Costs: assessing whether the claim or response had no reasonable prospects of success (Opalkova v Acquire Care)

When deciding whether to make a preparation time order or an order for costs of representation on the ground that the claim or response had no reasonable prospect of success, the tribunal should consider each cause of action comprised in the ET1 separately (or each defence to each such cause of action in the ET3). The correct point in time in respect of which to make that assessment will either be at the point when the claim or response was submitted, or at some later point when circumstances changed such as to alter the prospects and materially change the assessment, according to the Employment Appeal Tribunal.

Opalkova v Acquire Care (EA-2020-000345-RN (previously UKEAT/0056/21/RN))

 What are the practical implications of this judgment?

This case concerned an application for a preparation time order, but the principles annunciated would be just as applicable to an application for costs of representation, since the same rule in the ET Rules applies.

The judgment clarifies two points regarding how rule 76(1) of the ET Rules should be applied when deciding whether or not to make a preparation time order or an order costs of representation.

Firstly, it looks at how the test of whether ‘any claim or response had no reasonable prospect of success’ should be interpreted. The question was whether, when assessing the claim or response (i.e., the ET1 or the ET3 respectively):

• the party’s case as set out in that ET1 or ET3 should be assessed overall, or
• each constituent cause of action contained in the ET1, or each separate defence to each such cause of action contained in the ET3, should be considered separately

This point is important where, for example, a claimant’s ET1 comprises several causes of action, some of which are totally reasonable and others of which are fanciful and never had any prospect of success at all.

The judgment in this appeal makes clear that, in such circumstances, each separate claim, i.e., each separate cause of action (or each separate defence thereto, as the case may be) should be assessed separately.

It may be, for example that, as in this case, the claimant’s ET1 has six causes of action, three of which succeed and three of which fail. In assessing whether the ‘claim had no reasonable prospect of success’:

• the correct approach is to look at each of the six and decide separately, in each case, whether or not it had no reasonable prospect of success. This makes sense because some of them may have had a very firm foundation and others may have been totally lacking in any possible merit
• the wrong approach would be to do what the employment tribunal did in this case and say ‘well, three out of the six claims failed and three succeeded, hence looked at overall it cannot be said that the claim/response had no reasonable prospect of success’.

Considering this question for each separate cause of action may well lead to a preparation time order or an order for costs of representation that only covers part of the hearing and work done preparing for it. For example, if an ET1 contained a perfectly reasonable unfair dismissal claim but also contained a fanciful and hopeless discrimination claim, then:

• it might be shown that the case would only have taken a day in the absence of the discrimination claim, whereas it in fact took three days to deal with both claims, so
• in such circumstances, a preparation time order or an order for costs of representation might cover only two thirds of the overall costs incurred.

This judgment similarly confirms that when a tribunal is deciding, under the wording of rule 76(1), whether ‘a party (or that party’s representative) has acted… unreasonably in either the bringing of the proceedings (or part) or the way that the proceedings (or part) have been conducted’, it should consider each constituent cause of action separately (or the defence to each one separately) when deciding whether or not it was unreasonable for that party to continue to argue (or continue to defend, as the case may be) that particular cause of action.

The second point considered, in relation to the wording in rule 76(1) ‘any claim or response had no reasonable prospect of success’, is at what point in time it is to be assessed whether the claim or response ‘had’ no reasonable prospect of success.

In this regard, the EAT said as follows:

• it is possible that a claim or response when served had reasonable prospects of success, but that a development, such as new evidence coming to light, meant that the claim or response ceased to have reasonable prospects of success
• hence the question should be considered as follows:
  • first, objectively analysed when the claim or response was submitted, did it have no reasonable prospects of success?
  • second, at some later point in time, was a stage reached (due, e.g., to more evidence becoming available) at which the claim/response ceased to have reasonable prospects of success?

In the latter case, i.e., where in the first instance, when submitted, the claim or response did have reasonable prospects, but factors later emerged that meant that those reasonable prospects disappeared, a preparation time order or an order for costs of representation might be awarded for such relevant costs as were incurred after those factors emerged but not for the period before that.

Case details

• Court: Employment Appeal Tribunal
• Judge: HHJ Tayler
• Judgment handed down: 1 September 2021

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