Costs for Litigants-in-Person
Last updated 16 September 2021
- Second Consultation Paper
- Background to Second Consultation
- Clerk's Advice to the Rules Committee
- Consideration of Submissions to First Consultation
- First Consultation Paper
- What is the current position?
- What is being proposed?
- How to submit
2021: Second Consultation Round
On 16 September 2021 the Rules Committee published its second consultation paper on reforming the rules governing costs for self-represented litigants. The Committee is now inviting submissions in response to this paper, which should be sent to RulesCommittee@justice.govt.nz by 28 January 2022.
Abrogating the primary rule and no longer favouring lawyers-in-person
Based on its review of the submissions to the initial consultation process, and the Clerk's advice, at its meeting of 21 March 2021 the Committee arrived at a provisional view of how best to respond to the arguments raised in submissions and the concerns expressed in McGuire v Secretary for Justice.
In summary, this involved:
- abrogating the "primary rule" preventing an award of costs to lay-litigants, such a rule not being required to give conceptual integrity to the costs regime;
- consequently repealing or amending the "indemnity principle" found in r 14.2(1)(f);
- awarding costs to self-represented litigants (in ordinary cases) using a modified version of the scale currently employed to award costs to represented parties in ordinary cases;
- continuing to distinguish between represented and unrepresented parties in terms of the daily recovery rate applicable to each; and
- treating lawyers appearing on their own behalf as any other self-represented litigant, ending the preferential treatment currently afforded to lawyers-in-person with respect to the award of costs.
The position of in-house counsel
The Committee was unable to arrive at a firm provisional view with respect to the position of parties represented by in-house counsel. These parties are nominally self-represented, and so, under the provisional proposals, would will recover only at the new litigant-in-person rate unless some distinction was drawn in their favour (as is the case at present).
Because the issue of whether such a distinction should be maintained if the primary rule was abrogated was not a matter consulted on previously, the Committee decided that further consultation on this issue was appropriate. In particular, the Committee thought it necessary to invite submissions on whether:
- parties represented by in-house counsel should be entitled to costs at the same rate as other litigants-in-person, that is, at the new litigant-in-person daily recovery rate; or
- a new daily recovery rate somewhat below, but ultimately likely fairly close, to the daily recovery rate applicable to category 1 proceedings involving externally represented parties should apply for parties represented by in-house counsel; or
- the daily recovery rate appropriate to the proceeding for the purposes of r 14.3, as if the party was represented by external counsel, should apply to such parties.
The Committee's division of views on this topic turned, in essence, over whether in-house counsel are in practice as independent from their clients when they appear in litigation as are external counsel.
Some on the Committee felt that because in-house counsel have only a single client - their employer - and often have other duties as an officer in respect of, and a close relationship with. their employer, they may be less independent in practice than external counsel. If that is the case, those of that view argued, then it is appropriate to incentivise parties to seek external counsel.
Others on the Committee, noting that in-house counsel are still lawyers and are subject to the same ethical obligations and duties as officers of the court in litigation as external counsel, did not consider it necessary to use the costs regime to incentivise parties to seek external counsel. Concerns were also raised that this might distort the market for legal services.
The Committee accepted that whether the objectivity of in-house counsel is in fact compromised in practice because of their relationship to their employers is largely a factual question, and one on which the Committee had at that point insufficient evidence. So, further consultation was desirable.
The Committee requested that the Clerk provide it with advice as to how to respond to the concerns and arguments noted in the submissions to the initial consultation paper, particularly given the diversity of views expressed by submitters and the fundamental question as to the nature of costs
The previous Clerk to the Rules Committee, Mr Sebastian Hartley, provided his advice in a paper published on 15 March 2021, which was considered by the Committee at its meeting of 23 March 2021.
Following its discussions on 23 March 2021, the Committee arrived at an interim decision in respect of a number of issues arising under this heading, as canvassed in the clerk's paper, but was unable to arrive at a consensus view on a number of points.
The Committee determined that further consultation on these particularly contentious issues is required, given the importance of these issues.
That consultation is expected to begin in the third quarter of 2021. The Committee's interim decisions on a number of issues will also be set out in the consultation paper.
At its meeting of 30 November 2020, the Committee considered the 14 submissions received to its initial consultation paper. Submissions were received from the New Zealand Law Society, New Zealand Bar Association, Auckland District Law Society, other members of the legal profession, government departments, and academics.
The Committee noted that there was an even split of views as between submitters as to whether the primary rule precluding the award of costs to lay litigants should be abrogated, but almost unanimous consensus that, if the rule is abrogated, a modified scale approach should be used to award lay litigants costs. There was also universal consensus that, if the primary rule is not abrogated, the lawyer-in-person exception should be abolished as invidious. Views were divided, however, on whether, if the primary rule is not abrogated, employed lawyers should remain eligible for an award of costs.
The Committee also noted that the differing views expressed as to whether the primary rule should be abrogated and which exceptions (if any) maintained stemmed, fundamentally, from differing views held by submitters as to the nature of "costs".
Generally, those who viewed costs as an indemnity or partial indemnity for out of pocket expenses paid for legal advice favoured maintaining the primary rule. Conversely, those who viewed costs as an award of an amount deemed to be reasonable for particular items of work done that was required to be done to allow a party to prevail in litigation tended to favour the abrogation of the primary rule. This tended to suggest, the Committee agreed, that any reform in this area will need to proceed from a clear recapitulation of the nature of "costs". Whether the primary rule survives will depend on which of these views prevails.
Given this lack of consensus, and the need to answer this fundamental prior question, the Committee resolved to further consider the question of reform at its 22 March 2021 meeting, once further policy work as to the definition of "costs" was undertaken.
Costs for litigants-in-person (PDF, 225 KB)
Please Note: The deadline for submissions to this consultation process has now passed. The deadline was extended to 5 pm on 30 October 2020 from the original deadline of 2 September 2020, recognising the disruption associated with the outbreak of COVID-19.
In 2020, the Rules Committee sought comment from members of the legal profession, those who regularly use employed counsel to represent their organisation in court, and other court users on potential changes to the High Court Rules 2016 and District Court Rules 2014. It was envisaged that these reforms might affect the ability of litigants-in-person who successfully bring or defend a claim to obtain an award of costs.
Costs are an amount awarded by a court to the party that has succeeded in litigation in addition to any damages or relief that party receives. The costs model currently used in New Zealand assumes that the parties to litigation have engaged at least one lawyer to represent them. For this reason, a "primary rule" exists preventing self-represented litigants (litigants-in-person) from obtaining a costs award.
At the same time, exceptions to this rule remain. These favour lawyers who represent themselves in court, and litigants who employ internal counsel, as opposed to an external barrister or solicitor. These exceptions exist because, historically, the courts accepted that, in these cases, the lawyer-in-person or the party represented by in-house counsel had engaged a lawyer. As that was the situation the costs rules were meant to cover, it was reasoned, an award of costs should be made.
The current state of the law is set out in greater detail in the Committee's consultation paper (PDF, 225 KB).
The Supreme Court in McGuire v Secretary for Justice has criticised the “primary rule” and accepted that these two exceptions – the “lawyer in person” and “employed lawyer” exceptions – may well be considered indefensible and unfair. However, the majority of the Court did think it appropriate for the courts to reform the law. The High Court of Australia has recently abolished the “lawyer in person” exception, finding it to be anomalous and indefensible.
The Supreme Court in McGuire suggested that it would be appropriate for the Rules Committee to review the continuing appropriateness of the primary rule and the exceptions to it. Having carefully considered the decision in McGuire, the Committee has decided a review of the costs regime as it applies to litigants-in-person is necessary.
This process is intentionally being made to coincide with the Committee’s ongoing work on improving access to civil justice, given that the current costs regime may be seen as a barrier to access to civil justice.
The Committee is aware that any reform in this area involves navigating a range of principled and practical concerns regarding the purpose and operation of the costs regime.
In particular, the Committee is sensitive to commentary that any system of awarding costs to litigants-in-person may result in the award of costs becoming in-expeditious and unpredictable.
For this reason, the Committee has identified that it needs to consult with the legal profession and other court users as to what objectives a reformed costs regime should prioritise before putting forward any specific proposals for reform.
The Committee believes that doing so will both help build support for any changes made, and also allow for any practical issues to be identified and resolved in advance of the new costs regime coming into operation.
In particular, the Committee is aware these reforms may particularly affect those organisations that primarily rely on employed lawyers to represent them in court. The Committee’s impression is that this would primarily affect central and local government but wants to hear from any private entities that would be heavily impacted by this change.
To aid submitters, the Committee has ‘bundled’ what it sees as being the relevant considerations into a series of four questions:
1. Should the concept of “costs” be expanded beyond allowing partial recovery of amounts paid for legal services?
2. If question one is answered “yes”, how should the costs of litigants-in-person be determined?
3. If question one is answered “no”:
a. should the concept of “costs” be further narrowed, so that “costs” must be out-of-pocket expenses; and
b. if so, should an exception nonetheless be made for employed lawyers and, if so, on what basis should their costs be determined?
Put another way, these questions ask:
- should the primary rule preventing litigants-in-person from obtaining an award of costs be abrogated and, if so, how should lay-litigants’ costs be measured?
- if the primary rule is not abrogated, should the exception for lawyers-in-person be removed?
- should the exception for employed counsel be maintained and, if so, what would the justification for that be, and how should employed lawyers’ costs be measured?
The Committee's consultation paper sets in greater detail the considerations it sees each of these questions as raising and directs submitters to relevant judgments and commentary to assist them in formulating a response.
The Committee invites submissions and comments addressing any or all of these questions. The Committee would particularly welcome suggestions as to the rate of recovery for self-represented litigants.
The Committee is also interested in receiving submissions addressing related points and questions not identified in this paper. Identifying these is vital to ensuring any future regime is fit-for-purpose.
Submissions or comments should be sent to the Clerk to the Rules Committee using the below details:
Clerk to the Rules Committee
c/- Wellington High Court
2 Molesworth Street, Pipitea