Deposit Orders: Not to be used as a “strike out through the back door”

Chris Milsom succeeds before the EAT in Hemdan v Ishmail & Ors in an important case about the appropriate amount of a deposit order against someone who has very low means to pay. Navid Pourghazidiscusses the case.

The facts

The Claimant, who was a victim of trafficking, claimed that she had been employed in circumstances that amounted to slavery. She brought various employment tribunal claims against her former employers. The Respondents relied on verdicts and transcripts from criminal trials in which they were acquitted to pursue an application for deposit orders against the Claimant’s employment tribunal claims.

The employment tribunal decision

The employment tribunal ordered the Claimant, whose only income was Employment Support Allowance of £125.05 per week, to pay deposits of £75 each in respect of three allegations of race discrimination on the basis that the allegations had little reasonable prospect of success.

At paragraph 16 of his judgment, the Employment Judge stated:

“I accept that these will be difficult sums for the claimant to find, but that is the purpose of the deposit order. The claimant should understand that the tribunal has taken a certain view about the strength of certain of her allegations.”

The EAT decision

On appeal, the Claimant argued that the amount of the deposit orders was an error of law because the Claimant simply had no ability to pay them. The effect of the orders was to prevent her from accessing justice in respect of those allegations. By the time the EAT delivered its decision, one order had been disposed of by consent. As regards the remaining two orders, the EAT reduced the amount to £1 per allegation.

The EAT’s reasoning

The EAT stated that:

“the purpose of a deposit order is to identify at an early stage claims with little prospect of success and to discourage the pursuit of those claims by requiring a sum to be paid and by creating a risk of costs ultimately if the claim fails…the purpose is emphatically not…to make it difficult to access justice or to effect a strike out through the back door”. (para. 10-11)

“Accordingly, it is essential that when such an order is deemed appropriate it does not operate to restrict disproportionately the fair trial rights of the paying party or to impair access to justice. That means that a deposit order must both pursue a legitimate aim and demonstrate a reasonable degree of proportionality between the means used and the aim pursued” (para. 16)

In giving this guidance on the appropriate amount of deposit orders, the EAT emphasised that tribunals are required to take into account a party’s means when determining the amount of a deposit order (Rule 39(2)) and the blanket cap for deposit orders of £1,000 (Rule 39(1)) which the EAT stated that many Claimants, albeit not the majority, would not find difficult to raise (para. 11). The EAT also emphasised the different tests for deposit orders (“little reasonable prospect of success”) and strike out (“no reasonable prospect of success”) (para. 12). Finally, the EAT contrasted the exercise of determining the amount of a deposit order, which necessarily occurs before a case has been fully heard, with “the position that applies where a case has been heard and determined on its merits or struck out because it has no reasonable prospects of success, when the parties have had access to a fair trial and the tribunal is engaged in determining whether costs should be ordered.” (para. 17)

In deciding to reduce the deposit orders to £1 per allegation, the EAT regarded it as an important consideration that the Claimant was a victim of trafficking and required to be provided for by way of financial support so as to ensure her subsistence under Article 12 of the Council of Europe Convention on Action against Trafficking in Human Beings.

“Given her very limited means and that essential consideration, we have concluded that the deposit order made by the Employment Judge was not realistically capable of being complied and was accordingly not a proportionate and effective means of achieving its purpose of signalling to the Claimant the assessment of little reasonable prospects of success and warning her as to costs. This deposit was not a sum of money she was likely to be able to raise in the period available, or indeed, in our judgment, in any period, and was set at so high a level in context as to impede her access to justice. The Employment Judge was wrong to describe the intended purpose of the Order as to make it difficult for the paying party to find the sum payable. That was to misunderstand the purpose of a deposit order” (para. 25).

The EAT decided that although the £1 deposit orders were “nominal” in amount, the consequential costs warnings would continue to have effect.

Conclusion

The clear guidance in Hemdan v Ishmail & Ors on the quantum of deposit orders is significant because it will apply in all cases where a Claimant has little means to pay, whether or not they are a victim of trafficking. It is an important case for practitioners who regularly represent under-privileged clients to have to hand.

Cloisters has significant expertise in advising employers and employees on all aspects of employment law, especially in cases that raise issues of human rights and civil liberties. Please contact our clerks for more information.