Case - Peat v. Birmingham City Council (Court of Appeal)

Court of Appeal - Oliver Segal QC, Stuart Brittenden, Louise Chudleigh

Peat v. Birmingham City Council is an important case on costs with potential wide implications for when a costs award will be made in the employment Tribunal

Following the implementation of a singe status Agreement, the Council attempted to obtain agreement from its employees to accept new terms and conditions. Those that would not agree were dismissed and then re-engaged with no loss of continuous employment. Ten of the dismissed, supported by their unions, brought unfair dismissal claims alleging that the dismissals were unfair through lack of individual consultation.

The council had engaged in extensive collective consultation with the unions so it sent a costs warning letter to the claimants stating in effect, that due to the extent of the collective consultation that had taken place, there was no need for individual consultation and so their claim was misconceived because it relied on a lack of individual consultation.

At around the same time as the costs warning letter, other groups of Claimants in the same litigation who were represented by different unions and solicitors had withdrawn or were in the process of withdrawing their claims and no costs were awarded against them. It was also relevant that this was a test case, the Appellants were represented by well respected solicitors and Counsel and they faced a trial which was bound to be lengthy and costly

The claimants went on to lose and the ET allowed the application for costs on two bases, both of which were the subject of an appeal to the EAT.

Firstly, the ET found that continuing with the claims after receipt of a cost warning letter until the end of trial constituted unreasonable conduct of the case. The ET noted that at the time of the costs warning letter the Claimants 'had the full evidential package for the trial, and were given what we have found to be an "apparent conclusive opposition" to their cases. In the face of that, they went on and lost, and they did so on substantially the grounds that had been identified in the warning letter. We have concluded that in so doing they acted unreasonably.'

Secondly the ET found that the claims were misconceived so far as they asserted that events subsequent to the termination of the Claimants employment were relevant.

The Claimants appealed on both points but the EAT dismissed both grounds of appeal.

The EAT found that the Appellants' solicitors failed to engage with the point made in the costs warning letter: 'if they had engaged with that issue the Appellants, even if they considered they had a reasonable prospect of success, would have been likely to have appreciated that it was so thin, that it was not worth going on with the hearing'. Furthermore, the EAT held that it was not necessary for a party to satisfy the Tribunal that the other side had no reasonable prospect of success in order to succeed on an application for costs based on unreasonable conduct. In this case, the Respondent’s argument did not depend on establishing that the Appellants' cases had been doomed to failure.

As for the second ground of appeal, the EAT found the ET had not erred in law in concluding that all matters post-dismissal were irrelevant to the issue of fairness. There was no basis on which the ET could depart from the principle established by the House of Lords in Devis v. Atkins [1977] AC 91 and West Midlands Co-Operative Society v. Tipton [1986] ICR 192.

The Claimants now appeal to the Court of Appeal, the central point for the Court is whether it is possible to award costs on the basis of unreasonable conduct without finding that a claim is misconceived.

The appeal is due to be heard in the COA on 26 November 2012. Stuart Brittenden led by Oliver Segal QC represents the Appellants and Louise Chudleigh led by Paul Epstein QC appears for the Respondents.

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