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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2011-485-1562
CIV 2011-485-2052 [2012] NZHC 3229
UNDER The Human Rights Act 1993
BETWEEN THE ATTORNEY-GENERAL ON BEHALF OF THE MINISTRY OF HEALTH
Appellant
ANDIDEA SERVICES LIMITED (IN STATUTORY MANAGEMENT) Respondent
Hearing: 30 April 2012-4 May 2012
Additional submissions on 31 May and 18 June 2012
Memorandum of counsel of 26 November 2012
Counsel: M Coleman and G J Robins for the Appellant
A S Butler, O C Gascoigne and P Barnett for the Respondent
Judgment: 3 December 2012
JUDGMENT OF MALLON J,
MS J GRANT MNZM AND MS S INESON QSM
Contents
Overview ............................................................................................................................................ [1] The facts ............................................................................................................................................. [8] What is a disability? ....................................................................................................................... [8]
An intellectual disability................................................................................................................. [9] Disability Support Services .......................................................................................................... [10] Day services ................................................................................................................................. [11] Funding for disability services ..................................................................................................... [13] Appropriations.............................................................................................................................. [19] Present funding responsibilities as between government bodies .................................................. [22]
The MOH funder/provider arrangements ..................................................................................... [24]
The contract with IDEA Services.................................................................................................. [29] The contract with NASC ............................................................................................................... [33] Back on budget ............................................................................................................................. [34] The MOH’s decision ..................................................................................................................... [36] Explanation for the SMT decision ................................................................................................ [38] Financial effect of SMT decision .................................................................................................. [42] Preliminary issue no 1: Breach of contract ................................................................................... [44]
THE ATTORNEY-GENERAL ON BEHALF OF THE MINISTRY OF HEALTH V IDEA SERVICES LIMITED (IN STATUTORY MANAGEMENT) HC WN CIV 2011-485-1562 [3 December 2012]
The issue ....................................................................................................................................... [44] The Tribunal’s decision................................................................................................................. [45] MOH submissions......................................................................................................................... [50] IDEA Services submissions .......................................................................................................... [53] Our assessment ............................................................................................................................. [55] Preliminary issue no 2: Who is the claim made against ............................................................... [58] The issue ....................................................................................................................................... [58] The Tribunal’s decision................................................................................................................. [59] The submissions............................................................................................................................ [61] Our assessment ............................................................................................................................. [65] The pleading ................................................................................................................................. [70] Preliminary issue no 3: did the MOH have funding responsibility?........................................... [75] The issue ....................................................................................................................................... [75] The Tribunal’s decision................................................................................................................. [76] Submissions .................................................................................................................................. [77] Consideration given to who should have funding responsibility – pre the NZPHD Act ............... [78] Funding responsibilities post the NZPHD Act.............................................................................. [91] Summary ..................................................................................................................................... [121] Discrimination ............................................................................................................................... [124] The statutory test for discrimination .......................................................................................... [124] The relevant comparison ............................................................................................................ [126]
A) The Tribunal’s decision .......................................................................................................... [128] B) The submissions ..................................................................................................................... [129] Our assessment ........................................................................................................................... [134] Differential treatment on the basis of age................................................................................... [141] A) The Tribunal’s decision .......................................................................................................... [142]
B) Submissions ........................................................................................................................... [143]
C) Our assessment ...................................................................................................................... [146] Material disadvantage................................................................................................................ [160] A) The legal test .......................................................................................................................... [160] B) The Tribunal’s decision .......................................................................................................... [162] C) Submissions ........................................................................................................................... [163] D) Our assessment...................................................................................................................... [164]
Justification.................................................................................................................................... [165] The statutory test ........................................................................................................................ [165] Was the SMT decision “prescribed by law”? ............................................................................. [167] A) The issue ................................................................................................................................ [167] B) The Tribunal’s decision .......................................................................................................... [168] C) The submissions ..................................................................................................................... [171] D) Our assessment...................................................................................................................... [174] Reasonable and justified............................................................................................................. [194] A) Deference ............................................................................................................................... [196] Did the SMT decision serve a purpose sufficiently important to justify curtailment of the right to be free from discrimination? ........................................................................................................... [206] Was the SMT decision rationally connected to its purpose?....................................................... [218] Did the SMT decision impair the right to be free from age-related discrimination no more than reasonably necessary for its purpose? ....................................................................................... [222] Was the SMT decision in due proportion to the importance of its objective? ............................. [232]
Result on Part 1A claim ................................................................................................................ [236] Costs appeal ................................................................................................................................... [237] Introduction ................................................................................................................................ [237] Discretion to award costs ........................................................................................................... [239] The Tribunal’s decision............................................................................................................... [242] Consistency................................................................................................................................. [256] Were actual costs reasonable...................................................................................................... [261] High Court scale costs ............................................................................................................... [266] Increased costs ........................................................................................................................... [269] Conclusion.................................................................................................................................. [271] Costs on this appeal....................................................................................................................... [273]
Overview
[1] Around 31,000 people in New Zealand suffer from an intellectual disability.1
Their disability means that they require support to do everyday tasks. This includes support to do activities in the community, such as to take a trip to the library or the local swimming pool. This case is concerned with the decision of the Ministry of Health (“the MOH”) not to fund the support needed for community activities (called “day services”) for people with an intellectual disability who are over the age of 65 years.2
[2] The respondent (“IDEA Services”) is a provider of those day services. It says that the MOH’s decision discriminated against those affected by the decision on the grounds of age in breach of Part 1A of the Human Rights Act 1993 (“the HRA”). The case is before us by way of appeal from the Human Rights Review Tribunal. The Tribunal found that the decision breached Part 1A. It held that the decision discriminated on the grounds of age, was not prescribed by law and was not justified. The Attorney-General appeals against that decision.
[3] The MOH’s decision arose in the context of split responsibility for the funding of services to people with an intellectual disability. One of the funders is the Ministry of Social Development (“the MSD”). The MSD is responsible for funding vocational services, which is funding intended to assist people with disabilities to engage in work or work training. As part of that funding, the MSD provides funding to support people with an intellectual disability to engage in community activities. The community activities funding is available from the MSD even if a person’s disability means that they have no prospect of ever engaging in work. The MSD funding ceases, however, when a person turns 65 years (at which point, as with the rest of the New Zealand population who turn 65, they are eligible for government
superannuation).
1 Ministry of Health Health Indicators for New Zealand with Intellectual Disability (Ministry of Health, September 2011). This may slightly understate the number because the study does not appear to include the entire New Zealand population.
2 And who do not fall within one of the specific groups for which the MOH had committed to provide funding for. This is discussed further below at [22].
[4] For some time, once a person with an intellectual disability turned 65, at least some of them would continue to receive funding for community services. Sometimes this funding continued to be provided by the MSD even though under the MSD’s criteria they were no longer eligible. However in other cases this funding came from the MOH. An issue in this case is the extent to which the MOH (or its predecessors) ever had responsibility to provide this funding and the extent to which it actually provided this funding. The MOH says that it was not given that responsibility by its Minister or Cabinet and the extent to which it provided that funding was ad hoc and inconsistent. IDEA Services says that the MOH has responsibility and that its consistent practice and policy was to provide the funding.
[5] In any case, in March 2005 a decision (the “SMT decision”) was made by a team of senior managers within the MOH (“the SMT”) that no further funding for day services was to be provided to any person with an intellectual disability who was exiting MSD funding because they had turned 65 (the “affected group”).3 The decision was made in response to MOH disability support services overspending by
$15.7 million in the 2003/2004 financial year and a projected budget overspend for disability support services of $30 million for the 2004/2005 financial year. The MOH says it was made because the senior managers believed that the MOH did not have the funding responsibility for these services. Following that decision, the
funding for day services for the affected group ceased.4
[6] The principal issues in this case are:
(a) some preliminary issues: whether the SMT decision breached the contract between the MOH and IDEA Services; whether it is only the actions and responsibilities of the MOH (rather than other government agencies or the executive) that are relevant to the claim that Part 1A of the HRA is breached; and whether the MOH had funding
responsibility for day services for the affected group;
3 The minutes of the SMT decision referred to IHC’s clients, but the SMT decision was intended to and was acted upon as a decision in respect of all people with intellectual disabilities who have exited MSD funding for vocational services because they have turned 65.
4 IDEA Services has, however, continued to fund these services from its own resources, and is claiming damages as one of its remedies.
(b)whether the SMT decision was discriminatory: is the appropriate comparator group only other groups which MOH has responsibility to fund or is it those funded by MSD who are under the age of 65; is there discrimination on the basis of age if the MOH made the decision because it understood that it did not have responsibility to fund day services for those who were no longer receiving MSD funding because they had turned 65; and is there material disadvantage to the affected group if the funding is stopped;
(c) whether the SMT decision was justified: whether the decision was “prescribed by law” because it was made under the New Zealand Public Health and Disability Act 2000 (“the NZPHD Act”); if budget constraints was the reason for the decision should the Court defer to whether the decision was a reasonable and justified limit on the right to be free from discrimination on the ground of age; and is the process by which the decision was made relevant to the level of deference appropriate.
[7] The appeal is against the Tribunal’s finding of breach, the declaration it made that there was a breach, and its decision to award costs of $165,000 in favour of IDEA Services. Other remedies are sought by IDEA Services. These have been referred to the High Court for determination in the event that the appeal is dismissed.
The facts
What is a disability?
[8] Disabilities may be physical, sensory, psychiatric, intellectual or age-related.5
A person may be considered to have a disability if they have one or more of these disabilities, which is likely to continue for a minimum of six months,6 and which
5 That is, a physical, intellectual or psychiatric condition related to the on-set of age.
6 There are varying definitions in MOH documents over the years about the period over which the disability is to extend: e.g. the 1992 “New Deal” Government Statement refers to a disability which extends “indefinitely”.
results in reduced independent functioning to the extent that ongoing support is required.7
An intellectual disability
[9] Intellectual disability is one kind of disability.8 There is a spectrum of disability within those who meet eligibility for government funded support because of their intellectual disability. However, as discussed in evidence before the Tribunal, in general terms a person with an intellectual disability is less able to self- motivate and is therefore dependent on others to organise their lives for them, is less likely to be financially independent, is restricted in mobility (being largely dependent on others to provide transport for them or to help them with public transport), and have difficulty in carrying out everyday activities, such as reading, writing, toileting
and socialising, without support.9
Disability support services
[10] Disability support services are services which are provided to people with disabilities, for their care, or to support or promote their inclusion or participation in society and their independence.10 Examples include personal care services (e.g. washing and dressing), domestic services (e.g. cooking and cleaning), rehabilitation services (e.g. speech therapy), behavioural support services (e.g. crisis intervention)
and day services (the services which are at issue in this case).
7 The New Zealand Public Health and Disability Act 2000 does not define “disability”. The description set out in the judgment is the definition in the Government’s service specification for NASCs (discussed elsewhere in this judgment).
8 There are various definitions of what qualifies as an intellectual disability. See for example the definition in s 7 of the Intellectual Disability (Compulsory Care and Rehabilitation) Act 2003
which is similar, but not identical, to that set out in the Diagnostic and Statistical Manual of Mental Disorders, 4th Ed, (DSM-IV). The criteria for an intellectual disability as set out in the Diagnostic and Statistical Manual of Mental Disorders, 4th Ed, (DSM-IV) is: (a) the person must have an IQ of 70 (+/-5) or below, placing them at or below the 2nd percentile of the population (i.e. 98 percent or more of the general population are more able than them, as assessed on culturally and age-appropriate standardised intelligence tests); (b) The person’s disability must have first occurred before the age of 18 years; and (c) The person must have deficits in two or more adaptive functioning domains listed as communication, self-care, home living, social skills, community use, self direction, health and safety, functional academics and work.
9 There was evidence before the Tribunal about this from Dr Olive Webb.
10 New Zealand Public Health and Disability Act 2000, s 6.
Day services
[11] Day services, sometimes referred to as day activity programmes or services, or community participation services,11 are a subset of disability support services. They are activities which may provide assistance to the person in recreation and leisure, socialisation, daily living skills, education and learning, exercise and fitness and vocational and work experience.12 They may teach skills or provide stimulating activity which is seen as contributing to the quality of life, wellbeing, dignity, and life purpose of those with an intellectual disability.13
[12] The day services that are usually funded tend to be group activities. They are typically provided in two sessions a day, morning and afternoon. There are some specific programmes and outings for those who are unable or do not want to take part in all ten sessions per week.
Funding for disability services
[13] The current “umbrella”14 legislation under which disability support services are provided is the NZPHD Act. The purposes of that Act include providing funding for “disability support services” in order to pursue various objectives.15 Disability
support services, as defined by the Act, includes the day services at issue here.16
11 The services are referred to as community participation services where they are available as part of the MSD (or predecessors) vocational services.
12 This description is the one provided in the service specification for IDEA Services in the
Southern region, for example.
13 IDEA Services says that those with intellectual disabilities who are seeking day services will primarily be in the category of persons who are either receiving residential support (living in a Group Home or Contract Board [where the person boards with a family, friend or others and
IHC makes boarding arrangements and provide ongoing support]) or supported independent
living.
14 Ministry of Health v Atkinson [2012] NZCA 184, [2012] 3 NZLR 456 at [6].
15 Section 3(1).
16 Section 6 defines “disability support services” as follows:
“disability support services includes goods, services, and facilities—
(a) provided to people with disabilities for their care or support or to promote their inclusion and participation in society, and independence; or
(b) provided for purposes related or incidental to the care or support of people with disabilities or to the promotion of the inclusion and participation in society, and independence of such people.”
[14] Under the NZPHD Act, the objectives to be pursued from the public funding include achieving for New Zealanders:17
(i) the improvement, promotion, and protection of their health;
(ii) the promotion of the inclusion and participation in society and independence of people with disabilities;
(iii) the best care or support for those in need of services;
[15] These and the other objectives “are to be pursued to the extent that they are reasonably achievable within the funding provided”.18 Funding is provided to persons who arrange or provide services pursuant to Crown funding agreements.19
[16] The Act provides that the Minister of the Crown who is responsible for disability issues must determine a strategy for disability support services. This is called “the New Zealand Disability Strategy”. This strategy is to provide the framework for “the Government’s overall direction of the disability sector in
improving disability support services”.20 It can be amended and replaced at any
time. The Minister is required to make the strategy publicly available and to present it to the House of Representatives. The Minister is also required to report each year on progress in implementing the strategy.21
[17] The New Zealand Disability Strategy was formulated in April 2001. The foreword from the Minister for Disability Issues said that “The Government [was] committed to the New Zealand Disability Strategy”. The Strategy included the following:
Summary
...
Underpinning the New Zealand Disability Strategy is a vision of a fully inclusive society. New Zealand will be inclusive when people with impairments can say they live in:
17 Section 3(1)(a).
18 Section 3(2).
19 Section 10. IDEA Services’ contract is a Crown funding agreement which is described in more detail below.
20 Section 8(2).
21 Section 8(4).
‘A society that highly values our lives and continually enhances our full participation.’
Achieving this vision will involve ensuring that disabled people have a meaningful partnership with Government, communities and support agencies, based on respect and equality. Disabled people will be integrated into community life on their own terms, their abilities will be valued, their diversity and interdependence will be recognised, and their human rights will be protected. Achieving this vision will also involve recognising the principles of the Treaty of Waitangi.
...
Vision of a non-disabling society
...
Disabled people are treated equitably, regardless of gender, age, cultural background, type of impairment or when and how the impairment was acquired.
...
[18] The “Government Objectives” included the following:
...
Objective 8:
Support quality of living in the community for disabled people
Provide opportunities for disabled people to have their own homes and lives in the community.
Objective 9:
Support lifestyle choices, recreation and culture for disabled people
Create and support lifestyle choices for disabled people within the community and promote access to recreation and cultural opportunities.
...
Appropriations
[19] Appropriation of public money occurs each year via Appropriation Acts. At the time the SMT decision was made “Vote Health” had an appropriation for “Disability Support Services – National” of $666,844,000 for the 2004/05 year with supplementary funding of $46,072,000 later obtained. The appropriations were derived from a document “The estimates of Appropriations for the Government of
New Zealand for the year ending 30 June 2005”. That document described the scope of the appropriation as being for the “[f]unding of disability support services from District Health Boards and other Disability Support Service Providers.” It did not otherwise breakdown how that funding was intended to be applied.22
[20] The estimates document included a “Statement of Objectives and Trends”. Under that heading “Key Government Goals” were set out as follows:
Strengthen national identity and uphold the principles of the Treaty of Waitangi – the Ministry and District Health Boards (DHBs) will recognise the principles of the Treaty of Waitangi in its policies and activities.
Restore trust in Government and provide strong social services – the Ministry and DHBs will work to ensure the public has confidence in the health and disability system through efficient, effective and safe services, which improve health and participation outcomes.
Reduce inequalities in health, education, employment and housing – the Ministry will maintain and strengthen its focus on reducing inequalities in health status across population groups.
Improve New Zealanders’ skills – the Ministry and wider sector will work to further develop the health and disability support workforce, its capability and skills.
[21] It also stated the ultimate outcome Vote Health aimed to achieve was “Healthy New Zealanders”. It then set out “Contributing Outcomes” which included “Equity and Access” with the explanation that:
New Zealanders in similar need of services have an equitable opportunity to access equivalent services and resources are allocated in a manner that reduces inequity of outcomes.
Present funding responsibilities as between government bodies
[22] The funding of day services for those with disabilities is split between different government bodies as follows:
22 This contrasts with the appropriations for MSD where allocations were made for particular programmes such as vocational services.
(a) The Accident Compensation Corporation (the ACC) is the responsible funder for those with disabilities arising from a personal injury covered by the accident compensation legislation who need day services.
(b) District Health Boards23 are responsible for funding day services for:
(i)those whose need is due to aging (they are generally, but not entirely, over 65 because the eligibility is on the basis of need due to aging not on the basis of any specific age); and
(ii) those with psychiatric illnesses or addiction issues.
(c) The MSD24 is responsible for funding “community participation services” (which are similar to day services) as part of its funding of “vocational services” for those with disabilities who are aged between
16 and 65. (This is discussed further below).
(d)The MOH is (and accepts that it is) responsible for funding day services for people with intellectual disabilities:
(i)who were deinstitutionalised as part of a formal deinstitutionalisation plan;25
(ii) who are subject to the Intellectual Disability (Compulsory
Care and Rehabilitation) Act 2003 (“the IDCCR Act”);26 and
23 Since October 2003. Before that date, the responsibility was with the MOH (following the disestablishment of the HFA and the RHAs).
24 Previously the Department of Work and Income (or DWI or WINZ) and, before that, the
Department of Social Welfare (DSW).
25 As explained in the evidence before the Tribunal, during the last 40 years the Government has moved intellectually disabled people from institutional care to community based care. When
these people were in institutional care, the Health sector was responsible for the provision of day services. In 1993 the Government decided that the Health sector would have responsibility for funding day services for intellectually disabled people who were “deinstitutionalised”.
26 The IDCCR Act provides a system for compulsory care and rehabilitation of persons who have been charged with, or convicted of, an offence.
(iii)who have very high and complex needs similar to those under the IDCCR Act, but who are not subject to that Act (whom the MOH refers to as “civil clients”).
[23] In addition the MOH has funded day services for others with disabilities, including those with intellectual disabilities who are not in the above categories. As the claim relates to funding for day services for people with intellectual disabilities, there is limited information before us about the extent to which this has occurred and
the reasons for that in relation to disabilities other than intellectual disabilities.27 The
extent to which this has occurred in relation to people with intellectual disabilities and the reasons for this are in dispute in this case. It is discussed further below.
The MOH funder/provider arrangements
[24] In accordance with the NZPHD Act, disability services are provided to people by providers who are funded by the MOH pursuant to contracts entered into by the MOH and each provider. There are approximately 800 providers of disability services to people with disabilities funded by the MOH and 93 providers28 for the provision of day services to disabled people.
[25] IDEA Services is one such provider. It is a subsidiary of IHC New Zealand Incorporated (IHC). IHC is the largest provider in New Zealand of services to people who have an intellectual disability.29 It is a not for profit organisation with a history stretching back sixty years. IHC provides services in its own name and with
its own funding, such as its advocacy and volunteer services, and it provided a range
27 A “stocktake” in 2000 which is discussed later in this judgment showed that the MOH was funding day services for some people receiving age-related services and for some people with physical or sensory disabilities but the much larger category of recipients for MOH funded day services were people with intellectual disabilities. Counsel for the MOH says that this is not surprising because the general nature of an intellectual disability is such that people with an intellectual disability are more likely to need assistance to participate in community activities.
28 As at December 2011.
29 Although it is accepted that IDEA Services is a large provider, we do not have accurate information about IDEA Services’ share of the market for the provision of services to people
with intellectual disabilities. However there is information that at some point IDEA Services provided 58 per cent of MSD funded community participation services for people with intellectual disabilities and that, of 244 people over the age of 65 years receiving MOH funded day services, IDEA Services was the provider for 161 of them. But the scope and accuracy of these figures is not clear.
of government funded disability support services through its subsidiary companies, one of which is IDEA Services.
[26] In order to receive funding, a person with an intellectual disability is assessed by a Needs Assessment Service Co-ordination Organisation (referred to as a “NASC”). There are 15 NASCs.30 They are independent organisations which assess a disabled person’s needs and prioritises those needs, and identify and co-ordinate available resources to meet the prioritised needs. If the person meets the eligibility criteria for a MOH funded service they are referred to a provider for that service.
[27] This is represented diagrammatically as follows:
Ministry of Health
(Funder)
MOH/NASC Contract
MOH/Provider
Contract
Needs Assessment/Service Co-ordination
Refer for MOH-funded service
Service Provider
[28] A provider with a contract with the MOH will not necessarily receive any funding. The funding depends on whether the provider has actually provided disability support services. For example, of the 113 contracts the MOH has in place with the 93 providers of day services,31 15 of these are “zero volume”.
The contract with IDEA Services
[29] IDEA Services provides day services under a contract with the MOH. The contract is made up of a Heads of Agreement (between IDEA Services and Her
Majesty the Queen in right of her Government in New Zealand acting by the MOH),
30 Seven are non-government organisations, one is a private company and seven are DHB owned.
31 Some providers have more than one contract.
four service schedules covering different regions throughout New Zealand32 and variations to the agreement (extending the expiry date of the agreement and setting price components for the services).
[30] Under the Heads of Agreement:
(a) “[MOH] agree to purchase and [IDEA Services] agree to provide
Services on the terms and conditions set out in the Agreement ...”
(b) IDEA Services agrees to claim payments in respect of “Services”
provided to “Eligible Persons”.
(c) Services are defined as meaning the services in the service specification schedules.33
(d)An Eligible Person is defined as meaning any individual who “is in need of the Services as determined by a DHB or DHB/MOH authorised Needs Assessment Co-ordination Service” (i.e. a NASC) and who meets the essential eligibility criteria and other criteria.
[31] At the time of the MOH’s decision at issue here, the service specification under the IDEA Services contract for each region provided under the heading “Community Day Activity Programmes”:
DSD Philosophy
The aim of the Disability Services Directorate is to build on the vision contained in the New Zealand Disability Strategy (NZDS) of a fully inclusive society. New Zealand will be inclusive when people with impairment can say they live in:
‘A society that highly values our lives and continually enhances our full
participation.’
With this vision in mind, disability support services aim to promote a person’s quality of life and enable community participation and maximum independence. Services should create linkages that allow a person’s needs to
32 Largely reflecting the regions covered by the former Regional Health Authorities (“the RHAs”).
33 These schedules include “community residential services” . There is a difference in view between the Ministry and IDEA Services as to the scope of these services as compared with the scope of day services. We are not required to decide that issue.
be addressed holistically, in an environment most appropriate to the person with a disability.
Disability support services should ensure that people with impairments have control over their own lives. Support options must be flexible, responsive and needs based. They must focus on the person and where relevant, their family and whanau, and enable people to make real decisions about their own lives.
1. Definition And Principles
The MOH wishes to purchase community day activity services for people with an intellectual disability.
The following service principles will be incorporated in the provision of support services by the Provider under this service specification:
Service users are individuals who have the inherent right to respect for their human worth and dignity
Service users have the right to live in and be part of the community
Service users have the right to realise their individual capabilities for physical, social, emotional and intellectual development
Service users have the same rights as other members of society to services, which support their attaining a reasonable quality of life
Service users have the right to make choices affecting their lives and to have access to information and services in a manner appropriate to their ability and culture
Service users have the same rights as other members of society to participate in decisions which affect their lives
Service users have the same rights as other members of society to receive services in a manner which results in the least restriction of their rights and opportunities
Service users have the right to pursue any grievance in relation to services without fear of the services being discontinued or any form of recrimination
2. Service Objectives
2.1 General
Day activity programmes will assist integration of service users into the community, enable service users to have regular meaningful social contact and improve their personal skills through provision of stimulating activities.
...
3. Service Users
Day activity services as described in this specification are for people with intellectual disabilities who have been referred to the Provider for service by a Needs Assessment Service Co-ordination Service (NASC) provider contracted by the MOH.
4. Access
4.1 Inclusions
Access to the day services described is by referral from the NASC Service following a formal individual needs assessment process. This specification relates particularly to the purchase of Day Activity programme services for people living in community settings.
4.2 Exclusions
Excluded from services under this Specification will be any individual whose primary need for support is not as a result of an intellectual disability or an individual who has a claim accepted by ACC or funded by Department of Work and Income NZ for vocational services.
4.3 Service Access
4.3.1 Entry
The NASC provider will make referral of a person requiring Day Activity programme services to the Provider. The referral will:
Be for a specific number of half days of Day Activity programmes services per week
Be in the format to be agreed between the NASC provider and the
MOH
Provide all the information required for the Provider to commence delivery of the Day Activity Programme Service
It is expected that the Provider will be able to exercise a degree of flexibility within the scope of the approved level of half days as service user’s needs fluctuate week by week. However any permanent revision to the half days of Day Activity service delivered by the Provider must be authorised by the NASC Provider.
4.3.2 Exit
People may be discharged from the service if the service no longer meets their needs, or they reach retirement age and wish to retire, or move into other forms of day activity services. Any possible discharge will be managed by the NASC provider. It is expected that subject to the Health Information Privacy Code, appropriate information will be made available to the alternative service provider so that a smooth transition will be made into alternative services.
4.4 Prioritisation criteria
In order to equitably manage available resources the MOH may from time to time advise NASC Providers (and Providers of Day Activity services), of guidelines for maximum hours per week of Day Programmes available for people with intellectual disability, and protocols for prioritisation and organisation of any “waiting list” which may be required.
[32] The service specification goes on to set out “service components”. This includes setting out the types of activities that may be part of day services. This includes “Recreation and Leisure”, “Socialisation”, “Daily Living Skills”, “Education and Learning”, “Exercise and Fitness” and “Vocational and Work experience”. Under that last heading, the service specification states:
Vocational and Work experience
For service users who would clearly benefit from such opportunities provided that:
all avenues for accessing vocational and work related services through Department of Work and Income NZ funding have been thoroughly researched and have proved to be unavailable
the Provider does not receive funding from both Community
Funding Agency and the MOH for the same programme components
The contract with NASC
[33] The MOH also has in place contracts with NASCs. The MOH issues guidelines to NASCs in respect of those contracts. At the time of the MOH decision that is challenged in this proceeding, the contracts provided that the NASC should “work within the funding and policy boundaries of the funder when allocating public resources”.
Back on budget
[34] The evidence is that by mid-2004 it had become clear that the MOH had “overspent” in respect of disability support services. For the 2003/2004 financial year, total expenditure exceeded funding by $15.7 million. Also, a $30 million overspend was projected for the coming year. Between July 2004 and March 2005, the MOH put in place a work programme called “Back on Budget” to address
overspending and projected expenditure growth. The initiatives taken to address this included:
(a) closer monitoring of NASC allocation of services;
(b)more rigorous analysis of services and the clients to whom they were provided, so the MOH could better understand demand growth issues;
(c) closer working relationships with the newer NASCs to stress their accountability to the MOH; and
(d)analysis of growing discretionary funding expenditure by NASCs and correction of trends to use it for purposes unintended by the funder.
[35] The Back on Budget programme seems to have been effective. As matters transpired Disability Support Services finished the financial year 30 June 2005 under budget by $1.077 million.
The MOH’s decision
[36] In the context of the Back on Budget programme, and in response to clarification sought by IHC (discussed below) the SMT considered the funding of day services for people aged over 65 at a teleconference on 21 March 2005. The minutes of that telephone conference call record the following:
Vocational Services for People in IHC over 65 years
Note: Further work needed to be carried out about this issue as DSD [Disability Support Directorate] does not have an up-to-date policy on this matter.
Agreed: No new referrals to be accepted. Only services already in place to continue until our position is confirmed.
[37] The “agreement” of the SMT was that NASCs were not to make new referrals for day services for people in IHC’s care who were over 65 years. This was applied to all people with intellectual disabilities over 65 years regardless of whether IHC/IDEA Services was the provider. This meant that providers (including IDEA
Services) no longer received funding for day activities for people with intellectual disabilities, once they were no longer eligible for funding from MSD for vocational services because they had turned 65. The MOH “grandparented” those who prior to March 2005 received MOH funded day services on exit from MSD funded community participation services. It regarded these as “over referrals”. It continued the funding of those who had been over-referred because this was “standard Government practice”.
Explanation for the SMT decision
[38] There is no evidence of any briefing to the SMT before the decision was made on 21 March 2005. However an internal MOH briefing to a member of the SMT dated 5 April 2005 sets out a view from within the MOH as to the historic position for funding these services. It was as follows:
Background
Vocational services are not routinely purchased by the Ministry of Health (MOH) but are purchased alongside day services of a non-vocational nature on an individual and highly variable basis. The primary responsibility for purchasing services that enable people to progress towards workforce participation has been considered to rest with the Ministry for Social Development (MSD).
However, this has not been the practice for people who have previously lived in long-stay residential institutions. In September 2003 a snapshot of day services indicated that 457 users of day services had been resettled following deinstitutionalisation. The approval of such funding was necessary to ensure that people received at least comparable levels of support when they moved from residential institutions to community-based services.
People who have not previously lived in one of the 14 residential institutions that have been closed since the late 1980’s have also been funded, often on a highly variable basis, by the Ministry of Health. Such practices have emerged in acknowledgement of the fact that MSD funded services are not always available, and when available, are not always able to provide adequate support to people with higher levels of need.
Custom and Practice
While the official position of DSD is that the MOH only routinely purchases day services for people who have relocated from long-stay residential facilities to the community, it is clear that the MOH and NASCs have established numerous precedents by funding a variety of day services for people who have not previously lived in residential institutions. Around
1550 users of MOH funded day services accessed 127 funded services in
September 2003.
The September 2003 snapshot found that approximately 70% of users of day services funded by MOH had not been resettled as a result of deinstitutionalisation. Intellectual disability was also identified in the snapshot report as the population group that represented the “vast majority of the clients” using MOH funded day services.
A common justification for MOH funding of day services is that gaps in the delivery of vocational services have created a supply shortage that places pressure on the residential service provider when residents are unable to gain access to a specialist vocational service. In such cases, MOH service managers may have encouraged NASCs to seek alternative solutions and in some instances apparently directed, NASCs to fund day service solutions from their discretionary budgets.
...
Access
...
In the absence of operational policy, service providers have interpreted the official position of MOH from informal communications received from Ministry of Health employees. Although operational policy has not been defined, it is reasonable to assume that the sector will insist that future access should be based on historical precedents that have been set.
A current claim by IHC that the funding responsibility for day service for people over 65 years of age rests with the MOH could be considered a liberal interpretation of a historical practice. Such an interpretation has originated because of a MOH practice of funding a variety of alternative day services for some people over 65 years of age who are no longer able to use MSD funded services.
[39] There was also evidence before the Tribunal from Ms Woods,34 who was part of the SMT that made the decision. She said that “[b]udget pressures informed that decision” of the SMT because the MOH needed to focus on its core responsibilities “as determined by Government.” The SMT did not view the decision as representing a change in policy or responsibilities within the MOH. She expanded on this in cross-examination as follows:
[I]t was our understanding that we were not responsible for this group and, therefore, we needed to actually limit within the bounds of what we had
already accepted and were doing, we said no more while the policy and responsibilities were resolved.
34 The Director of National Services Purchasing in the National Health Board.
...
[40] And later:
Q: And the Ministry of Health understood that [constraining the community participation opportunities available to this group] would be a consequence of its decision to chop that funding?
A: Well, it wasn’t chopping the funding, we just were more concerned that actually the quality of our 24/7 services, the residential services, and more particularly at that time the home and community services, some of which are provided to people with an intellectual disability and some aren’t, that’s people’s physical and sensory [disabilities]. They were actually in serious financial strife and under massive stress, and we actually needed to ensure that those services were operating well and so there was a compromise.
...
From my perspective the core things I needed to make sure happened is that those [residential] services were properly shored up and they were the core services I had responsibility for, and the Day Services were not the core services, but in the meantime I was concerned that we needed to get some policy work done on that so the agency [responsible] would pick that up and then start to try to address that through the policy process and through the Government budget process.
But I couldn’t, in my own conscience, continue investing money in services that I didn’t have a core responsibility for and see other services fail and risk the quality of care and support to those individuals.
[41] There was also evidence before the Tribunal from Mr Powell.35 He was the manager of the team within the MOH with responsibility for contracting with NASCs. He said that the decision to stop funding the affected group “was not driven by age”. He said the rationale was that Health should not fund something for which it was not responsible. He said the “over 65” wording was a convenient way to
describe the group that had retired from MSD funded vocational services.
35 A manager of the Service Access Team for the Disability Support Services Group in the National
Health Board.
Financial effect of SMT decision
[42] The Tribunal summarised the financial effect of the SMT decision as follows:36
In fact the number of service users whose eligibility to be considered for funding for community participation activities has been affected by the SMT decision is relatively small. At the time of the hearing37 in the Tribunal there had been 105 people who, but for the SMT decision, would have been funded by the MOH notwithstanding having ‘retired’ from the MSD (although we note that of these 15 had ‘exited’ the group, so that the number of people affected by the SMT decision at the date of the Tribunal hearing was presumably 90).
...
For present purposes, however, it is enough to note:
[a] It will take some years before the financial situation
‘matures’; in other words, before a long run pattern of demand for the services settles out. In the short term the analysis is
influenced by (for example) attrition from the group of those
whose funding has been protected by the MOH’s commitment to de-institutionalised service users, and those for whom the funding has been grand-parented;
[b] On any view, however, over the next 20 years the number of people in the group will almost certainly increase;
[c] Looking at the anticipated picture in 20 years’ time (and again focussing on people with intellectual disabilities) the MOH evidence suggests that the per annum cost of funding the community participation services at issue in this case will be in the region of $8 to $15 million, and most likely around
$12.5 million. The same analysis by Idea Service’s expert (but using the different inputs he regarded as appropriate) yielded a range between $7.4 and $8.8 million, although he went on to say that as much as $4.3 million of that will be faced in any event, so that he would have put the additional cost to the MOH at something closer to $4 million in all.
We do not find it necessary to resolve the detail of the issues between the experts. For our purposes it is enough to know that in the medium to long run (particularly when the de-institutionalised and grand-parented service users are no longer a factor) the annual cost of providing the community participation activities that we are concerned with in this case is likely to fall somewhere between about $4 million to maybe as much as $15 million (but
36 Idea Services Ltd v Attorney-General [2011] NZHRRT 11 at [40]-[44].
37 That is, for the period between 2005 and 2011.
more likely less than $12.5 million). We agree with the succinct conclusion of the expert who was called for the MOH, who said that:
“ ... I think there’s so many imponderables, ... what is important here is to get a sense of the order of magnitude, so we’re not talking about hundreds of millions of dollars, were talking somewhere in this region, I’ve put it at $12 million, perhaps it’s 8, perhaps its 15, who knows, it’s in that region, not hundreds of millions of dollars; I think that’s the useful part of this.”
In order to put these figures into perspective:
[a] In the 2009/2010 financial year the total budget available to the MOH for purchase of disability support services from District Health Boards and all third party providers was $970 million;
[b] The evidence was that in that financial year the MOH in fact spent $38.9 million funding community participation activities;
[c] 2,167 service users accessed the services thus funded
(although not all of them were Idea Services-related referrals);
[d] Of the total $38.9 million, $4.3 million was spent on:
[i] Services users who either had high and complex needs or were subject to a compulsory care order under the Intellectual Disability (Compulsory Care and Rehabilitation Act 2003);
[ii] De-institutionalised service users;
[iii] Service users referred by a Needs Assessment and Service Co-ordination agency “ ... in keeping with historic practice in some regions ...”
[iv] Service users who retired from MSD-funded community participation activities at age 65 before the SMT decision;
[e] We were given several different figures for the average cost of providing community participation activities per service user per annum, ranging from $16,170.00 to $17,150.00 (although because the system is needs based and individually assessed, the actual cost of providing the funds to individual users will vary user by user).
[43] The MOH accepts this summary but makes two additional points:
(a) the above does not refer to the Ministry’s projected overspend of its budget by $30 million. The MOH needed to cut its expenditure by
over three per cent to get back on budget and if those cuts were to be spread evenly across all services, this would mean cutting $700,000 from its day services budget; and
(b)the above costs are only part of the picture because they deal only with those who have an intellectual disability, when there is no principled basis to distinguish them from persons with other disabilities. The MOH’s expert at the Tribunal hearing gave evidence estimating the cost of providing services to all persons with a disability to be more than twice that for providing day services to only persons with an intellectual disability. After one year this would mean costs of $1,958,040 (compared with $864,801) and after twenty years
$28,552,253 (compared with $12,610,578) according to the MOH
expert’s calculations.
Preliminary issue no 1: Breach of contract
The issue
[44] The Tribunal found that, by the SMT decision, the MOH breached its contract with IDEA Services. The MOH says that the Tribunal’s finding was wrong. IDEA Services supports the Tribunal’s decision on this point. Although this is not a claim for breach of contract, the parties consider the issue needs to be addressed because it is relevant to some of the issues that do need to be determined in a claim of this kind.
The Tribunal’s decision
[45] The Tribunal saw the issue as providing relevant context. It considered the issue to have relevance to whether the conduct complained of was or was not “prescribed by law” as referred to in s 5 of the NZBORA. It saw it as potentially relevant to the issue of “deference” under the justified limb. It also saw it as relevant
in relation to relief.38
38 Referring here to the relief claimed by IDEA Services under ss 92I(a),(b),(c) and (e) of the
[46] The Tribunal’s decision was that:39
... By entering into the contract the MOH undertook to fund Idea Services to provide day services, subject only to the exclusions identified. Service users over the age of 65 who, by virtue of turning 65, are no longer eligible for vocational services paid under the MSD are not excluded. They must therefore be included.
[47] This conclusion was on the basis that the contract provides what was included (cl 4.1 of the contract) and what was excluded (cl 4.2) and nowhere in the contract is there any suggestion that persons over 65 years are to be treated any differently. The Tribunal considered that the reference to the philosophy and the principles in the service schedule demanded that cl 4 of the contract be interpreted as including eligible people who would not otherwise be funded at all. The philosophy was viewed as governing the MOH’s commitment to funding these services.
[48] The Tribunal rejected the submission for the MOH that service users who are in residential care will have their essential needs met by community residential support services funding. It noted that there are different payment schedules under the contract for community participation services and residential support services. It considered that the specification for day services was about getting service users out into the community during the day and does not include home-based daytime activities for service users. By contrast it considered that the residential services specification was about providing support to allow service users to live in homes in the community.
[49] The Tribunal concluded this topic by saying “it is our conclusion that the MOH was (and still is) obliged by the contract to fund day services for ex-MSD service users under the care of Idea Services” and that “the SMT decision was a
breach of that contract”.40
Human Rights Act 1993.
39 Idea Services Ltd v Attorney-General, above n 36, at [74].
40 At [106].
MOH submissions
[50] The MOH submits that the contract creates a relationship between IDEA Services and the MOH for the potential purchase of day services only. It submits that the contract merely establishes that IDEA Services may seek payment for services delivered according to the contract service specification once the NASC process of assessment and service co-ordination has occurred, including a proper NASC referral. It submits that the contract does not stipulate the volume of services to be provided to service users.
[51] It submits that it is the role of government policy, which NASCs are required to abide by, rather than the contract which determines whether or not the MOH is responsible for funding day services for any particular person. An obligation to fund service provision under the contract, and IDEA Services’ entitlement to claim payment for providing services, only arise following a NASC assessment and referral to the MOH for day services. This requirement is contained in the clause describing who day services are for, as well as in the clause dealing with access to day services.
[52] It submits its interpretation is supported by the exclusion provision: that is those who have a claim accepted by ACC or who are funded by WINZ (MSD) are excluded. It submits that if the contract conferred a right to funded services, then anyone who was not receiving MSD funded services, for whatever reason, would be entitled to be provided with funded services on the same basis that IDEA Services now claims for those over 65. It submits that the provision is aimed to prevent double funding not to confer entitlements.
IDEA Services submissions
[53] IDEA Services submits that under the contracts those who are over 65 were “eligible” to be considered for day services. It submits that effectively a new eligibility criterion has been introduced. The specification was not limited to the deinstitutionalised group and it did not exclude people from consideration because
they were 65 or older. Via the direction to NASCs, that has now been changed. This is said to be a breach of contract.
[54] The MOH response is that the NASC/MOH contract enables the MOH to adjust referrals based on changes to policies of funding boundaries, so that when changes occur it is not necessary to renegotiate 800 provider contracts. The terms of the NASC contract are publicly available and known to IDEA Services. The MOH submits that it is implausible for IDEA Services to expect that the MOH cannot alter the volume of services it funds via a direction to the NASCs about who can be referred for funding.
Our assessment
[55] We agree with the MOH’s submission. The contract does not commit the MOH to continuing to provide funding for day services to those who are not funded by (now) MSD or ACC. Although it is within the Disability Services Directorate philosophy to fund these services where there are “funding gaps”, that philosophy is not converted to a contractual obligation because the philosophy is set out in the contract. The philosophy serves as an explanation to the services that are to be funded under the contract.
[56] The principles set out in the contract also do not bear upon whether the MOH is contractually obliged to fund the day services. Those are principles that are said to apply to IDEA Services, as provider. They are about IDEA Services’ responsibilities, not the MOH’s commitment to funding.
[57] The contractual commitment is that if the person meets the eligibility criteria, is not funded by MSD or ACC, and is referred to IDEA Services by a NASC for one of the services in the service specification, then IDEA Services is to provide the service and the government is to pay for it. It would be a breach of contract if the MOH refused to pay for day services provided by IDEA Services to such a person. But it has always been the case that NASCs have been subject to priorities and guidelines as advised to them from time to time. That is stated in the contract and known to IDEA Services. If NASCs are advised that people over 65 years are not to
be referred for day services to providers, the contract between IDEA Services and the MOH is not breached. For these reasons, we conclude that the SMT decision did not breach the contract between IDEA Services and the MOH.
Preliminary issue no 2: Who is the claim made against
The issue
[58] This issue arises because the MOH says that the Court’s determination of whether there was a breach of Part 1A must focus on the MOH’s actions and not the Government’s actions. It says that it is not discriminatory for the MOH to stop funding services that the Government has not made it responsible to fund. It says that if there is a gap in the funding for day services for people aged 65 years or older, Part 1A does not require the MOH to fill that gap.
The Tribunal’s decision
[59] The Tribunal said that when the SMT made its decision it was acting as a body exercising a public function and Part 1A applied for that reason. It said that although the delivery of government funding will always be through specific ministries and departments “when all is said and done the anti-discrimination standard set by NZBORA and Part 1A of the HRA applies to the executive branch of
‘the Government of New Zealand’”. It concluded:41
We return to the matter below, but we will say at the outset that there must be a limit on the extent to which ‘… the executive branch of the Government of New Zealand …’ can escape responsibility for an act or omission that is in contravention of Part 1A of the HRA just because one of its agencies considers that another of its agencies should be meeting the obligation in question.
[60] The Tribunal went on to reach the view that the MOH was “the default funder” of day services for those who exited MSD funded vocational services
because they were 65.42 This meant that the Tribunal’s decision on a breach of Part
41 Idea Services Ltd v Attorney-General, above n 36, at [25].
42 At one point in the decision this was said to be “because of the contract if nothing else” (at fn
67) but elsewhere the Tribunal refers to the MOH being the “conduit through which Government
1A proceeded to focus on the MOH’s actions or omissions rather than the MSD’s or
the actions of the executive.
The submissions
[61] IDEA Services’ principal submission is that the MOH had formal responsibility to fund day services and that its decision was discriminatory because its decision created a funding gap for those aged 65 or over (this is discussed under the next heading: Preliminary Issue no 3). However IDEA Services goes on to submit that, regardless of whether the MOH/Department had formal responsibility to fund day services for those aged 65 or over, the party to this proceeding is the Attorney-General. It submits that it is the executive branch of government that is ultimately responsible for compliance with the HRA. It submits that the Attorney- General cannot seek to justify the MOH’s decision by reference to a more systemic failure by the executive.
[62] Idea Services submits that Ministry of Health v Atkinson supports this submission.43 In that case the MOH’s policy to exclude family members from payment for the provision of disability support services to their adult children was at issue. IDEA Services submits that the MOH, as the agency which gave effect to the policy, was found to breach Part 1A even though it was not the sole lead agency involved in examining the appropriateness of the policy and there had been Cabinet
and other ministerial involvement.
[63] The MOH submits that Atkinson was quite different to the present case. It says that in that case the MOH was assigned clear funding responsibility for the particular disability support services in issue by Ministers and Cabinet. Further the MOH acknowledged that it had adopted the policy.
[64] In this case the MOH submits that the Attorney-General was not facing a claim that the executive had breached the HRA. Nor was the claim made against the
Attorney-General, on behalf of the MOH and the MSD. The MOH submits that, in
funding has flowed” and it fell within the philosophy of the Disability Services Directorate and
the MOH’s wider obligations (at [129] to [131]).
43 Ministry of Health v Atkinson, above n 14.
bringing the claim against the Attorney-General on behalf of the MOH, the pleading limited the claim to actions or omissions of the MOH. The MOH further says that if this had been framed as a claim against the Government as a whole, the claim would be that there was a positive obligation on the Government to fund day services if you can “search around” and find “another government agency that will in other circumstances fund them” and “anti-discrimination law has never stretched that far”.
Our assessment
[65] We agree with the MOH that Atkinson does not raise the same point as that raised here: namely, whether our assessment of the claim must focus on MOH’s responsibilities only rather than the Government’s responsibilities. In Atkinson there was no suggestion that any other agency had funding responsibility for the affected group and, consistent with that, the only named defendant was the MOH. The Court therefore did not consider a situation where the responsibility for government funding of a particular service was split between government agencies.
[66] However we agree with IDEA Services that a claim for breach of Part 1A of the HRA does not depend only on the funding responsibilities of the MOH. It is an “act or omission of a person or body referred to in section 3 of the New Zealand Bill of Rights Act 1990” to which Part 1A of the HRA applies.44 That is, an act or omission of “the legislative, executive, or judicial branches of the government of New Zealand” is in breach if the act or omission is inconsistent with s 19 of the NZBORA.
[67] Neither party referred us to s 92B(1)(b) of the HRA. That provides that civil proceedings for breach of Part 1A that is “an enactment, or an act or omission authorised or required by an enactment or otherwise by law” is to be brought against the Attorney-General. In our view, this section is consistent with our view that it is the actions of the executive (through its departments and ministries) that are relevant
to whether a breach of Part 1A is established.45
44 Section 20I and 20J.
45 Because we did not have submissions on this section, and the matter was not an issue in Atkinson, it is unclear why in that case the named defendant was the MOH (rather than the Attorney-General on behalf of the MOH).
[68] In this case, the MOH made a decision the effect of which is that those aged
65 years or older (outside the historic categories) will not receive funding. The MOH may have considered it needed to make that decision because it had not been allocated funding responsibility for the services. But if the effect of that decision is that the Government treats those aged 65 years or older differently from those under
65 years, then the MOH’s decision is an act or omission of the executive which may be discriminatory in breach of the HRA unless it is justified (under s 5 of the NZBORA).46
[69] The question that then arises is whether the claim as pleaded was limited to a claim in respect of the acts and omissions of the MOH. As was said in Atkinson “the nature of the case the government agency is facing has to be clear” given the “potential outcome of Part 1A cases for the government.”47 It is therefore necessary to consider what was pleaded.
The pleading
[70] The claim was brought before the Human Rights Review Tribunal by way of a statement of claim. The claim48 named as the defendant “the Attorney-General, sued on behalf of the Ministry of Health, a Ministry of the Crown established under section 27 of the State Sector Act 1988.” The claim repeated this in the pleading. It further pleaded that:
(a) The MOH purchased day services from IDEA Services, including for service users aged 65 years and over from at least 1998.
(b)In 2002 IDEA Services and the MOH entered into an agreement under which the MOH purchased disability support services, including day services. The terms of this agreement were repeated and replaced
with a contract in April 2004.
46 Section 20L.
47 Ministry of Health v Atkinson, above n 14, at [63].
48 As per the Amended Statement of Claim dated 11 May 2010 which is the relevant pleading.
(c) The MOH agreed under the contract to purchase day services. From July 2002 until May 2005 the MOH complied with the terms of the contract and purchased day services irrespective of age on the basis of need.
(d)In March 2005, the MOH determined that it would not pay for day services for someone who was aged 65 years or over unless that person was already in receipt of day services from the MOH prior to this decision.
(e) This decision was made “notwithstanding that no other government agency” would pay for day services for them.
(f) The MOH’s decision created a funding gap for service users aged 65 years and over and the MOH has not devolved funding responsibility to another government agency nor finalised an alternative funding source.
(g)The MOH’s decision not to pay for day services for those aged 65 years and over distinguishes persons on the basis of age. This distinction is a prohibited ground of discrimination pursuant to s 21(1)(i)(ii) of the HRA, which is not prescribed by law, is not “expressed as an exclusion criterion in the Contract”, and is not justified in terms of s 5 of the NZBORA.
[71] Two causes of action are pleaded:
(a) The first cause of action: “... the Ministry has refused to pay for Day Services provided by IDEA Services, on the prohibited ground of age, by reason of a discriminatory interpretation and application of the Contract”;
(b) The second cause of action: “[t]he Ministry has refused to pay for, and
has omitted to resolve the funding gap caused by its refusal to pay for,
Day Services provided by IDEA Services on the prohibited ground of
age in breach of 21(1)(i)(ii) of the HRA”.
[72] The relief sought in respect of both causes of action is declarations and orders in respect of the MOH. For example, a declaration “that the Ministry’s refusal to pay for IDEA Services to provide day services to service users aged 65 years and over (unless they were existing clients of the Ministry) is unlawful under the HRA in that it amounts to unjustified age discrimination”; and an order “restraining the Ministry from continuing or repeating the breach ... or causing, or permitting others to engage in, conduct of the same kind as that constituting the breach ...”.
[73] It can be seen that, although the named party was the Attorney-General, the claim was focussed on the MOH’s acts or omissions. The claim does not, for example, plead that the executive breached the HRA through the actions or omissions of the MOH or the acts or omissions of the executive following the MOH’s decision to cease to make referrals. The claim does not challenge the MSD’s decision to fund vocational services only up to the age of 65 years
[74] We therefore consider that the question is whether, given that the MSD does not fund day services after the age of 65 years, the SMT decision (being the MOH’s acts or omissions) was a breach by the Government of its obligations under Part 1A of the HRA. We return to this issue when consider the “comparator group” issue and the question of justification
Preliminary issue no 3: did the MOH have funding responsibility?
The issue
[75] This issue arises because the MOH says it is not discriminatory for the MOH to stop funding services that the Government has not given it responsibility to fund. It says that if those aged 65 years or older had no right to day services funded by the MOH, then it cannot be discriminatory to stop that funding. IDEA Services submits that the MOH did have that responsibility.
The Tribunal’s decision
[76] The Tribunal’s view was that:
(a) The MOH had and continues to have an obligation under the contract to provide funding for day services for those who are over 65 years.
(b)More importantly the contract reflected the historical pattern of government funding for day services.
(c) “Whether the MOH likes it or not, it has been the conduit through
which Government funding for the affected group has flowed”.49
(d)The MOH decision to grandparent those already receiving funding for day services who were over 65 years was really only explained by the MOH recognising that the history of day services funding imposed some obligations on it.
(e) Even if the MOH did not have an explicit statutory or regulatory obligation to fund day services for those over 65, that funding was squarely within the philosophy of the Disability Services Directorate and the MOH’s “wider obligations in respect of disability issues”.50
(f) “[A]s a matter of past practice and the MOH’s wider obligations in respect of the delivery of disability services” the MOH “did have responsibility as the conduit for Government funding for day service users after they turned 65.”51
Submissions
[77] IDEA Services submits that since the dissolution of the HFA, the MOH has been the government agency responsible for funding day services. It says that this
49 Idea Services Ltd v Attorney-General, above n 36, at [129].
50 At [131].
51 At [133].
follows from what it says is the MOH’s “longstanding policy and practice”, the nature and extent of the MOH’s responsibilities for funding disability support services and the MOH’s contract with IDEA Services. The MOH submits that the correspondence illustrates that that there was no formal policy and that the default position was that the formal obligations of the MOH would prevail. It says that these formal obligations did not include day services funding for people exiting the MSD funding when they turned 65. We turn to consider the evidence.
Consideration given to who should have funding responsibility – pre the NZPHD Act
[78] In 1992 the Government established the Regional Health Authorities (RHAs) which would purchase health services from a range of providers. At Cabinet meetings in July 1992 the Government decided that in principle the RHAs would be allocated responsibility for purchasing disability support services. This did not include vocational rehabilitation services. At that time “vocational services” for persons with disabilities were provided by what was then the Department of Social Welfare (DSW) (now MSD). Vocational services included “community participation services”, which are similar to and are sometimes referred to as day services (discussed in more detail below). The Government set up a working group to report on the preferred agency to purchase vocational services.
[79] These Cabinet decisions were set out in an August 1992 Government statement, issued by the Minister of Health and the Minister of Social Welfare, on “Support for Independence for People with Disabilities: A New Deal”. The working group reported to Government. Its report was considered by Cabinet in December
absence of any consideration of other alternatives.
161 Ministry of Health v Atkinson, above n 140, at [284]; Child Poverty Action Group Inc v
Attorney-General, above n 96, at [224]; R v Hansen, above n 101, at [134].
162 Idea Services Ltd v Attorney-General, above n 36, at [192].
Result on Part 1A claim
[236] For these reasons we agree that the SMT decision breached Part 1A of the
HRA. The appeal is dismissed.
Costs appeal
Introduction
[237] The Tribunal awarded costs of $165,000 in favour of IDEA Services. The
MOH appeals against this award. It says that the Tribunal erred because:
(a) the Tribunal’s award bears no resemblance to prior costs awards and
therefore failed to conform to the principle of consistency;
(b)in determining a reasonable contribution to actual costs, the Tribunal failed to assess whether the actual costs incurred were reasonable;
(c) the Tribunal wrongly applied the High Court Rules costs scale for category 3C proceedings;
(d) the Tribunal failed to assess whether increased costs were justified.
[238] IDEA Services contends that there was no error in the exercise of the
Tribunal’s discretion.
Discretion to award costs
[239] The Tribunal’s power to award costs is set out in s 92L of the HRA which provides as follows:
(1) In any proceedings under section 92B or section 92E or section 97, the Tribunal may make any award as to costs that it thinks fit, whether or not it grants any other remedy.
(2) Without limiting the matters that the Tribunal may consider in determining whether to make an award of costs under this section, the Tribunal may take into account whether, and to what extent, any party to the proceedings—
(a) has participated in good faith in the process of information gathering by the Commission:
(b) has facilitated or obstructed that information-gathering process:
(c) has acted in a manner that facilitated the resolution of the issues that were the subject of the proceedings.
[240] The parties are agreed that the principles relevant to the exercise of this discretion are as summarised in Herron v Speirs Group Ltd as follows:163
(a) The discretion to award costs is largely unfettered, but must be exercised judicially;
(b) Costs in the tribunal will usually be awarded to follow the event, and quantum will usually be fixed so as to reflect a reasonable contribution (rather than full recovery) of the costs actually incurred by the successful party;
(c) The Tribunal’s approach to costs is not much different from that which applies in the Courts although, as there is no formal scale of costs for proceedings in the Tribunal (as there is in the Courts), caution needs to be exercised before applying an analysis of what might have been calculated under either the High Court or District Court scales of costs. Such an analysis can be no more than a guide.
(d) An award of costs that might otherwise have been made can be reduced if the result has been a part-success, only;
(e) Assessment of costs must take account of the relevant features of each case, but there must be some consistency in the way costs in the Tribunal are approached and assessed;
(f) Offers of settlement “without prejudice except as to costs” are a
relevant consideration.
[241] The parties are also agreed that, because this is an appeal against the exercise of a discretion, the MOH must show that the Tribunal acted on a wrong principle, took into account irrelevant factors or failed to take into account relevant factors, or
was plainly wrong.
163 Herron v Speirs Group Ltd (2008) 8 HRNZ 669 (HC) at [14].The Court also noted at [15] the observation of the Tribunal at first instance that Parliament’s conferral of its jurisdiction was in part to protect access to justice for litigants who might otherwise be deterred by the costs and complexities of proceeding in the courts.
The Tribunal’s decision
[242] The Tribunal began by noting that IDEA Services was seeking an award of costs on a reasonable contribution basis. IDEA Services submitted that an award of
$235,000 would be an appropriate contribution given that its actual costs were more than $385,000. The Tribunal noted that the MOH accepted that an award of costs would be made against it, but submitted that the proper range was somewhere between $36,500 to $43,000. The question for the Tribunal was therefore one of quantum.
[243] The Tribunal referred to s 92L and the approach to costs as set out in Herron v Speirs Group Ltd and other cases.
[244] As to the conduct of the litigation, the Tribunal said:164
Idea Services won; neither side can sensibly be criticised for the way their respective cases were presented; there is no suggestion that the hearing was lengthened unnecessarily because of any default on either side; this was an important case involving factual and legal complexities; as noted significant time was required to prepare the matter; and we do not see that either side took any points the argument of which should now count against them in the costs assessment. We also agree that costs should be assessed on the basis that Idea Services was wholly successful in its claim.
[245] On the topic of consistency with previous awards the Tribunal said this:165
The Tribunal has never before made a costs award at or anywhere near the level sought by Idea Services. As the MOH observes, the pattern of previous awards made from a reasonable contribution starting point have often worked out at about $3,750.00 per day of hearing time. In this case that would yield a figure of around $26,500. The MOH accepts however that the award in this case needs to reflect the necessity of second counsel, and that it was a complex matter. It is on that basis that the MOH suggests a range of between say 36,500 to $43,000 (we understand that $43,000 is also roughly what might have been expected if the District Court scale had been applied).
[246] The Tribunal’s view about why the costs being sought were so much higher
that other awards was as follows:166
164 Idea Services Ltd v Attorney-General (No 3) [2011] NZHRRT 21 at [66].
165 At [67].
166 At [71].
The reason why the amount of costs sought here is very much greater than any previous award is quite simply that Idea Services has had to spend an unprecedented sum of money to bring its claim. We emphasise again that there is no suggestion that the amount spent was unreasonable; it is just that this really was a complex case that raised significant issues of fact and law, all of which required careful preparation.
[247] The Tribunal agreed that awards in previous cases can be used to calculate a rough average of costs awarded per day of hearing, although said that this was no more than a factor to be used at most as a guide. It said that another approach to the same data is to look at how the costs awards that have been made on a reasonable contribution basis compare with the actual costs reported as having been incurred in those cases. Recognising that the calculation was not precise, the Tribunal said that on this approach the upshot was that historically the Tribunal had awarded an average of around 30 per cent of actual costs incurred. Applying the approximate 30 per cent of actual costs guideline, the Tribunal said that the starting point for its assessment of a reasonable contribution award would be in the order of $115,500. It said that the figure should be uplifted because it would not really have been possible to run the claim without two counsel. It considered that any uplift should be above the $10,000 that the MOH accepted under this heading because it viewed that amount as manifestly inadequate.
[248] The Tribunal recognised that there may be some who viewed historic awards as generally too low, but there were access to justice issues involved and it was important that the risk of an adverse costs award did not have too much of a chilling effect on cases that are brought to the Tribunal.
[249] The Tribunal rejected the MOH’s submission that, if the case was so complex, then the matter would have been removed to the High Court at the outset. The Tribunal noted that it had the first instance jurisdiction and that it had dealt with other complex cases without there being any suggestion in those cases that they ought to have been remitted to the High Court for a first instance decision.
[250] The Tribunal recognised that an award for costs at the level claimed by IDEA Services would be for an amount that exceeded its power to award damages. It agreed with the MOH that it should be slow to do that. It expressed no view on
whether and when it could do that because its award was well under the damages maximum in any event.
[251] The Tribunal said that the application of court scales was “at best a guide”.167
It agreed with IDEA Services that, if it was to look at court scale costs, it was the High Court scale rather than the District Court scale that was most relevant. This was because of the complexity of the case, the significance of the issues, and the effort and skill that were expended on the matter. On a 3C basis the MOH calculated that an award of costs would be about $135,000 whereas IDEA Services’ calculation was that it would have been about $165,000. On this point the Tribunal concluded
that:168
... we think that it is relevant to our assessment to know that if the case had been heard in the High Court costs would not likely have exceeded $165,000
– notwithstanding that actual costs were over $385,000. We think we would need good reason to award a figure above the highest figure that the High Court would have been likely to have awarded;
[252] The Tribunal noted the MOH’s submission that a high costs award might impact upon the work of the Director of Human Rights Proceedings. The Tribunal understood that concern but considered that the costs award should not be tailored “to provide the Director with a protection that the legislation does not confer”.169 It also considered that it did not necessarily follow that an unsuccessful plaintiff in HRA litigation would face awards at the same kind of level as an award of costs
against a government agency.
[253] The Tribunal referred to a submission from the MOH that IDEA Services was a commercial entity that brought its claim for commercial reasons. The Tribunal noted that IDEA Services was a not for profit organisation and that, in any event, even if costs should be restricted because the plaintiff was a commercial entity that was more than taken care of in this case by the Tribunal’s award representing less
than half of the actual costs incurred.
167 At [76(c)].
168 At [76(c)].
169 At [76(d)].
[254] Lastly the Tribunal referred to the matters set out in s 92L(2) of the HRA. The Tribunal described IDEA Services’ submission about this as “a bit of an afterthought”.170 Having reviewed the affidavits relating to these matters, the Tribunal considered that only s 92L(2)(c) was engaged. It said:171
... neither of the parties [h]as criticised the other for its conduct during the Human Rights Commission’s information gathering process (such as that was). But we do regard the MOH’s reluctance to really try to resolve the concerns raised by Idea Services as a matter that should be taken into account as an upward pressure in the assessment of costs to be awarded to Idea Services.
[255] The Tribunal concluded:172
In the circumstances, pursuant to s.92L of the Act we award costs to Idea
Services in the sum of $165,000.00.
Consistency
[256] The MOH submits that the Tribunal’s award was not consistent with other awards because it represented an amount of $25,000 a day, which was well in excess of previous awards. It submits that the complexity and significance of the case did not justify such a departure. It says that although discrimination is a complex area of law, this is not novel in the context of the Tribunal’s jurisdiction. It makes a comparison with Smith v Air New Zealand which was acknowledged by the Tribunal at that time as at the complex end of the spectrum, and which was widely regarded as
a test case, and where the award of costs was $16,500.173 It also makes a comparison
with a case which had the longest hearing time (eight days) and where the award of costs was $22,000.
[257] The Tribunal expressly took into account its awards in other cases. The principle of consistency does not require the Tribunal to make awards similar in quantum to previous cases without regard to the circumstances of this case. Nor does it require the Tribunal to make an award that equates to a similar rate per day of
hearing. The cases the Tribunal hears vary widely in their complexity and
170 At [78].
171 At [81].
172 At [82].
173 Smith v Air New Zealand Ltd HRRT 37/02, 4 April 2006.
significance. Complexity and significance are not accurately measured by the number of hearing days before the Tribunal.
[258] This was without doubt at the high end of the complexity and significance spectrum. As our judgment shows, the claim raised a number of difficult issues and the issues are of considerable significance to IDEA Services’ clients. The issues we had to grapple with were all issues before the Tribunal as well. The comparison with the award in Smith is not apt for the reason that the Tribunal gave – the actual costs of the defendant in that case were $60,000, whereas here they were over $385,000.
[259] The Tribunal’s approach was to look at what previous cases indicated was a reasonable contribution to actual costs. This gave it a figure of 30 per cent of actual costs which in this case would give an award of $115,000. We consider that this approach was more likely to give an accurate comparison with other cases (providing actual costs were reasonable). We consider therefore that there was no error in this approach.
[260] The Tribunal considered that this amount should be increased because of the need for two counsel. We are not sure whether the other cases involved two counsel. It appears that Smith did and that this was included in the 30 per cent average calculation which the Tribunal calculated. In any event, if the approach is to take a percentage of actual costs, the need for two counsel will be accounted for in the actual costs. We consider that in adding something for second counsel, the Tribunal was effectively double counting this factor. In this respect we consider the Tribunal erred.
Were actual costs reasonable
[261] The MOH submits that the Tribunal wrongly understood that the reasonableness of IDEA Services’ actual costs was not challenged. It submitted to the Tribunal, and it submits to us, that costs should not be set by reference to the actual costs of a large commercial law firm. It says that if a party chooses to instruct counsel from a large commercial law firm, it cannot expect the other party to pay for the additional cost in so doing. It also submits that a reasonable contribution should
be assessed by reference to deemed reasonable costs (as the High Court scale does)
and not by reference to actual costs.
[262] We agree with IDEA Services that the Tribunal had express regard to the reasonableness of actual costs. In a footnote it compared the actual costs with the MOH’s total costs of defending the matter, which were $220,000 calculated at Crown rates. We also agree with IDEA Services that the complexity and significance of the claim justified experienced counsel with special skill in human rights claims. Whether that counsel came from a large commercial law firm or the independent bar or elsewhere is beside the point providing the costs are reasonable for experienced counsel with special skill in human rights claims.
[263] We also agree with IDEA Services that the 30 per cent of actual costs was one factor that the Tribunal took into account. Guidance was also provided by considering category 3C High Court costs. As calculated by the parties, the 3C scale gave a higher figure than the 30 per cent of actual costs calculation. This indicates that actual costs were reasonable.
[264] The MOH also submits that awards of costs calculated with reference to a reasonable contribution of the actual costs charged by a large commercial law firm will put HRA claims out of reach of the citizen of ordinary means. It also submits that such awards are likely to have a chilling effect on the Director’s decision to represent complainants and potentially to affect the budget of the Office of Human Rights Proceedings.
[265] The Tribunal expressly considered this issue. In the end it considered that cost awards should not be tailored to provide the Director with a protection that the legislation did not confer. It also considered that awards of costs against a government agency would not necessarily be the same as awards of costs against unsuccessful plaintiffs. We see no error of principle in the Tribunal’s approach on this topic. Its view was not plainly wrong. We agree that costs in a particular case will depend on its particular circumstances. The Tribunal’s approach to costs in this case was appropriate.
High Court scale costs
[266] The MOH submits that the Tribunal was wrong to conclude that the High Court scale was a more appropriate guide than the District Court scale. It bases this submission on s 92Q of the HRA which limits the Tribunal’s jurisdiction to award damages or any other remedy to awards or remedies that are within the District Court. We do not accept that the jurisdiction on awards or remedies dictates the level of costs that are appropriate in any given case before the Tribunal. It is the complexity and significance of the case which provides the better guidance.
[267] The MOH submits that if High Court scale costs are to guide the Tribunal and if category 3C costs are appropriate that begs the question of why the matter is heard in the Tribunal in the first place. The MOH submits that costs awards made at this level by the Tribunal may inappropriately become a factor in a party’s decision as to whether they seek to have the claim transferred to the High Court. We do not accept these submissions. The Tribunal is a specialist jurisdiction. It is well able to adjudicate on complex proceedings in its specialist area of expertise as is illustrated
by such cases as Atkinson174 and Child Poverty Action Group Inc.175 Again it is the
complexity and significance of the claim which makes category 3C the appropriate comparator.
[268] The MOH submits that if category 3C costs are properly calculated, the amount should have been $135,975 and not $165,000. The difference is that IDEA Services’ calculation included a step which only applies if a “trial does not eventuate”. IDEA Services does not challenge this. We agree with the MOH that the Tribunal’s award has apparently adopted IDEA Services’ calculation without resolving the discrepancy in the two calculations. The Tribunal appears to have justified the use of the higher calculation because of the view it took of the MOH’s reluctance to resolve the concerns raised by IDEA Services. Given the error in IDEA Services’ calculation we consider the Tribunal was in error in adopting the higher
figure.
174 Atkinson v Ministry of Health (2010) 8 HRNZ 902 (HRRT).
175 Child Poverty Action Group Inc v Attorney-General HRRT 41/05, 16 December 2008.
Increased costs
[269] The MOH submits that the Tribunal was wrong to increase costs for the MOH’s approach to resolution of the matter. The MOH says that it did invite IDEA Services to meet to discuss its concerns. It also says that once IDEA Services filed its claim, IDEA Services refused to mediate. IDEA Services refers to the MOH’s decision to decline IDEA Services’ invitation to mediate prior to commencing the claim.
[270] We do not consider it necessary to decide whether parties should or should not have sought to resolve matters prior to the claim being commenced. Ordinarily increased costs are appropriate for post proceeding conduct rather than events prior to the proceeding being commenced. In this case the Tribunal accepted that neither party’s conduct could be criticised in relation to the conduct of the proceeding. We also note that s 92L(2)(c) is put in positive terms. That is, if a party has acted in a manner that facilitated the resolution of the issues then the Tribunal may take that into account. It does not say that if a party has acted in a manner that has not facilitated the resolution of the issues then that should be taken into account. We therefore conclude that the Tribunal was in error in finding that the MOH’s conduct
“should be taken into account as an upward pressure in the assessment of costs”.176
Conclusion
[271] We consider that the Tribunal’s award was too high because:
(a) the Tribunal took into account second counsel when that was already accounted for in its 30 per cent of actual costs calculation;
(b) the Tribunal took the upper boundary of High Court 3C costs as
$165,000 when it was not;
(c) we do not agree with the Tribunal’s view that increased costs were
warranted for MOH’s conduct.
176 Idea Services v Attorney-General (No 3), above n 164, at [81].
[272] We consider that the 30 per cent of actual (which the Tribunal accepted were reasonable) costs calculation was an appropriate one. It is slightly less than category
3C costs, but they are no more than a guide. We therefore quash the Tribunal’s
award and substitute it with an award of $115,000.
Costs on this appeal
[273] IDEA Services has succeeded on the appeal to this court. We can indicate our preliminary view that it should have an award of costs on a category 3C basis. If the parties are unable to agree costs, they may submit brief memoranda (limited to no more than 3 pages) on the issues in dispute, within two months of this judgment (to allow for the Christmas break).
Mallon J Ms J Grant MNZM Ms S Ineson QSM
Solicitors:
Crown Law, Wellington for the Appellant
Russell McVeagh, Wellington for the Respondent
- AGLC
- Attorney-General v IDEA Services Ltd [2012] NZHC 3229
- Case
- [2012] NZHC 3229
- Decision Date
CaseChat Overview and Summary
The legal issues in this case were whether the MOH breached its contract with IDEA Services, whether the MOH had funding responsibility for day services for people with intellectual disabilities over the age of 65, and whether the SMT decision was discriminatory and justified. The Court found that the SMT decision did not breach the contract between IDEA Services and the MOH and that the MOH did have funding responsibility for day services for people with intellectual disabilities over the age of 65. The Court also found that the SMT decision was discriminatory and not justified.
The Court's reasoning was based on the principles of the HRA and the NZBORA. The Court found that the MOH's decision to stop funding day services for people with intellectual disabilities over the age of 65 was discriminatory because it distinguished persons on the basis of age, which is a prohibited ground of discrimination. The Court also found that the MOH's decision was not justified under s 5 of the NZBORA because it was not prescribed by law and was not a reasonable and justified limit on the right to be free from age-related discrimination. The Court also found that the Tribunal's award of costs was too high because it took into account second counsel when that was already accounted for in its 30 per cent of actual costs calculation and it took the upper boundary of High Court 3C costs as $165,000 when it was not. The Court substituted the Tribunal's award with an award of $115,000.
The final orders of the Court were that the appeal is dismissed and that the Tribunal's award of costs is substituted with an award of $115,000. IDEA Services is entitled to an award of costs on a category 3C basis.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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