Hong v Commissioner of Inland Revenue

[2018] NZHC 3077

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2018-404-0774

[2018] NZHC 3077

BETWEEN

BOON GUNN HONG

Appellant

AND

COMMISSIONER OF INLAND REVENUE

Respondent

Hearing:

On the papers

Appearances:

Mr Hong in person

M Deligiannis for the respondent

Judgment:

26 November 2018

JUDGMENT OF JAGOSE J

[Costs]

This judgment was delivered by me on 26 November 2018 at 3:00 p.m. pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Parties/Solicitors:

Mr B G Hong

Ms M Deligiannis, Crown Law Office, Wellington

HONG v COMMISSIONER OF INLAND REVENUE [2018] NZHC 3077 [26 November 2018]

[1]                 My 27 September 2018 judgment at [26] proffered the preliminary view the Commissioner was entitled to costs on a 2B basis. That is accepted by the Commissioner, who claims 2B costs of $13,157.00, plus transport and accommodation disbursements of $813.51.

[2]Mr Hong resists the claim and its quantification on multiple grounds.

[3]                 First, in reliance on Commissioner of Inland Revenue v Pemberton and Commissioner of Inland Revenue v New Orleans Hotel (2011) Ltd,1 Mr Hong says the Commissioner is not entitled to recover any costs contribution to expenses incurred on invoices raised by the Crown Law Office, such being “an attempt to circumvent those decisions”. Those decisions relate to disqualification from recovery of any costs contribution to the internal expenses incurred by the activity of in-house counsel. Their reasoning parallels Court of Appeal decisions on the disqualification from recovery of any costs contribution by unrepresented lawyer litigants.2 The point in all those cases is no legal expenses were incurred by the party claiming costs.

[4]                 Whether or not the earlier Commissioner of Inland Revenue decisions are correct, they have no application to the costs sought by the Commissioner here. The Crown Law Office is a separate entity to the Commissioner; a correlate department of the public service to her Inland Revenue Department.3 Only if the public service was an indivisible whole might Mr Hong’s complaint hold water. But it is plain each department operates independently of the others, subject to the functions, powers and responsibilities of its “appropriate Minister”.4

[5]                 I have no reason to think the Commissioner has not incurred legal expenses, and exceeding the sum of costs claimed. Her counsel could not responsibly make a claim for costs exceeding the legal expenses incurred.

1      Commissioner of Inland Revenue v Pemberton [2018] NZHC 1245, (2018) 28 NZTC 23-064; and Commissioner of Inland Revenue v New Orleans Hotel (2011) Ltd [2018] NZHC 971, (2018) 28 NZTC 23-058.

2      Joint Action Funding Ltd v Eichelbaum [2017] NZCA 249, [2018] 2 NZLR 70; McGuire v Secretary for Justice [2018] NZCA 37, [2018] 3 NZLR 71.

3      State Sector Act 1988, Sch 1.

4      Sections 28(7) and 32(1).

[6]                 Second, Mr Hong resists paying for the Commissioner’s preparation of the case on appeal, done by agreement with him. It is too late now to resile from that agreement. It is a step in the appeal taken by the Commissioner, for which she is entitled to claim a day’s effort, as a reasonable amount of time for the step. HCR 14.2(1)(f)’s principle “an award of costs should not exceed the costs incurred by the party claiming costs” is a universal principle, not to be applied on a step-by-step basis.

[7]                 Third, Mr Hong objects to the Commissioner’s claim for expenses incurred in connection with her external counsel’s travel and accommodation. As with the contribution to her legal expenses, the Commissioner is entitled to recover reasonable disbursements associated with the proceeding. Transport and accommodation expenses are such reasonable disbursements, particularly as the Commissioner is (as is any litigant) entitled to her reasonable choice of counsel. There is nothing unreasonable about instructing Wellington counsel for an Auckland hearing, especially in the specialised area of tax appeals, even if location otherwise may be material.

[8]                 None of Mr Hong’s objections being made out, I order him to pay the Commissioner costs in the amount of $13,157.00, plus disbursements of $813.51.

—Jagose J