Karaka

[2016] NZHC 183

IN THE HIGH COURT OF NEW ZEALAND

WELLINGTON REGISTRY

CIV-2014-409-000781

[2016] NZHC 183

IN THE MATTER OF	Section 135A of the Care of Children Act 2004
AND	KARAKA

Hearing:

5 February 2016

Counsel:

K M Muller and A L Dixon for Secretary for Justice (Legal Aid Services)

No appearance for Ms Karaka K E Pearce as Amicus Curiae

Judgment:

16 February 2016

JUDGMENT OF COLLINS J

Summary of judgment

[1]                  The question posed by the case stated in the Family Court1 is answered in the following way:

The Family Court can make an order under s 135A of the Care of Children Act 2004 (the Care of Children Act) against a party who has been granted legal aid.

I also rule, however, that any order for costs under s 135A of the Care of Children Act is subject to the restrictions as to orders for costs against legally aided persons set out in s 45 of the Legal Services Act 2011 (the Legal Services Act). Thus, an order cannot

1      Re [Karaka] FC Christchurch FAM-2010-009-002916, 14 October 2014.

RE KARAKA [2016] NZHC 183 [16 February 2016]

be made under s 135A of the Care of Children Act against a legally aided person unless the circumstances are exceptional.

[2]                  The practical effect of my judgment is that persons who are in receipt of legal aid are unlikely to be subjected to an order for costs under s 135A of the Care of Children Act.

Background

Key legislative provisions

[3]                  The case stated concerns two apparently conflicting statutory provisions, namely, s 45 of the Legal Services Act and s 135A of the Care of Children Act.

[4]                  Section 45 of the Legal Services Act governs the liability of a legally aided person to pay costs.

[5]                  Under s 45(1) of the Legal Services Act an order for costs against a legally aided person must not exceed an amount that is reasonable for the person to pay in all the circumstances, including the means of all parties and his or her conduct in connection with the dispute.

[6]                  Under s 45(2) of the Legal Services Act “no order for costs may be made against a legally aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances”.

[7]                  In determining whether there are “exceptional circumstances” the Court may take into account, but is not limited to, the following conduct by the legally aided person:2

(1)conduct that causes the other party to incur unnecessary cost;

(2)failure to comply with procedural rules and orders of the Court;

2      Legal Services Act 2011, s 45(3).

(3)misleading and deceitful conduct;

(4)unreasonable pursuit of one or more issues in respect of which the legally aided person fails;

(5)unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution;

(6)any other conduct that abuses the processes of the Court.

[8]                  Under s 45(4) of the Legal Services Act, if the Court makes an order for costs against a legally aided person, it must specify the amount the Court would have ordered that person to pay if s 45 had not affected the person’s liability. If the Court does not make an order for costs because of the operation of s 45, it may make an order under s 45(5) specifying what the party would otherwise have been required to pay.

[9]                  Section 135A of the Care of Children Act was inserted by s 30 of the Care of Children Amendment Act (No 2) 2013, with effect from 31 March 2014. The section provides for three situations in which parties to proceedings under that Act are presumed to be required to reimburse the Crown a proportion of professional fees and expenses incurred and paid by the Crown. Those three situations arise where:

(1)a lawyer for a child is appointed under s 7;

(2)a lawyer assisting the Court is appointed under s 130; or

(3)reports by psychologists and other specialists are commissioned by the Court under s 133.

[10]              The fees and expenses of these services are initially paid by the Crown after which the Court is required to make an order under s 135A of the Care of Children Act unless the Court decides not to do so in accordance with the criteria set out in s 135A. Any order under s 135A(1) “must require the parties to reimburse the Crown the prescribed portion of the amount paid by the Crown”. The prescribed portion of costs

is currently set at two-thirds.3 Section 135A(2) provides that “[d]espite subsection (1) the Court may decline to make any order against a party if satisfied that the order would cause serious hardship to the party or to a dependent child of the party”.

[11]              Section 135A(3) of the Care of Children Act requires that each party “against whom an order is made” must pay an equal share of  the  prescribed  portion.  Section 135A(4) then provides that “[d]espite subsection (3)”, the Court may substitute a “different amount not exceeding the prescribed portion” if it is satisfied that, in view of the circumstances of the case (including the conduct of any party), it would be inappropriate to require the party to pay the amount payable in accordance with s 135A(3).

The proceedings

[12]              Ms Karaka was the respondent in Family Court proceedings brought under the Care of Children Act by Mr McGregor, the father of Ms Karaka’s two children. Ms Karaka was granted legal aid for the purposes of the Family Court proceedings.

[13]              The Family Court proceedings were commenced on 4 June 2014 when both children were in Ms Karaka’s care and resolved on 28 July 2014 when consent orders were made. Under those orders, one child was placed under the day-to-day care of one parent and the other child placed under the day-to-day care of the other parent. During the course of the Family Court proceedings a lawyer was appointed under s 7 of the Care of Children Act. That lawyer rendered an account of $1,346.78, which was paid by the Crown pursuant to s 131(1)(b) of the Care of Children Act.

[14]              On 22 August 2014, Ms Karaka was sent a letter by the Family Court inviting her to make a submission to the Family Court concerning her contribution towards the costs incurred by the Crown in appointing the lawyer for the children. Ms Karaka was told her share of the costs was $448.88 but that she could be subject to an order to pay the maximum allowed under the Care of Children Act, namely $897.76 which was two thirds of the total costs incurred as a result of appointing the lawyer for the children.

3      Family Courts (Prescribed Portion of Professionals’ Costs) Regulations 2014, reg 4.

[15]              Ms Karaka filed a submission opposing the making of an order against her. The information made available by Ms Karaka showed she had left New Zealand for Tasmania, leaving her children in the care of Mr McGregor. Ms Karaka explained she had gained employment in Tasmania and that her income was now $35,592 and that her net expenditure was $29,140.

[16]In the case stated, the Family Court said it could conclude:4

(1)Ms Karaka’s conduct makes it appropriate she pay the maximum allowed under s 135A(1)(a) of the Care of Children Act ($897.67); and

(2)Ordering Ms Karaka to pay $897.76 would not cause her serious hardship.

The case stated

[17]              The Family Court has not yet made any orders requiring Ms Karaka to pay anything under s 135A of the Care of Children Act. Instead, the Family Court has posed a question of law for the High Court to answer. The question is:5

Can the Family Court make an order under s 135A [of the Care of Children Act] against a party who has been granted legal aid?

[18]              The question posed by the Family Court does not completely address the issues raised by Ms Karaka’s case. I have therefore endeavoured to address the real issues raised by this case.

[19]              On 21 November 2014, Whata J directed the Secretary for Justice be served with the case stated and be provided with an opportunity to be heard. It transpired the Secretary for Justice took the lead role in presenting submissions to me. Ms Pearce, counsel appointed to assist the Court, substantially agreed with the submissions advanced on behalf of the Secretary for Justice. It was made clear that the apparent inconsistency between s 45 of the Legal Services Act and s 135A of the Care of Children Act is a source of concern for many Family Court Judges.

4      Re [Karaka], above n 1, at [8].

5 At [12].

The issues

[20]              In her submissions, Ms Muller, senior counsel for the Secretary for Justice correctly identified the real issues raised by the case stated:

(1)First, are orders for reimbursement under s 135A of the Care of Children Act orders for costs within the meaning of s 45 of the Legal Services Act?

(2)If the answer to the first question is “yes”, then does s 45 of the Legal Services Act prevail over s 135A of the Care of Children Act?

Are orders for reimbursement under s 135A orders for costs?

[21]              In Payne v Payne6 Fisher J held that the fees of counsel for the child under s 30 of the Guardianship Act 1968 fell within the definition of “costs” in s 86 of the Legal Services Act 1991. Those provisions were similar to s 45 of the Legal Services Act and s 135A of the Care of Children Act. Fisher J held that the appellant, who was in receipt of legal aid, could not be required to contribute to the fees and expenses of counsel for the child because s 86 of the Legal Services Act 1991 prevailed over s 30 of the Guardianship Act 1968.

[22]              More recently, however, in Re Hanover7 Ellis J concluded that orders to reimburse part of the fees of counsel for a child made under s 135A of the Care of Children Act are not costs for the purposes of s 45 of the Legal Services Act.

[23]              Ms Muller respectfully disagreed with the approach taken by Ellis J and submitted I should follow the reasoning of Fisher J in Payne.

[24]              To assist in understanding why I believe the analysis in Payne continues to apply I shall explain:

(1)the earlier legislative provisions analysed in Payne;

6      Payne v Payne (1997) 15 FRNZ 706 (HC).

7      Re Hanover [2015] NZHC 1945.

(2)the reasoning of Fisher J in Payne;

(3)the reasoning of Ellis J in Re Hanover; and

(4)why I prefer the approach taken by Fisher J.

Earlier provisions

[25]              Section 86 of the Legal Services Act 1991 restricted the liability of persons in receipt of legal aid to pay costs. The relevant provisions stated:

86       Liability of aided person for costs

(1)... where any person receives civil legal aid in respect of any proceedings, that person’s liability by virtue of an order for costs made against that person with respect to the proceedings shall not exceed the amount (if any) that is a reasonable one for that person to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute.

(2)... except in exceptional circumstances, the amount that a person to whom [s 86(1)] applies shall be liable to pay under any such order for costs shall not exceed the ... contribution ... that person is required to make to the [Legal Services] Board ...

[26]              In summary, a person in receipt of legal aid under the Legal Services Act 1991 could only be required to pay costs that were “reasonable” and not in excess of the contribution he or she had been required to make as a condition to receiving legal aid, unless the circumstances were exceptional.

[27]              Section 29A of the Guardianship Act 1968 authorised the appointment of counsel for a child who was the subject of proceedings under that Act and the obtaining of medical, psychiatric and psychological reports. Those appointments and reports were paid for by the Crown.8

[28]Under s 30(7) of the Guardianship Act 1968 the Court could:

… if it [thought] proper [to do so] order that any party to the proceedings … refund to the Crown such amount as the Court specifies in respect of any fees and expenses paid [in relation to counsel for the child or any medical, psychiatric or psychological reports].

8      Guardianship Act 1968, s 30(4).

Reasoning in Payne

[29]              Fisher J reasoned there could be no doubt that where an order is made that a party to custody or access proceedings under the Guardianship Act 1968 pay fees under s 30(7) of that Act then an order has been made against that person with respect to those proceedings. Fisher J proceeded to explain that:9

“Costs” certainly include conventional party and party costs. Party and party costs normally involve a contribution towards the legal fees, disbursements and witness expenses incurred by the other party. That is the most common use of the word costs but from time to time a Court also orders that a party pay or contribute towards costs incurred by the Registrar, a Court-appointed referee, a Court-appointed expert or counsel appointed to represent a class or persons under a disability. All such payments fall naturally within the expression “costs” as it is commonly used in legal circles.

[30]              Fisher J concluded that any order that a party refund the Crown for any fees incurred in relation to counsel appointed to represent a child or expenses paid in relation to medical, psychiatric or psychological reports were “costs” for the purposes of s 86 of the Legal Services Act 1991.

Reasoning in Hanover

[31]              In Re Hanover Ellis J was required to determine whether the Family Court could make an order under s 135A of the Care of Children Act to require a party who had been granted legal aid to pay part of the costs of the lawyer appointed to represent the party’s children and the costs associated with the Court obtaining a report from a psychologist.

[32]Ellis J believed the issue could only be answered in one of two ways:

(1)“either … disagree with Payne and hold that, in light of the now changed legislative context, [Payne] does not remain good law;10 or

(2)“… interpret s 135A(4) as permitting the court to order that, in circumstances where a party is legally aided (and neither exceptional circumstances nor serious hardship exist), the amount otherwise

9      Payne v Payne, above n 6, at 710.

10     Re Hanover, above n 7, at [37].

payable by that party is to be substituted with a “different amount”, namely zero, on the grounds that the operation of s 45 [of the Legal Services Act] means that it is “inappropriate” for him to pay an equal share (or, indeed, anything)”.11

I have explained s 135A(4) of the Care of Children Act in para [11]. The suggestion that an order could be made under s 135A(4) that a party pay zero or a notional sum demonstrates a practice that has evolved whereby some Family Court Judges address the inequity of requiring legally aided parties to make a payment under s 135A(1) by ordering that the party against whom the order is made pay a zero or notional sum. Ms Muller provided statistical information, which explains how this practice has developed. The information suggests that between 7 August 2014 and 15 January 2016, the Family Court made 78 orders in which the amount ordered under s 135A(1) of the Care of Children Act was just $1. Twenty-four of those 78 cases involved parties who were in receipt of legal aid. Ms Pearce, who is an experienced Family Court lawyer, explained that the statistical evidence and prevalence of low-value orders for contributions to costs is consistent with her experiences.

[33]              Ellis J rejected the second option she identified, acknowledging that it “seems contrary to Parliament’s intentions”.12 Her Honour concluded “on balance” the first option she identified was preferable and “…the words ‘order for costs’ in s 45 do not include an order for contribution made in accordance with … 135A of the [Care of Children Act]”.13

[34]As a consequence, Ellis J reasoned:14

… the Court is required to order even a legally aided party to pay an equal share of the “prescribed proportion” under s 135A unless:

(a)that party establishes serious hardship (in which case the Court has a discretion as to whether to make an order); or

(b)due to some other “circumstances of the case” it is appropriate to order that the party shoulder some greater or lesser share of the prescribed proportion.

11 At [42].

12 At [43].

13 At [44].

14     Re Hanover, above n 7, at [44].

Analysis

[35]              There was a third option available to Ellis J, namely, that the reasoning in Payne remains good law and that when s 135A of the Care of Children Act and s 45 of the Legal Services Act intersect, the latter section prevails. In my assessment, this is the correct response to the issues posed in this case. I will explain my reasons for reaching this conclusion by examining the text and purposes of the relevant legislation.

Textual analysis

[36]              I have set out the key provisions of the Care of Children Act in paras [9]-[11]. Section 142 of the Care of Children Act also assists in understanding the textual meaning of s 135A. Section 142(3) was added at the time s 135A was enacted. Section 142 of the Care of Children Act provides:

142     Costs

(1)In any proceedings under this Act, the Court may make any order as to costs it thinks fit.

...

(3)       This section is subject to sections 131 and 135.

[37]              There are three reasons why, from a textual perspective, I am satisfied orders to reimburse the Crown under s 135A(1) of the Care of Children Act are costs orders within the meaning of s 45 of the Legal Services Act.

[38]              First, as Fisher J explained in Payne, orders requiring a party to pay some or all of the costs associated with the appointment of a lawyer to represent the interests of a child, and court-appointed experts “… fall naturally within the expression “costs” as it is commonly used in legal circles”.15 The changes in terminology in the relevant sections since Payne do not detract from the continuing validity of the fundamental point made by Fisher J, namely, orders to pay the costs of a court-appointed lawyer or expert fall within the plain and ordinary meaning of the words “costs”.

15     Payne v Payne, above n 6, at 710.

[39]              Second, it is significant that the regulations prescribing the amount that a party is liable to pay to the Crown under s 135A of the Care of Children Act refer to that party’s liability as a liability to pay “costs”.16

[40]              Third, Parliament’s decision to amend s 142 of the Care of Children Act to refer to costs orders being subject to ss 131 and 135 of the Care of Children Act, suggests that professional fees incurred under those sections are “costs” under s 142 of that Act. If orders relating to expenses incurred under ss 131 and 135 of the Care of Children Act are “costs” orders for the purposes of s 142 of that Act then, logically, they are also “costs” orders for the purposes of s 45 of the Legal Services Act.

Purposive analysis

[41]              The legislative origins of s 135A of the Care of Children Act can be traced to ss 29A and 30 of the Guardianship Act 1968. Under 29A(6)(b) expert reports and fees of a lawyer appointed to represent the interests of a child were to be paid “… by such party or parties to the proceedings as the Court [ordered] or if the Court so [decided]

… be paid out of… money appropriated by Parliament for [that] purpose”. Under s 30(7), the Court could in its discretion order any party to the proceedings to refund to the Crown such amount as the Court specified in respect of any professional fees or expenses paid by the Crown.

[42]              The regime in the Guardianship Act 1968 governing orders against parties to reimburse all or part of the fees incurred by the Crown where the Court appointed a lawyer to represent the interests of a child or when commissioning an expert report were substantially replicated in the Care of Children Act when that Act was first passed.  The previous sections were s 131 (“costs of court-appointed counsel”) and   s 135 (“costs of reports under section 133”). It is relevant that both consistently used the term “costs”.

[43]              The Care of Children Amendment Act (No 2) 2013 inserted s 135A into the Care of Children Act, with effect from 31 March 2014. The amending Act arose from

16     Family Courts (Prescribed Proportion of Professionals’ Costs) Regulations 2014, reg 4: “Costs of court-appointed professionals”.

the Family Court Proceedings Reform Bill, which was split into several Bills at the Committee of the Whole House stage of the legislative process.

[44]              The purposes of the reforms heralded by the Family Court Proceedings Reform Bill included “ensur[ing] a modern, accessible, family justice system that [was] responsive to children and vulnerable people and [which was] efficient and effective”.17 The Bill established mechanisms such as alternative dispute resolution processes to encourage people to resolve their family disputes out of court. The changes introduced “aimed at ensuring that the [Family Court] system remained affordable in the future”.18 Specific measures included:

(1)raising the threshold for appointing lawyers to act for a child;

(2)restricting the roles of lawyers in court proceedings;

(3)limiting the power of the Court to commission expert reports; and

(4)amending ss 131 and 135 and inserting s 135A into the Care of Children Act.

[45]              Despite these underlying policies, there is nothing in the enactment of s 135A to suggest any change to the reasoning in Payne. The legislative history of s 45 of the Legal Services Act demonstrates the long-standing exclusion of legally aided clients from any orders for costs.

[46]              The legislative origins of s 45 of the Legal Services Act can be traced to s 17(2) of the Legal Services Act 1969, which placed restrictions on costs against legally aided parties. Those restrictions were substantially repeated in ss 86 and 87 of the Legal Services Act 1991 and ss 40 and 41 of the Legal Services Act 2000.

[47]              The policy underpinning the restrictions to costs orders against legally aided parties was explained by the Court of Appeal in Laverty v Para Franchising Ltd19

17     Family Court Proceedings Bill 2012 (2013 90-2) (explanatory note) at 1.

18     At 1-2.

19     Laverty v Para Franchising Ltd [2006] 1 NZLR 650 (CA) at [19] per McGrath J.

when it said the restrictions on costs orders against legally aided parties facilitates access to justice by restricting the amount of costs which the Court may order against a legally aided person. The Court of Appeal went on to say:20

Its effect is to reduce, although not to remove, the risk such a person otherwise faces that, despite having legal aid, if unsuccessful in the litigation, the person may be required to pay substantial costs despite having limited means. Without such protection the potential for such a costs order would deter persons of limited means from exercising their right of access to the Courts …

[48]              To facilitate access to justice, s 45 of the Legal Services Act continues to limit the circumstances in which costs orders can be made against a party who is in receipt of civil legal aid.

[49]              In summary, when Parliament passed s 135A of the Care of Children Act it appreciated that s 45 of the Legal Services Act imposed significant restrictions on orders for costs against parties in receipt of civil legal aid. Both a textual and a purposive analysis of the meaning of s 135A leads to the conclusion that orders made against a party under that section are orders for “costs” within the meaning of s 45 of the Legal Services Act. The two legislative provisions intersect. It is therefore necessary to decide which section takes precedence.

Does s 45 of the Legal Services Act prevail over s 135A of the Care of Children Act?

[50]              I shall again resort to a textual and purposive analysis to explain why I am certain s 45 of the Legal Services Act prevails over s 135A of the Care of Children Act.

Textual analysis

[51]              Given the number of Acts in force in New Zealand, it is not surprising that there are occasions in which legislative provisions conflict. I am required to find a construction that reconciles the apparent inconsistency between section 45 of the Legal Services Act and s 135A of the Care of Children Act.

20 At [19].

[52]                Section 45 of the Legal Services Act is a specific piece of legislation which applies only to persons who are in receipt of civil legal aid. On the other hand, s 135A of the Care of Children Act is a general provision which purports to apply in any case where a lawyer has been appointed to represent the interests of a child or the Court has commissioned an expert report. In my assessment, this is a case in which the maxim of statutory interpretation generalia specialibus non derogant applies. This principle is a well established method of statutory interpretation. The principle was explained by Lord Selborne in the following way when he said that:21

Where there are general words in a latter Act capable of reasonable and sensible explanation without extending them to subjects specifically dealt with by earlier legislation, you are not to hold that earlier and special legislation indirectly repealed, altered or derogated from merely by force of such general words, without any indication of a particular intention to do so.

[53]The same principle was explained in Barker v Edger, in which it was said:22

When the legislature has given its attention to a separate subject, and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provision unless it manifests that intention very clearly. Each enactment must be construed in that respect according to its own subject matter and its own terms.

[54]              Similar expressions of the maxim can be found in Blackpool Corporation v Starr Estate23 and Miller v Minister of Mines.24 A recent application was also seen in Meridian Energy Ltd v Southland District Council25 where the earlier, specific Manapouri-Te Anau Development Act 1963 displaced the later, general Resource Management Act 1991.

[55]              In summary, the effect of the earlier special Act may be looked upon as engrafting an exception on to the general words of a later Act. Applying this well accepted maxim of statutory interpretation to the circumstances of this case leads to the conclusion that when Parliament enacted the general words of s 135A of the Care of Children Act, it did not intend to derogate from the specific provisions set out in s 45 of the Legal Services Act. It is unlikely that Parliament would wish by s 135A to

21     Seward v Vera Cruz (1884) 10 App Cas 59 (HL) at 68.

22     Barker v Edger [1898] AC 748 at 754.

23     Blackpool Corporation v Starr Estate Co Ltd [1922] 1 AC 27 (HL).

24     Miller v Minister of Mines [1961] NZLR 820 (CA) at 831per Gresson P.

25     Meridian Energy Ltd v Southland District Council [2014] NZHC 3178 at [50] per Whata J.

have repealed the long-standing provision that has specifically excluded legally aided clients from an order for costs, except in exceptional circumstances.

Purposive analysis

[56]              One of the purposes of the amendments to the Care of Children Act, including s 135A was to ensure efficiencies in the Family Court.26 That objective is best achieved by an interpretation that ensures s 135A is subordinate to s 45 of the Legal Services Act.

[57]              The alternative approach has seen some Family Court Judges devising mechanisms to mitigate what might otherwise be the effect of s 135A of the Care of Children Act. The so-called “solution” developed by some Family Court Judges, in which either “zero” or nominal orders are made under s 135A of the Care of Children Act against legally aided persons is the antithesis of an efficient and effective system of justice. Ms Pearce and Ms Muller have also emphasised the practical difficulties that arise out of this alternative approach. Efficiencies in the Family Court are more easily achieved by recognising Parliament intended s 45 of the Legal Services Act would prevail over s 135A of the Care of Children Act.

Conclusion

[58]              The Secretary for Justice is correct when he submits that s 135A of the Care of Children Act must be read subject to s 45 of the Legal Services Act in order to give proper effect to both statutory provisions. This conclusion is supported by the text and legislative history of the relevant provisions as well as orthodox principles of statutory interpretation. There is nothing to suggest that when enacting s 135A of the Care of Children Act Parliament intended to dilute the well-established provisions in the Legal Services Act restricting awards of costs against legally aided parties.

[59]              I therefore conclude that s 135A of the Care of Children Act is subject to s 45(2) of the Legal Services Act. The consequence is that a legally aided party is not

26 See above at [44].

required to pay costs for court-appointed lawyers or court-commissioned reports unless the exceptions set out in s 45 of the Legal Services Act apply. 27

[60]              The Secretary for Justice has participated in this litigation as a non-party in order to resolve an important legal issue. It is not appropriate that any award of costs be made.

D B Collins J

Solicitors:

Crown Law Office, Wellington for Secretary for Justice

Reids Family Law, Lower Hutt (K E Pearce, amicus curiae appointed by the Court)

27 After the hearing Ms Muller supplied a reference to a Cabinet paper, signed by the Minister of Justice, relating to s 135A of the care of Children Act. The relevant portions of that paper confirm the conclusions I have reached: “this policy will impact on the parties who will be required to pay where they have rarely done so previously… The provisions of the Legal Services Act mean that legally aided people, those least able to afford to pay, will not be required to contribute to costs, apart from in exceptional circumstances”. Office of the Minister of Justice “Legal Assistance (Sustainability) Bill: Approval for Introduction” (19 July 2011) at [24].