In-house counsel and litigation cost recovery

​In-house counsel is at serious risk of losing the ability to recover litigation costs – and at a time when self-representation is increasingly common, particularly among government departments, insurers and banks.

Hanging by a thread in the courts

The future of cost recovery rights depends on the outcome of an appeal lodged by the Commissioner of Inland Revenue against a High Court judgment in May this year to refuse IRD's application for costs in in a case on the basis that the Commissioner was represented by in-house counsel.

The High Court relied on the 2017 Court of Appeal interpretation of “costs actually incurred" under Part 14 of the High Court Rules – being those legal costs billed by a lawyer employed by a party litigant.[1] 

This decision represents a significant departure from longstanding authority and, if allowed to stand, will carry large strategic implications for in-house legal teams.    

Pincer movement?

The New Zealand Rules Committee is also considering the ability for in-house counsel to recover litigation costs, although from a slightly different angle.    

While the Court of Appeal will clarify the meaning of “incurred" under Part 14 of the High Court Rules, the Committee's focus will be what the Rules should actually provide.  They are now silent on the issue of in-house counsel, providing no guidance as to the principles which should govern   

There is no specific provision in the High Court Rules regarding costs where a party is represented by in-house counsel[2] or the principles which should be applied to cost applications. 

From here

Change is certainly on the horizon, and may force changes in practice.  We await developments in both the Court of Appeal and the Rules Committee with interest.

[1]     Joint Action Funding Ltd v Eichelbaum [2017] NZCA 249.
[2]     This has been discussed in the Court of Appeal: see Grant v Pandey [2013] NZHC 3323.

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Related topics: Litigation & dispute resolution; Finance; Insurance; Government

 

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