LIN v COMMISSIONER OF INLAND REVENUE [2019] NZHC 375

LIN v COMMISSIONER OF INLAND REVENUE [2019] NZHC 375 [8 March 2019]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2015-404-2267[2019] NZHC 375IN THE MATTER of Part VIIA, Tax Administration Act 1994BETWEEN PATTY TZU CHOU LINPlaintiffAND THE COMMISSIONER OF INLANDREVENUEDefendantOn the papersCounsel: B M Stewart for PlaintiffM Deligiannis and J B Y Cheng for DefendantJudgment: 8 March 2019JUDGMENT OF THOMAS J(COSTS)This judgment was delivered by me on 8 March 2019 at 1.00 pmPursuant to Rule 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate Solicitors:Simpson Western, Auckland for PlaintiffCrown Law, Wellington for Defendant[1] On 8 March 2018,1 the Court of Appeal allowed an appeal against my decisiondated 12 May 2017 wherein I found in favour of the plaintiff, Ms Lin.2 On 20 June2018, 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 of6 July 2017 and directed that costs should be fixed in accordance with the Court ofAppeal's judgment.4[3] Ms Lin and the Commissioner have been unable to agree costs. TheCommissioner 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 withthose aspects and is given after consideration of the Commissioner's memorandumdated 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 thedetermination on costs.2017 costs judgment[4] Ms Lin had sought costs on the basis of category 3 of the High Court Rules2016 (the Rules)5 but the calculation and allocation was not agreed by theCommissioner. I determined category 3 was appropriate, given the complexity of theproceedings.[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 comparativelylarge amount of time was reasonable for those steps.6 This was opposed by theCommissioner. For the reasons given in my judgment, band C was allocated for thepreparations of briefs and preparation for hearing, with band B allocated for all othermatters.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 heraccountant. 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 samebasis as those awarded to Ms Lin. The areas of disagreement between theCommissioner 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 principleswhich apply to the determination of costs:814.2 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 aninterlocutory application should pay costs to the party whosucceeds:(b) an award of costs should reflect the complexity andsignificance of the proceeding:(c) costs should be assessed by applying the appropriate dailyrecovery rate to the time considered reasonable for each stepreasonably required in relation to the proceeding orinterlocutory application:(d) an appropriate daily recovery rate should normally be two-thirds of the daily rate considered reasonable in relation to theproceeding or interlocutory application:7 There were originally five matters of disagreement, however, the Commissioner no longer seekscosts for inspection.8 High Court Rules 2016, r 14.2.(e) what is an appropriate daily recovery rate and what is areasonable time should not depend on the skill or experienceof the solicitor or counsel involved or on the time actuallyspent by the solicitor or counsel involved or on the costsactually incurred by the party claiming costs:(f) an award of costs should not exceed the costs incurred by theparty claiming costs:(g) so far as possible the determination of costs should bepredictable and expeditious.List of documents for discovery[9] The Commissioner claims 2.5 days for this step as was claimed and awardedto Ms Lin. Two and a half days is deemed a reasonable time for this step underband B.9 The Commissioner accepts that she was not required to provide any furtherdocuments because all relevant documents had been exchanged between the partiesduring the statutory disputes process. The Commissioner says, however, herinvestigating officer was still required to undertake a diligent search for all documentswhich had to be discovered, compile and refer those to the Inland Revenue LitigationManagement Unit, which then had to review them to ensure the Commissioner'sdiscovery obligations were complied with.[10] For Ms Lin, it is contended that the claim is unreasonable because the partieshad already exchanged all material information prior to the High Court proceedings.Therefore, the Commissioner's attendances on discovery during the proceedings musthave been minimal.[11] When the proceedings commenced, the parties jointly requested a tailoreddiscovery order, the effect of which was that the parties were not required to list thedocuments already provided. The Commissioner filed a one-page affidavit confirmingthe Commissioner had not identified any further documents to be disclosed.[12] On that basis, Ms Lin does not consider it reasonable for the Commissioner toclaim 2.5 days' worth of attendances (amounting to $8,250) for preparing a list of9 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 soughtby the Commissioner but says, upon reflection, it would have been appropriate for alesser amount to have been awarded. The costs earlier awarded to Ms Lin have beenrepaid to the Commissioner.[13] An award of costs should not exceed the costs incurred by the party claimingthem.10 That is generally regarded as applying to the overall costs award, rather thanpertaining to a particular step.11[14] While the purpose of the costs regime under the Rules is predictability andexpedition, meaning disputes about the time spent on particular steps should notusually trouble the Court, it is valid to raise an issue where the amount of time whichwould generally apply to a particular step could not possibly have been spent. Thegeneral principle that costs should not exceed those incurred should then apply to thatstep. That is not to encourage an overly detailed approach to costs and resort to theCourt in this regard should be considered unusual.[15] Costs are relevant to the proceedings. In this case, the Commissioner's claimrelies on work undertaken at a much earlier stage during the statutory disputes processwhich took place before the proceedings were commenced. It is therefore notappropriate for the Commissioner to receive costs at the level sought. I accept a certainamount 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 thepreparation of Professor Elliffe's brief of evidence, the Commissioner now seeksband 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 ofProfessor 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 beenmade as a reflection of the way in which Mr Oliver had prepared his evidence. Thisis indeed borne out by the related claim for Mr Oliver's expert expenses wherein hehas charged the Commissioner $6,500 for preparation of his brief, representing13 hours of his work. As with the claim in respect of discovery, there is, in myassessment, an issue with claiming band C costs where the costs were not in factincurred.[18] On behalf of Ms Lin, it is submitted that no time allocation should apply to thisstep. That, to my mind, takes matters to the other extreme. There can be no doubt thatcounsel would have been involved to some extent and I note counsel for theCommissioner contended that "minimum input" from Ms Lin's counsel would havebeen required. The implication is that, had the Commissioner succeeded at firstinstance, "minimum" costs would have been sought for this step. Taking that as theguide, 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 toMs Lin. Counsel for Ms Lin refers to the Commissioner's submissions in respect ofMs Lin's costs to the effect that the complexity of issues was covered within theband B time allocation. As a consequence, it is claimed that the submission must havebeen reflective of the Commissioner's experience and therefore the appropriateallocation 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 thecomplexity 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 anddisproportionate and should be reduced to $12,000. Ms Lin points out that ProfessorElliffe charged $7,000.[22] Disbursements must be reasonable in amount and proportionate in thecircumstances of the proceeding.12[23] While I note the discrepancy between the fees of the two experts, thediscrepancy alone does not mean that Mr Oliver's fee was unreasonable ordisproportionate. The fact he drafted his own brief of evidence is reflected in thecorresponding reduction to counsel's fee.[24] The case of Alexander v Clegg as referred to by Ms Lin's counsel can bedistinguished in light of the Court of Appeal's decision, which implicitly acceptedMr 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 thoseagreed between the parties) are awarded save that band A is to apply to the provisionof the list of documents on discovery and the Commissioner's preparation of briefs ofevidence. The award is subject to the principle that, overall, the award must not exceedthe costs incurred by the Commissioner.Thomas J12 High Court Rules 2016, rr 14.12(2) and 14.12(3).13 Alexander v Clegg (2003) 16 PRNZ 912 (HC).