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29 May 2015

Costs can be awarded even if an employee cannot afford to pay

An employment tribunal can decide whether to make a costs order. The recent case of Chadburn v Doncaster & Bassetlaw Hospital NHS Foundation Trust makes it clear that, in making its decision, the tribunal will not only consider what the claimant can afford to pay at the time the costs award is made but may take future income into account.

Background

Mrs Chadburn brought claims for unfair dismissal and race discrimination against her employer, an NHS trust.  The employment tribunal considered the unfair dismissal claim was “reasonably pursued” but found that she had fabricated the discrimination claims so that the tribunal could hear her complaints for harassment.

The tribunal made a £10,000 costs award against Mrs Chadburn for unreasonable conduct, holding that the employer’s costs were increased by approximately £35,000 in defending the discrimination element of her claim (out of a total of £72,500 excluding VAT).

Despite evidence that Mrs Chadburn had limited means to pay, the tribunal made the costs award considering that she was 39 years old and would be likely to improve her financial position in her future years of work.  The tribunal also noted that Mrs Chadburn’s future divorce was likely to improve her financial means.

Mrs Chadburn appealed, arguing that that her debts were greater than originally represented and that the tribunal should not have taken into account her future divorce.

Decision

The Employment Appeal Tribunal (EAT) dismissed her appeal.  The award was made on the grounds that Mrs Chadburn’s financial position was likely to improve in the future, as she would be able to earn enough to pay it.  The tribunal did consider that the future divorce might play a part in discharging the costs award but this was not their main consideration.

The EAT further held that the tribunal did not have to take Mrs Chadburn’s financial means into account at all.  The question of costs did not have to be decided on what Mrs Chadburn could afford when the costs order was made and the tribunal was right to consider Mrs Chadburn’s future ability to pay.

Comment

This case does not establish new principles but serves as a reminder of how tribunals may exercise their broad discretion to make costs awards and do not have to make a precise assessment of what each claimant can afford.  The decision also illustrates to employees the dangers of exaggerating or inventing claims, as the rules on costs can operate harshly against them.