Tonga v Accident Compensation Corporation
[2022] NZHC 934
•5 May 2022
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-656
[2022] NZHC 934
IN THE MATTER of an appeal under s 162 of the Accident Compensation Act 2001 BETWEEN
SOSIA TONGA
Appellant
AND
ACCIDENT COMPENSATION CORPORATION
First Respondent
ALLIANCE GROUP LIMITED
Second Respondent
Hearing: 2 May 2022 Counsel:
A C Beck for Appellant
No appearance for First Respondent H A Evans for Second Respondent
Judgment:
5 May 2022
JUDGMENT OF SIMON FRANCE J
Introduction
[1] The context of this appeal is the review process under the Accident Compensation Act 2001 (the Act) and in particular the costs regime that applies to it. Section 148(2)(b) of that Act provides:
(2) Whether or not there is a hearing, the reviewer—
…
(b)may award the applicant costs and expenses, if the reviewer does not make a review decision in favour of the applicant but considers that the applicant acted reasonably in applying for the review:
TONGA v ACCIDENT COMPENSATION CORPORATION [2022] NZHC 934 [5 May 2022]
[2] Mr Tonga was an unsuccessful review applicant.1 He was legally represented. It is common ground an award of costs would normally be made under subs (2)(b). However, his legal representation was provided and paid for by his union. This meant that no award of costs was made on the basis that Mr Tonga personally had no responsibility to pay his counsel. The District Court upheld the decision not to make a costs award but granted leave to appeal on the following question:2
Whether a claimant on review, who has no liability to pay his or her own costs because they are met by a third party, is entitled to costs under s 148 of the Act and the 2002 regulations.
[3] There are two respondents. The second respondent has the carriage of appeal. It is Mr Tonga’s employer and is an accredited employer under Pt 6 of the Act. It accordingly stands in the shoes of the Corporation for Mr Tonga’s claim. The Corporation abides the decision and does not wish to be heard. Its memorandum to that effect seeks to make clear the second respondent is not acting on the Corporation’s behalf in terms of the arguments being advanced.
Facts
[4] The facts of Mr Tonga’s injury claim are not relevant to the appeal. Mr Tonga’s claim was declined, as was his review of that decision. The reviewer declined to make an award of costs. The reviewer had earlier clarified with Mr Tonga’s counsel that Mr Tonga had not been invoiced, the union (which was meeting the costs of legal representation) had not charged Mr Tonga anything, and the only direct costs to Mr Tonga were his union membership fees. The reviewer concluded Mr Tonga had no costs liability and so there could not be an award of representation costs.
[5] Mr Tonga appealed to the District Court which overturned the reviewer as regards the cause of Mr Tonga’s condition, with the consequence he was entitled to cover. However, the District Court upheld the reviewer as regards the decision not to award costs.
1 Mr Tonga subsequently succeeded in the District Court.
2 Tonga v ACC [2020] NZACC 137 (substantive decision); and Tonga v ACC [2021] NZACC 181 (leave to appeal decision).
[6] There is no evidence as to the legal arrangements between Mr Tonga and the union. This judgment proceeds, however, on the assumption that an award of costs would be passed on to the union which funded the legal representation.
Decision under appeal and authorities it relies on
[7]Section 148 provides in full:
148 Costs on review
(1)The Corporation is responsible for meeting all the costs incurred by a reviewer in conducting a review.
(2)Whether or not there is a hearing, the reviewer—
(a) must award the applicant costs and expenses, if the reviewer makes a review decision fully or partly in favour of the applicant:
(b) may award the applicant costs and expenses, if the reviewer does not make a review decision in favour of the applicant but considers that the applicant acted reasonably in applying for the review:
(c) may award any other person costs and expenses, if the reviewer makes a review decision in favour of the person.
(3)If a review application is made and the Corporation revises its decision fully or partly in favour of the applicant for review before a review is heard, whether before or after a reviewer is appointed and whether or not a review hearing has been scheduled, the Corporation must award costs and expenses on the same basis as a reviewer would under subsection (2)(a),
(4)The award of costs and expenses under this section must be in accordance with regulations made for the purpose.
(5)If any costs and expenses are awarded against the Corporation under this section, the Corporation is liable to pay them within 28 days of the decision to award them.
[8] The decision under appeal applies a consistent line of authority that an applicant such as Mr Tonga who is represented by a lawyer provided by a third party cannot obtain an award of costs. The initial decisions3 were given at a time when the relevant regulation referred to “costs paid or payable by the applicant to his or her
3 Lucas v ACC [2000] NZACC 266 (DC); and Alliance Group Ltd v ACC [2000] NZACC 39 (DC).
representative”.4 The new regulations enacted in conjunction with the Accident Compensation Act no longer contained that phrase.5
[9] Notwithstanding this change in language, in Campbell v ACC Judge Ongley held the previous approach still applied.6 The key reason remained that in order to receive an award of costs, a party must in some way be at least potentially liable to pay their lawyer’s costs. In Campbell the claimant’s legal representation was provided by the Accident Injury Support Trust (the Trust) which is a charitable body assisting ACC claimants. The arrangements concerning legal representation seem identical to those applying to Mr Tonga (an expectation of reimbursement where costs recovered).7
[10] In Campbell Judge Ongley observed that it was likely that the costs situation could be different if the Trust varied in some way not identified the structure of its arrangement with the ACC applicant it was assisting.8 The comment appears to flow from the Court’s analysis of two High Court decisions.
[11] R v Rada Corp Ltd involved a claim for costs by defendants who had been acquitted of charges under the Securities Act 1978.9 There was a dearth of evidence concerning the detail, but it seems some defendants were supported by insurance policies which would meet all or most of the costs of their legal representation. The Crown submitted that because of this there could be no entitlement to an award.
[12] Hindered by the lack of evidence of the detail of the arrangements, Barker J in general terms adopted English authority which had held these insurance arrangements did not preclude an award except when:10
it has been agreed that the client shall in no circumstances be liable for the costs.
4 Accident Rehabilitation and Compensation Insurance (Review Costs) Regulations 1992, cl 3.
5 Accident Compensation (Review Costs and Appeals) Regulations 2002, cl 4.
6 Campbell v ACC [2013] NZACC 197 (DC).
7 Campbell was in fact a gathering together of five cases in which the same issue had arisen. It seems that at least one of the five cases involved a union provided lawyer.
8 At [22].
9 R v Rada Corp Ltd [1991] 2 NZLR 122 (HC).
10 At 127, applying R v Miller [1983] 3 All ER 186 at 190.
If there was not potential liability, the arrangement necessarily failed to meet the test of “costs incurred by him”.
[13] In Long v R,11 the defendant and now cost claimant was a doctor who had been unsuccessfully prosecuted. Dr Long’s legal expenses had been met by the Medical Protection Society Ltd. Membership of the Society was by subscription and if it chose to do so, the Society indemnified a member such as Dr Long for his legal costs in the situation in which Dr Long found himself. The arrangement was that:12
It is expected that Dr Long would repay the society any contribution towards the cost of his defence arising out of any order the Court may make.
Hammond J adopted Rada Corp, and observed of his case there was no evidence of any agreement of the type noted by Barker J as precluding an award.13 A costs award was made in circumstances that appear the same as those of Mr Tonga.
[14] The Campbell decision, affirming as it did previous authority to the same effect, has consistently been applied. I am advised the issue has not been considered in this Court.
Submissions
[15] Mr Beck submits there is nothing in the wording of s 148 that prevents an award under either subs (2)(a) or (b) to an applicant whose representation is provided by a third party such as a union. It is submitted an award of costs would be consistent with the Act’s purposes which seek to place all costs on the respondent (at least to the extent of the scale):
(a)the Corporation always meets the reviewer’s costs;
(b)if an applicant is successful there must be an award of costs in their favour;
11 Long v R [1996] 1 NZLR 377.
12 At 379.
13 At 380.
(c)even if an applicant is unsuccessful, there can be an award unless the review was unreasonable. I am advised by both counsel that awards are usually made.
[16] Mr Beck emphasises that here there is legal representation provided and paid for. Normal litigation costs have been incurred in support of Mr Tonga’s claim, and an invoice for those costs have been generated. That a third party pays the invoice should not be seen as requiring an outcome inconsistent with the policy of the Act.
[17] Mr Beck submits there are a number of recent costs decisions in other jurisdictions (criminal law, employment law, ordinary civil litigation) which are supportive of Mr Tonga’s position.14
[18] Mr Evans submitted the existing approach is correct because Mr Tonga has no liability to pay the legal costs, and the actual cost bearer is not a party to the proceeding. Mr Evans addressed the possibility of the union being “any other person” under s 148(2)(c) but that was not the basis on which the appeal is advanced. The focus is on an award to the applicant under either subs (2)(a) or (2)(b).
[19] Concerning the recent decisions, it is submitted none involve a third party such as the present case combined with a complete absence of any chance that the applicant will meet any of the legal costs incurred on his behalf. The Act is submitted to be its own scheme to which authorities from other jurisdictions have lessened or little relevance. A consistent line of authority in such a specialised area merits appropriate weight.
Decision
[20] There is nothing in the wording of the primary legislation that suggests Mr Tonga should not receive an award of costs, or be treated differently from any other legally represented applicant. He is an applicant who has not acted unreasonably. Section 148(4) says any award must be in accordance with the regulations, but again on their face nothing in the actual wording of the relevant regulation excludes
14 These will be discussed later in the judgment.
Mr Tonga.15 Clause 4 says awards are limited to the items listed in sch 1. Schedule 1 sets out the rates for an “applicant’s representation”.
[21] The restrictions currently applied to Mr Tonga flow from a previously well- recognised principle in the area of costs but are not found in the terms of the actual legislation. I therefore accept Mr Beck’s submission that what is fairly described as a developing approach to costs over a number of subject jurisdictions is relevant.
[22] The first case is McGuire v Secretary for Justice, a decision of the Supreme Court.16 It primarily concerned self-represented litigants but also addressed the situation of employed lawyers where that lawyer was acting for the employer. Its primary relevance to the present issue is the Court rejected reliance on receipt of invoices as a valid means of determining whether a party was eligible to receive a costs award.17
[23] Long and Rada Corp are older decisions and have been discussed. They are relevant in that they at the least recognise that the fact a third party is paying the legal representation does not of itself prevent a costs award. Rada Corp would appear to require that there is some potential liability on the party of the party to meet the lawyer’s costs in order for there to be an award. Long appears to agree with this, but in my view it is very difficult to discern any difference there between the arrangements for Dr Long and those applying to Mr Tonga.
[24] In NR v MR, the Court of Appeal commented on both conditional fee arrangements, and pro bono arrangements where any payment was to be limited to costs awards actually made in favour of the client.18 The Court observed:19
[41] I assume M R’s lawyers may work on a conditional fee arrangement, but such arrangements are permitted. They may even work pro bono, receiving only such amount by way of fees as N R is ordered to pay. None of this is of concern to a court, which does not ordinarily supervise litigation funding and finds inherently nothing wrong with a lawyer acting on the basis that he or she will be paid on a win and not on a loss. The Court’s only concern
15 Accident Compensation (Review Costs and Appeals) Regulations 2002.
16 McGuire v Secretary for Justice [2018] NZSC 116, [2019] 1 NZLR 335.
17 At [85]–[88].
18 NR v MR [2014] NZCA 623.
19 Footnotes omitted.
is to ensure that N R is not required to pay more by way of costs than is needed to indemnify M R. That concern can readily be addressed, if it be thought necessary, by requiring a solicitor’s undertaking, or for that matter an affidavit, in any given case to the effect that M R has incurred a liability to pay not less than the sum awarded. …
[25] The Court of Appeal has more recently made further comments on these situations. In Marino v Chief Executive of the Department of Corrections, the Court made an award of costs that exceeded what had been actually invoiced, recognising that the difference between the invoices and the scale costs reflected work done on a pro bono basis and not the actual cost.20 In Karmarkar v Manda the Court awarded costs where counsel had acted without fee but on an understanding costs would be sought and, if granted, an invoice in the equivalent amount would be issued.21
[26] The parallels between Karmarkar and Mr Tonga’s case are obvious. In neither case is there a cost risk to the party. In both cases the “funder” will be reimbursed only to the extent of any costs award. The only distinction on which Mr Evans relies is that in one there is a third party funder and the lawyer is paid regardless (Mr Tonga) whereas in the other the lawyer is effectively the funder. That distinction exists but is not of significance. What these cases do represent is seemingly a shift from the absolute requirement in Rada Corp that the client have some potential liability for their lawyer’s fees. This was the principle that informed the outcome in Campbell and it is implicitly rejected in all these decisions.
[27] A similar outcome was reached in Wallace v Commissioner of Police.22 Mrs Wallace brought proceedings concerning the death of her son. Counsel had acted for her on a “results” basis, the arrangement seemingly being the same as in Karmarkar. Ellis J relied on the authorities already reviewed, including the Supreme Court’s rejection of the “invoice required” approach, to make a costs award. There is no suggestion in the judgment that Mrs Wallace’s obligation to pass on any award to counsel was of any different legal character to that which exists with Mr Tonga.
20 Marino v Chief Executive of the Department of Corrections [2017] NZCA 2.
21 Karmarkar v Manda [2019] NZCA 130.
22 Wallace v Commissioner of Police [2021] NZHC 3315 at [5].
[28] Finally, the issue of costs in the Employment Court context has recently been reviewed. The Chief Judge set the scene in these terms:23
[1] Costs generally follow the event. Ms Popkin succeeded in defending the company’s challenge to a determination of the Employment Relations Authority. Ordinarily she would be entitled to costs. Ms Popkin was represented by lawyers from the Community Law Centre. While the Community Law Centre incurred the costs of making two of its lawyers available to prepare for and appear at the hearing on Ms Popkin’s behalf, Ms Popkin herself has not incurred any legal costs. The question is whether the Court may make an order of costs in such circumstances.
[2] There is limited authority on the matter. I have concluded it is within the Employment Court’s broad discretion to order a contribution to legal costs in proceedings conducted on a pro bono basis (including by the Community Law Centre), and that an order is appropriate in the circumstances of this case, for the reasons that follow.
[29] It is, as Mr Evans submits, noted in the substance of the judgment that the Employment Court has its own policy imperatives and has in the matter of costs long deviated from the standard approach that applies in other Courts.24 This is explained as flowing from its statutory purposes.
[30] I accept, as Mr Evans submits, that may make less relevant the Chief Judge’s analysis of that particular legislation. However, it is difficult to discern that an equally close analysis of the Accident Compensation legislation points to a different conclusion. Rather, what stands out with the review provisions is that other than where it is an unreasonable application, costs will flow back to the applicant. The Corporation is effectively responsible for funding the process except that its liability to meet an applicant’s costs is limited to specified maximum amounts.
[31] The thrust of the present approach to costs as reflected in the judgments that have been considered is substance over form. Judge Ongley in Campbell recognised a form change could alter the result in that case, and presumably very many cases since. However, courts today are placing less emphasis on the form issue if the relevant substance is already in place.
23 Innovative Landscape (2015) Ltd v Popkin [2020] NZEmpC 96, [2020] ERNZ 262 (footnotes omitted).
24 At [6]–[7].
[32] Here there was legal representation and this work was invoiced, as I understand the facts, on a normal charging basis. This places the facts on stronger footing than the pro bono cases where ultimately the invoice will merely reflect whatever costs award is made. It is difficult to discern a basis on which a contribution to costs that would be payable in a myriad similar situations with slightly different structures, and which the legislation contemplates will be paid other than in a few cases, is not payable on Mr Tonga’s arrangement. It seems to me to matter little whether it is pro bono representation provided by a barrister or an organisation such as Community Law, or it is a worker funded by his union (or a doctor by their Society), or it is a director indemnified by their insurer or a party who is backed by a litigation funder. In all these cases there is in reality either an unpaid lawyer or a third party paying the bills. The liability of the actual party is theoretical at best. Yet increasingly, costs awards are made on a normal basis. I consider there is no reason for it to be different with Accident Compensation Act reviews.
Conclusion
[33] The stated question is answered yes. Costs memoranda may be filed if necessary.
Simon France J
Solicitors:
Peter Sara, Dunedin for Appellant
Alliance Group Limited, Invercargill for Second Respondent
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