The Commissioners for Her Majesty’s Revenue and Customs -v- Blue Sphere Global Limited [2011] EWHC 90217 (Costs)

Posted on Tuesday, December 20th, 2011

R pursued a claim for repayment of input tax of £1,100,750 through the First Tier Tribunal. A appealed to the High Court and subsequently the Court of Appeal, without success. Prior to the hearing in the Court of Appeal, A was ordered to pay R £100,000 on account of costs. R instructed solicitors under a conditional fee agreement. Following the appeal to the High Court, the CFA was varied so as to proceed on the basis of discounted rates rather than no win, no fee. Counsel, who had been instructed under CFA’s, also amended their agreements to reduce the success fee to 85% in exchange for receiving some fees in any event. A took various points, including challenging the success fees claimed under the discounted CFA’s. A argued that the success fee should only apply to the difference between the discounted rate and the primary rate. The judge agreed. He found that the success fee of 80% was unreasonable. The prospects of success were 50% but the risk was greatly reduced by the agreement to pay discounted fees even in the event of failure. Success fees had to be calculated according to the risk, and applying the 50% chance of losing to the proportion of fees lost if the case failed produced a figure of 20%. A similar approach was adopted in respect of Counsel’s success fees which were reduced to 40% and 50% for the two barristers involved.

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