Contents

Chapter 9
Some judicial powers

Wasted costs

9.11One of the most controversial parts of Issues Paper 29 was the suggestion that there be a statutory “wasted costs” provision in new courts legislation, drafted in similar terms to section 364 of the Criminal Procedure Act 2011. We discuss this further below.

Issues Paper proposal

9.12In Issues Paper 29, we defined the perceived problem as follows:123

Regrettably, there are sometimes civil cases in which counsel are responsible for litigation dragging on. There may be completely inappropriate discovery demands, interminable interlocutory applications, endless and unfocussed briefs, or a complete inability to conduct the case in a professional manner in court. This inflicts additional costs on the opposing parties and wastes valuable court resources. Where such situations arise, what can be done by the court in relation to the offending counsel?

9.13We discussed how the ability to order costs against counsel in civil cases is grounded in the High Court’s inherent jurisdiction, which means that none of the other courts can make such orders.124  We also noted that a “wasted costs” provision had recently been enacted in first instance criminal matters,125  and that other jurisdictions use a mixture of statutory provisions and court rules.126
9.14We then discussed the standard for the exercise of the costs jurisdiction, which the Judicial Committee of the Privy Council in Harley v McDonald had held to be a “serious dereliction of duty to the court”.127  We also discussed the other key principles to have emerged from case law and noted there had only been three cases since Harley v McDonald in which costs had been awarded against counsel personally, despite a large number of cases in which such an order had been sought.128
9.15The Commission provisionally concluded that reform is needed, for the following reasons:129
9.16However, we did have some reservations, in particular that it might be better to leave counsel misconduct to be dealt with by way of disciplinary proceedings and that expanding the jurisdiction could lead to greater “screening” of cases by lawyers.130  We also noted that it could be an undue burden, given lawyers often have to make decisions in litigation and there can be unreasonable or difficult clients.
9.17Despite these reservations, we proposed a legislative provision along the lines of section 364 of the Criminal Procedure Act 2011, given the advantages in symmetry and that there are sound reasons for doing so, such as removing the current “open ended” discretion the High Court has.131  We noted the provision was based on a “procedural failure to comply” that was “significant” and for which there was “no reasonable excuse”, and so would be relatively tightly structured and consistent with the principles contained in the case law. We also recommended it apply in all the trial and appellate courts.
9.18We concluded by asking whether submitters agreed that there should be a wasted costs provision in new courts legislation and, if so, whether they had any views on the draft provision in Appendix 4 of Issues Paper 29.132

Submissions

9.19Seven submitters answered these questions and, while there was some limited support for the wasted costs proposal, most were not in favour of it. This is not surprising. The majority of submitters were lawyers, who would naturally be wary about any proposal to codify (and in some ways extend) the courts’ jurisdiction to order costs against them personally.

9.20The New Zealand Law Society submitted that, while in theory a wasted costs jurisdiction may have a role to play in ensuring the proper use of court processes, in practice the matter is fraught with difficulty and a statutory provision may create more problems than it solves. In particular, it pointed to: the very small number of cases where the jurisdiction is relevant; the presence of disciplinary proceedings; the conflict of interest that inevitably arises for the counsel involved (and the time and money required consequent on that); the likelihood of abuse by angry and frustrated judicial officers; and the stultifying effect it may have on the legal profession. The Law Society said if the Commission is to proceed with a wasted costs provision, substantial drafting would be required to deal with conflicts of interest.

9.21The New Zealand Bar Association also had real reservations about the proposed wasted costs regime and would support the inclusion of such a provision only if it not only preserved the current limits, but clearly confined it still further, and replaced, rather than supplemented, the existing jurisdiction. It suggested a number of changes that would need to be made to the proposed provision to do this, including:

9.22It was not only lawyers who were opposed to the wasted costs suggestion. The District Courts judges considered that the proposed jurisdiction would simply invite more applications and would distract from the primary proceedings, and said that foreign jurisdictions with such provisions have not seen any benefits.

9.23The Senior Courts’ judges were more neutral, accepting the advantage in symmetry between the criminal and civil jurisdictions. However, they did not expressly support the proposal, noting that their understanding was that the equivalent provision in the United Kingdom has been met with some criticism and has only rarely been used.

9.24Finally, one submitter was happy with the draft provision, so long as the meaning of “significant” (in the requirement that the Court must be “satisfied that the failure is significant”) is spelt out. The submitter’s suggested definition was:

Significant means a failure which–
(a) a competent lawyer would be expected by the court not to make; and
(b) which has adversely affected the procedural rights of an opposite party, or the court’s ability to achieve justice.

Commission’s view

9.25We had difficulty understanding the principle behind the Bar Association’s submission that any provision should restrict the jurisdiction to the High Court only. In our view, there is nothing different about the matters that come before the High Court that would make it the only court where a wasted costs order could be relevant. 

Rather, the reason why it is the sole court that can make such an order at present seems to simply be that it is the only court with inherent jurisdiction.133
9.26On the other hand, we accept the Bar Association’s submission that, while consistency with the criminal jurisdiction is desirable, alignment with section 364 of the Criminal Procedure Act 2011 should not be the overriding objective. Indeed, we note that the reforms in that Act were introduced to “require changes to some long-established and entrenched behaviours and practices” in the criminal jurisdiction.134  The wasted costs provision was part of a “benefits and sanctions regime” unique to that Act, which was intended to “encourage parties to comply with procedural requirements”.135  As such, it is not necessarily automatically transferrable to the civil jurisdiction, where those behaviours and practices may not exist (or be as apparent).
9.27We also accept that the difference in terminology between the draft provision136  and the principles contained in the case law could be interpreted as a shift away from the established jurisprudence. For instance, we agree with the Bar Association’s submission that the test in subsection (2) of the proposed draft provision – that the “failure is significant and there is no reasonable excuse for that failure” – could be seen to be less stringent than the current “serious dereliction of duty to the court” test.

9.28Overall, the submissions we received convinced us we should not presently recommend the draft provision be enacted as it is. We considered whether to recommend the enactment of an amended provision, but ultimately were persuaded not to recommend there be a wasted costs provision in new courts legislation.

9.29One of the primary reasons for this was the lack of support from the judges for having any such provision. Had the judges required more power to deal with counsel misconduct in civil cases, they would no doubt have made this plain to us in their submissions. The absence of any such feedback to this effect is, therefore, telling. Indeed, the District Courts judges specifically said they do not want such a power.

R44 A “wasted costs” provision should not be included in new courts legislation.

123Review of the Judicature Act 1908: Towards a new Courts Act, above n 108, at [5.24].
124At [5.25]-[5.27].
125At [5.28]-[5.29].
126At [5.30].
127Harley v McDonald [2001] UKPC 18, [2002] 1 NZLR 1 at [48].
128Review of the Judicature Act 1908: Towards a new Courts Act, above n 108, at [5.32]-[5.36]. We note that, since Issues Paper 29 was released, one of these costs orders has been quashed on appeal: see Deliu v The Chief Executive of the Ministry of Social Development [2012] NZCA 406.
129At [5.37]-[5.38].
130At [5.40]-[5.41].
131At [5.42]-[5.43].
132At Q14 and Q15. As with contempt in the face of the court, we provided a draft provision, at appendix 4, to enable submitters to see precisely what we were proposing.
133See, for example, Hughes v Ratcliffe (2000) 14 PRNZ 690 (HC) at [57].
134Criminal Procedure (Reform and Modernisation) Bill 2010 (243-1) at 7.
135At 7.
136Review of the Judicature Act 1908: Towards a new Courts Act, above n 108, at appendix 4.