News
The great cost in justice
When we read newspaper articles about employment law cases, our first thoughts are usually directed at the outcome of the case - and also its potential significance for other cases. One of the issues that is often forgotten, however, is the question of cost. Does justice come at a price?
Consistent with other jurisdictions, the Employment Relations Authority applies "well settled" principles in awarding costs. Usually, costs "follow the event" - meaning that a successful party to a proceeding will receive an award of costs - to be paid by the unsuccessful party.
Costs awards are discretionary, and in making an award the Authority may take into account a variety of different factors - such as the way that the parties conducted themselves at hearing, and the importance of the case generally.
An important thing to emphasise is that costs awards are not intended to reimburse a successful party's actual costs. An award of costs is intended to be a reasonable contribution to actual costs - not a complete repayment of them.
So what does this mean for parties before the Employment Relations Authority?
First, it should be remembered that prior to participating in a hearing before the Authority, the parties will almost certainly have been required to attend mediation. If a party is legally represented at mediation, it will of course incur additional legal cost. In fact, the cynic might argue that one of the central purposes of mediation is to provide a party with an overview of the legal cost that it might potentially incur (even if successful) if it proceeds to a hearing.
The costs awards made by the Authority were the subject of a recent analysis which suggested that, for a one day hearing, the average award to a successful party is about $1,500. This figure rose to about $4,000 for a two day hearing - and just over $6,000 in the event of a hearing taking three or more days.
The figures which were the result of this analysis were, of course, average figures over all cases. Individual cases may justify greater or lesser awards of costs.
A recent decision of the Employment Relations Authority is an example of how a costs award might be made in particular circumstances. In Paul v Capital and Coast District Health Board & Hutt Valley District Health Board (Unreported, Employment Relations Authority, Wellington, 26 August 2002) a doctor made a variety of claims against each of two of his employers. The doctor succeeded in one of his claims, although his application to the Authority was largely unsuccessful. The employers (who were jointly represented at the hearing) sought an award of costs.
Amongst other things, the employers had made an offer to settle prior to the hearing by way of a "Calderbank letter" (a tactical step for costs purposes which I will examine in a future article). That offer had been rejected, amongst other reasons because the doctor considered that as a devout Christian such a settlement would amount to a bribe in secret to facilitate an injustice - which the Bible condemns.
A hearing took place over four days. Overall, the employers incurred costs of $99,954.09 (over a six month period) in defending the doctor's application. The employers sought a costs award of $28,000 (being a contribution of $14,000 to each of the two employers).
In the event, the Authority ordered the doctor to pay the employers $11,500 as a fair and reasonable contribution to costs. In making this award, the Authority took into account the offers of settlement that had been made before hearing - and a number of other matters. The Authority made a critical comment about the employers' decision to be represented by two counsel (implying that actual costs could reasonably have been reduced).
Responding to the doctor's views of the Christian ethic (and perhaps demonstrating a formidable theological knowledge), the Authority suggested that there was a Biblical encouragement to "render therefore unto Caesar the things which be Caesar's, and unto God the things which be God's" (Luke 20:25).
A message which may be taken from this decision is that, even where successful, a party will only receive a contribution to its actual costs of an employment proceeding. A variety of factors will be taken into account in determining a costs award - including such things as the unsuccessful party's failure to accept settlement prior to hearing (in certain circumstances) and the way in which the successful party conducted its case (including the number of lawyers used to represent it).
Parties approaching litigation in employment cases should be well aware of the potential to incur significant cost - even where successful.
