Tribunals must “proceed with care” over wasted costs orders where privilege is not waived

Simler: Cannot assume there was negligence

Employment tribunals should generally give the benefit of doubt to a legal representative facing a wasted costs applications where their client refuses to waive privilege, the president of the Employment Appeal Tribunal (EAT) has decided.

Mrs Justice Simler warned judges to “proceed with care” when making wasted costs orders.

Her comments came as she allowed an appeal by claims management company KL Law, against a wasted order imposed by an employment tribunal after finding “negligent failure to comply with disclosure obligations”.

The EAT heard in KL Law v Wincanton Group and another [2018] UKEAT 0043_18_0105 – decided in May but only just published – that Mr Kozik at KL Law was representing Ms Marzec, who was claiming direct race and sex discrimination, along with constructive dismissal, against Wincanton.

On the third out of four days listed for the hearing, during questioning by an employment judge, Ms Marzec revealed that she had a diary entry recording an “important conversation with her manager”.

Asked whether she had other diary entries or notes about important meetings, Ms Marzec said she had, but they had not been disclosed.

Shortly afterwards Ms Marzec said she wanted to withdraw her claims, which were dismissed in March 2017.

Following the withdrawal, Wincanton applied for costs against Ms Marzec on grounds of unreasonable conduct in bringing and conducting the proceedings, which were misconceived, and against KL Law on grounds that the claim was both misconceived and because disclosure had been handled negligently.

The tribunal rejected Mr Kozik’s request for an adjournment, because of Ms Marsec’s imminent return to Poland, allowing only two more days to hear the matter.

Simler J recorded: “The tribunal found that there was conduct in relation to the duty of disclosure which did not meet the standard of competence reasonably to be expected of an ordinary member of the claims management fraternity, particularly one with a solid legal background.

“The tribunal regarded it as commonplace for employees to keep diaries or other contemporaneous records and concluded the missing documents could not be regarded as obscure or unusual.

“Moreover, the failure amounting to negligence was aggravated in this case, the tribunal held, by reason of the fact that the claimant did in fact provide some diary entries which would have put any reasonably competent representative on enquiry that there might be other relevant entries.”

The tribunal concluded that a wasted costs order should be made against KL Law to reimburse the defendant with £6,300 out of its total costs of £16,000.

Mr Kozik appealed, arguing that he was hampered in defending the claim of breach of duty because privilege had not been waived by the client.

Simler J said that where a wasted costs application was disputed, “save in the most obvious case, whether conduct is unreasonable, improper or negligent is likely to turn on what instructions the client gave and what advice the representative provided”.

She went on: “Both are covered by legal professional privilege that can only be waived by the client. Where it is not waived, privilege may make it difficult or impossible for a legal representative to provide a full answer to the complaint made against him or her.

“Where there is doubt in such cases, the legal representative is entitled to the benefit of that doubt.”

Simler J said it could not “simply be assumed” that where there had been a failure in disclosure, there was negligence on the part of the lawyer or breach of duty to the court.

“It is as likely as not that the claimant would have proceeded, notwithstanding negative advice about her prospects, and that even if disclosure had been given at an earlier stage, the respondent would have been put to the cost and expense of defending these proceedings in any event.”

Simler J said a wasted costs order should only be made after “careful consideration”.

She continued: “A wasted costs order is a serious sanction for a legal professional. Findings of negligent conduct are serious findings to make.

“Furthermore, even a modest costs order can represent a significant financial obligation for a small firm. Tribunals should proceed with care in this area.

“Although I can understand this tribunal’s desire to avoid an adjournment or hold a future hearing in circumstances where it was possible or even certain that the claimant would be returning to Poland, it seems to me the interests of justice mean it would have been preferable to allow an adjournment here.

“This would have enabled the appellant to prepare to resist the application, produce evidence and consider its position, together with any potential conflict it had so far as the claimant was concerned.”

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