The Manchester College v Hazel & Anor

Factual and Procedural Background

This judgment concerns an application by an employer ("the college") to set aside an order granting costs protection to two employees ("the claimants") responding to an appeal from the Employment Appeal Tribunal ("EAT") to the Court of Appeal.

The claimants were originally employed by Company A and transferred to the college in August 2009 under the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE"). The college subsequently restructured and required staff, including the claimants, to accept new contracts with substantial salary reductions. After initially refusing, the claimants accepted the new contracts under threat of dismissal.

The claimants brought proceedings for unfair dismissal, which the employment tribunal partially upheld, ordering reinstatement and reimbursement of lost salary and pension contributions. The college appealed to the EAT, which dismissed the appeal. The college then sought permission to appeal to the Court of Appeal, which was granted.

Fearing adverse costs liability in the Court of Appeal, the claimants applied for costs protection. Elias LJ granted an order conditioning the college's appeal permission on the college not seeking costs if successful. The college applied to set aside this order, leading to the present judgment.

Legal Issues Presented

1. Whether the Court of Appeal has the power to impose or vary conditions, including costs protection, on permission to appeal after it has been granted.
2. Whether there is a "compelling reason" under CPR Rule 52.9(2) to uphold the costs protection order made by Elias LJ.
3. The applicability and effect of the forthcoming CPR Rule 52.9A concerning costs protection in appeals from "no costs" or limited costs jurisdictions.
4. The relevance and applicability of precedent cases, including Unison v Kelly and Eweida v British Airways PLC, to the issue of costs protection in this context.

Arguments of the Parties

Claimants' Arguments

• CPR Rule 52.3(7) grants the court unfettered discretion to impose conditions on permission to appeal, including prohibiting an appellant from seeking costs if successful, even after permission is granted.
• The claimants have succeeded twice already and should not be forced to litigate at risk of costs in the Court of Appeal.
• The claimants have modest means and cannot risk adverse costs, which would force them to abandon their claims.
• The Court of Appeal's decision in Unison v Kelly supports costs protection in similar circumstances.
• The claimants have undertaken not to seek costs if successful, creating a level playing field.
• The forthcoming CPR Rule 52.9A supports the framework for such costs protection orders.

College's Arguments

• The claimants face the same costs risks as any other litigants at the Court of Appeal; no special treatment is warranted.
• CPR Rule 52.9 requires a "compelling reason" to impose conditions on permission to appeal, which does not exist here.
• The Unison case involves special circumstances and should be distinguished.
• The college is appealing solely to defeat what it regards as unmeritorious claims.
• The claimants can afford potential costs liability, for example through salary deductions, and remain employed by the college.
• Costs issues should be addressed after the appeal hearing, and the Court of Appeal may exercise mercy in awarding costs.
• The new CPR Rule 52.9A is not yet in force and is therefore irrelevant; if it were, evidence of financial circumstances would be filed.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by clarifying the applicable procedural rules. It held that CPR Rule 52.3(7), which allows conditions to be imposed when granting permission to appeal, cannot be invoked after permission has been granted. Therefore, the order by Elias LJ must have been made under CPR Rule 52.9, which permits conditions only if there is a "compelling reason".

Weighing the parties' arguments, the court identified seven cumulative reasons constituting a compelling reason to uphold the costs protection order:

• The claimants have already succeeded twice and have a viable case on appeal.
• The claimants would not continue without protection from adverse costs.
• The risk of costs liability up to £20,000 is unreasonable for the claimants to bear.
• Although the court may be merciful with costs, such mercy is not reliable or guaranteed.
• The claimants' undertaking not to seek costs if successful ensures fairness.
• The college's financial difficulties do not equate to the claimants' position; the college can absorb costs as part of restructuring.
• Setting aside the order would serve no purpose as the claimants could reapply under the imminent CPR Rule 52.9A, which is likely to succeed.

The court acknowledged the special features of Unison v Kelly but found the present case sufficiently similar to justify the same result. It declined to consider the merits of the underlying dispute, emphasizing that the appeal has a real prospect of success on both sides.

Holding and Implications

The court REFUSED the college's application to set aside the costs protection order made by Elias LJ on 7 January 2013.

This decision means that the college may pursue its appeal to the Court of Appeal only on the condition that it does not seek costs if successful. The claimants retain protection from adverse costs liability in this appeal.

The court noted that no new precedent was established beyond affirming the appropriateness of costs protection under the current circumstances and in light of the imminent CPR Rule 52.9A. The ruling preserves access to justice for litigants of modest means when transitioning from "no costs" jurisdictions to costs-shifting appellate courts.