Once the Court proceeding has been heard, and judgment has been given, the Court would consider an award of costs. Generally, the successful party in the proceeding would seek a reimbursement of costs, such as the legal fees paid to their lawyers and disbursements (e.g. Court filing fees, expert witness costs etc), from the unsuccessful party.
The determination of costs is at the discretion of the Court.
The Judge may:
If there is an award of costs from one party to another, the costs are generally ordered on a scale basis (i.e. determined in accordance with the Court’s rates and time allocations and do not represent the actual amount incurred by the party). However, in special cases, the Court may award indemnity costs (i.e. the awarded costs represent the actual amount incurred by the party).
All references to Rules below are references to District Court and High Court Rules (the same rule numbers apply for both Courts).
Under r 14.2(1), the following general principles apply to the determination of costs:
Under r 14.2(1)(a), the unsuccessful party is generally liable to pay money to the successful party.
Complexity and significance under r 14.2(1)(b) are assessed objectively, based on what the case really involves and how significant it really is. Actual time spent and costs incurred are irrelevant. Depending on the complexity and significance determined under r 14.3, a category (ranging from category 1 – 3) is allocated.
The aim of r 14.2(1)(c) – (d) is to provide for a daily recovery rate which is designed to represent two-thirds of a rate considered reasonable for the proceeding. Appropriate daily recovery rates are imposed by r 14.4 and depend on the category determined under the previous step.
Following r 14.5, the daily recovery rate is then applied against the allocated time for a particular step. In determining a reasonable time for a particular step, the proceeding should be allocated to a band (ranging from band A to C).
Rule 14.2(f) limits costs to those incurred (although, it is rare that the scale costs would exceed the actual costs), which gives effect to the principle that no party should profit from the conduct of litigation. Rule 14.2(f) comes into play only after the Court has determined the category, and daily recovery rate and applied it against allocated time in accordance with the band.
Rule 14.2(g) states that the determination of costs should be predictable and expeditious. Predictability enables parties to assess the likely cost of litigation from the outset. The cost rules are designed to be “self-calculating”, removing from Judges the burden of having to determine costs in every case.
The scale of costs is a legislative direction as to a reasonable contribution in an ordinary case. If compliance with that direction will not achieve the purpose of an award of costs, the Court is entitled to award less or more (Morton v Douglas Homes Ltd (No 2) [1984] 2 NZLR 620 (HC)).
Under r 14.7, the Court may order reduced costs, or refuse costs altogether, where:
Reduction is often done by applying a set reduction percentage (e.g. 30% reduction) to the scale cost amount determined by the steps outlined above. The reduction could apply to all or limited steps in the proceeding.
Under r 14.6, the Court may order increased costs where:
The party claiming increased costs carries the onus of persuading the Court that their award is justified.
Increased costs may be ordered where there is a failure by the paying party to act reasonably (e.g. see Bradbury v Westpac Banking Corp [2009] 3 NZLR 400, (2009) 19 PRNZ 385 (CA)). The Court should consider the extent to which the failure to act reasonably contributed to the time or expense of the proceeding. Any percentage uplift from scale can only be justified to that extent.
The Court of Appeal guided the correct approach to an award of increased costs in Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA) as follows:
Increased costs have in the past been awarded where the party opposing costs pursued an entire claim that lacked merit, failed to admit the facts, failed to accept an offer of settlement, or proceeded with an inappropriate statutory demand.
The Court may order the payment of the actual costs incurred, instead of costs on a scale basis, where:
The party claiming indemnity costs carries the onus of persuading the Court that their award is justified.
Indemnity costs are awarded when a party has behaved either badly or very unreasonably.
To justify indemnity costs, misconduct must be flagrant. But, where indemnity costs are sought in a “hopeless case” situation, it is not necessary that there be flagrant misconduct (Ben Nevis Forestry Ventures Ltd v Commissioner of Inland Revenue [2014] NZCA 348, (2014) 22 PRNZ 322).
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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