McLean v Chief Executive Officer of the Ministry of Social Development

[2013] NZHC 2412

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-5438 [2013] NZHC 2412

BETWEEN

KELVIN McLEAN and RUTH McLEAN

Plaintiffs

AND

THE CHIEF EXECUTIVE OFFICER OF THE MINISTRY OF SOCIAL DEVELOPMENT

Defendant

Hearing:	21 August 2013
Appearances:	T Hallett-Hook for applicant R Hooker for respondent
Judgment:	16 September 2013

JUDGMENT OF WINKELMANN J

Thisjudgment was delivered by me on 16 September 2013 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar

Vallant Hooker & Partners, Auckland Crown Law, Wellington

McLEAN v THE CHIEF EXECUTIVE OFFICER OF THE MINISTRY OF SOCIAL DEVELOPMENT [2013]

NZHC 2412 [16 September 2013]

[1]    The defendant, the Ministry of Social Development (the Ministry), applies for summary judgment against the plaintiffs on the basis that the plaintiffs’ claim against it cannot succeed. Since 2003, the plaintiffs, Kelvin and Ruth McLean (the McLeans), have been involved in a dispute with the Ministry arising out of custody arrangements for two of their grandchildren. In 2002, the Ministry resolved to place the children in the McLeans’ permanent care but in 2003 a Ministry social worker determined that the children, who were at that time visiting other family, would not be returned to the McLeans. The children were then placed with another family member on a permanent basis.

[2]   It is common ground that the McLeans have a legitimate grievance against the Ministry in connection with these events. A 2009 report commissioned and prepared by the Ministry, in addition to identifying a number of procedural defects, found that the social worker who decided to remove the children exercised poor judgment in the decision and that the actions taken by that social worker may not have been in the best interests of the children. The Ministry acknowledged that the emotional and financial impact on the McLeans had been significant.

[3] Following this report the McLeans and the Ministry began negotiating in an attempt to agree upon payments to and arrangements for the McLeans in light of the Ministry’s acknowledgment that they had been harmed.

[4] The critical allegation made by the McLeans against the Ministry in this proceeding appears at paragraph 18 of their first amended statement of claim:

The Defendant on a date unknown to the McLeans but between 22 June 2010 and March 2011 accepted the report of the social worker (“the acceptance”) and agreed with the McLeans that they should receive from the Defendant:

(a)An apology;

(b)A sum of money being reimbursement of costs the McLeans had incurred in pursuing the claim including legal costs and the cost of the psychologist [a psychologist engaged by the McLeans to assist them in preparing a victim impact statement];

(c)Payment by the Defendant for counselling for the McLeans to address the issues relating to the removal of the children and how they were treated by the social worker and the Defendant; and

(d)Payment by the Defendant of an adequate sum of money in compensation for the hurt suffering and pain and emotional distress (“the compensation sum”).

[5] However, the basis of the McLeans’ claim has shifted over time, from this pleading, to how the claim is described in written submissions, and finally, to the claim as presented by Mr Hooker during his oral argument on this application. The essential allegation in the pleading is that an oral agreement was concluded at a date unknown by the McLeans. Mr Hooker, I hope in acknowledgment of the deficiency in such an allegation, was more particular during the course of argument. He stipulated that it was alleged that the oral agreement was reached at settlement discussions that took place on 2 March 2011. He says that at this meeting it was agreed that, as well as paying for legal fees and counselling, and providing a letter of apology, the Ministry would pay to the McLeans an adequate and fair sum of money in compensation for hurt, suffering and pain, and emotional distress. This did not oblige the Ministry to carry on negotiating until they named a figure the McLeans were happy with, but rather obliged the Ministry to negotiate in good faith to agree that amount.

[6] The McLeans say the agreement has been part  performed  because  the Ministry has apologised to the McLeans for the wrongful actions of the social worker, and has paid the McLeans’ legal costs, the cost of the psychologist used to prepare the victim impact statement, and the cost of counselling. But the McLeans say the Ministry is in breach of the agreement that it would pay a sum of money which is “adequate and fair compensation for the hurt, suffering, humiliation and distress the McLeans suffered following the wrongful actions of the social worker”.

[7] The McLeans claim $80,000 each by way of compensation for hurt, pain and suffering. They say that in light of the evidence that will be produced at the hearing of their claim, the Court will be in a position to make this award on the basis that it is an “adequate and fair sum of money” in terms of the agreement.

[8] Although the agreement is alleged to have arisen during the course of a settlement negotiation, neither party takes the point that these discussions were without prejudice.  The McLeans, of course, rely upon those negotiations.  For its

part, the Ministry has proceeded on the basis that in its dealings with the McLeans it has openly acknowledged wrongdoing and has been working with them to see if the Ministry can right these wrongs.

[9] The Ministry applies for judgment on the basis that there is no credible evidence of any agreement having been reached, and even if there is such evidence, the agreement would be void because the alleged agreement omits an essential term

– either the amount of compensation to be paid, or a mechanism by which that amount can be fixed. Finally, the Ministry says that there is no evidence of consideration flowing from the McLeans for the alleged undertaking given by the Ministry.

Summary judgment principles

[10] The principles to be applied in a defendant’s application for summary judgment are not in dispute. They were authoritatively stated by the Court of Appeal in Westpac Banking v M M Kembla (NZ) Ltd.1 Applications for summary judgment by a defendant can only succeed “if the defendant satisfies the Court that none of the causes of action in the plaintiff’s statement of claim can succeed”.2 The onus is on the defendant to prove on the balance of probabilities that the claim or claims cannot succeed.3 Summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits.4 Except in clear cases, such as a claim for a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim.5

[11] The issues for determination on this application are therefore whether the Ministry has established:

(a)That there is no evidence of the alleged agreement; or

1       Westpac Banking Corp v M M Kembla (NZ) Ltd [2001] 2 NZLR 298 (CA).

2 At [58].

3 At [61].

4 At [62].

(b)If there is such an agreement, would it be void:

(i)for want of certainty? or

(ii)for want of consideration?

Is there any evidence of the alleged agreement?

[12] To address this issue it is necessary to consider the evidence as to the dealings between the parties. Mr Brendan Booth, currently the Acting Chief Legal Advisor of the Ministry, provided an affidavit in support of the Ministry’s application. The McLeans have each sworn affidavits in opposition and Mr Grant Bennett, who was at relevant times a Regional Director for the Ministry, has sworn an affidavit in reply. These affidavits all provide detail of the dealings between the McLeans and the Ministry. Those dealings were extensive, involving numerous letters, emails and telephone conversations. I propose only to outline those of significance to the claim.

[13] Although the events to which the McLeans’ grievances relate took place in 2003, events relevant to this claim begin with the report prepared in 2009 by a senior social work advisor, Ms Fiona Wilson. She reported the result of her investigation into complaints made by the McLeans concerning how the Ministry dealt with them and the decision to remove their grandchildren from their care. Her findings are described earlier.6

[14] Following preparation of her report, Ms Wilson asked the McLeans to outline what would resolve their grievance with the Ministry. In June 2009 they responded, seeking arrangements regarding access to their grandchildren, admissions of wrongdoing by the Ministry, an apology, payment of legal fees, and compensation for hurt, distress and humiliation in an amount to be determined.

[15] Ms Wilson discussed her report and the McLeans’ requests with Mr Garth Young, the National Manager of the Care, Claims and Resolution Team. Ms Wilson then emailed the McLeans as follows:

In relation to what you consider it will take to resolve this; Garth is prepared to recommend to the Deputy Chief Executive of Child, Youth and Family the following points:

Aletter sent by CYF to the current caregiver, explaining in brief, the contents of the report.

[MH’s]offer of some practical help to see your granddaughters at holiday time and some weekends in between.

Fullcompensation of legal fees up until the time of Care, Claims and Resolution team involvement ($42,592.09)

Thatconsideration be given to payment of compensation for hurt, distress and humiliation – amount yet to be determined.

[16] In March 2010 the McLeans provided Ms Wilson with a legal opinion they had obtained from Mr Hooker which recommended compensation of $90,000 for each of them. However, in the accompanying letter the McLeans said they felt the compensation should be fixed at $110,000 each and that an additional one-off payment of $30,000 should be made to cover loss of income over the period in which they pursued their complaint.

[17] On 21 April Ms Wilson emailed the McLeans to explain the process that would be followed in connection with their complaint. She referred to the material that was to be sent to the Deputy Chief Executive of Child, Youth and Family (CYF) which would include the McLeans’ views as to what should be done to address the findings in her report. She said “[it] will of course be up to the Deputy Chief Executive to act on those recommendations.”

[18] Mr Young subsequently drafted a memorandum to the Deputy Chief Executive, which made the following recommendations:

16Given the findings of our review, I recommend that an apology be provided to Mr and Mrs McLean.  …

17.I also recommend that you consider reimbursing the McLeans for the costs they have incurred in pursuing this matter.

18.The Northern Regional Director in 2008 offered Mr and Mrs McLean counselling and travel costs to assist with access to their grandchildren. I understand Mr and Mrs McLean now have regular access with their grandchildren, but their needs in relation to these matters should be discussed further with them.

19.I have not sought advice on the level of compensation that the McLeans have sought. I recommend that you seek advice from the Chief Legal Advisor, and I would be happy to assist in this regard.

[19]   This memorandum was not provided to the Deputy Chief Executive because of concerns about some of the factual findings and recommendations which the Ministry wished to resolve before further steps were taken, and because the recommendations included the making of payments which the Deputy Chief Executive did not have the necessary financial delegations for. The memorandum was not initially provided to the McLeans, but was subsequently released to them under the Official Information Act 1982.

[20] It was then decided that a memorandum would be prepared by the Deputy Chief Executive to the Chief Executive, the latter having the necessary financial delegation to make settlement and ex gratia payments. However, a final version of the memorandum could not be agreed, and in December 2010, the McLeans complained about the lack of advancement towards resolution of their complaint. Consequently, the Ministry decided to meet with the McLeans to make them a conditional settlement offer prior to finalising the memorandum to the Chief Executive. Mr Booth says they decided to meet with the McLeans before seeking approval to make specific settlement or ex-gratia payments because if they were able to reach an agreement in principle with the McLeans, they could avoid the need to go back to the Chief Executive a second time should they need to adjust the offer. The Ministry scheduled a meeting with the McLeans on 2 March 2011 to present the Ministry’s offer. In advance of that meeting, a letter was drafted, recording the offer. That draft was never provided to the McLeans, but Mr Booth’s evidence is that the letter is an accurate record of the offer presented by the Ministry at the meeting. The draft letter provided:

We wish to make the following conditional offer in full and final settlement of your complaint:

A payment in settlement, without acknowledgment of liability, of

$10,000;

Acontribution towards the costs incurred by you, upon receipt of evidence of those costs. This is to be at a maximum of $40,275;

A letter to you from the Chief Executive of the Ministry of Social

Development  acknowledging  and  apologising  for  the  Ministry’s failings and for your experiences with the Ministry;

Paymentfor six to ten counselling sessions each to assist you to move towards re-establishing family relationships.

Upon receipt of your written confirmation that you agree in principle to the terms of settlement, we will negotiate with you the, [sic] amount of the contribution towards your costs and the terms of the letter of acknowledgment and apology.

We would then seek approval from the Chief Executive of MSD, Peter Hughes and then agree with you the terms and wording of the deed of settlement.

[21] The meeting that took place was attended by the McLeans, and from the Ministry, Ms Jo Field (Acting General Manager for Operations), Mr Booth (then the Team Manager of CYF’s Litigation and Historic Claim Team) and Mr Bennett.7 Mr Booth said the Ministry representatives did not suggest that the proposed settlement payment was up for negotiation nor commit to paying the McLeans an indeterminate “adequate sum” by way of compensation.  The McLeans made it clear

that the $10,000 offered was completely inadequate. The meeting ended when discussion moved to the apology the Ministry was prepared to make. At that time the Ministry was prepared to accept that the decision to remove the grandchildren from the McLeans’ care had been badly implemented, but was not prepared to accept that the decision was incorrect, or apologise for this.

[22] According to the evidence of Mrs McLean, Mr Booth did not present the offer in the letter, and it was Mr Bennett who made all the offers. As to the alleged agreement, she says that the meeting  proceeded on the basis that the  Ministry acknowledged and agreed that there had been errors in the way it had handled matters and compensation was to be paid. She says:

I believe that there is an agreement between us and the Ministry. This was reached when the Ministry verbally discussed with us the acknowledgement that the Ministry social workers had acted wrongly. This was at a meeting both I and my husband attended (2 March 2011) where there was an oral presentation of the Ministry’s acknowledgement and  agreement  with  us. This was later confirmed at the second meeting (4 May 2011). … All the subsequent events have followed that agreement on the basis we were to be paid compensation.  The Ministry has performed part of the agreement.   I

7       I note that Mr Bennett denies that Ms Field was present at the meeting. However, this is of no consequence and does not affect my conclusions.

believe there is an agreement.

[23] Mrs McLean agrees that the apology that was offered was only for practice failings, and says that was inadequate because they were entitled to an apology for the children being wrongly taken from their care and appropriate compensation:

We were insulted by the offer of $10,000 compensation and told them to return to Wellington and to sharpen their pencil [sic]. We and the Ministry were however clear that what was occurring was an agreement that they had committed errors and the question now was simply what “will fix it for us”. This was the term that was used by Grant Bennett and had occurred at the meeting. I do not believe that Booth can accurately recall the discussion because of his demeanour and lack of attention at the meeting and his demeanour and his drowsiness at the meeting.

[24]	She says further: The meeting came to an end because we could not agree on how much was
to be paid to fix it. The Ministry however acknowledged that it needed to be fixed and that included the compensation. Booth certainly did not bring the meeting to an end. As I mentioned above he was almost asleep at the meeting.
[25]	Immediately following the meeting Mrs McLean wrote to Mr Young.	Her

letter stressed the inadequacies of the apology offered. She also noted, among other deficiencies, that there was no mention in the Ministry’s offer of an amount for loss of income.

[26] On 4 May 2011 Ms Field met with Mrs McLean, this time to present a revised offer.  The amount to be paid to the McLeans was increased to $10,000 each. Mrs McLean’s evidence in connection with this meeting is that there were no conditions to this offer:

The offer was predicated on the agreement that the Ministry had acted wrongly and we were to be compensated. I asked Ms Field to write to us to confirm the offer.

[27] Ms Field did write following the meeting and recorded the offer presented at the meeting. She stated that the offer made, if accepted, would be in full and final settlement of the McLeans’ complaint, and was conditional upon them signing a deed of settlement.

[28] Mr Hooker responded on behalf of the McLeans. He said that while the McLeans thought that the offer of reimbursement of legal expenses and payment for counselling were broadly acceptable, they were not prepared to accept the Ministry’s offer of a compensatory payment of $10,000 each. He proposed a mediation to resolve the dispute, and suggested potential mediators.

[29] The Ministry agreed to mediate but there was not ready agreement as to the mediator. Mr Hooker suggested another meeting to try to resolve the broader issues between the parties. Accordingly another meeting took place on 5 August 2011 between the McLeans and Ministry personnel.  Again, no compensation amount was agreed; both parties maintained their previous stance as to the appropriate sums, although on this occasion the Ministry agreed to pay the McLeans’ legal costs.

[30] Mr Hooker wrote further to the Ministry on 25 August 2011. In that letter he confirmed that the McLeans would “accommodate” a compensatory payment of

$75,000 each and reiterated that the compensation offer the Ministry had made at the 5 August 2011 meeting was considered inadequate. By this time the McLeans were also receiving counselling the Ministry had agreed to pay for.

[31] Mr Hooker wrote again on 13 September 2011 asking the Ministry to confirm the timeframe in which the Ministry would make a “further offer concerning compensation”.

[32] After some further exchanges between the parties, mediation occurred on 27 January 2012. The content of what occurred during the mediation is subject to a confidentiality agreement but the  “Memorandum  of  Understanding”  drafted  by Mr Hooker and signed at the end of the mediation was produced by the Ministry, as was  a  document  recording  that  the  Ministry  would  consider  and  decide  by 4 February 2012 whether or not they would recommend to the Chief Executive entering into arbitration with the McLeans.

[33] On 31 January 2012 Mr Hooker wrote to Mr Booth to propose the Ministry attend a binding arbitration to determine the level of compensation. He said:

If the Department is unwilling or unable to reach agreement with our clients as to the quantum (in the circumstances where it is accepted that quantum is payable) then there must be a mechanism whereby the sum of money can be determined and it is preferable in our respectful view that this be done in privacy and expeditiously.

We therefore suggest the President of the Auckland Law Society be appointed arbitrator and that we meet with the arbitrator in the next three weeks to resolve procedural matters. As noted the arbitration would be with both a floor sum ($15,000) and a ceiling ($95,000).

[34]    The Ministry responded by letter dated 3 February 2012 in which it said that a settlement offer of $15,000 each would be put before the Chief Executive, but that it did not consider that arbitration was appropriate, and that the Chief Executive would be advised of this. By email dated 5 April 2012, Mr Booth confirmed that the Chief Executive was happy to increase the settlement offer to $15,000 each, conditional on the McLeans signing a settlement deed, and that the Chief Executive also considered arbitration to be inappropriate. At that point the discussions broke down. These proceedings were issued in September 2012.

Analysis

[35]   In considering this issue it must be kept in mind that it is not for the McLeans to prove the existence of an agreement but rather for the Ministry to establish that there is no evidence of an agreement, such that the claim cannot succeed.

[36] The McLeans allege an oral contract entered into on 2 March 2011. For that reason it is their evidence of what was said and done at the 2 March meeting that they would need to rely upon to prove that such a contract was formed if the matter proceeds to a hearing. However, the McLeans’ evidence, at its best and highest, is that the Ministry acknowledged at that meeting, and after it, that the McLeans should be paid compensation. The evidence does not establish any agreement as to how much compensation would be paid or even what the compensation was for. Were they to be compensated for procedural defects or  for wrongful removal of  the children? There is, contrary to Mr Hooker’s submission, no conflict of any significance between the evidence of the McLeans and Mr Booth in relation to what occurred at the March meeting.

[37] There is no other evidence which supports a conclusion that a contract was formed at that meeting. Rather the evidence establishes that the parties went to the March 2011 meeting to negotiate, that no agreement was reached at that meeting as to how the issues should be resolved between them, and that they therefore continued to negotiate after the meeting. This construction of events is corroborated by correspondence between the parties. For example, Mr Hooker’s correspondence refers to the Ministry’s “offers”, to a proposed mediation to better facilitate an agreement, and ultimately to an arbitration whereby some mechanism could be settled upon to fix the amount in dispute.

[38] Nor are the various steps the Ministry has taken to pay the McLeans’ costs, and to provide an apology and counselling, evidence of part performance of such an agreement. As the McLeans have emphasised, the Ministry has not stepped away from their acknowledgment that the process that was followed was flawed and there was a need to “put it right”.  The Ministry paid these costs toward putting things right. That is not evidence of the broader agreement alleged.

[39] Accordingly, I am satisfied that there is no evidence to support the plaintiffs’ allegation that the Ministry agreed to pay “fair and adequate” compensation for hurt, pain and suffering. I consider it is appropriate to grant the application for summary judgment given the detailed and materially consistent evidence before me and the fact that that evidence demonstrates compellingly that negotiations were entered into to remedy the Ministry’s failings but never resolved the issue of compensation. This is not a case where further evidence is necessary, nor one involving defects the plaintiffs might remedy in an amended statement of claim. The Ministry has demonstrated that in a case where the plaintiffs need to establish proof of an oral contract, there is no proof of such a contract. The Ministry is therefore entitled to summary judgment. For completeness, however, I proceed to address the remaining issues.

If there is such an agreement, would it be void for want of certainty?

[40] The second ground on which the application is brought is equally strong. The agreement alleged by the McLeans, even if proved (including all of its various

articulations), would be void for uncertainty. In Fletcher Challenge Energy Ltd v Electricity Corp of New Zealand Ltd the majority of the Court of Appeal stated the relevant principles thus:8

The question whether negotiating parties intended the product of their negotiation to be immediately binding upon them, either conditionally or unconditionally, cannot sensibly be divorced from a consideration of the terms expressed or implicit in that product. They may have embarked upon their negotiation with every intention on both sides that a contract will result, yet have failed to attain that objective because of an inability to agree on particular terms and on the bargain as a whole. In other cases, which are much less common, the intention may remain but somehow the parties fail to reach agreement on a term or terms without which there is insufficient structure to create a binding contract. This latter situation is uncommon because normally negotiating parties will have an appreciation of what basic terms they need to reach agreement upon in order to form a contract of the particular type which they are negotiating. It is comparatively rare that, having an intention to contract immediately, not only do they fail to deal expressly with an essential or fundamental term but it also proves impossible for the Court to determine the contractual intent in that regard by implication of a term or by reference to what was reasonable in the particular circumstances or to some other objective standard.

...

The prerequisites to formation of a contract are therefore:

(a)An intention to be immediately bound (at the point when the bargain is said to have been agreed); and

(b)An agreement, express or found by implication, or the means of achieving an agreement (eg an arbitration clause), on every term which:

(i)was legally essential to the formation of such a bargain; or

(ii)was regarded by the parties themselves as essential to their particular bargain.

[41] In this case, even if everything that the McLeans say is accepted as true, the parties have failed to reach agreement on an essential term of the agreement, namely the amount of compensation. Further, there is no mechanism that the McLeans can point to which could calculate the appropriate compensation. To use words such as “adequate and fair”, words which seem to be a product of Mr Hooker’s pleading, is to add nothing by way of certainty. Not only is an amount or a mechanism to fix that

8       Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433 (CA) at [50] and [53].

amount lacking, but as already mentioned, just what the McLeans were to be compensated for remained at large as at the 2 March 2011 meeting.

[42] In the absence of an agreement between the parties as to how the question of compensation would be resolved, a contract to pay the McLeans compensation has not been formed.

If there is such an agreement, would it be void for lack of consideration?

[43] The Ministry highlights that in the McLeans’ pleading there is no indication that they have agreed to do anything in return for receiving compensation, or that the alleged agreement has been formalised in a deed. It is the case that the McLeans allege that the Ministry bound itself to pay compensation without having received from the McLeans any acknowledgment that the agreement to pay adequate compensation was in full and final settlement of claims the McLeans might have against the Ministry. However, this issue is probably best viewed as relevant to the plausibility of what the McLeans contend rather than as giving rise to an additional ground of challenge to the enforceability of the alleged agreement.

Outcome

[44] For these reasons I am satisfied that the defendant’s  application  must succeed. The McLeans’ cause of action has no prospect of success whatsoever.

[45] The defendant is entitled to costs. It seems likely that costs on a 2B basis are appropriate. If the parties cannot agree that, they may file memoranda in accordance with the following timetable:

(a)Ministry’s costs memorandum by 5.00 pm, 11 October 2013.

(b)Mr and Mrs McLeans’ costs memorandum by 5.00 pm, 25 October 2013.

(c)Ministry’s reply (if any) by 5.00 pm, 1 November 2013.