New Zealand Venue and Event Management Limited v Worldwide NZ LLC  NZCA 282
The uncertainty as to how GST ought to be take into account in court awarded costs and disbursements has long vexed practitioners, particularly those not accustomed to dealing with tax issues on a day-to-day basis. Conveniently, the Court of Appeal has now clarified how and when GST is relevant to the calculation of an award of costs and disbursements in a clear and concise judgment.
The underlying dispute between NZ Venue and Worldwide was resolved in Worldwide’s favour by the Supreme Court in 2014, and following the Court’s decision, the parties agreed that NZ Venue should pay Worldwide’s costs, plus disbursements. However, an issue subsequently arose as to whether GST should be included in the award and the dispute came before the Court of Appeal.
The Court recognised that a successful party that was unable to recover GST on its legal costs could be detrimentally affected by an award of costs calculated on the basis that a GST input credit had been claimed on those costs. In this light, the Court confirmed that in determining whether court awarded costs and disbursements should include a sum representing GST, account should be taken of:
The Court then considered the different types of costs awards in turn and noted:
The Court considered that its practice of proceeding on the basis that a successful party is GST registered and entitled to a GST input credit ensures double recovery is avoided and puts the onus on the successful party to inform the Court of its inability to recover GST if it wants to fully maximise the recovery of its costs.
The Court’s guidance in this area will be welcomed by the profession. Although nothing has been produced to date, we may well see a practice direction or other guidance from the judiciary or Ministry of Justice setting out how and when GST registration information might be provided during the course of proceedings.
© G D Clews, 2016