The costs regime can have an important impact on access to justice and the Rules Committee is currently considering changes to the costs rules that apply to litigants-in-person in the District and High Courts. The review follows recent Supreme Court criticism that the current rules – which prevent successful self-represented litigants from being awarded costs – are difficult to reconcile in principle.
The consultation raises difficult issues and has generated a great deal of discussion and debate, highlighting that a broader ‘first principles’ review may be needed. In its recent submission the Law Society acknowledges there is no universally agreed or perfect costs system: each system involves various trade-offs and it may be impossible to formulate a rule that achieves perfect consistency of treatment across different categories of litigant. The submission notes that:
“A costs regime should treat litigants fairly and equitably. The legitimacy of the system is important. Any differentiation between litigants, including categories of unrepresented litigants, needs to be principled, transparent and grounded in common sense.”
The Law Society believes the first step in making meaningful reforms to the costs system is to establish overarching objectives that are accepted as the basis for a good system.
The submission suggests the costs regime should be consistent with the principles underpinning the current costs rules, and should also promote access to justice, provide fair and equitable treatment of litigants, maintain fairness between successful and unsuccessful parties, avoid perverse incentives and protect the integrity of the justice process and the deterrence of undesirable conduct.
Litigants-in-person are an increasing feature of litigation in New Zealand and can place great and disproportionate pressure on the courts. However, they have a fundamental right to have access to the courts without the need for legal representation – a right which must and will continue to be respected by the profession and the courts regardless of which costs regime is ultimately favoured by the Rules Committee. However, the Law Society does note that litigants and the courts are generally better served when the parties have competent, independent legal advice and representation:
“We would not wish to see costs rules creating a perverse incentive whereby litigants opt to appear in person when they would otherwise have been represented. On the other hand, there is also a risk of reputational harm to the legal profession if cost rules designed by lawyers were perceived to be self-serving, which could make it more difficult, not less, to promote the value of legal advice and assistance to wary litigants.”
The submission analyses different reform options but notes there are different perspectives in the profession about what rules would best promote the overarching objectives of a good costs system.
Two options for the Rules Committee to consider, and arguments in favour of each are set out in the submission:
Option 1: abolishing the ‘primary rule’ that prevents self-represented litigants from recovering costs
This option would enable all litigants-in-person (including lawyer-litigants and in-house counsel) to claim costs. The same costs scale could apply to all litigants, whether represented or not, with greater flexibility to reduce costs to prevent inequities (i.e. discretion to reduce costs awards if steps taken are disproportionate to the proceeding). Alternatively, costs could be calculated at a lower daily rate for litigants-in-person, lawyer-in-person litigants and employed lawyers.
Option 2: maintaining the ‘primary rule’ and abolishing the lawyer-in-person exception
The alternative option would be to retain the primary rule but abolish the lawyer-litigant exception and maintain the employed lawyer (in-house counsel) rule in a refined form.
The Law Society agrees with the criticism that there is no principled reason for treating lawyer litigants-in-person differently from other unrepresented litigants for costs purposes, and says the continued existence of this exception risks undermining the reputation of the legal profession and the integrity of the justice system.
Law Society members are divided on the issue of the employed lawyer rule. The submission sets out the view of ILANZ (the in-house lawyers section of the Law Society) that the rule should be retained, and examines arguments for and against retaining the rule. The Law Society is reluctant to support a universal rule, and suggests the test for when costs can justifiably be claimed by an employed lawyer should be consistent with the standard used to assess issues of privilege, where similar tensions can arise. The Law Society notes that if the employed lawyer rule is to be retained it should be formally recognised in the Rules, and recommends criteria be specified for its application – such as in‑house counsel holding a current practising certificate.
Where to next?
The submission highlights the complexities involved and that achieving symmetry in the costs regime is not an easy task. We are grateful to the many lawyers who contributed to discussing and finalising the submission, in particular the Civil Litigation and Tribunals Committee. Moving forward the Law Society supports the Rules Committee’s objectives in the current consultation and would welcome a wider review of the costs regime.
More information regarding the review of the costs rules can be found on the Rules Committee’s website.