Costs for litigants-in-person

 

Last updated 26 March 2021

Clerk's advice to the Committee
Consideration of submissions received

The Committee's initial consultation paper

What is the current position?
What is being proposed?
How to submit

Clerk's advice to the committee

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 Clerk, 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 second quarter of 2021.  The Committee's interim decisions on a number of issues will also be set out in the consultation paper.

Consideration of submissions received

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 Commitee 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 aborgation 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. 

The Committee's initial consultation paper

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 Commitee 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.  

What is the current position?

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.

What is being proposed?

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 inexpeditious 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:

  1. 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?
  2. if the primary rule is not abrogated, should the exception for lawyers-in-person be removed?
  3. 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.

How to submit

Please Note: The deadline for submissions to this consultation process has been extended to  5 pm on 30 October 2020 from the original deadline of 2 September 2020.

The Committee invites submissions and comments addressing any or all of these questions and the points raised under each.  The Committee would particularly welcome suggestions as to how, if the primarily rule was abrogated, the costs of litigants-in-person can be justly but expeditiously determined.

The Committee is also very much 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 Sebastian Hartley, Clerk to the Rules Committee no later than 5:00 pm on 30 October 2020 using the below details:

Digital:Sebastian.Hartley@justice.govt.nz

Postal:Sebastian Hartley
Clerk to the Rules Committee
c/- Auckland High Court
PO Box 60
Auckland 1010