Nicolson Highlandwear Ltd v Nicolson EAT/0058/09
unfair dismissal | costs applications | unreasonable behaviour
The Employment Appeal Tribunal (EAT) has held that, in the context of costs applications, it is unreasonable behaviour for a claimant to pursue an unfair dismissal claim purely for the purpose of obtaining a declaration that he or she was unfairly dismissed.
Implications for employers
- This is a welcome decision for employers. It does not seem reasonable behaviour for an employee to bring and pursue an unfair dismissal claim, and thereby put his or her former employer to great expense, in circumstances where he or she stands little chance of receiving any compensation even if successful.
- Employers must, however, note that this case involved exceptional facts: Mr Nicolson admitted much of his fraudulent behaviour. It is only where an employee has genuinely acted unreasonably in bringing or continuing proceedings that the employer should make a costs application.
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Mr Nicolson was employed as a retail manager by Nicolson Highlandwear Ltd, and operated the company’s outlet in Edinburgh. In 2008, a company director inspected the outlet and found that Mr Nicolson had been defrauding the company, and passing off his own retail operation as that of his employer. The company dismissed Mr Nicolson, who claimed unfair dismissal. Although the tribunal upheld Mr Nicolson’s claim, on the basis that the company had failed to follow the (then applicable) statutory dismissal procedures, it decided not to award him any compensation. The tribunal’s decision was based on the exceptional facts of the case: Mr Nicolson, who in the words of the tribunal, “at times seemed unable to distinguish between truth and fiction”, freely admitted much of the evidence against him. His misconduct, which included deliberately engineering financial irregularities to deprive his employer of money, led directly to his dismissal.
The company applied for costs against Mr Nicolson, arguing that he had acted unreasonably in bringing and pursuing proceedings for unfair dismissal: he had been fully aware what he was doing and was unrepentant about his actions. The tribunal, however, refused the company’s costs application. The tribunal’s reasons included that Mr Nicolson had, after all, won his unfair dismissal claim, and that he had not been legally represented – if he had been, he might have been aware that it was very possible he would receive no compensation. Most notably, the tribunal said that claimants are entitled to seek “simply findings of unfair dismissal without the objective of obtaining money”.
The company appealed the tribunal’s decision to refuse its costs application to the EAT, and relied on two previous EAT cases from 2009, Dunedin Canmore Housing Association Ltd v Donaldson EAT/0014/09 and Daleside Nursing Home Ltd v Mathew EAT/0519/09. These two cases are authority that, where a claimant is dishonest in relation to his or her claim, that will constitute unreasonable behaviour for costs purposes, and a costs award should be made. The company argued that the tribunal’s decision to refuse to award costs was perverse, given its explicit findings about Mr Nicolson’s fraudulent conduct.
The EAT upheld the company’s appeal, holding that Mr Nicolson’s success in claiming unfair dismissal did not mean, by itself, that he had not acted unreasonably. The EAT also found that the tribunal was wrong to have speculated on what advice Mr Nicolson might have received had he been legally represented, and that he had in any event been put on notice that he might receive no compensation by the company’s ET3 form. Most importantly, the EAT held that an employee cannot reasonably pursue an unfair dismissal claim purely for the purpose of obtaining a declaration that he or she was unfairly dismissed; the Employment Rights Act 1996 provides for no such remedy. The EAT therefore found that Mr Nicolson had acted unreasonably in bringing his claim in the first place, and then by persisting with it.
Additional resources
- Get more information on costs applications in the XpertHR FAQs section, which answers the following questions:
- Keane v Investigo and others EAT/0389/09 In this case, the EAT upheld a costs order made against an employee who had made spurious tribunal claims.
Case transcript of Nicolson Highlandwear Ltd v Nicolson EAT/0058/09 (Microsoft Word format, 95K) (on the EAT website)
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