CIR v New Orleans Hotel (2011) Limited

In CIR v New Orleans Hotel (2011) Limited [2019] NZCA 4, the Court of Appeal confirmed in the tax context the Supreme Court’s decision that a party represented by an employed solicitor is entitled to costs if successful in litigation.

The Commissioner sought to liquidate New Orleans Hotel (2011) Limited. After a number of adjournments full payment of the company’s debt was made and the application to wind it up was withdrawn. The Commissioner sought costs on the proceedings, the course of which she had been represented by an Inland Revenue lawyer employed by Inland Revenue.

Based on the decision of the Court of Appeal in Joint Action Funding Ltd v Eichelbaum [2017] NZCA 249, [2018] 2 NZLR 70, the company opposed an award of cost, arguing that the Commissioner had not incurred costs as required by Part 14 of the High Court Rules 2016. In Joint Action Funding the Court ruled that Mr Eichelbaum, a barrister who had acted for himself should not be awarded costs because the phrase ‘costs actually incurred’ is “confined to legal costs billed by a lawyer retained by a party litigant for legal services provided by the lawyer to that litigant”.

Associate Judge Matthews dismissed the Commissioner’s application for costs in the liquidation proceedings, saying he was bound by the reasoning of the Court of Appeal in Joint Action Funding and McGuire v Secretary for Justice [2018] NZCA 37, [2018] 3 NZLR 71. An award of costs in respect of attendances by in-house counsel was excluded unless the circumstances of that counsel’s retainer came within the terms set out by the Court of Appeal in Joint Action Funding and McGuire..

Unsurprisingly the Court of Appeal allowed the Commissioner’s appeal from the Associate Justice’s decision. That was because the Supreme Court had in the meantime allowing the appeal in McGuire v Secretary for Justice [2018] NZSC 116. The Commissioner’s appeal was allowed by consent.

In McGuire, the Supreme Court held that Joint Action Funding was wrongly decided. The High Court costs regime did not override the primary rule, the lawyer in person exception or the employed lawyer rule. The result was to reinstate that the position as before Joint Action Funding. That meant that lawyers representing themselves in litigation were entitled to costs, as was a litigant represented by an employed lawyer, but litigants in person (not being lawyers) were not entitled to costs.

© G D Clews, 2019


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