Attorney-General for England and Wales v R CA185/05

[2006] NZCA 527

ORDER PROHIBITING PUBLICATION OF NAME OF RESPONDENT

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IN THE COURT OF APPEAL OF NEW ZEALAND

CA185/05

BETWEEN  HER MAJESTY’S ATTORNEY- GENERAL FOR ENGLAND AND WALES

Appellant

ANDR Respondent

Hearing:         27 July 2006

Court:            William Young P, Chambers and O’Regan JJ Counsel:           B W F Brown QC and H M Brown for Appellant

W G C Templeton for Respondent

Judgment:      18 December 2006         at 3 pm

JUDGMENT OF THE COURT

A        The appeal is allowed.

BThe judgment of the High Court dated 5 August 2005 is set aside in so far as that court allowed by way of deduction from what was payable to the appellant the legal fees incurred in New Zealand by the respondent in opposing the appellant’s claim.  In all other respects, that judgment is confirmed.

CIf costs in the High Court with respect to the application dealt with in the judgment under appeal have already been fixed and if the appellant considers that costs order to be inappropriate now in light of this judgment, leave is reserved to the appellant to apply to the High Court

for a review of that costs order.

HER MAJESTY’S ATTORNEY-GENERAL FOR ENGLAND AND WALES V R CA CA185/05  18 December

2006

DThe respondent must pay to the appellant costs of $6,000, plus usual disbursements.  We certify for second counsel.

EAn order is made suppressing the name of the respondent in any report or summary of this judgment or the reasons therefor.

REASONS OF THE COURT

(Given by Chambers J)

The aftermath of Soldier Five

[1]      In August 1990, the respondent, R, joined the British Special Air Service (the SAS), part of the United Kingdom Special Forces.   As a member of the SAS, R served in the first Gulf War.

[2]      R voluntarily left the SAS in 1997.  The next year he decided to write a book dealing  with  his  experiences  in  the  SAS,  including  what  happened  during  the Gulf War.  R wrote the book, entitled Soldier Five, under the name of Mike Coburn; we  shall  refer  to  him  as  Mr  Coburn  in  these  reasons  for  judgment.     The United Kingdom Ministry of Defence was very concerned about the book.  They said its publication would be in breach of a confidentiality contract which Mr Coburn had signed with the ministry.

[3]      The  ministry,  through  the  Attorney-General  for  England  and  Wales,  the appellant on this appeal, sought to restrain the publication of the book.  The ministry brought its claim under two heads: breach of contract and breach of confidence. Mr Coburn opposed the ministry’s claim on a host of grounds.  In the High Court, the ministry lost on its contract claim.  It had a minor victory on its claim for breach of confidence.   Neither side has ever appealed with respect to the finding on the breach of confidence cause of action and it has not figured as  an issue in any subsequent round of this litigation.

[4] The ministry appealed the High Court decision so far as its claim in contract was concerned. This court heard the appeal in May 2001 and delivered judgment that November. Essentially the ministry won. This court held the confidentiality contract was valid and that, if Mr Coburn went ahead and published his book, he would be in breach of the contract. But Mr Coburn still carried the day on one point. He successfully persuaded this court he should not be enjoined from publishing his book: [2002] 2 NZLR 91. The Privy Council subsequently upheld this court’s decision: [2004] 2 NZLR 577.

[5]      Following the Privy Council’s decision, Mr Coburn proceeded to have his book  published.     The  ministry  thereupon  fired  up  its  claim  for   monetary compensation for Mr Coburn’s breach of contract.  Eventually this question fell to Williams J to determine. In a reserved decision (Her Majesty’s Attorney-General for England and Wales v R HC AK CIV1998-404-343 5 August 2005), His Honour held that the ministry were entitled to the proceeds Mr Coburn received from his publishers, less the sums paid to his New Zealand lawyers (at [74]) and to the Legal Services Agency pursuant to a charge it claimed over the proceeds from the book (at [64]).   Mr Coburn had been in receipt of legal aid in the course of defending the proceeding brought by the ministry.

[6]      The Attorney-General appeals against the High Court decision on the basis that Williams J was wrong to permit deductions for Mr Coburn’s legal expenses.

Issue on the appeal

[7]      Because of the view we take of this case, we need to deal with only one issue on this appeal.  That is: was it correct to deduct from the sum payable to the British Government Mr Coburn’s legal costs?

Was it correct to deduct from the sum payable to the British Government

Mr Coburn’s legal costs?

[8]      In  order  to  answer  this  question,  we  need  to  begin  by  setting  out  the procedural history of this case leading up to Williams J’s judgment, as it is of

importance  in  understanding the  task  with  which  His  Honour  was  charged  and

His Honour’s reasoning.

[9]      When this case first came before this court in May 2001, this court was primarily concerned with the enforceability of the contract between the ministry and Mr Coburn and with whether Mr Coburn should be enjoined from publishing the book.  This court determined that the contract was enforceable, but, in the exercise of discretion, declined to enjoin publication.   The court referred to the undertaking which Mr Coburn had given, the relevant parts of which were as follows:

I hereby give the following solemn undertaking binding me for the rest of my life:

(1)I will not disclose without express prior authority in writing from MOD  [the  ministry]  any  information,  document  or  other  article relating to the work of, or in support of, the United Kingdom Special Forces which is or has been in my possession by virtue of my position as a member of any of those Forces.

(2)I  will  not  make  any  statement  without  express  prior  authority  in writing from MOD which purports to be a disclosure of such information as is referred to in paragraph (1) above or is intended to be taken, or might reasonably be taken, by those to whom it is addressed as being such a disclosure.

(3)     I will assign to MOD all rights accruing to me and arising out of, or in connection   with,   any   disclosure   or   statement   in   breach   of paragraph (1) or (2) above.

[10] Tipping J considered “that the contract should generally be specifically enforced”: at [111]. He noted that clause 3 “specifically envisages that R will hold for the Ministry any profits he makes from a publication in breach of the contract which accordingly provides contractual entitlement to this form of financial relief”: at [113]. He described the account of profits to which the ministry would be entitled under clause 3 as “a kind of specific performance but of a monetary kind”: at [113]. In short, the only remedy which Tipping J was not prepared to give was that of injunction. As for other remedies, he said at [113]:

Whereas injunctive relief would not be equitable and should be refused as a matter of discretion, for the reasons already given, the contractually provided remedy of accounting for, strictly assignment of, profits is in a different category to which the discretionary issues do not apply, or at least not with the same effect.

[11] McGrath J reached a similar conclusion. He too referred to clause 3 and said its effect was “that the Ministry, rather than [Mr Coburn], would enjoy any financial benefits arising from a publication covered by the contract”: at [147].

[12] The third judge, Keith J, agreed with Tipping and McGrath JJ that, if Mr Coburn went ahead and published his book, the ministry would be entitled “to claim damages and have an account of profits”: at [2].

[13]     It must be stressed that the comments made by the members of this court on the topic of remedy and quoted above at [10]-[12] were not intended to be definitive. For a start, this court did not know whether Mr Coburn would elect to go ahead and have his book published.  Even if he did, the court did not know the terms on which any such publication might take place.  The lack of definitiveness is reinforced by the formal orders this court made.  They were set out in [116] of Tipping J’s opinion. We quote only the first two orders: the remaining three are irrelevant for current purposes:

(1)To enable the parties to consider their positions the orders below are not to be sealed and will not come into effect until 14 days have elapsed from and excluding the date of delivery of judgment.   The current stay will continue in the meantime but is rescinded at the end of the 14-day period.

(2)The proceeding is remitted to the High Court for the entry of such formal judgment, if any, as may be required on the breach of confidence cause of action; and also such formal judgment, if any, as may be required on the breach of contract cause of action to reflect the conclusions reached in this Court.

[14]     In other words, it was left to the High Court to work out what the appropriate orders should be, given the findings of fact and law made in this court.

[15] Before that course could be taken, however, Mr Coburn appealed to the Privy Council. As we have already said, the Privy Council endorsed this court’s approach. Lord Hoffmann, for the majority, referred to this court having made it clear “that in its opinion the contract is valid and should be specifically enforced”: at [34]. Their Lordships agreed with that view.

[16]     Following the Privy Council’s decision, Mr Coburn entered into publishing contracts with Bullet Publishing and Media Limited and Mission Vista Limited. Mr Coburn has subsequently sworn an affidavit in which he deposes that the former paid him $45,000 and the latter $5,000 for the right to publish his book.  Both sums were paid, at Mr Coburn’s direction, straight to the Legal Services Agency in satisfaction of the debt he owed it.

[17]     Mr Coburn’s decision to publish prompted the Attorney-General for England and Wales to apply for a formal judgment based on the Court of Appeal’s decision, as confirmed by the Privy Council.   The application was heard by Doogue J.   He made the following formal orders (HC AK CIV1998-404-343 18 March 2004 at [14]):

(a)The confidentiality contract entered into between the defendant and the United Kingdom Ministry of Defence dated 28 October 1996 is valid and enforceable.

(b)The plaintiff is entitled to an account in respect of any sums paid to the defendant by reason of any disclosure or statement past, present or future, of any information, document or other article, relating to the work of, or in support of the United Kingdom’s Special Forces, which is, or has been in his possession by virtue of his position as a member of any of those Forces.

(c)The defendant will pay to the plaintiff all sums found to be his profits upon the taking of the said account or accounts.

(d)The defendant will assign to the plaintiff all rights accruing to him and arising out of, or in connection with, any disclosure, statement or publication he has made or may make in breach of clause (1) and/or clause (2) of the said confidentiality contract.

(e)Subject to arrangement being reached between the parties as to appropriate amendments to the manuscript to meet the concerns expressed in Schedule B to the earlier judgment of this Court of 6

December 2000, the plaintiff’s claim under the second cause of action is dismissed.

(f)      The parties are at liberty to apply at any time in respect of the terms of this judgment, or in respect of any ancillary relief sought as a result of it.

(g)     The  defendant  is  to  file  and  serve  an  affidavit  as  to  all  relevant receipts and payments relating to all disclosures or statements coming within  clauses  (1)  or  (2)  of  the  said  confidentiality  contract  by

30 April 2004.

(h)If the parties cannot agree on costs, they are to be determined by the Court  in  the  light  of  the  fact  the  plaintiff  has  not  succeeded  in obtaining  injunctive  relief,  but  has  succeeded  in  upholding  the contract for all other purposes.

[18]     Pursuant to order (g), Mr Coburn filed an affidavit setting out receipts and payments.   This affidavit showed receipts of $54,500, but payments of $125,993. Accordingly, Mr Coburn asserted that nothing was payable to the ministry.   The ministry challenged Mr Coburn’s assertion, pursuant to the leave reserved under order (f).  This led to the hearing before Williams J.

[19]     Before turning to that judgment, we note two matters.  First, neither party has appealed Doogue J’s judgment.  Secondly, although order (d) required Mr Coburn to assign his rights to the ministry, it appears he has never done so.  The ministry for its part, at least to date, seems to have been content to accept an account of profits.

[20] We now turn to Williams J’s judgment. First, His Honour rejected any suggestion that Mr Coburn “was required to account for his entire gross proceeds of publication”: at [45]. In His Honour’s view, all the Court of Appeal and the Privy Council had been concerned to ensure was “that R accounted for his profits should he proceed and publish “Soldier  Five””.  It  was  never,  in  fact,  the  ministry’s argument that Mr Coburn was necessarily obliged to account for gross proceeds. Mr Brown  QC, for the Attorney-General for England  and  Wales,  conceded  that certain payments might in theory be deductible from the gross payments.  His point was that the legal fees incurred by Mr Coburn in fighting the ministry’s case were not  among  those  justifiable  deductions.    Nor  were  any  of  the  other  expenses Mr Coburn had claimed as a set-off in the category of justifiable deduction.

[21]     Williams J then proceeded  to  consider  Mr  Coburn’s  claimed  deductions, which totalled $125,993.   The payments fell into, the judge said, the following categories:

(a)     An allowance for Mr Coburn’s writing time (at $120 an hour); (b)      English solicitors’ fees;

(c)     New Zealand legal fees incurred before the grant of legal aid ($3,982) – “the pre-legal aid fees”;

(d)New Zealand legal fees incurred after the grant of legal aid ($52,000) – “the legal aid fees”;

(e)     An allowance for time Mr Coburn spent in promoting and marketing the book.

[22]     Williams J disallowed Mr Coburn’s claim so far as writing (category (a)) and promoting  and  marketing  (category  (e))  were  concerned.    Mr  Coburn  has  not cross-appealed  against  that  finding.    During  the  course  of  the  hearing  before Williams J, Mr Coburn abandoned the  claim relating to English solicitors’ fees (category (b)).   So that leaves simply categories (c) and (d), which Williams J allowed.

[23]     He  allowed  category  (c)  on  the  basis  of  what  he  understood  to  be  a concession by Mr Brown.  We shall discuss that alleged concession later.

[24]     So far as category (d) is concerned, the judge rejected any suggestion that anything hinged on the fact that, under the publishing contracts, the payments to which Mr Coburn was entitled were directed to be paid straight to the Legal Services Agency: at [64]-[65].  But he nonetheless allowed a deduction for the legal aid fees on the basis that this sum had been, he considered, properly payable to the Legal Services Agency pursuant to a statutory charge the agency had.  The Legal Services Agency had funded the bulk of Mr Coburn’s legal fees pursuant to a grant of civil legal aid. Williams J considered those advances were, in terms of the Legal Services Act 1991, “property…recovered or preserved” for Mr Coburn in the proceeding: at [57]-[63].

[25]     We should also record that, before Williams  J,  Mr  Coburn  advanced  an argument that about 25 to 40% of the contents of Soldier Five related to his early life and his experiences as a member of the New Zealand Special Air Services.   This information was not caught by the confidentiality contract.  He therefore argued that

the receipts, which he said totalled $54,500, should for these accounting purposes be adjusted to reflect the fact that only some of the book utilised confidential information.  Williams J rejected this apportionment argument.  Again, there is no cross-appeal concerning that part of the decision.  Accordingly, we do not need to consider it.

[26] The end result was that the payments in categories (c) and (d) were “properly deductible from R’s account of profits” and “just allowances” in terms of r 404 of the High Court Rules: at [64]. The effect of the judgment was that nothing was payable to the ministry, as the deductible costs allowed by Williams J exceeded the proceeds Mr Coburn received.

[27]     Mr Brown submitted before  us  that  His  Honour’s  reasoning was  wrong. Mr Templeton, for Mr Coburn, argued to the contrary.  We are satisfied Mr Brown’s submission is correct.  These are the reasons.

[28]     We deal first with Williams J’s conclusion concerning the legal aid fees, even though these fees were incurred after the pre-legal aid fees.  His Honour dealt with the payments to the Legal Services Agency at some length: at [49]-[65].  In essence his conclusion was that the Legal Services Agency was entitled to a statutory charge over the sums Mr Coburn received from Bullet and Mission Vista.   With respect, however, that analysis was irrelevant.  What Mr Coburn’s arrangements were with his lawyers or the Legal Services Agency could not affect what he was obliged to pay pursuant to his earlier contract with the ministry.  The ministry was entitled to all the proceeds of the publication of the book, subject only to deduction of such costs as were necessarily incurred in order to enter into the publishing contracts.

[29]     Mr Coburn’s legal costs in fighting the ministry did not come within the category of justifiable deduction.  After all, all of Mr Coburn’s arguments against the ministry, bar one, were unsuccessful.  His sole success – namely, his opposition to an injunction – was qualified.  This court and the Privy Council made clear that, if he published  his  book,  he  would  be  breaching the  contract  and  he  would  have  to account to the ministry for his profits and he might also be liable for damages. The effect  of  His  Honour’s  decision  is  that  the  ministry  has  ended  up  paying

Mr Coburn’s legal fees incurred in what was an essentially unsuccessful defence of the ministry’s claim.   That cannot be right.   It is completely contrary to the costs decision this court made in 2001 that each party bear his own costs: [2002] 2 NZLR

91 at [116]. It would not be “just” in terms of r 404 of the High Court Rules to make an allowance for these legal fees.

[30]     This was not and is not the appropriate proceeding in which to determine what rights and obligations Mr Coburn and the Legal Services Agency have between themselves.  They are irrelevant to the ministry's rights and Mr Coburn’s obligations to it.  We may add, however, that we have distinct reservations about Williams J’s analysis, as the $50,000 was subject to assignment to the ministry.  It had a nil value in Mr Coburn’s hands.    Whether or not the agency has a charge over “property…recovered or preserved” is determined  after the ministry has received its contractual entitlement, not before it.

[31]     In principle, the account of profits should, in this case, yield the same net result for the ministry as it would have received had Mr Coburn complied with Doogue J’s order (d).  Had Mr Coburn executed an assignment of his rights under the publishing contracts, the ministry would have received the $50,000 Mr Coburn received.   The ministry would not have had to pay anything to the publishers to secure that result.  This seems to be what Tipping J had in mind when he effectively equated the two remedies by referring to “accounting for, strictly assignment of, profits”: see [10] above.  And, of course, the ministry would not have been bound to pay the Legal Services Agency.  In those circumstances, the agency would have had to look to other property of Mr Coburn’s if it wanted to recover the grant of legal aid it had made to Mr Coburn.  In fact, the agency had always contemplated that it might need to look to other property owned by Mr Coburn for its charge.  In its letter of

5 February 2001 to Mr Coburn’s lawyer, the agency advised of its grant of $50,000 with respect to the “Court of Appeal Civil Appeal”.   The agency continued in its letter of grant:

Unless an exemption is sought, in whole or in part, the Legal Services Board will take a charge over any assets or funds recovered or preserved in the proceedings.   If there are no such assets or funds the Board will consider taking a charge on any property your client owns, at the conclusion of this

matter.  Your client will be given an opportunity to make submissions as to whether any such charge should be taken, in whole or in part.

[32]     It is obvious that Mr Coburn arranged his publishing contracts so that his entitlement under them would be paid to the Legal Services Agency in an attempt to prevent the agency from taking a charge over other property he owned.   But his action in that regard cannot affect his liability to the ministry.  After all, this court had indicated that the ministry was entitled to an assignment of any rights accruing to him from publication of his book.  The rights he acquired were worth $50,000.  If he chose not to assign those rights, then he should account to the ministry for their worth.  His decision to pay the agency debt from this asset rather than other assets he may own cannot affect the ministry’s entitlement.  Nor can the ministry’s entitlement be affected by the fact he retained his lawyers on a legal aid basis rather than on a conventional basis.

[33]     As to the pre-legal aid fees, Williams J said at [74]:

As mentioned earlier, Mr Templeton abandoned the claim for the UK expenses during this hearing.  As the Court understood it, Mr Brown did not seriously contest that R’s legal expenses were not, if all other aspects were held against the plaintiff, properly deductible as part of the expenses of R producing the manuscript and bringing it to publication.   If the Court’s understanding is correct, that seems a sensible concession since costs of litigation ensuring ability to publish, however unwelcome to authors and publishers, must be regarded as an expense properly incurred in cases such as this.

[34]     Mr Brown before us strongly disputed he had made the concession attributed to him.  Indeed, it seems very unlikely he did make this concession, given that part of his submissions which the judge himself quoted earlier in the judgment.  At [67], the judge recorded Mr Brown’s submission that “it would make a nonsense of the Courts’ orders if a person in R’s position who has been held to be in breach of contract   and   thus   obliged   to   account   for   the   profits   accruing   from   the contract-breaching activity could simply neturalize that obligation by incurring massive expenses and unsuccessful resistance to that to the finding of breach”.

[35]     Whether  or  not  the  concession  was  made,  it  is  in  our  view  clear  these pre-legal aid fees cannot be deducted.  They are not in a different category from the legal fees incurred in England, which Mr Templeton apparently conceded could not

be claimed as a deduction.  Nor can these legal fees be in a different category from the fees incurred while Mr Coburn was legally aided.

Conclusion

[36]     It follows that Williams J’s judgment of 5 August 2005 must be set aside in so far as it permitted Mr Coburn to deduct from the sum payable to the ministry his New Zealand legal expenses.  In all other respects, we confirm it.

[37] If the parties cannot now agree on what sum Mr Coburn owes the ministry, they will need to return to the High Court pursuant to the leave Williams J reserved: at [79].

[38] We do not know whether costs in the High Court arising from the application dealt with by Williams J have yet been fixed. Williams J reserved those costs, granting leave to the parties to come back to him if they were unable to agree on costs: at [81]. If those costs have not been fixed, they should now be fixed in light of this judgment. If, however, costs have been fixed in the High Court and if, in light of this judgment, the ministry now considers the costs order was inappropriate, we reserve leave to the ministry to apply to the High Court for a review of that costs order. Whether an adjustment is appropriate will be entirely a matter for the High Court, though obviously any costs order should reflect not only the outcome in the High Court so far as it has not been disturbed but also the outcome in this court.

[39]     So that there is no misunderstanding, we record that all parts of Doogue J’s judgment remain extant.  Whether the ministry wishes to enforce order (d) will be a matter for it.   It may be the ministry considers the account of profits it has now received will be sufficient relief for the wrong Mr Coburn committed.

Solicitors:

Bell Gully, Wellington, for Appellant

Anthony R Thomas, Auckland, for Respondent