A costs application, delayed by over five months as a result of “elementary errors” by solicitors, has been rejected as out of time by the First Tier Tax Tribunal (FTT).
Judge Timothy Herrington said solicitors acting for John Cozens, who were not named in the ruling, gave a “quite extraordinary” explanation for assumptions that they could “wait and see” whether HMRC would appeal and until they had settled other matters related to the High Court litigation.
“They said that they were unaware of rule 10(4) of the [tribunal] rules which requires an application for costs to be made no later than 28 days after the release of a decision which disposes of all issues in the proceedings and assumed that the tribunal would list a hearing to deal with consequential matters in accordance with High Court practice.
“In other words, the solicitors did not think to familiarise themselves with the rules. Although such ignorance might be forgiven on the part of an unrepresented appellant, it seems inexplicable on the part of a firm which holds itself out as having expertise in matters coming before this tribunal.”
Cozens v HMRC  UKFTT (TC) concerned the costs of a preliminary matter in which Mr Cozens successfully appealed against an assessment of £6.1m in excise duty made against him. He sought £34,168 in costs but HMRC argued that the application for them was out of time.
Judge Herrington said it was “absolutely clear” that there was no good reason for the long delay, and the position was “compounded” by the fact that the delay continued for over a month after the respondents’ solicitors drew attention to the existence of rule 10(4).
Applying the approach set out by the Court of Appeal in Denton, the judge said the prejudice to HMRC if he granted the application, apart from paying the costs, was “relatively slight”. If he rejected the application, Mr Cozens was unlikely to suffer prejudice because he had instructed solicitors under a contingency fee agreement.
Although he might be held liable for costs under the agreement, Mr Herrington said his solicitors had admitted that they were in error. “In those circumstances it seems unlikely that they could legitimately ask the appellant to pay the costs concerned.
“Had the application for a costs order to this tribunal been made in time, bearing in mind the cost-shifting provisions of the rules that applied, then the appellant would have had his liability to meet his solicitors’ costs discharged by recovery of the same from the respondents.
“He has lost that opportunity as a result of his solicitors’ failings.”
Judge Herrington concluded that in the circumstances of such a long delay in making the application with no good reason, and since it was unlikely that there would be any prejudice to the appellant, it would not be in the interests of justice to admit it out of time.