Forrest v Attorney-General of New Zealand (on behalf of the Department of Child Youth and Family Services) HC Christchurch CIV 2010-442-202

[2010] NZHC 2246

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2010-442-000202

UNDER  the Illegal Contracts Act 1970

IN THE MATTER OF     of application to set aside

Contract/Agreement

BETWEEN  BRENDON DOUGLAS FORREST Plaintiff

ANDTHE ATTORNEY-GENERAL OF NEW ZEALAND (ON BEHALF OF THE DEPARTMENT OF CHILD YOUTH AND FAMILY SERVICES)

Defendant

Hearing:         29 November 2010 (by telephone conference) Appearances: B D Forrest in person

A Williams for Defendant

Judgment:      14 December 2010

RESERVED JUDGMENT OF ASSOCIATE JUDGE OSBORNE

as to Security for Costs

[1]      Mr Forrest entered the care of Child, Youth and Family in 1999 and was discharged in 2000.  He brought civil proceedings in relation to issues as to his care against the Attorney General (on behalf of the Department) in 2007.   In 2008 Mr Forrest accepted in full and final settlement of his claim a sum of $1150, and he discontinued the proceeding.

[2]      In  the  present  proceeding,  Mr  Forrest  seeks  to  have  set  aside  the  2008 settlement agreement.

FORREST V THE ATTORNEY-GENERAL OF NEW ZEALAND (ON BEHALF OF THE DEPARTMENT OF CHILD YOUTH AND FAMILY SERVICES) HC CHCH CIV-2010-442-000202  14 December 2010

[3]      The Attorney-General applies for an order for security for costs.  Mr Forrest opposes any order.

[4]      In his same notice of application, the Attorney-General also applies for an order striking out the proceeding, but by agreement that application has been put to one side while the security for costs issue is dealt with.

Security for costs – the approach

[5]      The provisions of r 5.45(2) High Court Rules empower a Judge to order the giving of security for costs when a Judge thinks it is just in all the circumstances to do so.

[6]      In A S McLachlan Ltd v MEL Network Ltd (2002) 16 PRNZ 747 the Court of Appeal emphasised the discretionary nature of the jurisdiction and observed that it is not to be fettered by constructing “principles” from the facts of previous cases. There is no checklist of so-called principles.

Application of r 5.45 in this case

Threshold – inability to meet costs

[7]      Rule 5.45(1)(b) High Court Rules establishes as one threshold test whether there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.

[8]      Mr Forrest appropriately conceded in his submissions that the threshold test is satisfied in this case.  Mr Forrest is an inmate at Christchurch Prison, and has been imprisoned there and elsewhere recently.   In the present proceeding he received waiver of the filing fee because he satisfied the Registrar he was unable to pay it.  On

2 June 2010, in Forrest v Martin HC Christchurch CIV-2009-409-001529, Judge

Doherty, he was ordered to give security for costs.

[9]      Mr Forrest did not, in his notice of opposition, take issue with the Attorney- General’s proposition that Mr Forrest is impecunious.  Rather, he simply stated “the

defendant has other options to recover any costs if the plaintiff is unsuccessful and it is also a government department”.   Mr Forrest has not pointed to any evidence suggesting that he has any assets from which the Attorney-General could recover costs.  The fact that the Attorney-General is sued in relation to a Department does not impact on the defendant’s impecuniosity.

[10]     I am satisfied that Mr Forrest was right to concede that the threshold test was established.

The merit of the claim and its prospect of success.

[11]     The Attorney-General asserts that the case brought by Mr Forrest lacks merit. The Attorney-General notes that Mr Forrest is not represented by counsel, with the apparent implication that there is no recognition by anyone legally qualified that Mr Forrest has a tenable claim.

[12]     The merits of a plaintiff’s case are a proper matter for consideration in the context of security for costs: see Ambrose v Pickard [2009] NZCA 502. An order which prevents a plaintiff from pursuing his claim will generally be made only after consideration and a case in which a claim has little chance of success: McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA) per Gault P at [15].

[13]     The  authors  of  McGechan  on  Procedure  comment  at  HR5.45.03(2),  in relation to Meates v Taylor (1992) 5 PRNZ 524 (CA) that there is a very real limit as to how far an inquiry into the merits can be made, particularly at an early stage of a proceeding.

[14]     I turn to consider the nature of Mr Forrest’s proceeding and how it arose.

[15]    In March 2007 Mr Forrest filed a claim against the Ministry of Social Development seeking damages of $10,000 for events which he alleged had occurred while he was in the care of the Ministry.  He had entered the care of Child, Youth and Family Services in May 1999 and was discharged in September 2000.   Mr Forrest says that he has suffered mental health problems since he was three to the present time.  He says that he was diagnosed as having mental health issues while in

the care of Child, Youth and Family Services.   He was also diagnosed as having

Asperger’s syndrome in 2003.

[16]     Mr Forrest represented himself in the 2007 proceeding.   He first filed a relatively brief (six paragraph) statement of claim alleging abuse over the 1999 to

2000  period.    He  claimed  $10,000.    He  subsequently  filed  an  amended,  more detailed, statement of claim which particularised his claims and responded to the Attorney-General’s affirmative defence.  He amended his claim to seek $46,000.  He attended to these matters while an inmate at Auckland Prison, Paremoremo.   The Attorney-General filed defences at the appropriate times.

[17]     Case management conferences occurred.  The parties agreed to meet with a view to reaching a resolution outside the Court process.  Mr Forrest dealt with the procedures  in  an  articulate  manner  and  in  relation  to  the  settlement  meeting suggested that it be conducted as soon as possible to avoid delays with the proceeding.  In correspondence Mr Forrest expressed himself as “more than willing to have representatives meet with me to discuss the issues…” and expressed the desire that the meeting be arranged as soon as possible so that it did not hold up proceedings if a suitable resolution was not achieved.

[18]     In the course of his correspondence, Mr Forrest raised a further issue relating to a mountainbike which he said had been lost while in care, and for which he sought

$150.  His letters on these subjects remained detailed, articulate and courteous.  He went so far as to draft his own settlement document in relation to the $150, should it be accepted, signing his “discharge” with an acknowledgement that he had sought independent legal advice.   This letter preceded the settlement agreement by two months.

[19]     In April 2008 the settlement discussion occurred at Paremoremo Prison.  The Ministry offered $1000 in full and final settlement of the District Court claim and an additional $150 in relation to the mountainbike.  The $150 was a standalone offer, offered regardless of whether the District Court claim was settled.   Discussion occurred during the meeting in which it was confirmed that a separate claim, in relation to adoption, which Mr Forrest was pursuing against the Ministry would not

be stopped by any settlement which Mr Forrest made in relation to the District Court claim.

[20]     Five days after the settlement meeting Mr Forrest telephoned Crown counsel to accept the settlement offer.  Documents were immediately prepared and forwarded to Mr Forrest.  Approximately two weeks later Mr Forrest accepted in writing the terms of full and final settlement.  The Ministry was to pay Mr Forrest $1150 and Mr Forrest was to discontinue his proceeding with no costs.

[21]     The settlement sum was paid and the discontinuance filed in or about May

2008.

[22]     Against  this  background  I  turn  to  consider  the  basis  of  Mr  Forrest’s application to this Court to set aside the settlement agreement.

[23]     The heading to Mr Forrest’s statement of claim suggests that the claim was brought under the Illegal Contracts Act 1970.  I will return to that.

[24]     The body of the statement of claim identifies unconscionable bargain as the ground for relief.  That is detailed in this way in the statement of claim:

A.        FIRST GROUND FOR RELIEF – UNCONSCIONABLE BARGIN [sic]

20.That the agreement/contract between the defendant and the Plaintiff is an unconscionable Bargin on the basis as follows:

21.The  Plaintiff  (the  weaker  party  of  the  transaction)  was  under  a disability;

22.      That the defendant knew of the disabilities of the Plaintiff;

23.The stronger party (the defendant) has victimised the weaker party (the  Plaintiff)  in  the  sense  taking  advantage  of  the  Plaintiff’s disability and associated mental health issues and passive acceptance of it in the circumstances where it was contray [sic] to conscience that the bargin should be accepted in that there is a marked inadequacy of consideration and the stronger party knew that to be so.

24.That the unconscionable bargin in this case in that the conduct in this matter   was   victimisation,   taking   advantage   and  over-reaching against the plaintiff by the defendants employees.

[25]     In his notice of opposition Mr Forrest elaborated his grounds by noting that his claim will come down to matters of evidence at trial.   He asserted that it was tenable for him to plead that he accepted the payment by impulse as a direct result of a mental health condition.  He indicated that various reports would be submitted.

[26]   Ms Williams, for the Attorney-General, referred me to the elements of unconscionable  bargain  as  summarised  by  Tipping  J  in  Attorney-General  for England and Wales v R [2002] 2 NZLR 91 (appeal dismissed – [2004] 2 NZLR 577 (PC)). At [89], his Honour, having reviewed earlier authorities, said:

These authorities demonstrate that for a bargain to be characterised as unconscionable, and thus able to be set aside, there will necessarily be: (1) serious disadvantage on the part of the weaker party known to the stronger party; and (2) the exploitation of that disadvantage by the stronger party in circumstances amounting to actual or equitable fraud. Associated with (1) and (2) will usually, but not necessarily be: (3) some procedural impropriety, established or presumed, and attributable to the stronger party; and (4) a substantial inadequacy of consideration.

[27]     Ms Williams pointed to the documents which came into existence during the District Court proceeding and the exchanges which occurred between Mr Forrest and the Ministry.   Mr Forrest presented detailed documents and re-drafted them appropriately.  Negotiations were planned and then carried out in a timely, not hasty, manner.  Mr Forrest made reference to taking legal advice – there was no reason for the Ministry to doubt that.  There was a period for consideration of the settlement proposals after the settlement meeting.   Further time was then taken before the settlement agreement was signed and the notice of discontinuance was signed and filed.

[28]     The plaintiff then received the settlement money and has not repaid it.  Some two years later Mr Forrest applied to set aside the agreement pursuant to which he received the payment.

[29]     Linda Susan Lee, a legal executive in the Crown Law Office at Wellington, has provided an affidavit.  She deposes as to Mr Forrest’s self-representation in other litigation.   She refers to his self-representation in criminal appeals in the Court of Appeal, habeas corpus applications, civil proceedings and an application for leave to appeal to the Supreme Court.  Ms Lee referred to two judgments in particular.  She

referred to a judgment of the Court of Appeal in Forrest v R [2010] NZCA 34. She noted the Court of Appeal’s reference to the psychiatric evidence of Dr Earthrowl, who had concluded for the 2007 hearing that Mr Forrest was fit to stand trial and suffered from no major mental illness.

[30]     Ms Lee referred also to the judgment of Fogarty J in Forrest v Attorney- General HC Christchurch CIV-2009-404-006358, 30 March 2010 (judgment on an appeal from a decision of the District Court dismissing an application to bring an action in respect of bodily injury out of time).  The judgment indicates (at [16]) that Mr Forrest had relied partly on a proposition that he had been under a mental health disability up to March 2008.

[31]     In his submissions, Mr Forrest referred in some detail to the elements of unconscionability as identified in Bowkett v Action Finance [1992] 1 NZLR 449 and in O’Connor v Hart [1985] 1 NZLR 159. The law as expounded in those cases found expression in the judgment of Tipping J in Attorney-General for England and Wales – indeed, his Honour approved Bowkett and applied O’Connor.  The essence of the equitable ground of intervention remains in the unconscionability which arises when a stronger party takes serious disadvantage of the other or exploits the other’s disadvantage.  In this case the disadvantage Mr Forrest relies on is a mental health condition.  In his submissions he noted also a failure by the Ministry to advise him that he could have a support person or advocate present at the hearing.

[32]     While  any assessment  at  an  early point  of  the  proceeding  may have  its difficulties, this is a case in which I can conclude clearly that Mr Forrest’s case for setting aside on the grounds of unconscionability is weak.  The documented record of his proceedings and of his negotiations points to a person who fully understood the nature of the task he was undertaking and was competent to look after his own interests.  Nothing in the evidence he points to indicates any procedural impropriety on the part of the Ministry.  The time over which matters developed and settlement was achieved points away from impulsive reaction and reflects considered decisions. This is not to say, if the matter goes to trial, that Mr Forrest might not point to other evidence, but in the context of this interlocutory application for security for costs and

upon the basis of the evidence as it is now before the Court, his claim based on unconscionability is very weak and arguably hopeless.

[33]     I turn then to deal with the possibility of relief under the Illegal Contracts Act.  Although the Act is referred to in the heading to the statement of claim, there is in fact no foundation made for  relief under that Act in the body of the claim. Nonetheless, Ms Williams was prepared to deal with the matter upon the basis that it was at least impliedly pleaded.  For his part, Mr Forrest in his submissions made it clear  that  the  Court’s  equitable  jurisdiction  was  the  substantial  basis  of  his proceeding.  He said:

Whether the Illegal Contracts Act 1970 is the correct Act but the Plaintiff submits  that  the  Court  can  determine  the  claim  under  its  equitable jurisdiction, the Plaintiff submits the claim does not lack merit and does bare prospectus of success [sic].

[34]     After that, Mr Forrest did not further develop an illegal contract argument.

[35]     Ms Williams noted that by s 3 of the Illegal Contracts Act, the Act applies to any contract which is illegal at law or in equity.   The contract in this case was a contract in settlement or compromise of a legal claim.  Such a contract is prima facie a valid and enforceable contract at law: see Burrows Finn & Todd Law of Contract

in New Zealand (3rd  ed, LexisNexis, Wellington 2007) at 4.5.2.   There is nothing

illegal in such a contract.

[36]     Accordingly, if Mr Forrest sees fit to seek to amend his statement of claim so as to directly plead illegality under the Illegal Contracts Act, such a claim would have to be viewed on the information before the Court as hopeless.

Prolific nature of Mr Forrest’s litigation generally

[37]     The Attorney-General submitted that a further factor in favour of the granting of security is that Mr Forrest is a prolific litigant who is not legally aided and not represented by counsel.  Ms Williams pointed to Mr Forrest’s commencement of at least 38 separate civil proceedings between February 2004 and July 2010, the majority  of  which  were  withdrawn  or  discontinued  by  Mr  Forrest  or  were

unsuccessful at hearing.   The absence of legal  representation, on Ms Williams’ submission, results in a situation where proceedings with little or no prospect of success are not submitted to the professional assessment of a qualified barrister and solicitor before they are issued and pursued.

[38]     In his submissions in opposition, Mr Forrest took issue with the number of civil proceedings issued and the period over which he had pursued proceedings.  He puts the starting date of his legal proceedings as January 2007 rather than February

2004.  He accepts that he has commenced 13 private prosecutions and submits that those against officers of Corrections involved prima facie cases.

[39]     Ms Lee had referred to 17 proceedings in the District Court, 15 proceedings in the High Court, two in the Social Security Appeal Authority and four in the Human Rights Review Tribunal.   She had said that 26 of the cases involved the Crown.  Understandably, she did not go into the detail of each proceeding.

[40]     In the absence of such evidence I am not able to reach a clear conclusion as to the number or nature of all proceedings.  The existence of a significant number of them is a matter of public record through the publication of judgments.   What is clear, on any view, is that Mr Forrest frequently litigates against the Crown.  He does not dispute the fact that a significant proportion of his litigation has been unsuccessful.

[41]     The weight I attach to this factor is modest, but still to be taken into account. Mr Forrest comes to the Court as a person with a case of minimal (if any) merit.  But this is not the first or even the second or third time on which he has come to Court to address a case of minimal merit.  Access to justice issues do not weigh so heavily in such circumstances.

Lack of public interest

[42]     The  relevance  of  public  interest  was  encapsulated  by  Richardson  J  in

Ratepayers and Residents Action Association Inc v Auckland City Council [1986] 1

NZLR 746 (CA) at 750:

Any Court exercising a discretion in the interests of justice in the particular case must have regard to any public interest considerations which the litigation serves.

[43]     The Attorney-General submitted in support of the application for security for costs that there was no wider public interest in this case, nor is it a case of general importance.

[44]     Mr Forrest in his notice of opposition did not suggest otherwise.  In fact Mr

Forrest went so far as to say that the case was neither difficult nor complex.

[45]     I do not overlook the fact that the Attorney-General is sued on behalf of a Government  service.    The  proceeding  arises  however  in  relation  to  a  contract between parties, one of whom happens to be a Government service.  It is a contract in compromise of litigation.   It is essentially an issue of private law.   There is therefore  no  strength  in  any suggestion  that  an  otherwise  weak  case  should  be permitted to proceed, without security for costs, by reason of public interest or importance.

The value of the claim

[46]     I also consider it just in the circumstances of this case to have regard to what is in dispute.  What is in dispute is a contract pursuant to which Mr Forrest received

$1150.  He received it two and a half years ago and has apparently not repaid it.  It is the case that having issued his District Court proceeding for $10,000 he subsequently increased the claim to $46,000.   Within short order, however, he was prepared to settle that part of his claim for $1000.

[47]     I regard what is truly at stake as modest indeed in terms of the jurisdiction of this Court.

[48]     Mr Forrest has indicated the likelihood that he may need to call at least one expert witness in relation to his mental state.   Even were the Attorney-General to conduct a comparatively lean defence, he would still be faced with calling sufficient witnesses of fact to refute what are serious allegations to make against any party.  He will also be faced with the potential need to call expert evidence in rebuttal.

[49]     Ms Williams has perhaps modestly suggested that security should be assessed on a scale 2B basis having regard to a two-day defended hearing.   That in itself would carry an assumption of four days’ preparation for hearing.

[50]     Having regard to the time involved and the legal costs that a represented party will incur, the sheer legal costs that a plaintiff would incur if represented in the proceeding might lead a plaintiff looking at the matter in a commercial way to abandon thought of litigation.  Mr Forrest, being self-represented, does not have that further consideration and arguable discipline weighing upon him.

[51]     The fact that the litigation, leaving aside litigation risk, must be viewed as of marginal economic value is a factor I should take into account, particularly when the plaintiff’s merits are weak.

Overall balancing

[52]     None of the factors I have identified can be determinative on its own.

[53]     In this case, however, the lack of merit and the absence of any public interest strongly point towards an award of security for costs.  I acknowledge that the effect of an order for security may be in this case that the plaintiff is prevented from pursuing his claim.   In  that regard  I apply the observations of Gault  P in A S McLachlan Limited at [15] (see above at [12]).  Because the claim has little chance of success, it would be unjust to the Attorney-General if the Court were to fail to order security.

Amount of security

[54]     The fixing of the amount of security is a matter of discretion.  The amount the Court awards by way of security is not intended to a pre-estimate of the actual amount of party and party costs that might become available should the case go to trial and the plaintiff be unsuccessful.  The Court fixes the amount which it thinks fit in all the circumstances: National Bank v Donald Export Trading Ltd [1980] 1

NZLR 97 at 103; A S McLachlan Ltd at [27].

[55]     I  am  satisfied  that  in  this  case  costs  on  a  2B  scale  together  with disbursements can realistically be expected to be $32,000, if not more.

[56]     I do not consider there should be any significant reduction from an ordinary award simply because this litigant appears in person.   It is the experience of the Court that when a plaintiff appears in person it frequently complicates matters for the other party and adds to expense rather than the opposite.  However, if I am correct in my assessment that the merits of Mr Forrest’s case are weak (and that has certainly been the strong submission on behalf of the Attorney-General) then the Attorney- General may well be able to effect some savings, particularly in the area of preparation, given the confidence he can have in his case.

[57]     I would normally have been inclined to order costs of approximately 66 per cent (approximately $21,000).  In all the circumstances, I consider a just order would be $15,000 (being a little less than 50 per cent).

Staging of security

[58]     It is within the Court’s discretion to order payment of security in stages.

[59]     I  must  assume  that  the  raising  of  security  will  be  very  difficult,  if  not impossible.  It is appropriate in the circumstances of this case to order security to be paid in two tranches on separate dates.  Having regard to the fact that interlocutory attendances may be few, it is appropriate that the two tranches be $5000 initially and

$10,000 at setting down.

[60]     I do not have regard to any costs associated with the Attorney-General’s application to strike out the claim should the Attorney-General proceed with that. That would be dealt with as a separate costs event in its own right.

Orders

[61]     I order:

i)        The plaintiff is to provide security for costs in the sum of

$15,000, which sum shall be paid to the Registrar of the Court pending the resolution of this proceeding in two tranches, namely:

1.  one tranche of $5000 to be paid to the Registrar within 30 working days of this order;

2.  a second tranche of $10,000 to be paid to the Registrar within five working days after the setting down date.

ii)The  proceeding  shall  be  stayed  until  the  plaintiff  has  in relation to each tranche of security provided such security as

required.

Costs

[62]     I reserve the costs associated with that part of the application which concerns security for costs.  In my judgment it would be appropriate to dispose of any costs issues as and when the proceeding is no longer stayed.  If either party disagrees with that approach as to costs, memoranda (no longer than three pages) may be filed on

the costs issue.

Associate Judge Osborne