Legal Services Agency v Rossiter HC Christchurch CIV 2004-409-2529
[2005] NZHC 1755
•13 May 2005
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV 2004-409-002529
BETWEEN LEGAL SERVICES AGENCY
Appellant
AND
LISA DAPHNE ROSSITER
Respondent
Hearing: 9 May 2005
Appearances: R M Taylor for Appellant
C A Gibson for Respondent Judgment: 13 May 2005
JUDGMENT OF FOGARTY J
Introduction
[1] The Agency appeals against a decision of the Legal Aid Review Panel (“the Panel”) dated 15 October 2004. The Agency had made a decision that legal aid was to be granted to the solicitors for the respondent to the maximum sum of $1,250.00 and that full repayment of the aid from the proceeds of the proceedings would be required. The Panel reversed the Agency’s decision and directed it to grant aid in the sum of $3,540.61 and to waive any requirement for repayment of that sum.
[2] Counsel for the appellant argue that the Panel has simply substituted its conclusion on the merits. The appellant argues that as well as simply substituting its own decision, and in part because of that, the Panel erred in law.
LEGAL SERVICES AGENCY V ROSSITER HC CHCH CIV 2004-409-002529 [13 May 2005]
The Panel’s power to review
[3] The Panel has limited grounds for review. They are set out in s 54(1) of the Legal Services Act 2000 which provides:
54 Grounds for review
(1) An aided person or an applicant for legal aid may apply to the Review Panel for a review of a decision of the Agency referred to in subsection (2) on the grounds that the decision is—
(a)manifestly unreasonable; or
(b)wrong in law.
The appeal to the High Court
[4]The appellant appeals under s 59 of the Act which provides:
59 Appeal on question of law
If the Agency or an applicant considers that the Review Panel's determination is wrong in law, the Agency or the applicant (as the case may be) may appeal to the High Court on the question of law, and the appeal must be dealt with in accordance with the rules of court.
Background
[5] The respondent separated in July 2003. In September/October 2003 she applied for a grant of civil/family legal aid. Initially the Agency declined to grant legal aid. On 5 April 2004 the Panel directed the Agency to reconsider the application. About 26 April 2004 the respondent reached a settlement agreement with her ex husband. On the 30th of the month she received a payment of $6,931.40 as a result of that settlement. On 23 June the respondent’s solicitor (in the jargon of the Act “the provider”) informed the Agency of the settlement and confirmed that all matters had been settled.
[6] In a letter dated 6 July the Agency granted legal aid for ten hours. A condition of the grant was that the proceeds from the proceedings were to repay the Legal Services.
[7] On 13 July counsel for the respondent applied for a reconsideration of the Agency’s decision. In that reconsideration the first reason in the form was as follows:
Given delay in receiving advice that [legal aid] granted (ie applied in October 2003) & now matters have progressed & been resolved – consider aid needs to be increased to time spent.
That reason was elaborated upon in an accompanying letter dated 13 July. That letter also included an application for relief from the requirement that their client be required to pay the costs of legal services, on the grounds of hardship. It informed the Agency that the proceeds were dispersed to Mrs Rossiter on 30 April 2004.
[8]On 19 July the Agency issued a decision reaffirming the decision of 6 July:
LEGAL AID 03C058633 Lisa Daphne Rossiter
in the matters(s) of Custody/Access, Property – Other
A senior grants officer who was not involved in the original decision has carried out your client’s request for reconsideration and the following decision was made.
The previous grants officer’s decision to refuse amendment under section 24(1)(c) of the Legal Services Act 2000 has been upheld. The Agency has no discretion under the Act – please refer to the High Court decision in Mansell v LSA (Wellington AP261/02), 5 May 03.
It is noted that Relationship Property matters were resolved on 26 April 2004 and Ms Rossiter was entitle (sic) to receive $6811.72. Counsel advised that proceeds received amounting to $6931.40 has already been disbursed to Ms Rossiter.
There are two main areas of concerns:
1 - Approximately, two weeks after counsel lodged an application for a Review of the decision to Legal Aid Review Panel, matters were resolved and client had a changed (sic) of circumstances. She was to receive
$6811.72 which is well above the costs of services. Counsel failed to advise the Legal Aid Review Panel nor the Agency of these changes as per section 22 of the Act. The infromation (sic) was only provided when the Agency requested verification and confirmation of debts and the mortgage for the Property on 24 June 2004.
Secondly, counsel is well aware that as a condition of the grant if approved would be that the legally aided person would repay from the any (sic) settlement the costs of services. Cousel (sic) had an obligation to protect the interest of the Agency.
In view of the above, the Agency has approved your final invoice dated 08/07/04 for $3540.61 at the reduced balance of $1250.00 being the balance
of aid available. Payment of this account will be made when the Agency receives the repayable from settlements the amount of $1250.00.
Given the restrictions and inability of the Agency to excercise (sic) discretion under section 24(1)(c), approval is given for counsel to seek the balance of legal costs directly from your client.
We have advised your client to discuss the options of reconsideration and/or review if they are dissatisfied with this decision. An application for reconsideration is sent to the Agency and we request this is done as soon as possible. An application for review must be made within 20 working days from the date of this letter, although late applications may be considered by the Panel Convenor upon request.
[9] In reply on 22 July, the solicitors for the respondent sought reconsideration. They took issue with the application of s 24 pointing out that it only applies after legal aid is granted. They also took issue with the proposition that they were under an obligation to retain the proceeds received from the settlement, because legal aid had not been granted. They said to do so would be contrary to the rules of professional conduct for barristers and solicitors. Materially, thirdly they also submitted that the Agency had not appropriately considered s 37 of the Act in respect of the hardship point.
[10]On 30 July the Agency issued another decision as follows:
LEGAL AID 03C058633 Lisa Daphne Rossiter
in the matter(s) of Custody/Access, Property – Other
I refer to your letter of 22 July 2004 and interpret that as containing a request for the Agency to write off the contribution imposed, pursuant to S.37 Legal Services Act 2000. Despite your comment, your letter of 23 June 2004 did not include such request.
We have considered your request to write-off the debt your client owes the Agency. We have not approved it because the Agency does not accept that enforcement of the debt would cause hardship to your client, nor does the Agency consider that justice and fairness would best be served by writing off the debt.
The amount of the debt to the Agency is less than one-quarter of the amount which your client received from the proceedings which were funded by the Agency and at all times your client was informed that a repayment would be required from any money she received as a result of her case.
We have advised your client to discuss the options of reconsideration and/or review if they are dissatisfied with this decision. An application for reconsideration is sent to the Agency and we request this is done as soon as possible. An application for review must be made within 20 working days
from the date of this letter, although late applications may be considered by the Panel Convenor upon request.
Decision of the Panel
[11] The respondent sought a review by the Panel of the decisions dated 19 and 30 July. Although it is not immediately apparent the Panel treats the application as for the review of the decision of the Legal Services Agency released on 6 July 2004 and as reconsidered and confirmed by the aforesaid letters of 19 and 30 July 2004. Paragraph [1] of the Panel’s decision under the heading Introduction refers to all three determinations and the language employed in paragraphs [9], [10] and [11] reflects the reasons and arguments before and in the reconsideration determinations of 19 and 30 July.
[12]The reasons for the Panel’s decision are contained under the heading
Discussion in three paragraphs:
[9]There seems little doubt the delay in the granting of aid was not due to any fault on the part of either the Applicant or her listed provider. Application for aid was made in October 2003, some six months before the matter was settled. The Applicant acted in a timely fashion in seeking a review of the decision to decline aid. The Panel’s decision was delivered without undue delay, and it was not until 6 July 2004, some 9 months after aid was originally applied for that it was granted. In these circumstances it seems manifestly unreasonable to penalise the listed provider by requiring that she be paid at guideline rates. Had aid been granted at a much earlier stage, then the listed provider would have had an opportunity to apply for an amendment to the grant to seek payment over the guideline rate. It is trite to say that no amendment to the grant of aid could be made until such time as aid was granted.
[10]On the issue of the applicability of s.32 of the Act, the Panel’s view is that the Agency is wrong in law when it asserts that, “The requirement for repayment from the proceeds of proceedings …is a statutory requirement under s.32…and is a condition of every grant of aid.” Section 32 does not require that money paid under a grant of aid must be repaid from the proceeds of proceedings. It creates a charge in favour of the Agency over “(a)ny unpaid contributions” (s.32(1)(a) and “(t)he repayment payable under the grant” (s.32(b)). The charge may be waived (s.33). In this case it was manifestly unreasonable for the Agency to make it a condition of the grant that full repayment of the legal aid expenditure would be required. By that stage the modest proceeds of the settlement had already been disbursed to the applicant (as they were required to be). Section 32 of the Act assumes that the property sought in the proceedings for
which aid was applied, has yet to be recovered. It may be ineffective in law where delays in processing an application for aid mean that money has been recovered and distributed before aid has been granted.
[11]The listed provider referred to the hardship which would be occasioned to the Applicant if she was required to repay the grant of aid, and whilst no details as to how that hardship would be occasioned, the Panel is prepared to accept, having regard to the financial details provided by the Applicant in support of the original grant of aid, that that submissions is well-founded, as her financial circumstances are clearly modest. The Panel is satisfied that the Agency has not properly exercised its discretion under s.37 of the Act, and has not appropriately considered the issue of hardship to the Applicant and justice and equity overall. In its letter of 30 July the Agency indicated that the issues of hardship, justice and equity were outweighed by the fact that the amount of the debt was one-quarter of the amount received and that the Applicant had been informed that repayment would be required. The difficulty for the Agency with that submission is that at the time aid was granted the Applicant had already been paid the proceeds.
Grounds of appeal
[13]There are four grounds of appeal:
1.The Panel erred in law in holding in paragraph [9] that the Agency was manifestly unreasonable in paying the provider only at guideline rates when the grant of aid had been delayed. A decision on whether to pay above guideline rates is made on the particular circumstances of the case, ie whether there are any complexities or factors which make the case more time consuming, such as a disability on the part of the client. No evidence of any such complexity has been given to either the Agency or the Panel. It cannot be regarded as a penalty to pay maximum guideline rates to a provider.
2.The Panel erred in law in holding in paragraph [10] that the Agency was wrong in law when it [the Agency] asserted that:
“The requirement for repayment from the proceeds of proceedings … is a statutory requirement under s32… and is a condition of every grant of aid.”
The Panel correctly stated that s32 does not create a requirement for repayment but creates a charge in favour of the Agency over “the repayment payable under the grant”. However the Agency’s statement that repayment from proceeds of proceedings is a condition of every grant of aid is legally correct and is not an error of law. It is established by s15(2). The reference to s32 rather than s15(2) by the Agency is merely a technical error, not an error of law.
3.The Panel erred in law in holding that it was manifestly unreasonable for the Agency to make it a condition of the grant that full repayment of the legal aid expenditure from the proceeds would be required, without giving any reason except that the applicant had already received the proceeds.
4.The Panel erred in law in holding that the applicant would suffer hardship if required to repay, when no details of any hardship were before the Panel. There is no chain of reasoning between the finding that the applicant’s circumstances were modest and the finding by the Panel that it was satisfied that the Agency had not properly exercised its discretion under s37 and not appropriately considered the issue of hardship to the applicant and justice and equity overall.
Subject matter of the review
[14] The Panel was correct to consider that it was being asked to review the decisions of the Agency dated variously 6, 19 and 30 July. The formal application for review sought a review “of decision of the Legal Services Agency dated 19 & 30 July”.
[15] The first of these decisions of 19 July was a reconsideration of the first decision of 6 July. That decision itself was a reconsideration of the original decision following a successful review. The importance of the decision of 6 July is that it provided for aid for ten hours to recover relationship property and custody and access matters. It recorded “this should be sufficient given that agreement has now been reached”. The decision of 19 July confirmed that judgment. Implicit in the application to review the decisions of 19 and 30 July was also a review of that decision of 6 July. Effectively, the reconsiderations of 19 and 30 July were intended to and did reinforce the reasoning of 6 July though they also made some additional determinations which are not the focus of the review. For example the Agency approved the calculation of the final invoice for $3,540.61. That approval is contained in the decision of 19 July.
First ground of appeal
[16] The decision to pay the provider for ten hours was made on 6 July and confirmed on 19 July. On 19 July the Agency refused to consider the merit of
paying for a higher number of hours and the invoice for those hours for $3,560.41. The Agency considered it had no discretion under the Act to consider that because s 24(1)(c) of the Act applied.
[17]Section 24 of the Act provides:
24 Application for amendment to grant of legal aid
(1)An application for amendment to a grant of legal aid—
(a)must be made by either the aided person or the lead provider; and
(b)must be made in the prescribed manner to the Agency; and
(c) may be made at any time before the matter to which the application or grant relates is finally disposed of by the relevant body.
(2) Following an application for amendment to a grant of legal aid, the Agency may, subject to section 27, confirm the grant, or may amend it in any manner consistent with this Act and any regulations made under it.
[18] The Agency’s logic proceeded plainly on the basis that no application for an increase from the sum already sought could be made after the settlement of this dispute on 27 April. The Agency assumed that within the concept of “finally disposed by the relevant body” is the concept of settlement. It is not necessary to decide whether that is right. For s 24 only applies to applications for amendment to an existing grant of legal aid.
[19]Section 12 provides:
12 Application for grant of legal aid
An application for a grant of legal aid—
(a)must be made in the prescribed manner to the Agency; and
(b) must include a statement of financial means in a form prescribed by the Agency; and
(c) may be made at any time before the matter to which the application relates is finally disposed of by a court or tribunal.
[20]Section 14(1) provides:
14 Decision on application for legal aid
(1) On an application for legal aid, the Agency may, in respect of the whole or any part of the proceedings or appeal,—
(a)grant legal aid to the applicant; or
(b) grant legal aid on an interim basis pending further consideration of the application; or
(c) request further information from the applicant, the proposed lead provider, or both; or
(d)decline the application.
[21] The Agency’s decision is then capable of being reconsidered. Section 29 provides:
29 Reconsideration
(1) An aided person, or an applicant for legal aid, who is aggrieved by a decision of the Agency that affects the person, may apply to the Agency for a reconsideration of the decision.
(2) When the Agency receives an application for a reconsideration, the decision must be reconsidered by a person other than the person who made the original decision, and the person doing the reconsideration may take into account any new or additional information supplied by the person applying for the reconsideration.
(3) The Agency may decline to reconsider a decision if the Agency has already reconsidered that decision or a decision relating to substantially the same issue.
[22] It may be noted that s 29(2) enables the person doing the reconsideration to take into account any new or additional information.
[23] The reason why Parliament allowed new or additional information to be taken into account in a reconsideration is not difficult to discern. The subject matter is an application for legal aid by a person who is asserting insufficient means to pay for legal representation out of his or her own pocket. A person’s means and circumstances can change from time to time. These circumstances can change in the course of the process towards a decision. It is implicit in s 12 that Parliament plainly intends that all decisions on an application for a grant of legal aid to be made against
a reliable understanding of current financial means. There is an implicit obligation in s 12 that an applicant should advise the Agency if the statement of financial means becomes materially out of date before the Agency decides on the grant of legal aid. For example, should an applicant receive a windfall bequest after signing a statement of financial means and before the grant of legal aid, there is naturally an obligation to so advise the Agency. By corollary, should the applicant’s financial means worsen the applicant is entitled to submit an amended statement of financial means bringing the Agency up to date prior to decision. The improvement or deterioration of financial means can and should be advised in the course of an application for reconsideration. Section 29(2) reinforces this obligation. This interpretation is consistent with s 22, which requires an aided person to advise any change in disposable income or capital, after the grant of aid.
[24] Associated with the improvement or deterioration of financial means there must be concomitantly the ability to amend the application as to the amount of legal aid required. The correct interpretation of s 12 and 29 is that while the outcome of an application for grant of legal aid is not finally resolved by the Agency the applicant has the ability to amend not only the statement of financial means (and may have a duty to do so) but also the amount of aid sought.
[25] In this case the application on 13 July for reconsideration of the decision of 6 July included, as described above, an application for recovery of the value of the actual hours of attendance exceeding ten, and justifying an invoice for $3,540.61. That application was enabled by both ss 12 and 29 of the Act.
[26] The Agency erred in law on 19 July thinking it had no ability under the Act to entertain the merit of that application. The Agency was in error of law in thinking that the only way such an application could be made was under s 24. Section 24 addresses the circumstance where there has been a grant of legal aid and where there is no outstanding reconsideration process. In this situation the Agency has completed its task, so there is no live application which is capable of being amended. Section 24 enables a new application.
[27] The Panel, in paragraph [9] of its decision, proceeded on the basis that the refusal of the Agency to consider increasing the grant of aid was manifestly unreasonable; saying that that was because the grant of aid had been delayed. The Panel’s thinking was also infected by the mistake of law as to the ability to amend applications.
[28] This Court is dealing with the unusual circumstance where both the Agency and the Panel are in error of law, but where it is plain that the Agency decision is in error of law and for that reason is also manifestly unreasonable. For this error of law led the Agency to refuse to consider the merit of the application. The Panel came to the right decision but for the wrong reasons. As the Panel came to the right conclusion the fact that its reasons were wrong is irrelevant. The first ground of appeal fails.
Second ground of appeal
[29] Paragraph [10] of the Panel’s decision is wrong when it records the Agency as asserting in its decision reliance on s 32. None of the decisions of the Agency refer to s 32. Paragraph [10] is in fact responding to a submission made by counsel for the Agency on appeal. That submission itself was in error. The requirement for repayment from the proceeds of proceedings is imposed by s 15(2) of the Act. Section 15(2) provides:
15 Conditions on grant of legal aid
…
(2) Every grant of legal aid in respect of civil proceedings is subject to the condition that the aided person will repay to the Agency, out of the proceeds of proceedings (if any), the repayment payable, calculated in accordance with section 18(1).
[30]Section 18(1) provides:
18 Amount of repayment payable
(1) The repayment payable under section 15(2) by an aided person is the cost of services, as defined in subsection (2), minus—
(a)any contribution paid or payable by the aided person; and
(b) any deductions allowed by the Agency in accordance with this Act or any regulations made under this Act; and
(c)any write-offs allowed by the Agency under section 37.
[31] There is no issue of the applicability of s 32 arising on the application for review. The only material in paragraph [10] which is relevant to the review by the Panel is the observation in these two sentences:
… In this case it was manifestly unreasonable for the Agency to make it a condition of the grant that full repayment of the legal aid expenditure would be required. By that stage the modest proceeds of the settlement had already been disbursed to the applicant (as they were required to be).
[32]The second ground of appeal goes nowhere, and consequently fails.
Third and fourth grounds of appeal
[33] The third and fourth grounds of appeal both challenge paragraph [11] of the decision and the conclusion by the Panel that the Agency did not properly exercise its discretion under s 37 of the Act.
[34] The Panel is obliged to give a brief summary of reasons. Section 57(3) provides:
57 Determination of review
…
(3)Every determination by the Review Panel must be accompanied by a brief summary of the reasons for it.
[35] If a Panel decision does not contain an adequate summary that is of itself an error of law, sufficient for the purposes of empowering the High Court to set aside the Panel’s decision. See LSA v A and O (High Court, Christchurch, CIV 2003-409- 587 and 588, 22 May 2003, John Hansen J).
[36] In this case the relevant facts were that the applicant had received from the settlement the sum of approximately $6,900 on 30 April 2004. The legal aid invoice was approved at $3,540.61 on 19 July. The application for relief under s 37 was
made, clearly, on 24 July, if not before on 13 July. It is reasonable to presume that the applicant having already been paid the proceeds and being a person of modest circumstances had used the proceeds. The proceeds have probably been used to pay bills.
[37]Section 37(1) provides:
37 Agency may write off amounts payable
(1) The Agency may write off all or any part of a contribution or repayment payable to the Agency by an aided person in any of the following circumstances:
(a) enforcement of the debt would, in the opinion of the Agency, cause hardship to the aided person:
(b) enforcement of the debt would jeopardise a reconciliation between parties to proceedings referred to in paragraphs (a), (b), or (c) of the definition of civil proceedings in section 4(1):
(c) the cost to the Agency of enforcing the debt is likely to exceed the amount of the debt:
(d) the Agency considers that justice and fairness would best be served by writing off the debt.
[38] The Agency decision of 30 July offers two reasons why the Agency does not write off amounts payable. (It needs to be kept in mind also that on 30 July the Agency was proceeding on the basis that it had not lifted the amount of aid allowed to be funded from $1,250.) The reasons of the Agency are:
The amount of any debt to the Agency is less than one-quarter of the amount which your client received from the proceedings which were funded by the Agency and at all times your client was informed that a repayment would be required from any money she receives as a result of her case.
[39] This reasoning goes to the consideration s 37(1)(d) of justice and fairness. It does not go to the question of hardship.
[40] Whether or not enforcement of debt would cause hardship is a question of fact, unaffected by any moral judgment as to earlier conduct which may have led to assets being dissipated. It is a question which examines the effect of enforcement of a debt by legal process on the aided person. That effect depends on what assets remain to be taken in satisfaction, or what income stream is available to be tapped,
and the needs of the aided person, and that person’s dependants. Hardship has nothing to do with the relative proportion of the sum being sought to be enforced against the total amount received, if the amount received has already been spent. Hardship has nothing to do with whether the aided person had an earlier opportunity, not taken, of setting money aside to allow for the contingency of the enforcement of the debt. If both these issues of relativity and earlier information are introduced into the analysis of hardship they bring in irrelevant values judging the prudence or lack of it of the aided person.
[41] The decision of 30 July of the Agency does not reveal any appropriate consideration of hardship. So the Panel was entitled to come to its view that the Agency did not appropriately consider the issue of hardship to the applicant. The Panel explained sufficiently its reasons by reiterating the basic facts that the applicant’s circumstances were clearly modest and the applicant had been paid the proceeds much earlier. The obvious inference from the combination of these two facts is that upon the probabilities the settlement money would not be sitting in the bank, to be collected upon the enforcement of the debt. The Panel’s decision is supported by adequate reasoning. There was no other error of law asserted.
[42] Having correctly identified manifest unreasonableness the Panel was entitled to either modify or reverse the decision under review or send it back to the Agency for reconsideration. See ss 57(2) and 58. The Panel has a discretion as to which of these two alternatives to take. Plainly it decided to exercise the power under s 57. Section 57(2) provides:
57 Determination of review
…
(2) The Review Panel may determine a review by confirming, modifying, or reversing the decision under review.
[43] In the course of argument there was some discussion as to whether or not the power under s 57(2) enabled the Panel to itself exercise the discretion provided under s 37. It does have that power. Section 57(2) gives to the Review Panel the power given to the Agency in s 37. For the Review Panel can, by reversing the
exercise of discretion against writing off the repayment payable, so write off the repayment payable.
[44] None of the grounds of appeal have succeeded. The appeal is dismissed. Counsel advise me that the Agency has earlier agreed to pay the respondent’s costs in any event, at a sum which has been agreed. Accordingly, there is no order for costs.
Fogarty J
Solicitors:
Bartlett Partners, Wellington, for Appellant Cunningham Taylor, Christchurch, for Respondent
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