The Uses And Abuses Of “Subject To Costs” In Employment Litigation (UK)
There are many things about our jobs which we all find irksome from time to time but right up there for me (#firstworldproblems) is gratuitous use in legal correspondence of the heading without prejudice “subject to costs”.
What this is supposed to mean is that the correspondence is intended to be without prejudice and so kept out of the Tribunal until a decision on liability has been made (so far so good), but that it may thereafter be relied upon in support of an application for costs. As we know, however, costs awards in the ET are (some say regrettably) very hard to obtain. The level of unreasonableness required is very high. Rule 76(1)(a) of the 2013 Constitution and Rules of Procedure Regulations says that you have to be “vexatious, abusive, disruptive or otherwise unreasonable” in the bringing or conduct of the claim, so this goes way beyond merely having a weak case or losing after the other side said you would. Rule 80, concerning wasted costs orders, requires the legal representative to have committed some “improper, unreasonable or negligent act or omission” causing loss to the other side.
So either way, what this reference implies is that either I am about to be improper or vexatious, or that the other party’s offer is so compelling, so reasonable, so incontrovertible, that any disagreement on my part will necessarily make me negligent or my client unreasonable and so potentially sound in costs. This is exceptionally irritating largely because it is exceptionally rarely true – the law is not an exact science and employment law less so than most.
Costs are rarely awarded in ordinary circumstances because of the Employment Tribunals’ original mandate as the “little man’s court”, where unrepresented individuals could have a good faith crack at obtaining redress without fear of adverse costs consequences and where lack of legal experience or training would be mitigated by the assistance (but not favouritism) of the Judge. Errors, misrepresentations, misunderstandings, delays and all the other possible consequences of anxiety, ignorance or lack of experience or education of a party are necessary consequences of that remit. Therefore, none of them will usually trigger a costs award. Even outright lying will not do so automatically, merely if it materially increases the other side’s outlay [here].
Therefore you generally need something more, some sign that the other side positively understood the consequences of its actions but went ahead anyway. If you are in a position where there is a genuine possibility that Rules 76 or 80 might apply, you should provide the other side with a detailed explanation of why – what it is about their conduct which you say is vexatious, unreasonable, negligent, improper, or why their position has no reasonable prospects of success, etc. It is proving that knowledge on their part, far more than repeated references to “subject to costs” which will be most persuasive to the Employment Tribunal. In other words, simply adding “subject to costs” at the top of your correspondence will achieve little or nothing.
Moreover, there is an active down side to sprinkling that phrase wantonly over all your without prejudice correspondence, especially if it is to a claimant who is unrepresented or otherwise vulnerable, and still more if it is a discrimination matter. Using costs as a threat where there is no realistic possibility of their being awarded (which is pretty much all the time) could easily be seen by itself as the unreasonable conduct of proceedings by the employer, and in discrimination cases, also as retaliatory victimisation.
It is not negligent or unreasonable or vexatious to pursue a subjectively weak case. It may be all or any of those things to pursue an objectively hopeless one, but you will need to be very sure you are right about that as employer before making costs threats becomes a good idea.