Chief Executive of New Zealand Customs Service v Country Road Clothing (NZ) Ltd

[2024] NZHC 2310

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2023-404-327

[2024] NZHC 2310

BETWEEN

CHIEF EXECUTIVE OF NEW ZEALAND CUSTOMS SERVICE
Appellant

AND

COUNTRY ROAD CLOTHING (NZ) LTD

Respondent

Hearing:	On the papers
Appearances:	P Courtney and L Worthing for Appellant R Geldenhuys for Respondent
Judgment:	16 August 2024

COSTS JUDGMENT OF BECROFT J

This judgment was delivered by me on 16 August 2024 at 4pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Solicitors/Counsel: Crown Law, Wellington R Geldenhuys, Auckland

CHIEF EXECUTIVE OF NEW ZEALAND CUSTOMS SERVICE v COUNTRY ROAD CLOTHING (NZ) LTD [2024] NZHC 2310 [16 August 2024]

Costs – original view that no costs should be awarded

[1]This is a costs application.

[2]        In my substantive decision I indicated that my preliminary view was that costs should lie where they fell.

[3]        I said that I was not minded to award costs given that the appeal by the Chief Executive of the New Zealand Customs Service (Customs) was necessary to clarify the position in “what might be said to be the public interest in maintaining the integrity of the customs duty regime”. I expressed my hope that the parties could agree as to costs.

[4]        Agreement has not been possible. The parties have filed helpful submissions. Customs seek an award of costs. Country Road Clothing (NZ) Ltd (CRNZ) opposes any costs award and support my initial view, as outlined.

[5]        Having considered the submissions, I have changed my mind in this matter. In my view it is appropriate to award costs to the appellant (Customs) for the following reasons.

Revised view: why costs should be granted

[6]        The general principle is that costs should follow the result. Whatever adjectival nomenclature is used to describe this principle, it is certainly a fundamental principle that guides the exercise of judicial discretion in determining costs.1

[7]        Similarly, I accept that strong, if not exceptional, reasons are required to depart from this general principle.2

[8]        I accept that the costs regime is of a regulatory character, and it is important that its integrity is maintained. There is a strong implication that the Court is to apply the regime in the absence of some reason to the contrary. Any departure must be a considered and particularised exercise of the discretion.

1      Manukau Golf Club Inc v Shoye Venture Ltd [2012] NZSC 109, [2013] 1 NZLR 305 at [8] and [16]; citied in Environmental Defence Society Inc v New Zealand King Salmon Company Ltd [2014] NZSC 167, (2014) 25 PRNZ 637 at [35].

2      Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] 3 NZLR 523 at [19].

[9]        I consider that I overstated the “public interest” nature of this appeal. I accept the submission by Customs that the decision by CRNZ not to originally pay a portion of the customs duty in respect of “intellectual property” was a commercial one. It would be wrong to say, as I perhaps assumed, that it was primarily exercised out of concern for the public good and as a public service gesture for the benefit of other commercial enterprises. This is not what CRNZ asserted—they are my words, but although overstated reflect the underlying reality. Realistically, CRNZ had a clear, private interest financial motive to pursue this litigation. The point, which I now accept, is that CRNZ made an entirely business-based decision not to include the licensing and royalty payment in their customs duty assessment, and then to pursue this litigation if necessary.

[10]      I accept CRNZ’s submission that there is a “public interest” exception to an award of costs. However, a matter that arises out of private, commercial and business interests does not become a public interest issue simply because it has the benefit of clarifying the law in a certain area. In the general sense, much litigation has the effect of clarifying the law, as I hope my decision has done in this case. But that alone does not elevate it into being a matter of public interest—at least public interest justifying an exception to the ordinary rule applying to costs. Any “public interest” aspect to this litigation does not reach the stage of justifying a nil or reduced costs award.

[11]      Customs has also drawn my attention to past and previous emails with CRNZ where it seems that CRNZ accepted the reality and the likelihood of costs orders being made. Indeed, the notice of appeal against this decision, filed by CRNZ, specifically contemplates costs orders being made that will follow the event.

[12]      In all the circumstances, I revise my preliminary view. I conclude that this is an appropriate and proper case in which to award costs and that there is no persuasive basis to depart from the principle that costs follow the event.

Second counsel?

[13]I note that the memorandum filed includes an allowance for second counsel.

[14]      The High Court Rules do not provide any guidance on when an allowance should be made for second counsel.3 The general approach of the courts has been that normally only costs for one counsel will be appropriate, unless there is good reason to make an allowance for a second.4 Whether such allowance should be made is a matter to be assessed by the court, with reference to the complexity of the issues, the length of the trial, and the number of witnesses and documents involved in a proceeding. There is some onus on the party seeking the allowance to demonstrate why a second counsel was warranted in the relevant circumstances.5

[15]      This was a one-day hearing. While the matter was not without difficulty, there was previous precedent and parallel arguments in similar cases. I would have thought it was within the capability of one counsel. I observe that CRNZ had only one counsel. I note that second counsel here was clearly of assistance to senior counsel. But it was a role of support—and a second pair of eyes. Realistically, this was not a matter which, in my view justified second counsel. Costs for second counsel are not warranted.

[16]      Costs on a 2B scale are awarded to Customs in the amount of $16,252.00, plus disbursements of $2,548.49. This does not include an allowance for second counsel.

Costs before the Customs Appeal Authority?

[17]      Normally in these situations, Customs should be refunded costs paid to CRNZ before the Authority. If the parties are unable to agree on that issue, then the matter is to be returned to the Authority for determination as to the quantum of costs, if any, in light of this decision.

Becroft J

3      Northwest Developments Ltd v Zhang [2019] NZHC 2146 at [23].

4      At [23]; Brady v Presbyterian Church of Aotearoa New Zealand [2013] NZHC 2300 at [2]; and Lifestyles Investment Group v Coral Investments Securities Ltd (struck off) [2017] NZHC 2122 at [9].

5      Specialised Structures New Zealand Ltd v Findlater Construction Ltd [2016] NZHC 1752 at [8].