Lowry v Auckland District Legal Services Subcommittee HC Auckland AP 404/28/01

[2001] NZHC 395

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
AP.404/28/01

UNDER Section 136 of the Legal Services Act 1991

IN THE MATTER of a decision of the Legal Aid Review Authority

BETWEEN HELEN LOWRY
Appellant

AND THE AUCKLAND DISTRICT LEGAL SERVICES SUBCOMMITTEE Respondent

Hearing: 2 May 2001

Counsel: Graeme Minchin for appellant
Rosaleen Taylor for respondent

Judgment: 21 May 2001

JUDGMENT OF POTTER J

[1] Helen Lowry appeals against a decision of the Legal Aid Review Authority (“the Authority”) dated 19 September 2000 dismissing her appeal against a decision of the Auckland District Legal Services Subcommittee (“the Committee”). The Committee required that a charge be taken on her house property to secure $8148.75 legal aid funds granted to Mrs Lowry to enable her to take proceedings before the High Court by way of case stated and judicial review of a decision of the Social Security Appeal Authority (“SSAA”).

Scope of the appeal

[2] The appeal is brought under s.136 Legal Services Act 1991 which provides for an appeal to the High Court on a question of law if the appellant is dissatisfied with any decision of the Authority as being erroneous in point of law. To succeed in this appeal the appellant must show that there was an error of law by the Authority.

[3] In Edwards v Bairstow [1956] AC 14 (HL) Lord Radcliffe provided the classic statement of what constitutes an error of law - where there is no evidence to support the determination, where the evidence is inconsistent with or contradictory of the determination, or is one in which the true and only reasonable conclusion contradicts the determination.

[4] It is also relevant to note the limit of the Authority’s jurisdiction on appeal. Pursuant to s.132 of the Act, the Authority is required to hear the appeal against the Committee’s decision as if the decision was made in the exercise of a discretion. The test to be applied on appeal from the exercise of a discretion is well established - did the body appealed from fail to take account of relevant matters, take account of irrelevant matters, or was the decision plainly wrong (May v May (1982) 1 NZFLR 165, Mendelssohn v Centrepoint Community Trust [1999] 2 NZLR 88, 98). The Authority is not at liberty to substitute its view of the matter for that of the Committee (if the circumstances are such that it would have reached a view different from that of the Committee), unless the Authority is satisfied that the Committee was wrong under one or more of those three heads.

Issue

[5] In this appeal the issue therefore is -

Did the Authority err in law in upholding the exercise by the Committee of its discretion to require a charge over the appellant’s property to secure the sum of $8148.75?

Factual background

[6] The appellant sought advice from New Zealand Income Support Services (“NZISS”) as to whether her benefit would be reduced if she, the owner of a mortgaged property in Henderson, were to acquire jointly with another person for their joint occupation a property on Waiheke Island, while renting out the Henderson property.

[7] NZISS advised her it would not change her benefit. In this they made a mistake. On further investigation they corrected their mistake. They offered the appellant a 3 months special benefit in compensation for the incorrect advice.

[8] The appellant unsuccessfully sought review of the Department’s decision before the SSAA. In its decision SSAA made certain comments about the appellant to which she took exception on the grounds that they implied fraud on her part.

[9] She was granted legal aid to fund proceedings in the High Court by way of case stated and judicial review. These actions were dismissed in a reserved judgment of Cartwright J dated 6 May 1999. Cartwright J found there was no evidence before the SSAA to sustain the inference made in the comments complained of, and that while the remarks had not been taken seriously by NZISS, which had taken and would take no action in relation to them, such that no damage resulted -

“Nonetheless, it is understandable that the appellant would be disturbed by the gratuitous comments.” (p.15)

There was no order for costs.

[10] The Committee required a charge on the appellant’s property to secure the amount of the legal costs of the High Court proceedings.

[11] The appellant appealed to the Authority which dismissed the appeal. From that decision, this appeal is brought.

The Committee

[12] Section 40(1) of the Act imposes a charge for unpaid contributions against any property of the legally aided person (i) recovered or preserved in the proceedings for which the grant was made, or (ii) “any other property of that person (where ever that property is situated)” on which a charge is imposed in accordance with ss.(2).

[13] Subsection (2) provides that the District Subcommittee (the Committee in this case) may determine to charge such property -

“ . . . unless it is of the opinion that it would be unjust or inequitable to do so . . . ”

[14] When Mrs Lowry through her solicitors applied for legal aid for the judicial review proceedings in respect of the decision of SSAA, her solicitors noted that she owned two residential properties with an approximate equity of $110,000 (though she says the market value of the properties has now diminished). Her solicitors requested that the requirement for a charge over the properties be waived. Full submissions were filed. The submissions concluded -

“ . . . the Committee has a discretion under the Act not to impose a charge. Obviously such discretion would be exercised as an exception rather than a general rule. The Act provides some guidance by allowing the Committee to exercise its discretion where it considers it would be unjust or inequitable to apply a charge.”

[15] It was submitted that due to the “extraordinary nature” of this case the discretion not to impose a charge should be exercised in favour of the applicant.

[16] Mrs Lowry’s application for legal aid acknowledged that she may be required to contribute towards her legal costs and that-

“ . . . any of my assets and property, including money or property recovered in the case, may be the subject of a charge in favour of the Legal Services Board for the purposes of recovering any Legal Aid paid on my behalf.”

[17] By a letter dated 6 October 1998 the Auckland Regional Legal Aid Unit advised that legal aid had been granted but advised -

“Counsel to note charge will be required. Counsel will have the opportunity to make submissions as to the amount of the charge at the conclusion of this matter.”

[18] Following the High Court hearing and submission by the appellant’s solicitors to the Committee of his final account on 23 September 1999, the solicitors responded to a question from the Committee -

“Why is case considered to be so exceptional as to not warrant a charge?”

- reiterating concerns as to the appellant’s precarious financial position and the erosion of her equity in the properties which would result if a charge were imposed.
[19] The Committee determined that the appellant’s property should be charged for the full amount of the costs in the High Court.

The Authority

[20] On appeal the Authority considered the appellant’s submissions as set out in its decision of 19 September 2000 - the appellant needed the assistance of the High Court in order to challenge the overpowering burden of bureaucracy; the appellant’s difficult financial situation was brought about as a direct consequence of the incorrect advice from NZISS; there was a significant public interest aspect in the proceedings because they concerned gratuitous continents made by SSAA.

[21] The Authority also considered a submission that this was in effect a test case on behalf of all beneficiaries, but set that submission to one side on the basis that legal aid is not available to fund test cases. Mr Minchin for the appellant submitted that was not the submission before the Authority, but nothing turns on the point as the Authority did not take account of it in reaching its decision.

[22] The Authority then dealt with the appellant’s submission that she was not aware that her property would be subject to a charge, citing her acknowledgement on her application and the subsequent correspondence with the Committee referred to in [16] and [17] above. The Authority concluded that the appellant must have been aware of the possibility of a charge being taken.

[23] The Authority held -

“ . . . there is nothing exceptional in the appellant’s position which makes her case different from other cases which come before this Authority . . .

We consider that in accordance with s.40 of the Act it was just and reasonable that the charge be imposed and the decision of the subcommittee was correct.”

Thus, the Authority implicitly held not only was there no basis for it to intervene on appeal from the exercise of a discretion vested in the Committee, but that the Committee correctly exercised its discretion in the circumstances of this case. It is important to keep in mind that it is not the Authority which exercises the discretion under s.40(2), but the Committee. The Authority may only intervene on appeal if the Committee is wrong; it exercises no discretion.

Appellant’s submissions

[24] The written submissions filed on behalf of the appellant were under nine headings. In oral submissions Mr Minchin for the appellant focused on two principal submissions; that the Authority erred in law -

[a] In not holding that the Committee failed to exercise its discretion;

[b] By applying the wrong test in finding there was “nothing exceptional” in the appellant’s position which makes her case different from other cases which come before this Authority, when the test under s.40(2) is whether it was unjust or inequitable to impose a charge.

[25] As to [b], he submitted that because this was the exercise of a discretion to impose a charge under s.40(2), not the exercise of the discretion to grant an exemption under s.45(4), the approach of the Committee was wrong when it asked the appellant, why was the case considered to be so exceptional as to not warrant a charge; and the approach of the Authority was wrong in finding that there was nothing exceptional in the appellant’s position which made her case different from other cases which came before the Authority.

[26] Mr Minchin referred to the preamble to the Act which provides -

“An Act to make legal assistance and legal services more readily available to persons of insufficient means.”

He submitted that the object of the Act was to provide “aid” not a “loan” to persons of insufficient means, and the Committee and the Authority fettered the exercise of their discretion by limiting their consideration to whether there were exceptional circumstances in this case which would justify a charge not being taken. Accordingly, submitted Mr Minchim, the exercise of the discretion was misconceived - the Committee and the Authority did not properly turn their minds to whether it was unjust or inequitable in the circumstances of this case to require a charge, but instead required to be satisfied that there were exceptional circumstances justifying a departure from the norm, which is to require a charge.

[27] Mr Minchim also submitted strongly that Mrs Lowry came to this matter with “clean hands” and there was a strong public interest in the High Court proceedings because they concerned the administration of justice, in particular by the SSAA a statutory body. He submitted -

“As the appellant’s cause of action was a just cause it follows that it would be unjust for the appellant to bear the cost, which for the appellant acts as a penalty, of an imposition of a charge over her property.” (written submission para 5.8)

[28] That proposition in my view misses the point. There is no dispute that the appellant’s cause was a just one, and Ms Taylor for the respondent accepted this.
NZISS made a mistake in the advice they gave the appellant about the continuation of her benefit; when she took that matter on appeal SSAA made unfortunate and unfounded remarks. The Committee granted legal aid so she could properly pursue her “just cause” before the High Court. But it does not necessarily follow that it is unjust or inequitable that pursuant to s.40(2), a charge should be imposed on her property for costs incurred. That is a matter within the discretion of the Committee.

The Committee’s Discretion

[29] The Committee is a creature of statute. It must exercise its discretion in terms of the Act. The Act provides a mechanism for making legal aid available but it also provides for recovery of contributions from persons granted legal aid. Ms Taylor for the respondent, referred to Bates v Legal Services Board [1999] NZALR 91. That case concerned an appeal from a decision of the Authority which disallowed an appeal from a decision of the Committee requiring a charge to cover the appellant’s legal costs under s.45 of the Act. Section 45 concerns the exemption that may be granted from liability for a charge over property recovered in proceedings for which legal aid has been granted. The contention for the appellant was that it was not “just and equitable” within the meaning of s.45(4) that the Committee declined to grant an exemption from charge.

[30] The Court noted that the scheme of the Act is to impose an initial charge on the judgment debt but to permit the Committee to grant an exemption from that charge if just and equitable in all the circumstances. It stated -

In short, a charge is the norm, an exemption the exception. (p.95)

The Court further stated at p.96 -

“The demands upon legal aid funds constantly exceed what is available . . . Every charged dollar from which the appellant was exempted was a dollar less for other legal aid applicants, whose claims may also be highly meritorious, or needs urgent. The object of the Act was achieved in relation to the appellant . . . As a result of being granted legal aid, she was able to bring her proceeding and recover damages, albeit limited by the size of the defendant’s estate. And that is the rub. But does that factor make it unjust and unequitable not to require other applicants for legal aid, in effect to subsidise the appellant’s recovery? The circumstances relevant in deciding what is just and equitable in terms of s.45(4) surely extend beyond those personal to the appellant.”

[31] Mr Minchim sought to distinguish Bates on the basis that the discretion there in issue was under s.45(4) which relates to an exemption from charge against property recovered in the proceedings, while this case concerns the discretion under s.40(2) which is differently worded. However, I accept Ms Taylor’s submission that the general principles underpinning the Act must inform the discretions exercised by the Committee under both ss.45(4) and 40(2). The Committee must have regard to the “bigger picture” as it was described in Bates, which requires a balancing of the interests of a legally aided litigant seeking the exercise in her or his favour of the discretion to exempt from charge or not to require a charge, against the interests of all those having claims against the legal aid fund. That bigger picture must always be a relevant factor in the exercise by the Committee of its discretion, under both s.45(4) and s.40(2).

[32] However, the discretions are different. Where property is recovered in the proceedings the property is charged under s.40(1) unless exempted under s.45. Where the property to be charged is “any other property” of the legally aided person, the charge is not automatic, but under s.40(2) may be imposed by the Committee., unless it is of the opinion that it would be unjust or inequitable to do so. Under s.40(2) the imposition of a charge is itself discretionary. It follows that if in its discretion the Committee determines that the imposition of a charge would be unjust or inequitable then the charge may not be imposed. It is not a question of granting an exemption. So the approach required of the Committee to the exercise of its discretion in the two situations, is necessarily different.

[33] But the “bigger picture” described in Bates will be relevant to the exercise of the Committee’s discretion under both provisions. Accordingly the Committee will be called upon to balance the circumstances of the legally aided person against the interests of other applicants for legal aid, which requires, as was observed in Bates, that considerations of justice and equity must extend beyond those personal to the appellant.

Conclusion

[34] It appears the Committee did not provide reasons for its decision to require a charge. Its advice by letter of 6 October 1998 was that if there are no assets or funds recovered or preserved in the proceedings -

“the Board will consider taking a charge, on any property your client owns, at the conclusion of the matter. An opportunity would be given to make submissions as to the amount of the charge at the conclusion of the matter.”

The ultimate decision was to take a charge for the full amount.

[35] The Authority in its decision on appeal referred to submissions attributed to Ms Taylor for the respondent that -

“Section 40 directs the subcommittee to take a charge over any property recovered or preserved in the proceedings, and over any other property of an applicant, for the costs involved in the grant of aid. Section 40 goes further, and provides the subcommittee with a discretion not to impose a charge if “it would be unjust or inequitable to do so”.” (emphasis added)

[36] The decision makes no comment upon those submissions. It seems the Authority adopted them. However, as recorded in the Authority’s decision, they are incorrect in two respects. First s.40 does not direct the Committee to take a charge over “other property”; section 40(2) provides that the District Subcommittee may determine that such property shall be subject to a charge under subsection (1). Secondly, the discretion to take a charge over other property is conferred unless the Committee is of the opinion that it would be unjust or inequitable to take a charge (that being a matter within the discretion of the Committee). If the conclusion is reached that a charge would be unjust or inequitable, then the charge may not be taken. The distinctions are fine, but important.

[37] The important distinction in the discretion conferred by s.40(2) and that conferred by s.45(4), the former applying to “any other property” of the legally aided person, the latter applying to assets recovered or preserved by the proceedings, is logical. In s.45 cases the legally aided litigant with the assistance of legal aid, has pursued proceedings from which recoveries have been made; in s.40(2) cases the Committee will be seeking to protect the legal aid fund where there are no recoveries, by charging assets of the legally aided litigant not related to the proceedings.

[38] I am concerned that notwithstanding in the final sentence of its decision the Committee states that “in accordance with s.40 of the Act it was just and reasonable that the charge be imposed”, the Authority incorrectly approached consideration of the exercise by the Committee of its discretion. While observing a distinction between s.40 and s.45 on another aspect (reference in s.45 to “all relevant circumstances”), by adopting the submissions for the respondent as recorded in the Authority’s decision, the Authority appears to have approached consideration of the exercise by the Committee of its discretion under s.40(2), in the same or a similar way to the discretion exercised under s.45(4), i.e. that the Act directed a charge to be imposed on other property, and that an exemption could be granted only if it was just and equitable.

[39] That the Authority considered the exercise by the Committee of its discretion in those terms, tends to be confirmed by the Authority’s reference to there being -

“ . . . nothing exceptional in the appellant’s position which makes her case different from other cases which come before this Authority.”

While, as Ms Taylor submitted to this Court, that may be simply the Authority applying the underlying principles of the Act as recognised in Bates, it may also indicate that the Authority considered the exercise of the discretion appealed from, was a discretion to grant an exemption from a charge otherwise imposed by s. 40(1) of the Act.

[40] While I do not accept Mr Minchin’s submission that the Committee failed to exercise its discretion, I am not satisfied that in this case, the Authority adopted the correct legal test when considering on appeal the exercise by the Committee of its discretion under s.40(2). That is an error of law. In those circumstances I consider the appropriate course is to allow the appeal and remit the decision to the Committee for reconsideration in the light of this judgment.

Result

[41] The appeal is allowed. The matter is remitted to The Auckland District Legal Services Subcommittee for reconsideration in the light of this judgment, of the appellant’s application to waive the charge on her property to secure the sum of $8148.75.

[42] There will be no order for costs.