Reproduced from Practical Law with the permission of the publishers. The original blog can be access HERE.
Deposit orders can be a useful tool for respondents facing unmeritorious claims. This is particularly true for discrimination or whistleblowing claims, which are notoriously difficult to get struck out. A separate deposit order can be made in respect of each allegation in a claim, not just each claim, and this can be useful where the claims make wide-ranging allegations over a long period.
In H v Ishmail and another UKEAT/0021/16, the EAT held that a deposit order will be disproportionate if it is so high that it is not practically possible for the paying party to comply; it substituted nominal deposit orders of only £1. This decision may actually help respondents in persuading a tribunal to make a deposit order, despite appearances to the contrary.
The test for a deposit order
In H v Ishmail, Simler P held that the “little reasonable prospect of success” test is “less rigorous” than the “no reasonable prospect of success” test which applies on a strike-out application, but that there must be a proper basis for doubting the likelihood that a party can establish the facts essential to the claim. That simply confirms the law as stated in Van Rensburg v Royal Borough of Kingston-upon-Thames UKEAT/0095/07. Van Rensburg confirmed that a tribunal is not restricted to a consideration of purely legal issues, but is entitled to have regard to the likelihood of the party being able to establish the facts essential to his case, and, in doing so, to reach a provisional view as to the credibility of the assertions being put forward. This can be helpful when arguing for a deposit order.
Deterrent effect of a deposit order
From a respondent’s perspective, one of the biggest advantages of a deposit order (and one of the key factors that helps to persuade a tribunal to make such an order) is the strong costs warning that it gives to a claimant with a weak claim. A costs warning from the tribunal itself is often far more effective than a costs warning from the respondent’s solicitor. The point was made cogently in H v Ishmail:
This passage should assist in persuading a tribunal to make a deposit order in the first place, and in explaining to a claimant in subsequent correspondence the costs risks if they continue with the claims.
The rationale holds good even in respect of impecunious claimants: a nominal deposit order still acts as the “sword of Damocles” in respect of a future costs order.
When a costs order is sought against an impecunious litigant, tribunals may ask counsel whether it is disproportionate to spend time considering such an order at all. There are often two good responses to this question:
A deposit order remains an important weapon in the respondent’s tribunal armoury, regardless of whether a claimant pays the deposit. The costs threat remains and can be highlighted to a claimant in subsequent correspondence. While the decision in H v Ishmail is helpful to claimants seeking to minimise the amount of any deposit order, some of what is said in the case should actually assist respondents to obtain an order in the first place, and then to make clear to the claimant the ongoing costs risk as a result of such an order.