authority. When the Head was forced to back down and to seek a qualified teacher through an Agency then it appears that the Head and Deputy Head's behaviour towards the Claimant swiftly deteriorated. 15. The Head and Deputy Head had a meeting with Ds' on the 10 June 2004. It was the Head and Deputy Head's behaviour/conduct in dealing with this complaint at that meeting which was an important example of the Head and Deputy Heads trust destroying conduct. The complaint by the parents was one of the Claimant's continuing "abuse" of their child. Abuse which had gone on for some time yet there had been no prior indication of concern after September 2003. If the complaint of the parents was well-founded it would have involved dramatic failings by the Claimant as a teacher, making the allegations would be worrying and upsetting to the Claimant and the Claimant would be entitled and would have a reasonable expectation that the Respondent would support her and would pause and think and proceed carefully, in the circumstances. Instead the Claimant was called into the Head's office when the parents left in the presence of the Deputy Head who neither asked the Claimant for her account of how the child had been during the year, failed to interview other staff witnesses to the biting incident in 2003, carried out no investigation but considered that the way forward was to allow the Claimant to be publicly humiliated at a face to face meeting with the parents. The Claimant was told that she would have to go along with this proposed course of action and apologise and it was the Deputy Head who told the Claimant that she should be "very worried" and noted down on a piece of paper (which she handed to the Claimant) suggested terms in which the Claimant should apologise. The Head accused the Claimant of being weak telling her "look at yourself you can learn from this Parsley". Language such as that is not trust building but trust destroying. The lack of support concerned and worried the Claimant and she began to lose her trust and confidence in the Head and Deputy Head as her superiors. This conduct on the part of the Head and Deputy Head was calculated to destroy the trust and confidence in the employment relationship. The Claimant expressed the wish to be accompanied by a solicitor at the 15 June 2004 meeting with the parents this illustrates the Claimants' lack of trust and confidence in receiving support from the Head and Deputy Head. The Head and Deputy Head had berated the Claimant rather than support her. This unsupportive conduct and pressure on the claimant was maintained by the Head and Deputy Head, by the Head threatening the Claimant with a warning if she did not attend the meeting without her solicitor and then the taking away of the Health and Safety inset day without explanation just five minutes before the meeting with Mr and Mrs D. 16. At the meeting on 18 June (page 342) the Head accused the Claimant of being unprofessional and said that senior colleagues had lost respect for her and recorded that a Governor had said that she should be subjected to disciplinary action. For what we ask?. Health and Safety duties were taken away from the Claimant and she was told that her classroom assistant, Fiona Rizzo was to be moved to another class, there had been no discussion about it and later in the staff meeting the Head announced that staff in rotation would chair the Kew College Council meeting a function previously carried on by the Claimant. The timing of such matters was significant and not considered. At the staff meeting the treatment by the Head represented a public humiliation of the Claimant before the other staff. Later Michelle Pile was asked to meet and take care of the new Kindergarten Green teacher on his induction visit on 23 June 2004, despite having made arrangements with the Claimant previously that she would be seeing him. The Head also informed others of the proposed classroom move of the Claimant without telling or discussing the matter with the Claimant and announcing it at a staff meeting on 25 June 2004. Whilst the Respondent is correct to say that the Head teacher has the right to determine which class occupy which room one would have expected — indeed it would have been just common decency for the Head and/or Deputy Head to have discussed proposed moves of a classroom with the teacher before announcing it. Even when the Claimant raised a grievance which she handed to the Deputy Head, the behaviour did not stop; with the Head and Deputy Heads' reaction to the grievance being to attack the Claimant rather than to deal with the grievance on its merits. The attack was to threaten to disadvantage the Claimant if she did not withdraw the grievance. Again not withstanding the grievance the response of the Head and Deputy Head (at page 90) and the confidential response of the Head (page 130) continued to attack the Claimant before the Governors, an example being the use by the Head and Deputy Head of the letter from C's parents of 12 July to suggest that the Claimant was a bad teacher who had reacted unprofessionally. In putting in the letter of 12 July 2004 to the Governors in response to the grievance this was highly prejudicial and was of no probative value at all to the Governors in deciding the Claimant's grievance. It is significant that the Respondent's response to the grievance submitted to the Governors does not deal with the 10 June 2004 meeting, although it forms the basis of the grievance at page 81. The Head and Deputy Head rather than answering the grievance attempt to deflect the attention by attacking the Claimant. 17 The open response (Page 90) is seriously misleading, it does not make reference that in the past the Claimant as Head of Early Years had been consulted about appointment, made no reference to the fact that the offer to Katie Mabbett was of a teaching position. The Respondent suggested that there was in existence a School Complaints Policy as at the 10 June 2004 whereas there was none. The Respondent fails to refer to the meeting with the Claimant on 10 June 2994, and further characterises the Claimant's request for a lawyer to accompanying her at the meeting on 15 'June as "unprofessional" and omits to indicate that the Claimant learned of her classroom move from junior colleagues rather than from the Head and the confidential responses submitted on 21 July (page 130) totally misrepresented what a prospective parent (Mrs Barrow) had said to the Head by suggesting that "Mrs Parsley was reputed to be a bully", and the Head in evidence to the Tribunal confirmed that she had made that statement knowing it to be untrue. The Tribunal reminds itself that the fact that this had occurred was not known to the Claimant at the time she resigned. However the fact it did occur, that the Head admits it was completely untrue does assist the Tribunal in its deliberations, it confirms to the Tribunal that the Claimant's concerns about the way she was being treated, by the Head were well-founded and not imagined - the Claimant was justified in believing she had lost the support of the Head and her Deputy. 18 The Tribunal then went on to consider how the Governors had dealt with the grievance procedure and the conduct referred to in the grievance was three fold. First that the Claimant had been undermined by the job offer made to Katie Mabbett and in the way in which it was made. Secondly, the mishandling by the Head and Deputy Head of the complaint from the Ds' in June 2004 and the mistreatment of the Claimant following the 15 June 2004 meeting. The grievance was not dealt with properly or fairly. The grievances were not addressed properly. The Grievance Panel's findings in respect of the Katie Mabbett matter were completely flawed. The Head's account of events was accepted notwithstanding that the findings refer to an initial offer and then a revised offer and the Claimant's case that the offer of a teaching post was dismissed by the Governors was based on statements by third parties whereas the Claimants evidence clearly was that it was based on statements by the Head and Deputy Head themselves. 19 The Governors failed completely to deal with the grievance about the 10 June 2004 meeting and indeed the Governors resolution of the grievance was on the basis, quite wrongly, that the Ds' complaint was well-founded, and then the Governors failed to make a finding in respect of the subsequent mistreatment by dismissing it as misconceived. Finding as an excuse to reach that conclusion that the Claimant was unjustifiably angry over the Katie Mabbett affair. 20. Having seen all the material the Tribunal were able to understand why the Governors dealt with the grievance as they did sadly and, regrettably because they succumbed to pressure from the Headmistress and that the response by the Head and Deputy Head were untrue and misleading and that some material like the secret response had not been disclosed, and so relying on the cumulative effect of the Head's decision to offer Katie Mabbett a corresponding teaching post to the Claimant's post and the Head's failure to consult with her in relation to Katie Mabbett's appointment and the failure of the Head and Deputy Head to support the Claimant in respect of the D's complaint. By requiring the Claimant to attend a meeting with the D's on her own having told the Claimant that the D's were alleging "abuse" of their child and, intending to sue, and that she should be very worried; the conduct of the Head and Deputy Head following the meeting of 15 June 2004 with the D's as set out in the' Claimant's grievance and the failure of the Governors to properly investigate and to fairly investigate and to redress the Claimant's grievances. It was for those actions on the part of the Respondent that caused the Claimant to resign by letter of 26 August. The conduct of the Respondents had led to a total breakdown of the implied term of trust and confidence, 'the breach was so serious as to entitle the Claimant to resign forthwith. 21 Without hesitation we find that the Claimant was unfairly constructively dismissed."[6]The Employment Tribunal then went on to consider the question of compensation and as a result of agreement between the parties awarded the Respondent £54,193.85: Employment Tribunal decision paragraphs 22-23: EAT bundle pages 80-81. The Employment Tribunal judgment: the costs hearing (1)[7]The first question for the Employment Tribunal was the scope of the application for costs. The Employment Tribunal dealt with the matter in this way at paragraphs 2-7 of its reasons:
"2. By an application dated 18 July 2005 the Claimant indicated her intention to seek an order against the Respondents under Rule 40(2)(3) in respect of costs, on the grounds that the Respondent in conducting the proceedings acted unreasonably and/or the response to the proceedings by the Respondent was misconceived. 3. At paragraph 4.of the application, page 35 of the bundle, it states that the amount of the Claimant's costs total in excess of £45,000 that the Claimant was in the process of seeking some indemnity through family household insurance. But that in any event there would be a shortfall in excess of £10,000 between the Claimant's actual costs and any amount met by the Insurers. 4. At paragraph 8 of the application it provided: "
On this basis the Claimant's primary submission is that all of her coats in establishing liability should be met by the Respondents ". At paragraph 9 of the application an alternative is proposed that the costs should be recovered for the period following the Claimant's disclosure of diary/contemporaneous notes which occurred on 28 February 2005. 5. A schedule of costs is at pages 39-41 of the bundle, and at page 41 it is stated that the grand total of costs is £62,337.40 and that the Claimant has been reimbursed £31,874.16 by her insurers. 6. By a letter dated 26 February 2006, from the Claimant's Solicitor to the Respondent copy at page 91 of the bundle, the Claimant confirmed the amount paid by the insurers to the Claimant and then went on to say — " We are instructed that our client's claim for costs against yours represents the difference between her total outlay and the sum she has received from the insurers. However such sum must be without prejudice to any separate claim which the insurers may wish to bring or directly brought against your clients by way of recovery of their outlay ". 7. In a document, prepared by the Claimant pages 77 to 79 dated 20 March 2006 and under paragraph 3(11) thereof the Claimant's Solicitors deal with the fact that monies have been received from the insurers and then write " We also take this opportunity of clarifying for the avoidance of doubt the extent of the coats sought by the Claimant In her application for which purposes we are grateful to you for drawing our attention to this aspect. The Claimant's seeks recovery of the entirety of her costs particulars of which are set out in the statement of costs (summary assessment) dated 23 February 2006. " The Employment Tribunal judgment and reasons: the costs hearing (2)[8]The Employment Tribunal set out the relevant law in paragraph 8 of its reasons. It specifically had regard to the relevant regulations and rules of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 : EAT bundle pages 3-4. The Employment Tribunal judgment and reasons: the costs hearing (3)[9]The Tribunal's conclusions on whether or not the Appellant's response on the Employment Tribunal was misconceived and on the issue of unreasonableness are set out at paragraphs 9-20 of its reasons: the Employment Tribunal says this:
"9. The first question for the Tribunal is whether the Response was misconceived, i.e. should the Respondents have realised that the Respondents had no reasonable prospect of success. 10. The Respondent in this case was advised by First Assist and Mr Roes a Solicitor in particular who appeared at the Tribunal. As a Tribunal we would expect that a Respondent legally represented and properly advised would be able to make a more informed judgment and be able to take a more informed view of the likely prospects of success in the event a claim went before a Tribunal than an unrepresented lay respondent. 11. The Respondent is a limited company operating through a Board of Governors and with the day to day activities of the school being run by the Head and Deputy Head. We have, for the purposes of this application considered that the knowledge of the Head, Deputy Head and the Governors is collectively the knowledge of the Respondent. We are not satisfied that we should be persuaded by the proposition that the Governors were mislead by the Head and Deputy Head and it was the Governors who were the Respondents so when considering our decision on costs this application should take into account the suggestion that the Head and Deputy Head not only attempted to mislead the Tribunal but the Governors too. We think not — for our purposes knowledge of the Head and her Deputy must be knowledge of the Governors. 12. So was the response misconceived? The Claim before the Tribunal was one of constructive dismissal, a situation where the Tribunal would need to make findings of fact, first to identify which term of the employment contract was broken, in this instance it was alleged the implied term of trust and confidence and then the Tribunal would need to look at the conduct alleged to have broken that term. 13. The Claimant had raised her concerns about the way in which she was treated by the Head and Deputy Head by way of a written grievance which was presented to the Governors. The response to the grievance by the Headmistress and the Deputy Head failed to deal with the Claimants main concern, namely the Claimant's treatment at the meeting on 10 June 2004. Neither did the Governors when dealing with the grievance deal with that concern even after it was pointed out to them after the initial draft report was sent. However and more importantly, the Head wrote a "secret letter" to the Chairman of the Governors, that letter was set out in full in the Tribunal's decision, starting at page 18, and paragraph 5.5. We remind ourselves that the Governors were dealing with a grievance raised by Mrs Parsley against Mrs Lyness and Mrs Harrison a grievance which specified what the Claimant considered as unacceptable treatment by the Head and Deputy Head. The Governors were aware of what was being alleged they had an opportunity to consider the grievance — they failed to do so fully. Had they have done so properly they would have discovered the truth as to what had been happening. The secret letter which was sent to Mr Weiss the Chairman was not a response to the grievance and constituted a suggestion almost an instruction to the Governors that far from investigating the grievance into the Head and Deputy Head's behaviour, the Governors should be considering disciplinary action against Mrs Parsley, and in that secret letter the Head made it perfectly clear that she would not be satisfied with anything short of Mrs Parsley being dismissed. Mr Weiss' knowledge of that letter must be the knowledge of the Board of Governors, even if not when considering the grievance then certainly by the time the proceedings at the Tribunal were issued. 14. When the Governors dealt with the grievance it was not adequately dealt with and this was pointed out to them in a letter from the Claimant following receipt of the draft report suggesting that the Governors should look at matters again and deal with the grievance fully. Despite the omissions being pointed out the Governors failed to rectify their omissions and In fact made no proper findings on the grievance at all. The Claimant resigned. This was the expectation and hope of the Head and indeed was the result the Head was angling for as she openly directly acknowledged in her letter to the Governors. 15. The position that actually occurred was anticipated by the Head in paragraph 5 of her secret letter whereby she wrote: " doubtless she will take the school to an Employment Tribunal, in my opinion the school should be prepared to defend its actions vigorously, in any such Tribunal and should expect to win. It is my opinion that the pendulum is beginning to swing back towards sanity with regard to the attitude of Employment Tribunals towards grievances such as this ". 16. It is further appropriate to point out that at paragraph 6 of that secret letter the Head recorded that she had a phone call from a prospective new parent Mrs Barrow In which Mrs Barrow withdrew her son because he would be going into Mrs Parsley's class in September and that Mrs Barrow had heard: " on the grapevine that Mrs Parsley was reputed to be a bully and she was not prepared to take the risk that he will be unhappy and that Mrs Barrow was sending her son to a different school ". 17. The Head asked that action be taken speedily to defend the School's reputation saying that it was essential that the situation was not allowed to drag on a moment longer than absolutely necessary otherwise the school may find themselves with a landslide of withdrawn applications and damage to the school's reputation which would not easily be made good. That, as the Head admitted during the hearing, was a complete fabrication and untrue. The Head and hence the Respondents would have realised that In any proceedings before the Employment Tribunal for constructive dismissal the fact of those lies was bound to come out. 18. When the Claimant presented her claim alleging that she had been unfairly constructively dismissed, the school In preparing the action open to them and the steps to take would have known that in any proceedings all documentation and paperwork would be disclosed The Respondent would have or should have known that the truth would out, the Head had lied and accused Mrs Barrow of attributing the remarks about Mrs Parsley which she had in fact not done. Those remarks were extremely damaging to Mrs Parsley and were likely to influence arid were no doubt intended to influence the Board of Governors in dealing with the grievance. It was clear, reading that secret letter as a whole that the Head was determined that Mrs Parsley should no longer be at the school for the next term, September 2004. So on that basis and with all of that knowledge we ask ourselves should the Respondent have considered having received the claim that any response would have little prospect of success. The overwhelming answer is yes, they must have or had they have properly addressed their minds to the situation they should have realised their defence would have had no reasonable prospect of success. 19. The Tribunal wishes us to emphasise that whilst it accepts that the secret letter could not be relied upon by the Claimant as an act which broke the implied term of trust and confidence because she did not know about it at the time, the Tribunal is of the view that it was illustrative or should have been illustrative to the Chairman of the Governors of the thoughts of the Head and Deputy Head on the question of retaining the Claimant as an employee, and was clear evidence of the Head's determination that Mrs Parsley be dismissed, notwithstanding she had done nothing wrong save to raise a grievance. It appears the Governors fell into the trap laid for them by the Head. In the knowledge that this information would be before a Tribunal, the Tribunal finds that It is inconceivable that the Respondent could have thought that they would have had any prospect of being successful in resisting a claim for constructive dismissal. 20. We rely on the same facts and evidence to support our findings that in addition, the Respondents conducted proceedings in an unreasonable way and certainly in that respect, even if we are wrong, on finding that they should have been aware right from the start that their defence was doomed to failure should certainly have known when the diaries and contemporaneous notes were disclosed the Respondents had had an opportunity to take instructions on them. Again on disclosure and service of the Claimant's witness statements and in particular the statement of Mrs Barrow which clearly highlighted the fact that the Head had lied. The Respondent had a duty to review its position as matters proceeded and to assess the position from time to time, it did not. The Respondent still persisted in resisting the irresistible. Our primary finding is that the unreasonable conduct can be traced right back to the initial resisting of the claim in the first Instance."
The Employment Tribunal judgment and reasons: the costs hearing (4)[10]The Employment Tribunal went on to consider whether or not it had a discretion to award costs and decided that it had and then dealt with the exercise of its discretion in paragraphs 21-22 of its reasons. The Employment Tribunal said this:
"21. We have discretion whether or not to award costs. This claim related to a woman in her 50's who had been employed for some seventeen years, did not have a teaching qualification so would find it difficult in the outside market having the Respondent, by the Head and Deputy Head, instigating what seemed to be a campaign of conduct against her which certainly on or after the 10 June 2004 appeared to be orchestrated with a view to ensuring that the Claimant left the Respondent's employment. A campaign which succeeded. The position in which the Claimant found herself without a job was one which the Head and Deputy Head intended should happen. They were personally responsible for the Claimant's dilemma. 22. In these circumstances we cannot contemplate a worse situation nor can we contemplate any reason why we should not exercise our discretion in favour of the Claimant and make an award of costs in her favour in the exceptional circumstances of this case."
The Employment Tribunal judgment and reasons: the costs hearing (5)[11]Finally the Employment Tribunal considered the order for costs which it wished to make in this case. Its reasoning is set out in paragraph 23-24 of its judgment and reasons where it said this:
"23. We now come to the Order which we can make. Our powers are set out in Rule 41(1)(a) (c), for all of the reasons above we find that this is a case where we should make an order for all of the Claimant's costs to be taxed on the higher County Court Scale for the whole of the proceedings up to determination of liability. 24. By the whole of the costs we mean the whole of the costs excluding any deduction for any amount received by the Claimant via her insurers. We are satisfied that that was the basis of the application and was clarified just before the hearing by the Claimant's Solicitor document of 20 March 2006. The Tribunal acknowledges as indeed does the Claimant that she is not able to make a profit and that as a result of any final assessment the Claimant may well have to refund some money to the insurance company, but that is not a matter that this Tribunal need concern itself about. We are not able to assess the costs as clearly the sum is likely to far exceed £10,000."
The Notice of Appeal[12]The Notice of Appeal is set out at EAT bundle pages 9-13 and amplified by Mr Cohen's skeleton argument and oral submissions.[13]It is important to note that this is an appeal against the order for costs alone. There has been no appeal against the merits decision.[14]It is therefore helpful to set out the relevant statutory provision in relation to the award of costs in an Employment Tribunal. This is now in Rule 40 of Schedule 1 of the Employment Tribunals (Constitution and Rules of Procedure) Regulations 2004 (SI2004 No1861). This provides as follows:
"40. When a costs or expenses order may be made (1) (Not relevant) (2) A tribunal or chairman shall consider making a costs order against a paying party where, in the opinion of the tribunal or chairman (as the case may be) any of the circumstances in paragraph (3) applies. Having so considered, the tribunal or chairman may make a costs order against the paying party if it or he considers it appropriate to do so. (3) The circumstances referred to in paragraph (2) are where the paying party has in bringing the proceedings, or he or his representative has in conducting the proceedings, acted vexatiously, abusively, disruptively, or otherwise unreasonably, or the bringing or conducting of those proceedings by the paying party has been misconceived. (4) (Not relevant)"
By regulation 2 of the 2004 Regulations the word "misconceived" includes having no reasonable prospect of success (our emphasis). It is therefore clearly not limited only to those cases which in the Tribunal's view have no reasonable prospect of success. We agree with the Employment Tribunal that pursuing a "misconceived" claim or defence may also be regarded as "unreasonable conduct" but the latter may be found to have occurred without the claim or defence being misconceived.[15]Rule 41(1) of the 2004 Rules provides as follows:
"41. The amount of a costs or expenses order (1) The amount of a costs order against the paying party shall be determined in any of the following ways- (a) The Tribunal may specify the sum which the paying party must pay to the receiving party, provided that sum does not exceed £10,000; (b) The parties may agree on a sum to be paid by the paying party to the receiving party and if they do so the costs order shall be for the sum so agreed; (c) The Tribunal may order the paying party to pay the receiving party the whole or a specified part of the costs of the receiving party with the amount to be paid being determined by way of detailed assessment in a County Court in accordance with the Civil Procedure Rules 1998 or, in Scotland, as taxed according to such part of the table of fees prescribed for proceedings in the sheriff court as shall be directed by the order. (2) The Tribunal or Chairman shall have regard to the paying party's ability to pay when considering whether it or he shall make a costs order or how much that order should be. (3) For the avoidance of doubt, the amount of a costs order made under paragraphs 1(b) or (c) may exceed £10,000."
The Notice of Appeal in detail Ground 1: general perversity[16]Mr Cohen submits that costs are only exceptionally ordered in an Employment Tribunal: Lodwick v London Borough of Southwark [2004] IRLR 554 paragraphs 23-27. An order that a party should pay indemnity costs is even rarer. Mr Cohen does not accept that the Head Teacher either lied or fabricated evidence or that she acted unprofessionally in this case. Despite Mr Cohen's submission on this point it is quite clear to us that the Employment Tribunal took a completely different view of the evidence and we remind ourselves of the substantial number of witnesses it heard and the substantial amount of documentary material before it: merits judgment paragraph 2-4; EAT bundle pages 50-51. The simple answer to Mr Cohen's submission on this point is in the findings of fact and conclusions of the Employment Tribunal in the merits hearing: see paragraph 5.12; 5.13; 5.20; 5.46; 5.49; 5.58-5.59; 5.60; 5.69; 13; 15; 17 and 20. It is difficult to imagine a more critical series of findings of fact and conclusions by an Employment Tribunal on a particular individual. They were all findings of fact and conclusions which this Employment Tribunal was entitled to come to on the evidence it heard. We again emphasise that there has been no appeal against the merits judgment.[17]Mr Cohen's second submission on general perversity is that the claim turned on disputed evidence and that this was a constructive dismissal case. It was not until the evidence had all been heard that the Tribunal could have made its findings of fact and reached its conclusions. He relies on the comments of Sir Hugh Griffiths in Marler Ltd v Robertson [1974] I.C.R 72 at 77. For the reasons already given we do not accept Mr Cohen's submission that this case is not out of the ordinary. The Employment Tribunal heard extensive evidence and made a very substantial number of extremely adverse findings of fact and conclusions against the Appellant. His argument that the Employment Tribunal's finding that the claim was misconceived and/or unreasonable from the beginning and that a paying party properly advised would have known that and not defended the proceedings was untenable is rejected. It was a conclusion open to it on the facts.[18]Finally on this first ground of appeal Mr Cohen submits that the decision of the Employment Tribunal in exercising its discretion to award costs at all was perverse. It is sufficient to refer to the judgment of the Court of Appeal in Yeboah v Crofton [2002] IRLR 634 at paragraphs 92-95 per Mummery LJ. The test for perversity is a very high one. Mr Cohen's submissions do not begin to persuade us that the Employment Tribunal was perverse in its decision to decide to make an award of costs at this case. Ground 2: perversity and "the secret letter"[19]Mr Cohen submits that the "secret letter" occupies the central and most important part of the Employment Tribunal's decision on costs: Employment Tribunal judgment paragraphs 13-19. By contrast it occupies a relatively small part of the merits decision, it is set out at paragraph 5.58 and there is a brief conclusion on it in paragraph 5.59 which we have already set out. In particular Mr Cohen says that the letter was indeed secret and initially unknown to Mrs Parsley; it played no part in her decision to resign.[20]As Mr Millar points out the issues in the two hearings are different. The first hearing was concerned to determine whether or not Mrs Parsley had been constructively unfairly dismissed. The second hearing was to deal with the application for costs under Rule 40(3) of Schedule 1 of the 2004 Regulations. The issues are different in law. Furthermore, we do not consider as a matter of law that a costs judgment has to recite every single matter on which the Tribunal rely in making an award of costs. Any costs judgment has to be read alongside the Employment Tribunal's judgment on the merits. Otherwise the costs judgment would end up being as long as the merits decision or indeed even longer. On this aspect of the matter we bear in mind the overriding objective imposed upon Employment Tribunals set out in Regulation 3 of the 2004 Regulations. Finally, a close reading of the costs judgment and the merits judgment make it quite clear that the "secret letter" did have considerable significance in this case: see merits judgment paragraph 17 and costs judgment paragraphs 13, 18-19. It is quite clear to us that the Employment Tribunal took account in its merits decision of a substantial number of other relevant matters including the failure by the Governors to deal adequately with Mrs Parsley's grievance: merits judgment paragraphs 2 and 16 and it made a substantial number of criticisms of Mr Weiss, the Chairman of the Governors: merits judgment paragraph 4.49; 5.58; 5.60-5.61; 5.65; 18 and 20. Ground 3: exercise of discretion[21]Mr Cohen accepts that if the Employment Tribunal find that the Respondents conduct was either misconceived or unreasonable then the Employment Tribunal has an unfettered discretion to award costs providing that such an award is not made as a punishment: Beynon v Scadden [1999] IRLR 700 and McPherson v BNP Paribas [2004] IRLR 558 . Mr Cohen submits that this claim was a classic one of one employee claiming to be mistreated by another (Mrs Parsley against the Head Teacher) and that much of the blame for Mrs Parsley's resignation and claim for unfair constructive dismissal was found by the Tribunal to be the direct result of actions by the Head Teacher and Deputy Head Teacher. Although he accepts that there were findings of a failure to follow a proper grievance procedure by the Board of Governors and particularly the Chairman of the Governors, Mr Weiss. In particular Mr Cohen relies upon the finding by the Employment Tribunal in the costs judgment that the governors "fell into the trap laid for them by the Head": costs judgment paragraph 19. In those circumstances an award of costs should not be made against the Appellant.[22]Furthermore, Mr Cohen submits that on the facts of this case it is the Head Teacher (and Deputy Head Teacher) who were primarily responsible for Mrs Parsley's resignation and that a finding of unreasonableness requires consideration of a thought process as a motivation of those responsible for conducting the litigation i.e. the Governors. It is also relevant to the exercise of the discretion to make an award of costs at all.[23]We do not accept that submission. We accept Mr Millar's submission that the collective knowledge point raised by Mr Cohen is irrelevant in this case. Indeed, Mr Cohen conceded that if the issue had been one of vicarious liability the Employment Tribunal might well have reached the correct conclusion. We consider that it did. The answer to Mr Cohen's submission is that the Employment Tribunal correctly approached this case on the basis of looking at the conduct of the proceedings and found on the facts that the defence of the proceedings was (a) misconceived and/or unreasonable within the meaning of Rule 40(3) and Regulation 2 of the 2004 Regulations. That is clearly set out in the Employment Tribunal's judgment on costs: paragraphs 12-19 (misconceived) where the Tribunal end in saying in paragraph 19:
"In the knowledge that this information would be before a Tribunal, the Tribunal finds that it is inconceivable that the Respondent could have thought that they would have had any prospect in being successful in resisting a claim for constructive dismissal."
[24]The same reasoning applies to unreasonableness: paragraph 20. The last sentence of that paragraph reads:
"Our primary finding is that the unreasonable conduct can be traced right back to the initial resisting of the claim in the first instance."
[25]As Mr Millar submitted this limb of Rule 40(3) requires the Employment Tribunal to ask whether the conducting of the proceedings was reasonable i.e. whether it was unreasonable to defend, or to continue defending past a certain point.

(a) Ground 4: indemnity costs

[26]Mr Cohen submitted that at the costs hearing Mrs Parsley submitted a detailed costs application which did not request the Employment Tribunal to make an order for indemnity costs and that such an application was not therefore properly before the Employment Tribunal. In the alternative he submitted that indemnity costs can and should only be awarded in the most serious of cases: Amoco (UK) Expiration Co. v British Offshore Ltd (2002) BLR 135 . At paragraphs 2-3 Langley J said this:
"2. The fact of success, however resounding is not sufficient of itself to justify an award of costs to be assessed on an indemnity basis. The general rule is that costs are to be awarded on a standard basis. The fact is to be considered by the courts in deciding what orders to make as to costs as stated in CPR Rule 44.3. The discretion is of course ultimately to be exercised to as to deal with the case justly and authority indicates that it is not helpful to seek to define the circumstances in which indemnity costs may be appropriate. 3. The difference in approach between assessments on the standard and the indemnity bases was stated following the wording of CPR 44.4 by Lord Woolf in Petrotrade v Texaco an unreported decision in the Court of Appeal dated 23 May 2000. The relevant paragraphs of the judgment are numbered 62 to 63. In summary costs are reasonably incurred or unreasonable in amount cannot be recovered in either basis. On a standard basis any doubts as to whether costs were reasonably incurred or are reasonable or proportionate in amount are resolved in favour of the paying party, in this case Amaco . On an indemnity basis such doubts are to be resolved in favour of the receiving party, in this case BAO, and there is no express reference to the need for the costs to be "proportionate" in amount. But it is important to keep in mind both the basic principle that costs, even awarded on an indemnity basis, do not amount to a full recovery of costs unless all the costs have been reasonably incurred and are reasonable in amount that there has to be some added fact as to justify departure from the general rule. Such a factor is to be found it is most likely to be found in some conduct of the paying party which the court considers merits sufficient criticism beyond that which might ordinarily apply in the case of a party which is fought and lost such as to make it appropriate to order assessment of costs on the indemnity basis."
[27]In our judgment there was ample material before the Employment Tribunal which enabled it to make an award of costs on an indemnity basis. It is sufficient to refer to the biting criticisms made by the Employment Tribunal in both of its judgments of(a) the Head Teacher(b) the Deputy Head Teacher(c) the Governors, including the Chairman Mr Weiss, and also the Respondent's circumstances. That is cogently put in paragraphs 21 and 22 of the Employment Tribunal's judgment on costs. Ground 5: amount of costs[28]Mr Cohen submitted that what the Respondent was claiming at the costs hearing was the balance of costs which she had been unable to recover through the family's household insurance policy: supplementary bundle 2/2 page 35 paragraph 4 (Respondent's written submissions in support of her costs application). This is dated 11 July 2005. By 23 February 2006 the Statement of Costs claimed by the Respondent's solicitor was £30,463.24 which figure had been reached from a total of legal costs of £62,337.40 less the sum paid by the insurers of £31,874.16. By 20 March 2006 the Respondent's position had changed. She now sought recovery of the entirety of her costs i.e. £62,337.14: supplementary bundle 2/2 page 79.[29]The costs hearing was on 3 April 2006. It is quite clear from paragraphs 23-24 of the costs judgment that the Employment Tribunal awarded the Respondent her costs "for the whole of the proceedings up to determination of liability": paragraph 24 and that meant "the whole the costs excluding any deduction for an amount received by the Claimant via her insurers". No question of double counting arises. The Tribunal expressly recognised that the Respondent could and should not make a profit and that as a result of any final assessment of costs by a costs judge she may well have to refund some money to the insurance company: paragraph 24. We can see no error of law in this approach. The position was quite clear at the hearing before the Employment Tribunal as the Employment Tribunal recognised. The award of costs was perfectly proper. There is no error of law. Ground 6: wrong test[30]Finally, Mr Cohen submitted that the Employment Tribunal erred in law in applying a subjective test to the question of whether or not the Appellant should have appreciated that their defence to the claim would have no reasonable prospect of success. Mr Cohen submitted that the test was an objective one only. He makes a similar submission in respect of the alternative finding of the Tribunal that the response was misconceived.[31]We accept the submission of Mr Gavin Millar QC that the relevant words in Rule 40 of the 2004 Regulations are "the…conducting of the proceedings by the paying party has been misconceived" (our emphasis). This requires the Employment Tribunal to look back at the paying party's conducting of the proceedings, that is its acts and decisions in bringing or defending the claim. It requires the Employment Tribunal to decide whether, in any respects, those acts/decisions have been "misconceived". There is no statutory definition of "misconceived" for the purposes of the 2004 regulations. An act/decision may therefore be characterised as "misconceived" by an Employment Tribunal for any number of reasons, depending on the facts.[32]However, regulation 2 of the 2004 regulations makes it clear that where the word "misconceived" appears in the regulations or any of the schedules Rules it may (our emphasis) mean "having no reasonable prospect of success".[33]In our judgment the Employment Tribunal considered whether the Appellant's conduct in defending the proceedings was misconceived because the defence was misconceived i.e. it had no reasonable prospect of success. The Employment Tribunal was entitled to find first, that the defence was misconceived and second, that the Appellant ought to have understood this from the outset. There is no error of law here. The Employment Tribunal correctly applied the relevant words in Rule 40(3) which required it to look back at the Respondent's decision to defend and ask whether it was misconceived.[34]In our judgment a similar analysis should apply to no reasonable prospects of success. Her Majesty's Attorney General v Mr S Deman[35]At the conclusion of the hearing Judge Birtles referred the parties to the decision of the Employment Tribunal in Her Majesty's Attorney General v Mr S Deman (UKEAT/0113/06: unreported judgment 1 September 2006) on the question of the wrong test. He invited the parties to submit written submissions. Both Mr Cohen and Mr Millar QC have done so.[36]It is not necessary for us to go into the detail of the lengthy judgment of Underhill J in that case. It is sufficient to refer to paragraphs 168, 174-175. In our judgment the Employment Appeal Tribunal correctly undertook an objective assessment of the prospects of success for Mr Deman's case as "The starting point" in considering whether vexatious conduct had been made out: paragraph 168. It referred to Lord Bingham's "hallmarks" of vexatious litigation having "little or no basis in law" (which must be regarded as including no basis in fact or law). The Employment Appeal Tribunal emphasised that this element of vexatious conduct has to be viewed objectively: paragraph 174.[37]The Employment Appeal Tribunal went on to infer the necessary improper purpose from Mr Deman's conduct as a whole: paragraph 172. In relation to this element the Employment Appeal Tribunal emphasised that it was not determining Mr Deman's "subjective state of mind" this was because bad faith/improper motive, although a possible element in vexatiousness was not a necessary one. It was, rather, characterising his conduct as one involving an improper purpose. It was doing this by the familiar judicial process of an inference drawn from all the evidence: paragraph 175.[38]While the words "vexatious" and "misconceived" and "unreasonable" are different they all require the assessment of a person's conduct in proceedings before the Employment Tribunal. We agree with Mr Millar QC that the Tribunal's approach to the assessment of conduct should be the same under both. The analysis of Underhill J in Deman supports our analysis of the terms "misconceived" and "unreasonable" in the same rule. Conclusion[39]For these reasons this appeal is dismissed.