Costs award overturned after judge read ‘without prejudice’ letters

Confidential correspondence: Court should not have had sight of it

A judge was wrong to make a costs order after viewing ‘without prejudice’ material relating to settlement discussions that was not marked “save as to costs”, the Employment Appeal Tribunal (EAT) has ruled.

Her Honour Judge Eady QC said the employment tribunal’s (ET) decision was “vitiated by its reliance on material to which it should never have been referred”.

In Hossaini v EDS Recruitment Ltd (t/a J&C Recruitment) & Anor [2019] UKEAT 0297_18_1605, HHJ Eady first overturned the ET’s decision to dismiss the claimant’s claims of race and religion and belief discrimination and harassment because of new evidence that suggested the defendants had “doctored” a translation they provided to the tribunal to remove a meaning to a disputed term that had a racial or religious connotation.

The claimant also appealed the ET’s order that the claimant pay each of the defendants £10,000 in costs.

This was made on the basis that he had acted unreasonably in the way he had approach settlement negotiations, in particular a late demand for 10 times the damages than had previously been discussed.

HHJ Eady said that in the absence of correspondence being marked “without prejudice save as to costs” – sometimes referred to as a Calderbank offer – the law was clear the court has “no jurisdiction to order disclosure of the without prejudice negotiations for the purpose of deciding the question of costs”.

She continued: “Given my view that the new evidence adduced by the claimant would probably have an important influence on the ET’s substantive decision, I find it difficult to see how the costs decision can stand: either the respondents relied on evidence that had been doctored or the claimant has adduced material that he has fraudulently created – in either event, I cannot see that this would not have an important influence on the question of costs.

“Even if that was not correct, it is apparent that the ET had regard to without prejudice material that was not marked ‘without prejudice save as to costs’ and did not, in the body of the document, suggest that was its purpose; that was wrong.”

The judge said the claimant’s privilege also could not be, and was not, waived by any reference to his counter-offer in the defendants’ correspondence.

“The ET’s decision is thus vitiated by its reliance on material to which it should never have been referred.

“In the yet further alternative, even if the ET had been entitled to refer to this material and it was entitled to see the claimant’s refusal of the respondents’ offer as unreasonable conduct such as to mean that its costs jurisdiction was engaged, I am not satisfied that the ET then demonstrated any recognition of the fact that it still had a discretion as to whether to make an award of costs.”

The wording of its ruling suggested that the ET saw the making of the award as an “inevitable consequence”, she explained.

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