In Chesterfields Preschools Ltd & Ors v The Commissioner of Inland Revenue [2013] NZCA 44, the Court of Appeal considered whether interest could be claimed on an award of costs from the time the costs were incurred. The appeal derived from proceedings involving an application by Chesterfields for judicial review in 2006. Chesterfields sought interest on costs for the period of approximately five and a half years between the judgment and the award of costs in 2012.

The Court rejected Chesterfields' submission that section 87 of the Judicature Act (which sets out the powers of the Court to award interest on debts and damages) should apply to an award of costs not yet quantified by the Court. The proceedings to which the cost judgment related were applications for judicial review and not a "proceeding....for the recovery of debt or damages" as required under section 87.

Instead the Court concluded that High Court Rule 11.27 was applicable. This rule provides that a judgment debt carries interest from the time judgment is given at the rate(s) prescribed under section 87 of the Judicature Act if the High Court has either:

  1. Awarded costs in a specific sum, or 
  2. Made a costs order in terms that costs enable to be calculated or determined without reference back to the court.

In both of these situations, interest accrues from the date of the costs award even if, in the case of (b), the quantification is not completed and the amount of costs not determined until a later date.

Until the most recent judgment against the CIR for costs (effectively a debt due), there was no order by to pay a fixed or ascertainable, mistake free, sum of costs. Accordingly, interest on costs did not accrue from the date of the earlier judgment.