In its recent decision in McGuire v Secretary for Justice [2018] NZSC 116, 27 November 2018, the Supreme Court unanimously dismissed the appeal and also held that Joint Action Funding had been incorrectly decided by the Court of Appeal.

Before Joint Action Funding, the position relating to the costs issue was that litigants in person were not entitled to costs (the primary rule) unless the litigant in person was a lawyer (the lawyer in person exception). A litigant represented by an employed lawyer was also entitled to recover costs (the employed lawyer rule). Under the approach adopted by the Court of Appeal in Joint Action Funding, the primary rule was upheld and the lawyer in person exception abandoned. This decision was made on the basis that under the current costs rules, costs may only be awarded to reimburse a party for legal fees actually incurred (the invoice required approach). The Court of Appeal did not directly address the employed lawyer rule but the invoice required approach it adopted was inconsistent with the continuation of that rule.

The Supreme Court noted that in the United Kingdom (by legislation) and in Canada (by judicial decisions) the primary rule had been abandoned. As far as the Supreme Court was aware, the employed lawyer rule had not attracted controversy.

The Supreme Court also noted that C of IR v New Orleans Hotel (2011) Ltd illustrated the application of Joint Action Funding and, in particular, the invoice required approach to the employed lawyer rule.

The Supreme Court concluded that Joint Action Funding was wrongly decided in that the current costs regime in the High Court Rules did not override the primary rule, the lawyer in person exception or the employed lawyer rule. The result was that the law as it was understood to be before Joint Action Funding was to continue to apply — namely, lawyers representing themselves in litigation were entitled to costs, as was a litigant represented by an employed lawyer, but litigants in person were otherwise not entitled to costs.

The Supreme Court said that if there was to be reform to the law as it stood before Joint Action Funding, this should be effected otherwise than by the courts. This could be done by the legislature although the Court thought that such reform was probably within the competence of the Rules Committee. In either case, the Court said reform should occur only following appropriate consultation.

Ellen France J agreed with the conclusion reached by other members of the Court on the costs issue. However, she noted that if the underlying premise of costs was to recompense a person for loss of opportunity cost, the distinction drawn in the primary rule between lawyers who appeared in person and other self-represented litigants was irrational. She said it was difficult to see why a solicitor who brought a proceeding challenging a decision of a government department should be treated differently for costs purposes than, say, a chartered accountant bringing the same proceeding.