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Costs awards to legally aided parties — what happens if scale costs exceed legal aid costs?

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If a legally aided person is the successful party in litigation, and the amount of legal aid approved for payment is less than scale costs, can scale costs be awarded instead?

Despite the overriding discretion of New Zealand courts as to costs (see for example r 14.1 of the District Court Rules 2014, r 14.1 of the High Court Rules 2016 and r 53 of the Court of Appeal (Civil) Rules 2005), usually the non-profit principle that “an award of costs should not exceed the costs incurred by the party claiming costs” (in r 14.2(1)(f) of the District Court Rules, r 14.2(1)(f) of the High Court Rules and r 53A(1)(f) of the Court of Appeal (Civil) Rules) is applied by default to cap an aided person’s costs award at the amount of legal aid approved, rather than awarding scale costs.

However, this issue (among others) was recently considered in Basham v Abdollahi [2023] NZHC 2432. This was an appeal from a District Court decision that limited the aided person’s costs award to the legal aid amount ($5,070) rather than the amount eventually calculated as scale costs ($10,699.60). While the appeal was unsuccessful and the costs decision was confirmed, the High Court held (among other things):

“[53] In his decision Judge Clark appropriately noted that pursuant to DCR 14.1 all matters regarding the awarding of costs were at the discretion of the Court. And in relation to whether he should exercise his discretion to award scale 2B costs he noted that pursuant to DCR 14.2(1)(f) an award of costs should not exceed the costs incurred by the party claiming costs. I agree with the Judge that the use of the word should in DCR 14.2(1)(f) is properly read as not creating a mandatory provision which would preclude the making of an order for costs which exceeded a party’s actual costs incurred. This is consistent with the overriding principle that costs are in the court’s general discretion. In common usage the word should is an auxiliary verb used to describe an action that in general ought to be undertaken. While actions (or decisions) that should or ought to be to be taken will in most cases be the most appropriate to take or make, the nature of the obligation can be distinguished from obligations imposed by the use of mandatory language used in statutes and rules to describe an action or approach that must be taken. I accordingly agree with Judge Clark’s conclusion that the overriding discretion as to all matters of costs contained in DCR 14.1 enables the Court to depart from what should generally be the case, and award costs in excess of the actual costs incurred in a case where it considers it to be in the interests of justice to do so. I would add however that the clear implication of the use of the word should in DCR 14.2(1)(f), necessarily means that departures from the general principle that an award of costs should not exceed the costs incurred by the party claiming costs will be rare, and the justification for doing so compelling, having regard to the overall interests of justice.” (footnote omitted)

As mentioned, neither court here found that the present case justified an award of costs in excess of the approved legal aid amount. Nonetheless, this passage seems to allow for that possibility on rare and compelling occasions. It remains to be seen what features such an occasion might have.

This and other legal aid aspects of the Basham case are noted in Legal Services (online ed, Thomson Reuters) on Westlaw New Zealand: see Legal Services — What’s New for details.

By Kevin Leary

Kevin Leary is a Senior Legal Editor in the New Zealand Analytical Law team at Thomson Reuters. He has more than 20 years' experience as an editor of bound books, looseleafs, precedents and their digital equivalents.

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