By Pierce Bedogni - 15 Mar 2018
- 1 comment
In most cases in litigation, the losing party contributes to the
winning party's costs. The Court awards those costs based on a
'scale' (scale costs). In theory, scale costs are meant to reflect
a reasonable contribution to the actual costs incurred, which is
approximately two-thirds of a party's costs.
In certain circumstances, a party may be entitled to an increase
from the scale costs or even full reimbursement of their legal
costs and disbursements. In relation to full reimbursement of legal
costs, confusion has existed amongst lawyers as to whether Goods
and Services Tax (GST) can be claimed.
The Court of Appeal has however ruled on the issue. A GST
registered party cannot claim GST on an award for legal costs and
disbursements. This is because that party can claim a GST credit
from the Inland Revenue Department on its original legal costs and
disbursements paid to its solicitor. If the Court awarded GST, in
addition to the costs and disbursements awarded, then the winning
party would obtain a double recovery of GST.
A non-GST registered party is entitled to claim GST on its award
of costs and disbursements, as it does not have an ability to
recover GST from the Inland Revenue Department. However, that party
must notify the Court in advance, so the Court can consider this
when making its award.
If you have any further queries relating to the legal issues
around awards of legal costs and disbursements, please contact Tony Johnson or
Pierce
Bedogni.