Guideline for an increase in costs is only a guideline, not a rule

Summary

The Plaintiff objected to the Commissioner of Inland Revenue's claim for increased costs for trial preparation and for disbursements, including expert witness fees, on the basis that the increased costs were significantly more than the "rule of thumb" (no more than 50% over the scale) and that the Commissioner's expert fees were excessive. The Court disagreed and upheld the majority of the Commissioner's claim for increased costs and allowed for full disbursements incurred by the Commissioner.

Impact of decision

This case is an example where, due to its complexity, the Court awarded increased costs.

Facts

On 4 October and 24 October 2012, the Commissioner filed memoranda to the Court regarding costs. The Commissioner claimed the sum of $383,082 for costs (this was an increase on scale costs) and $716,667.45 for disbursements. The Plaintiffs ("Sovereign") disputed the costs claimed by the Commissioner.

Decision

Costs

The main component of the Commissioner's cost claim that was disputed was for trial preparation. Band C of the High Court Rules' scale provides an allocation of 14 days for trial preparation. However, due to the nature of the case, the Commissioner claimed 60 days.

Costs for preparation of statements of defence and the first case management conference were also claimed by the Commissioner who sought:

1. band C in relation to the initial Statement of Defence;
2. band B in relation to subsequent substantive defences;
3. band A in relation to amended and consolidated defences; and
4. one day each for preparation of the case management conference.

Sovereign objected to the 60 days claimed and argued that the claim would be grossly in excess of the guideline or "rule of thumb" that increases are likely to be limited to 50%.

Furthermore, Sovereign calculated that the increase from 14 to 60 days would be a 429% increase and argued that it was beyond any comparable decisions.

Dobson J considered Sovereign's "rule of thumb" argument but took the same approach as France J in New Zealand Fish & Game Council v Attorney-General (2009) 20 PRNZ 557 (HC) at [15], that the 50% increase limit is only a guideline and not a rule. Accordingly, his Honour found that the case was vastly complex and granted an allowance of 50 days for trial preparation.

Dobson J upheld the Commissioner's claim in respect of the defences but agreed with Sovereign that costs relating to the case management conference preparation should be reduced from $2,940 to $1,176.

Disbursements

Sovereign objected to the Commissioner's claim of $514,057.80 for the four United Kingdom-based expert witnesses as being excessive. Rule 14.12(2)(d) of the High Court Rules was relied upon by Sovereign, arguing disbursements can only be awarded to the extent that they are reasonable in amount.

Sovereign also submitted that two of the four experts would be of little assistance to the Court and proposed that the Commissioner should be limited to a recovery of $70,000 per witness for the UK experts.

His Honour was satisfied that it was appropriate for the Commissioner to retain and call each of the experts due to the complexity of the case. Accordingly, Dobson J allowed the full extent claimed under disbursements.