P v Attorney-General HC Wellington CIV-2006-485-874

[2010] NZHC 2387

This case has been anonymized

NOTE: NAME SUPPRESSION ORDERS OF PLAINTIFF AND OTHERS ARE IN PLACE (REFER JUDGMENT OF 23 JULY 2010)

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2006-485-874

BETWEEN  P Plaintiff

ANDTHE ATTORNEY-GENERAL Defendant

On the papers:

Counsel:         Mr H Hancock for Defendant

Mr G Taylor for Legal Services Agency

Judgment:      14 December 2010 at 1.00 pm

JUDGMENT OF MALLON J Costs

Introduction

[1]      This proceeding involved a claim for substantial damages and other orders arising out of alleged sexual and physical abuse said to have occurred when P was in the Navy.  The claim was unsuccessful (refer judgment delivered on 16 June 2010). P was in receipt of legal aid during some periods of the proceeding, including when the proceeding was at the stage of preparing for trial and also during the trial. The defendant does not seek an order for costs against P.  The defendant does, however, seek an order specifying what costs would have been made against P if his liability to pay costs had not been affected by s 40 of the Legal Services Act 2000.   The defendant  also  “seeks  the  Court’s  view  as  to  the  conduct  of  [P]  in  these

proceedings”.

P V THE ATTORNEY-GENERAL HC WN CIV-2006-485-874 14 December 2010

[2]      Submissions opposing the defendant’s application have not been made on behalf of P.  P’s counsel in the substantive proceeding has not been granted legal aid to do so.  Submissions opposing the application have, however, been made by the Legal Services Agency – leave was granted for this over the objection of the defendant.

Statutory provisons

[3]      The defendant’s application is made under s 40 of the Legal Services Act

2000.  That section was amended with effect from 1 March 2007.   The defendant accepts that s 40, as it was before its amendment, is the relevant provision.  Section

40, as it then was, provided as follows (so far as is presently relevant):

40       Liability of aided persons for costs

(1)Subject  to  subsection (2), if  a  person (in this  section,  the  aided person) receives legal aid for civil proceedings, the aided person’s liability  under  an  order  for  costs  made  against  him or  her  with respect to the proceedings must not exceed the amount (if any) that is a reasonable one for the aided 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  the  aided person is liable to pay under any such order for costs must not exceed  the  amount  of  the  contribution  that  the  aided  person  is required to make under section 15(1).

(3)Any order for costs made against the aided person may specify the amount  that  the  person  would  have  been  ordered  to  pay  if  this section had not affected that person’s liability.

(4)Where, because of this section, no order for costs is made against an aided person, an order may be made specifying what order for costs would have been made against that person with respect to the proceedings if this section had not affected that person’s liability.

...

[4]      The combined effect of s 40(1) and (2) is to limit the costs that can be ordered against legally aided persons.   The Court may make an order specifying what costs it would have ordered against the legally aided person were it not for those limits, whether it makes an order for costs against that person within those

limits (s 40(3)) or whether it does not make any order for costs against that person

(s 40(4)).

[5]      If the Court does make an order under s 40(3) or (4) then s 41 becomes relevant.   At the time that applies to this proceeding it provided:

41       Costs of successful opponent of aided person

(1)If an order is made under section 40 that specifies that an aided person would have incurred a liability, or a greater liability, for costs if that section had not affected his or her liability, the party to the proceedings who is prejudiced by the operation of that section may apply to the Agency in the prescribed manner for payment by the Agency of some or all of the difference between the costs (if any) actually awarded to that party against the aided person and those to which that party would have been entitled if that section had not affected the aided person’s liability.

(2)In considering any such application, the Agency must have regard to the following:

(a)      the conduct of the parties to the proceedings;

(b)whether the costs of the proceedings were unnecessarily increased by the conduct of the applicant or of any person providing legal services under the grant;

(c)       the hardship that would be caused to the applicant if the costs were not paid by the Agency.

(3)For the purposes of subsection (2)(c), the Agency may require any person to furnish information on the financial circumstances and needs of the applicant.

(4)If, having regard to the matters specified in subsection (2) and to any information received under subsection (3), and to all relevant circumstances, the Agency considers that any payment should be made by the Agency to the applicant, it may order accordingly, and must make the payment.

[6]      Therefore s 41 permits a party “who is prejudiced” by the limits as to costs imposed by s 40 to apply to the Legal Services Agency for payment of  some or all of the costs that would have been ordered if the party were not legally aided. The decision about this is made by the Legal Services Agency having regard to the stated relevant considerations.    The Legal Services Agency may recover any payment it determines should be made as a debt due from the legally aided person.

Submissions

[7]      The Legal Services Agency emphasises the discretionary nature of any order under s  40(4).    It  says  that relevant to  that discretion is whether the case was reasonably arguable.  It further says that the conduct of the legally aided person is relevant so that an order under s 40(4) may be more likely if they have unnecessarily added to the costs.  It submits that the greater the responsibility of the Legal Services Agency in continuing the case to the point it reached, the more likely it will be that a s 40(4) order will be made.

[8]      In this case, the Legal Services Agency notes the difficulty it had in assessing prospects  on  limited  information  and  further  notes  that  the  test  for  exemplary damages changed between the hearing and the judgment.  It accepts that the quantum of P’s claim for exemplary damages was unrealistic but also notes that “justification for proceeding is not to be counted in money terms alone”.  It notes that the Legal Services Agency’s view on the prospects of success was such that it had withdrawn legal aid but its view was not upheld through the legal aid appeal process (which included two High Court decisions).

[9]      The defendant seeks an order for costs on a 2B basis.   He calculates that those costs amount to $140,843.12.   He accepts that there is a discretion as to whether to make an order under s 40(4).  He says that s 40 is directed at what would have been ordered against the legally aided person.  He submits that considerations relating to the Legal Services Agency’s conduct are therefore not relevant.  Despite that submission, the defendant refers to P having now brought a civil proceeding in relation to this matter and says that “[i]f adequate findings of liability for costs are not made here future plaintiffs ... may come to believe that they can inflict large costs deficits on defendants without any adverse effect for themselves or in this case their funder, [the Legal Services Agency]”.  He further says that plaintiffs and those who fund their claim should not be sheltered from costs in respect of proceedings which had little or no chance of success.

[10]     Relying on what was said in W v Attorney-General1 that orders under s 40(4) are made “as a matter of course” where a successful party requests that such an order, the defendant submits that there is a “presumption” in favour of an order being made here.   He submits that an order should be made because “failure” in the proceeding  by P  “was  entirely foreseeable”.    He  submits  that  the  real  costs  of defending this claim far exceed the costs claimed by the defendant and that no doubt the amounts paid by the Legal Services Agency were also extremely high.   He submits that an order under s 40(4) is “an appropriate way for the Court to record the expense of such claims to the judicial system and to society as a whole”.  He seeks “comment” from the Court because a “stand needs to be taken against this type of disproportionate expenditure on very weak cases”.

My assessment

[11]     I agree with both sides that s 40(4) is phrased as something the Court “may” do and that therefore there will be circumstances where it is not appropriate for it do do so.   I disagree with the Legal Services Agency, that its conduct is relevant to whether an order should be made under s 40(4).  As the defendant submitted, s 40 is concerned with costs awarded against a legally aided person.  The order that can be made under s 40(4) is an order directed at the costs that would have been ordered against the legally aided person were it not for the limits on costs imposed by s 40(1) and (2).  The purpose of making an order under s 40(4) is to enable the party to make an application under s 41 if he or she wishes to do so.  That application enables a person prejudiced by the limits on costs against legally aided persons to, essentially, seek relief from the Legal Services Agency which in turn can seek to recover the money from the legally aided person.

[12]     The defendant does not say if he is intending to make an application under s

41.  Nevertheless I see no reason not to make the order and the matters referred to by the Legal Services Agency do not persuade me that the order should not be made. The order in and of itself does not determine anything of consequence as against P or the Legal Services Agency.  It is merely a pre-condition to an application under s 41. It will be up to the defendant whether to proceed with an application under s 41.  If

1      W v Attorney-General HC Wellington CIV-1999-485-85, 864, 28 September 2008 at [9].

the defendant makes such an application the Legal Services Agency will be put to the time and cost of considering it, but that is a function given to it under the legislation.  It will be for the Legal Services Agency to consider any such application having regard to the three matters set out in s 41(2) (as it was prior to the 2006 amendment).

[13]     I disagree with the defendant that the purpose of s 40(4) is to enable a “stand” to be taken in respect of expensive and unmeritorious litigation.   Whether there should have been public money spent on the proceeding is not for me to assess.  That was the role of the Legal Services Agency and the appeal process that related to that. The Legal Services Agency’s view was that public money in the form of legal aid should not have been spent on the proceeding but its view was not upheld in the appeal process.  My view of the proceeding is as stated in my substantive judgment. It is not submitted that there were “exceptional circumstances’ under s 40(2) which may have required me to consider the conduct of the plaintiff (depending on the basis for any claimed exceptional circumstances).  The Legal Services Agency will consider this if an application is made to it.  The only comment that is appropriate from me at this juncture relates to the costs order which the defendant seeks.

[14]     As to that, I have no difficulty with the 2B categorisation.  I am prepared to order that, but for s 40 of the Legal Services Agency, the defendant would have been entitled to the costs of the proceeding as calculated in accordance with High Court Rules on that basis.  That is because the defendant succeeded and costs ordinarily follow  the event.    The  nature  and  complexity of the proceeding  was  such  that category 2 was appropriate and, in the absence of reasons suggesting otherwise, band B seems reasonable for the particular steps for which costs under the High Court Rules are payable.   It was a case where I would certify costs for two counsel as claimed by the defendant.   I would also have approved the witnesses’ expenses claimed as disbursements to be paid by P but for s 40.   I do not propose to go through a line by line analysis of the calculation submitted by the defendant.  I have no response from P or the Legal Services Agency about them and, in any event, the costs regime is designed to enable costs to be calculated without court involvement. If an application is to be made under s 41, and if there is any issue about any of the line items (and there should not be), then that can be considered if and when it

becomes relevant.   I reserve leave should it be necessary for me to determine any particular item that may be in dispute.

[15]     The parties made submissions as to whether the wording of ss 40 and 41 as amended from 1 March 2007 was materially different from the wording that applies here.    I was also referred to a number of authorities.   Although I have considered these submissions and the authorities, they did not alter my assessment as set out above.

Result

[16]     I order that an order for costs, on a 2B basis for the steps taken by the defendant for which costs can be claimed under the High Court Rules, would have been ordered against P if s 40 had not affected P’s liability for costs.  Such order would have included a certificate for second counsel as claimed.  It would also have included the claimed witnesses’ expenses as a disbursement.

Mallon J

Solicitors:

Crown Law, Wellington for Defendant

Bartlett Partners, Wellington for Legal Services Agency, [email protected]