Commissioner Not Entitled to Costs for In-House Counsel Appearing in High Court
The Commissioner of Inland Revenue (“the Commissioner”) failed in her application for 2B costs on a liquidation proceeding
The Commissioner of Inland Revenue (“the Commissioner”) failed in her application for 2B costs on a liquidation proceeding on the basis that the Commissioner had not incurred costs in the sense contemplated by part 14 of the High Court Rules 2016.
The impact of this decision is that in-house counsel employed by the Commissioner are not entitled to apply for costs under the High Court Rules. It appears that claims for disbursements will be unaffected.
This was a cost decision in relation to a long running liquidation matter that had been filed on 1 September 2016. Following a defended hearing in relation to an application to restrain advertising (CIR v New Orleans Hotel (2011) Limited  NZHC 2500) and an appeal of the decision (CIR v New Orleans Hotel (2011) Limited  NZHC 2769) in favour of the Commissioner on that application, the liquidation proceedings were eventually withdrawn on 25 January 2018, upon confirmation that the defendant company had paid its tax debt in full.
At the time the liquidation proceedings were withdrawn, Osborne AJ reserved the question of costs until the decision of the Full Bench of the Court of Appeal in McGuire v Secretary for Justice  NZCA 37.
Osborne AJ wanted to know whether or not the Court of Appeal would comment on or modify the position in the earlier decision of Joint Action Funding Limited v Eichelbaum  NZCA 249. In Joint Action Funding Limited, the Court of Appeal had overturned the longstanding exception for self-represented lawyers to the general principle that a self-represented litigant was not entitled to an award of cost.
In Joint Action Funding Limited, the Court of Appeal had held that the phrase "costs incurred" in rule 14.2(f) envisaged invoices rendered for legal services provided by a legal practitioner to a client. It followed from this that under the current cost rules, claims for costs are confined to legal costs billed by a lawyer retained by a party litigant for legal services provided by the lawyer to that litigant (at ).
In McGuire the Full Bench did not consider that there was any need to revisit the conclusions reached in Joint Action Funding.
The Commissioner argued that, based on the Court of Appeal authority in Henderson Borough Council v Auckland Regional Authority  1 NZLR 16 at , she was entitled to claim for costs when she was represented by in-house counsel.
The defendant argued that Joint Action Funding Limited had materially altered the way in which a Court is to determine awards of cost.
Matthews AJ noted that "costs actually incurred" is confined to legal costs billed by a lawyer retained by a litigant for legal services provided by the lawyer to that litigant, and as there was no bill rendered by the lawyer who had represented the Commissioner to the Commissioner, there were no costs actually incurred in terms of Joint Action Funding.
Matthews AJ noted that Henderson Borough Council had been regularly applied by the Courts, but considered that the interpretation of the rules in Joint Action Funding applies outside the context of a litigant representing him or herself in person. Matthews AJ stated:
 Thus this Court is now called upon to decide whether to apply Henderson, or the interpretation of the Rules in Part 14 in accordance with Joint Action Funding. I have concluded that this Court should follow Joint Action Funding and McGuire. In both cases the Court of Appeal expressly interpreted the current Rules. In neither case did the Court limit its interpretation to application only in relation to self-representing lawyers. Nor does there appear to be any principled basis upon which the rules could bear one interpretation in one context and another in a different context. The interpretation set out by the Court excludes an award of costs to in-house counsel unless the circumstances of that counsel’s retainer fit within the terms of these cases.
The Judge declined to follow the decision in Henderson. The Judge noted that he was departing from previous decisions in the High Court in relation to costs awarded to in-house counsel, but distinguished those cases on the basis that they were decided prior to Joint Action Funding.
Matthews AJ noted that Rule 4.1 preserved the rule that all matters are at the discretion of the Court if they relate to costs of a proceeding. He considered, however, that since Joint Action Funding and McGuire, it would not be a principled exercise of the discretion under Rule 4.1 to award costs in a circumstance where legal costs have not been billed by a lawyer retained by a party litigant for legal services provided by the lawyer to that litigant.
High Court Rules 2016 Rules 14.1, 14.2 and 14.6