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27 July 2015 0 Comments
Posted in Employment, Opinion

Wasted costs order – beware inflating Claimant’s expectations!

Author headshot image Posted by , Partner

In Hafiz and Haque Solicitors v Mullick and another an Employment Tribunal made a wasted costs order against a solicitor based on an inference that an exaggerated schedule of loss drafted by the solicitor gave the Claimant unreasonable expectations as to what he might expect to receive if he won. In fact he did not – his claims of race discrimination and constructive dismissal were dismissed. The company applied for costs against the Claimant on the basis of a massively exaggerated schedule of loss of around £90,000. On several occasions the Respondent has pointed out to the Claimant that his schedule was unrealistic and made several offers of settlement, all of which were refused.

The Employment Judge accepted the Respondents’ argument and awarded £4,900 against the Claimant which he duly paid. They then sought to obtain a wasted costs order against the representatives under rule 80 of the Tribunal Rules 2013. The Judge considered that the schedule of loss had not been prepared properly, raising the expectations of the Claimant with regard to settlement, which should have happened (and probably would have) had the schedule of loss been reasonable. The Judge awarded costs from the last date on which the final settlement offer of £9,000 could have been accepted.

The solicitors appealed to the EAT which allowed the appeal on the basis of a House of Lords case which emphasised the difficulties faced by a representative responding to an allegation of negligent conduct where legal professional privilege prevented the representative revealing details of the instructions given and the material provided by the client. The EAT considered Tribunals should be slow to make wasted costs orders in cases where legal professional privilege prevents a representative revealing details of the client’s instructions. The EAT felt the Employment Judge should only have made the order if she was satisfied that there was conduct which amounted to being unreasonable or negligent; that the costs were wasted consequent upon that conduct; and that there was no room for doubt. The EAT considered that the Judge had not applied these principles; and that it was eminently possible it was the Claimant himself who had placed an unrealistic value on his claims.

This legal update is provided for general information purposes only and should not be applied to specific circumstances without prior consultation with us.

For further details on any of the issues covered in this update please contact Gemma Ospedale, Partner in Employment on 020 7583 2222.

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