Employment tribunals rarely order a losing party to pay a contribution to the successful party’s legal costs. However, in the recent case of Vaughan v LB Lewisham, the unsuccessful Claimant was ordered to pay a contribution to the Respondent's costs in the region of £87,000.

The EAT rejected the Claimant's appeal against that order and gave guidance as to when costs orders may be made. The rule is that a tribunal may make a cost order if it considers that a party has acted vexatiously  or it considers that the bringing or conducting of the proceedings by the paying party has been ‘misconceived’.

In deciding whether this claim was ‘misconceived’, the question was not whether the Claimant thought she was right but whether she had reasonable grounds for thinking so. On the facts of this case, she did not have such grounds.

It is not necessary that the paying party should have received a previous ‘costs warning’ from either the tribunal or the other party. In this case, it was particularly relevant that the Claimant at no stage said that, if she had been given a costs warning, she would have discontinued her claim.

It did not matter that the only indication the Claimant had that the Respondent might apply for a costs order was made in the context of settlement negotiations. The EAT accepted that, even though the Respondent considered the claim misconceived, it was within its rights to attempt to achieve a commercial settlement.

Points to note –

  • Relevant factors in this case were that the Claimant was a young professional and the Respondent was a public body which had incurred substantial expense on the case so it would unjust for her simply to ‘walk away’.
  • The fact that a party is legally represented will always be relevant
  •  In this case, the tribunal had said the Claimant should pay one-third of the Respondent’s costs. The EAT said that it might have been better for the tribunal to fix a ‘cap’ of a specific sum.