Have you ever looked at the other side’s Schedule of Loss in a Tribunal case and wondered if he inhabits the same legal system you do?

Employment Tribunals routinely require such Schedules to try to bring some order and boundaries to both sides’ financial thinking, but this does not always work.  Sometimes the compensation at issue is grossly over-stated by the Claimant or hopelessly under-valued by the Respondent.  The net result of the gulf which this appears to open between the parties is often an increased reluctance by either to open settlement overtures, so protracting the dispute between the parties and the costs which go with it.

Haviz & Haque Solicitors –v- (1) Mullick (2) Paul UK Limited considers whether those costs can be recovered from a lawyer when an unreasonable Schedule of Loss put in for his client blocks a settlement which the Tribunal thinks would otherwise have been reached.

Mr Mullick was claiming race discrimination and unfair dismissal against well-known patisserie chain, Paul.  H&H were his advisers.  They lodged a Schedule of Loss on his behalf which was, to put it gently, fairly aspirational, and to put it as the Tribunal did, grossly exaggerated.  On an annual salary of less than £20,000, Mullick sought nearly £90,000, to include (i) loss of earnings for a five month period when he would not have been paid anyway; (ii) a potentially unsustainable injury to feelings award of £30,000 plus interest on that figure back to 2002, totalling nearly a further £18,500; (iii) aggravated damages of £3,000; and (iv) twelve months’ future loss, even though 10 days before that Schedule was lodged, he had secured another job at a higher salary which blotted that loss out altogether.

Paul made an offer of £9,000, significantly in excess of the maximum identified by its own counter-schedule.  Mr Mullick’s claims then failed.  Paul obtained a £4,900 costs order against him for his unreasonableness in not accepting the £9,000, and then sought further costs against H&H.  They admitted that part of the problem was that they had negligently used a template schedule from an earlier case, and that this had led to Mr Mullick’s race claim being significantly over-valued.

Partly on the back of that admission, Paul was awarded some £2,500 wasted costs against H&H.  The Tribunal Judge took the view that the unreasonably high Schedule of Loss had given Mr Mullick an unrealistic view of his likely entitlements if he were successful, and so had hampered any settlement.  A sharp and timely lesson for employment advisers everywhere, one might think, but then H&H appealed to the EAT.

Their challenge was two-fold.  First, that there was no actual evidence that the Schedule of Loss had distorted Mr Mullick’s perceptions of what he might get, merely an assumption.  Though H&H did not say so, any claimant’s approach to settlement (as that of a respondent) can be coloured by greed, ignorance or just the not wholly unwarranted view (see below) that being an intransigent pain in the neck will lead the other side to move on its position first.  Second, that the Judge did not and could not know (due to H&H’s obligation to maintain the privilege attached to their advice) what they had told Mr Mullick about his realistic entitlements.  If they had told him that the Schedule was not sustainable as a matter of law or evidence, they could do little more.  After all, recognised the EAT ruefully, “a client who regards his claim as being very substantial when an experienced lawyer would not is a figure well known in legal circles”.   If the client says that he wants/will pay £X and persists in that position in the face of advice, it is rarely for an adviser to decline to act as instructed.  There is an argument that it should not advance a position it knows (as opposed to should know, or believes) to be untrue, and on that basis the Schedule should maybe not have included the year’s future loss.  But that was less than a quarter of the total claimed and Paul quickly found out about it from other sources anyway.  In reality that issue by itself was therefore immaterial to Paul’s understanding of the size of Mullick’s claim.

It is established law that a Court or Tribunal should only award costs against a representative if there was nothing it could say, even if privilege were waived (here it was not), which would show that it had not behaved unreasonably.  That was not the case here and so the costs order was overturned.

The inescapable point to bear in mind here is that sometimes an unreasonable stance in negotiations just works.  Despite all its reasoned arguments and forensic dissection of Mullick’s compensation position, Paul UK still increased its initial offer from £2,000 to £9,000, money which would not have been on the table had Mullick taken its equally reasonable (on the facts) £2,000 opening bid.  So the issue is maybe not so much about being unreasonable but about knowing when to stop being so, and that applies equally to respondents.  If you refuse to make an offer of a sensible size when the Tribunal thinks you should have done, possible costs sanctions await.

And a sad little dessert for Paul – it ultimately offered to drop its claim for the wasted costs awarded by the Employment Tribunal if H&H would drop its appeal.  That should have been an end to the matter, thought the EAT.  However, since that offer had not been made before the initial appeal fee of £400 was incurred by H&H, Paul was ordered to reimburse that sum to them.