Litigants can no longer recover from the losing side legal costs for in-house lawyers representing them in court, the High Court ruled in a landmark case. This rule applies equally to both private sector and public sector corporate litigants.
Associate judge Matthews said revisions to the High Court Rules governing court procedure tightened up entitlements for recovery of legal costs. Revised Rules now limit recovery against unsuccessful litigants of a contribution towards only those costs ‘actually incurred’ by a successful litigant in having a lawyer appear in court. Recovery is no longer permitted for in-house counsel. There is an economic cost in employing legal staff: salaries and overhead office expenses. This economic cost is not a direct cost ‘actually incurred’ as now required by the Rules, Judge Matthews ruled.
Most affected is Inland Revenue. It files hundreds of bankruptcy and company liquidation applications in the High Court each year as an act of last resort against defaulting taxpayers. Inland Revenue frequently uses its own legally-qualified staff to appear in court on its behalf, rather than hiring outside lawyers.
It was taxpayer New Orleans Hotel (2001) Ltd who successfully argued it was not liable to cough up for Inland Revenue’s use of in-house lawyers. Operated by South Island hospitality entrepreneur Peter Whittaker, New Orleans paid its tax in full, but late and only after Inland Revenue took action in the High Court to have the company liquidated for a failure to pay.
Inland Revenue v. New Orleans Hotel (2011) Ltd – High Court (7.05.18)
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