Lin v Commissioner of Inland Revenue
[2019] NZHC 375
•8 March 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-2267
[2019] NZHC 375
IN THE MATTER of Part VIIA, Tax Administration Act 1994 BETWEEN
PATTY TZU CHOU LIN
Plaintiff
AND
THE COMMISSIONER OF INLAND REVENUE
Defendant
On the papers Counsel:
B M Stewart for Plaintiff
M Deligiannis and J B Y Cheng for Defendant
Judgment:
8 March 2019
JUDGMENT OF THOMAS J (COSTS)
This judgment was delivered by me on 8 March 2019 at 1.00 pm Pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date ………………………
Solicitors:
Simpson Western, Auckland for Plaintiff Crown Law, Wellington for Defendant
LIN v COMMISSIONER OF INLAND REVENUE [2019] NZHC 375 [8 March 2019]
[1] On 8 March 2018,1 the Court of Appeal allowed an appeal against my decision dated 12 May 2017 wherein I found in favour of the plaintiff, Ms Lin.2 On 20 June 2018, the Supreme Court dismissed Ms Lin’s application for leave to appeal.3
[2] The Court of Appeal set aside the order for costs I made in my decision of 6 July 2017 and directed that costs should be fixed in accordance with the Court of Appeal’s judgment.4
[3] Ms Lin and the Commissioner have been unable to agree costs. The Commissioner seeks an award of costs on the same basis as the award to Ms Lin. However, Ms Lin has identified items of disagreement. This judgment deals only with those aspects and is given after consideration of the Commissioner’s memorandum dated 18 January 2019 and the letter dated 18 October 2018 from Ms Lin’s lawyers, Simpson Western, to Crown Law which Ms Lin asks to be taken into account in the determination on costs.
2017 costs judgment
[4] Ms Lin had sought costs on the basis of category 3 of the High Court Rules 2016 (the Rules)5 but the calculation and allocation was not agreed by the Commissioner. I determined category 3 was appropriate, given the complexity of the proceedings.
[5] Ms Lin then submitted that band C should apply to the preparation of briefs, preparation for hearing and supplementary submissions on the basis a comparatively large amount of time was reasonable for those steps.6 This was opposed by the Commissioner. For the reasons given in my judgment, band C was allocated for the preparations of briefs and preparation for hearing, with band B allocated for all other matters.
1 Commissioner of Inland Revenue v Lin [2018] NZCA 38.
2 Lin v Commissioner of Inland Revenue [2017] NZHC 969.
3 Lin v Commissioner of Inland Revenue [2018] NZSC 54.
4 Lin v Commissioner of Inland Revenue [2017] NZHC 1548 [HC Costs judgment].
5 High Court Rules 2016, r 14.3 and sch 2.
6 High Court Rules 2016, r 14.5 and sch 3.
[6] The Commissioner had objected to Ms Lin’s claim for fees charged by her accountant. I decided they were not properly claimable as a disbursement.
Current dispute
[7] The Commissioner’s view is that costs should be awarded to her on the same basis as those awarded to Ms Lin. The areas of disagreement between the Commissioner and Ms Lin are in respect of four matters:7
(a)list of documents for discovery;
(b)preparation of briefs;
(c)preparation for hearing; and
(d)the Commissioner’s expert witness fees.
[8] Before addressing each disputed step, it is appropriate to set out the principles which apply to the determination of costs:8
14.2 Principles applying to determination of costs
(1)The following general principles apply to the determination of costs:
(a)the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds:
(b)an award of costs should reflect the complexity and significance of the proceeding:
(c)costs should be assessed by applying the appropriate daily recovery rate to the time considered reasonable for each step reasonably required in relation to the proceeding or interlocutory application:
(d)an appropriate daily recovery rate should normally be two- thirds of the daily rate considered reasonable in relation to the proceeding or interlocutory application:
7 There were originally five matters of disagreement, however, the Commissioner no longer seeks costs for inspection.
8 High Court Rules 2016, r 14.2.
(e)what is an appropriate daily recovery rate and what is a reasonable time should not depend on the skill or experience of the solicitor or counsel involved or on the time actually spent by the solicitor or counsel involved or on the costs actually incurred by the party claiming costs:
(f)an award of costs should not exceed the costs incurred by the party claiming costs:
(g)so far as possible the determination of costs should be predictable and expeditious.
…
List of documents for discovery
[9] The Commissioner claims 2.5 days for this step as was claimed and awarded to Ms Lin. Two and a half days is deemed a reasonable time for this step under band B.9 The Commissioner accepts that she was not required to provide any further documents because all relevant documents had been exchanged between the parties during the statutory disputes process. The Commissioner says, however, her investigating officer was still required to undertake a diligent search for all documents which had to be discovered, compile and refer those to the Inland Revenue Litigation Management Unit, which then had to review them to ensure the Commissioner’s discovery obligations were complied with.
[10] For Ms Lin, it is contended that the claim is unreasonable because the parties had already exchanged all material information prior to the High Court proceedings. Therefore, the Commissioner’s attendances on discovery during the proceedings must have been minimal.
[11] When the proceedings commenced, the parties jointly requested a tailored discovery order, the effect of which was that the parties were not required to list the documents already provided. The Commissioner filed a one-page affidavit confirming the Commissioner had not identified any further documents to be disclosed.
[12] On that basis, Ms Lin does not consider it reasonable for the Commissioner to claim 2.5 days’ worth of attendances (amounting to $8,250) for preparing a list of
9 High Court Rules 2016, sch 3.
documents on discovery, given it is disproportionate to what in fact was required. Ms Lin acknowledges she had previously been awarded costs on the same basis sought by the Commissioner but says, upon reflection, it would have been appropriate for a lesser amount to have been awarded. The costs earlier awarded to Ms Lin have been repaid to the Commissioner.
[13] An award of costs should not exceed the costs incurred by the party claiming them.10 That is generally regarded as applying to the overall costs award, rather than pertaining to a particular step.11
[14] While the purpose of the costs regime under the Rules is predictability and expedition, meaning disputes about the time spent on particular steps should not usually trouble the Court, it is valid to raise an issue where the amount of time which would generally apply to a particular step could not possibly have been spent. The general principle that costs should not exceed those incurred should then apply to that step. That is not to encourage an overly detailed approach to costs and resort to the Court in this regard should be considered unusual.
[15] Costs are relevant to the proceedings. In this case, the Commissioner’s claim relies on work undertaken at a much earlier stage during the statutory disputes process which took place before the proceedings were commenced. It is therefore not appropriate for the Commissioner to receive costs at the level sought. I accept a certain amount of work would have been required and band A is allocated.
Preparation of briefs
[16] Consistent with the award to Ms Lin of band C costs in respect of the preparation of Professor Elliffe’s brief of evidence, the Commissioner now seeks band C costs for the preparation of Mr Oliver’s brief. This would represent five days ($16,500).
[17] The Commissioner had opposed Ms Lin’s claim for costs in respect of Professor Elliffe’s brief on the basis there was no factual evidence at the hearing and,
10 High Court Rules 2016, r 14.2(1)(f).
11 Gilmour v Chief Executive of the Department of Corrections [2017] NZHC 2165.
as an expert, Mr Elliffe should prepare his own brief requiring little input from counsel. It is submitted on behalf of Ms Lin that the Commissioner’s objection must have been made as a reflection of the way in which Mr Oliver had prepared his evidence. This is indeed borne out by the related claim for Mr Oliver’s expert expenses wherein he has charged the Commissioner $6,500 for preparation of his brief, representing 13 hours of his work. As with the claim in respect of discovery, there is, in my assessment, an issue with claiming band C costs where the costs were not in fact incurred.
[18] On behalf of Ms Lin, it is submitted that no time allocation should apply to this step. That, to my mind, takes matters to the other extreme. There can be no doubt that counsel would have been involved to some extent and I note counsel for the Commissioner contended that “minimum input” from Ms Lin’s counsel would have been required. The implication is that, had the Commissioner succeeded at first instance, “minimum” costs would have been sought for this step. Taking that as the guide, band A is appropriate in respect of costs to the Commissioner.
Preparation for hearing
[19] The Commissioner claims five days for this step, consistent with the award to Ms Lin. Counsel for Ms Lin refers to the Commissioner’s submissions in respect of Ms Lin’s costs to the effect that the complexity of issues was covered within the band B time allocation. As a consequence, it is claimed that the submission must have been reflective of the Commissioner’s experience and therefore the appropriate allocation is band B.
[20] Notwithstanding the Commissioner’s submissions in respect of Ms Lin’s costs, I am satisfied that band C is appropriate for preparation for hearing, given the complexity of the case.
Disbursements - Mr Oliver’s expert fees
[21]The Commissioner claims Mr Oliver’s expert witness fees in the sum of
$23,000 as a reasonably necessary disbursement which is of a reasonable amount. Ms Lin objects on the basis that the amount of fees is unreasonable and
disproportionate and should be reduced to $12,000. Ms Lin points out that Professor Elliffe charged $7,000.
[22] Disbursements must be reasonable in amount and proportionate in the circumstances of the proceeding.12
[23] While I note the discrepancy between the fees of the two experts, the discrepancy alone does not mean that Mr Oliver’s fee was unreasonable or disproportionate. The fact he drafted his own brief of evidence is reflected in the corresponding reduction to counsel’s fee.
[24] The case of Alexander v Clegg as referred to by Ms Lin’s counsel can be distinguished in light of the Court of Appeal’s decision, which implicitly accepted Mr Oliver’s evidence.13
[25]I allow the full disbursement of Mr Oliver’s fees.
Costs award
[26] For the reasons given, costs as sought by the Commissioner (including those agreed between the parties) are awarded save that band A is to apply to the provision of the list of documents on discovery and the Commissioner’s preparation of briefs of evidence. The award is subject to the principle that, overall, the award must not exceed the costs incurred by the Commissioner.
Thomas J
12 High Court Rules 2016, rr 14.12(2) and 14.12(3).
13 Alexander v Clegg (2003) 16 PRNZ 912 (HC).
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