LEGAL SERVICES AGENCY V OGILVIE HC WN CIV-2006-404-739

LEGAL SERVICES AGENCY V OGILVIE HC WN CIV-2006-404-739 29 June 2006IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY CIV-2006-404-739UNDER the Legal Services Act 2000 IN THE MATTER OF a decision by the Legal Aid Review Panel dated 20 January 2006 BETWEEN LEGAL SERVICES AGENCY Appellant AND ROWAN PETER OGILVIE Respondent Hearing: 6 June 2006 Appearances: GDS Taylor for Appellant JAL Oliver as Amicus Curiae No appearance for Respondent Judgment: 29 June 2006 In accordance with r 540(4) I direct the Registrar to endorse this judgment with a delivery time of 10.00 am on the 29 th day of June 2006.JUDGMENT OF CLIFFORD J These proceedings[1] In this appeal the Legal Services Agency ("the Agency") claims that the Legal Aid Review Panel ("the Panel"), in reversing a decision of the Agency withdrawing further legal aid from the respondent for a civil proceeding for exemplary damages brought by him relating to a motor vehicle accident on 30 June 2003: a) Erred in law by misconstruing the judgment in Legal Services Agency v Black HC WN CIV-2004-404-2561 14 October 2005; andb) As a result, erred in law when it held that a judgment of Judge Noble in the District Court in Christchurch was not something that, in terms of Black, could constitute a further development or further information, or an alteration of circumstances, upon which the Agency could lawfully withdraw legal aid from the respondent. [2] The issue raised in this appeal was, I was told by counsel for the Agency, a point of principle and a matter of some importance. It relates to one of the core aspects of the way in which the Agency administers grants of legal aid. This involves what is known as the staged grant system, whereby the Agency makes decisions over time as to whether proceedings should continue to be legally aided, and the basis upon which it makes those decisions. Very specifically, Mr Taylor for the Agency saw this appeal relating to the way in which Goddard J in Black had interpreted the phrase "no longer" in s 26(2)(a) of the Legal Services Act 2000 ("the Act"). [3] The Agency accepts the Black decision, but disagrees with the way the Panel has interpreted and applied it in this instance. [4] Mr Taylor noted at the hearing that when the Legal Services Amendment Act 2006 comes into force (planned for 1 April 2007) the Agency's decisions in this area will be affected by an amendment to s 26(2) of the Act. Prior to this time, however, grants will continue to be governed by s 26(2) in its current form. The Agency's concern, therefore, is as to the correct interpretation and application of the Blackdecision up until the time when the amendment to s 26(2) becomes operative.Facts[5] On 10 June 2003 the respondent was involved in a car accident in Christchurch. He was severely injured and his (unwarranted and unregistered) motor vehicle was written off. The respondent alleged that he lost control of his car when it came into contact with oil which had flowed from the sump of a truck an hour previously, the sump of the truck in question having been holed by a metal object thrown from a passing vehicle. The respondent alleged that the truck driver'sconduct subsequent to that event was grossly negligent and should attract an award of exemplary damages against him. [6] Legal aid was granted to commence such proceedings, and further grants were made from time to time. [7] Subsequent to the initial grants of legal aid for the respondent's civil proceedings, the truck driver was prosecuted under (now revoked) regulation 26(1)(b) of the Traffic Regulations 1976. The prosecution was heard by Judge Noble in the Christchurch District Court on 9 September 2004. The essence of the charge was that the truck driver failed in his duty to warn the public or to report to the police the accident that had occurred where there was a substance (the oil) on the road, the removal of which could not be achieved quickly or safely, and where there was a likelihood of harm to the public or any person. [8] By a narrow margin, Judge Noble was not satisfied beyond reasonable doubt that the spillage of oil from the truck driver's vehicle had given rise to a likelihood of harm to the public or any person. Moreover, and more relevantly, the Judge noted that even if he had concluded that that element of the charge had been established – and, therefore, that the truck driver's actions in not advising the police brought him formally within the ambit of the offence – the truck driver would likely have been discharged without conviction. Alternatively, if a conviction had been entered, he would have been convicted and discharged with no disqualification being imposed. These latter remarks were based on Judge Noble's finding that the truck driver was a reasonable citizen doing what he thought was reasonable in all the circumstances. [9] Returning to the issue of legal aid, this had first been granted to the respondent on 7 February 2004. The Agency learnt at a relatively early stage that the prosecution of the truck driver had been unsuccessful. Nevertheless it continued to make grants of legal aid in respect of various steps of the civil proceedings. [10] It was only when the Agency received the full text of Judge Noble's decision that it became aware that the central element of the prosecution case had not beenproved beyond reasonable doubt. Moreover, Judge Noble had favourably commented on the conduct of the truck driver, in the following terms:In the circumstances I found him to be a reasonable citizen doing what he thought was reasonable in all the circumstances of the case.[11] Appraised of these specifics, the Agency decided that the respondent was no longer entitled to civil legal aid and gave notice accordingly. [12] The respondent appealed that decision to the Panel. [13] In its decision of 20 January 2006 the Panel reversed the decision of the Agency. The Panel concluded that the Agency's only reason for withdrawing legal aid amounted to what were essentially "second thoughts" about the merits of the case prompted by the decision of Judge Noble. On the basis that Black held that "second thoughts" are an insufficient reason for reviewing and discontinuing civil legal aid, the Panel decided that the Agency's decision could not stand. [14] The Agency now appeals against the Panel's decision. [15] The Agency raises two issues on appeal. First, was the Panel right to applyBlack and conclude that Judge Noble's decision "cannot be" a change in circumstance as a matter of principle. Second, was the Panel correct to determine that the Agency could not properly withdraw the respondent's legal aid?Legislative background[16] Mr Taylor provided a comprehensive overview of the legislative framework within which legal aid is provided. I think the key elements of that framework, as relevant for these proceedings, may be summarised as follows: a) Section 14(1) provides for the Agency to grant legal aid in respect of "the whole or any part" of the proceedings or appeal in respect of which an application is made. I note that s 7(1) characterises the "matters" in respect of which legal aid may be granted by reference toa range of proceedings and cases specified in paragraphs (a) to (o) of s 7(1). The phrase "grant of aid" is defined to include an amendment to grant (s 4). b) Section 20 provides for grants of legal aid to specify a maximum grant, which may be expressed in any way. c) Section 24 provides for applications to amend grants of legal aid, which may be made at any time before the matter to which the application or grant relates is finally disposed of by the relevant body. d) Section 26 provides for the withdrawal of, or amendment to, grants of legal aid in civil matters. Section 26(2) provides discretionary grounds upon which legal aid may be withdrawn or a grant of legal aid amended. These include: i) The aided person is no longer a person who would be entitled to that grant of legal aid, by virtue of any of the provisions of ss 9, 10 or 11 (s 26(2)(a)). ii) The Agency considers that the aided person no longer has reasonable grounds for taking, defending, or being a party to the proceedings, or that it is unreasonable or undesirable in the particular circumstances for the person to continue to receive legal aid (s 26(2)(d)). e) Section 27 sets out a procedure for the withdrawal or amendment of grants of legal aid. This procedure requires notice to be given to the aided person before aid is withdrawn or amended, and for that person to make submissions and have those submissions considered by the Agency. No issues arise under s 27 in this instance. [17] Based on this statutory framework, it can be seen that the Agency operates a staged process for the grant of legal aid. I note in this regard that the Agencyreceives about 68,000 applications for legal aid each year and grants aid for about 60,000 of them. On average three decisions are made on each file where legal aid is granted. [18] As it was explained to me by Mr Taylor, the staged process reflects the system developed earlier where legal aid was granted not for a single sum for the entire proceeding, but for a sum for certain stages, e.g. to commencement, or to discovery, or setting down. As a matter of normal course, each stage now has attached to it a maximum grant. When that stage has been completed, the grant will be extended to the next stage for a further sum. Similarly staged grants may, as I understand, be amended "within a stage". The context in which the Agency makes its initial decision to grant aid, and its later reassessments of grants in relation to amendments to grant, is therefore one of growing knowledge of the evidence and prospects of success. An initial grant of aid is usually made before proceedings are commenced, and therefore in a state of limited knowledge. The Agency, rightly as submitted by Mr Taylor, takes a tolerant view of prospects of success in these circumstances. Later, after discovery, additional information may lead to a less tolerant approach. The Agency cannot avoid assessing the prospects of success (seeLegal Services Agency v A (2003) 17 PRNZ 443 at paras [12]-[14], [16]-[17]; andLegal Services Agency v Brown (2005) 17 PRNZ 523 at para [64] and this will, in Mr Taylor's submission, change as successive stages of a proceeding are completed and more information about the merits of the proceeding become available. Mr Taylor submitted that the recent decision of Legal Services Agency v Ng-Peta Taawha-Falwasser HC AK CIV-2005-404-1792 19 May 2006 is an example of how this staged process works.The Agency's decision[19] The sequence of the Agency's decision in this instance was as follows: a) Legal aid was initially granted on 27 February 2004 up to a maximum of $1,020.00 for "step 1 – civil matters". The covering letter to the application had noted that a prosecution had been brought against the truck driver.b) On 1 December 2004 an amendment to grant was approved, covering defending a strikeout application. The application for that grant included the information that the traffic charges had been dismissed, but the respondent's lawyer did not know the reasons for that. c) On 28 March 2005 a further application was received for an amendment of grant to cover filing an amended Statement of Claim. That application included the comment that the criminal prosecution had failed as the police had failed to call an appropriate expert, and had themselves failed to give expert evidence. That application was approved by a letter dated 7 April 2005. d) On 11 April 2005 the Agency received a letter from the respondent's lawyer, dated 6 April 2005. That letter appears to have been written before the lawyer received confirmation of the amendment of grant to cover the work involved in the amended Statement of Claim. In that letter, the lawyer noted that in his view the prosecution had failed because the police did not call an appropriate expert. The lawyer says nevertheless that his client still had a reasonable prospect of success, and that he was attempting to obtain a copy of Judge Noble's decision. e) On 14 April 2005 the Agency confirmed that the respondent remained eligible for legal aid. It also approved a lawyer's invoice for payment. f) On 10 May 2005 the Agency received a letter dated 6 May 2005 from the solicitors for the truck driver. It sought costs from the Agency under s 41 of the Act. In doing so, it included two decisions of Judge Moran on costs. In these decisions the Judge commented critically on the conduct of the respondent's case. g) On 1 June 2005 the Agency wrote to the respondent's lawyer, noting that the matters outlined in Judge Moran's costs decision gave it cause for concern. The letter stated that the Agency needed to be fullyinformed about the future steps in the proceedings. It continued: "prospects of success are clearly marginal in this case. It should not be assumed that aid will be granted to take this matter to conclusion. We will require a fully reasoned opinion on prospects of success for granting an amendment for trial". h) On 8 June 2005 the Agency received an application to amend the grant regarding the discovery stage of the proceedings. The letter applying for that amendment of grant recorded that the respondent's lawyer had several times asked the District Court for a copy of the criminal judgment, and was still awaiting the same. i) On 10 June 2005 that application was approved. j) On 28 June 2005 the respondent's lawyer replied to the Agency's letter of 1 June 2005. He defended the approach he had taken in some detail, and also advanced his argument that the question of whether there had been diesel as opposed to oil on the road had not been properly considered by the District Court. This letter discloses the lawyer's considerable enthusiasm for the claim in question, and his confidence in his ability to advance his client's case. It recorded his submission that there was no need for the substantive merits of his client's case and the issue of "reasonable prospect of success" to be further considered by the Agency. k) The Agency then wrote to the respondent's lawyer on 8 July 2005, confirming that it did not require the lawyer to appeal the costs order, acknowledging his significant experience in this field of law and confirming that legal aid would not be withdrawn at that stage. l) Then, on 12 July 2005, the Agency received an application for amendment to grant legal aid to prepare for trial. At that point, a copy of Judge Noble's decision was, for the first time, provided to theAgency, along with briefs of three witnesses summonsed by the police at the hearing. m) On 3 August 2005 the Agency wrote to the respondent and his lawyer advising them that a specialist adviser had reviewed the file. It went on to inform the respondent that, following consideration of Judge Noble's judgment on the traffic charge, the Agency was no longer satisfied that the prospects of success were sufficient to justify aid continuing. [20] Subsequent to that letter, the respondent's lawyer provided three written submissions to the Agency (letters of 10 August 2005, 2 September 2005 and 5 October 2005). On 21 October 2005, the Agency confirmed its decision. In doing so it noted that the submissions made by the respondent's lawyer had been considered and that another special adviser had been involved. It also referred to the limited circumstances in which awards of exemplary damages are given.The Panel's decision[21] The Panel reviewed the factual background and noted the issue before it was whether the Agency's decision was manifestly unreasonable, wrong in law, or both. It then correctly summarised those requirements, before recording its finding that the Agency's decision to withdraw aid was wrong in law. The essence of its findings are set out in paras 23 and 24, and read as follows:[23] The factual summary outlined above shows that the Agency granted aid in February 2004 and then approved a number of amendments to the grant. It is implicit in the original grant of aid that the Agency considered that the Applicant's prospects of success were sufficient to justify the grant of aid. In Legal Services Agency v Black (CIV- 2004-404-2561, 14 October 2005, High Court, Wellington registry), Goddard J said (at paragraph 47): "Parliament cannot have intended that plaintiffs could be aided so that a proceeding can be instituted and continued to a midpoint and then stranded without continuing unless there is some alteration of circumstances so that what was initially commenced in good faith should be terminated. It is entirely legitimate to review progress in light of events since commencement. It is counter-intuitive andcounter productive to enable a proceeding to start and then to stop it when nothing has changed since the original decision." [24] In its decision of 21 October 2005, which confirmed its earlier decision of 3 August 2004, the Agency's only reason for withdrawing aid amounts to what is essentially "second thoughts" bout the merits of the case, prompted by the decision of Noble DCJ in which His Honour dismissed the Police prosecution against Mr XY. However, Noble DCJ's decision cannot be a change in circumstance that affects the prospects of the claim for exemplary damages. That claim has the same prospects it had when the Agency granted aid in February 2004. At best, Noble DCJ's decision has led the Agency to the belated realisation that the prospects of success are not as great as it originally thought. But, as Goddard J found in Black (supra), such a belated realisation is, on its own, not a proper basis for withdrawing aid.[22] The Agency alleges that these findings disclose that the Panel made errors of law.Analysis[23] Section 59 of the Act confers on the Agency, or an applicant, a right of appeal to this Court on the grounds that the Panel's determination is wrong in law. To determine whether the Panel erred at law, it is appropriate first to consider the decision in Black, in particular the context in which Goddard J made the comments relied upon by the Panel in the decision under appeal. [24] In Black the first ground of challenge to the Agency's decision was that it had failed to give notice – a facet of natural justice – as required by s 27 of the Act. The Agency had asserted that its "staged" procedure for the grant of legal aid meant that where an applicant receives a staged grant under s 14, they have no automatic entitlement to funding beyond that part of the proceedings for which funding has been granted. Therefore, where the Agency decides not to fund a further stage, or part of a proceeding, the original grant of legal aid is being neither "amended" nor "withdrawn" in the sense used in s 27 of the Act, so that the protections in s 27(2) are not triggered. There had, in other words, been no decision made under s 26 at all. The argument was that, when the end of the stage for which aid had been granted was reached, the grant simply came to an end and the respondent must applyde novo for a further grant of aid for the next stage. Goddard J rejected this contention as follows:[47] This argument cannot succeed, Parliament cannot have intended that plaintiffs could be aided so that a proceeding can be instituted and continued to a midpoint and then stranded without continuing unless there is some alteration of circumstances so that what was initially commenced in good faith should be terminated. It is entirely legitimate to review progress in the light of events since commencement. It is counter-intuitive and counter- productive to enable a proceeding to start and then to stop it when nothing has changed since the original decision. [48] On that basis, I am not persuaded that the staging interpretation for which Mr Taylor contends does accord with the purpose of part funding under s 14(1)(a). I find the approach contended for by Mr Lillico preferable: that the words "part of" the proceedings in s 14(1)(a) do not envisage a staged grant system that commences with the issuing of proceedings. It makes no sense for a grant to be made that envisages only the institution of proceedings but not the continuation of those proceedings to some logical conclusion. That is not to say that circumstances may not change necessitating a change to the funding approach; or that developments in the course of litigation may not militate in favour of settlement rather than trial. It must be supposed that an initial assessment as to the viability of a proceeding is made before a grant of aid is approved. If on an assessment of the situation a grant of aid is approved to cover the commencement of litigation then unless circumstances alter or (as I said in Legal Services Agency v Goodship) the initial decision to grant aid was made in error "perhaps on a material mistake of fact", there is a legitimate expectation that aid will continue in the absence of any s 26(2) matter arising.[25] Those comments were therefore made specifically in the context of Mr Taylor's argument, rightly rejected in my view, that the "staged grant" system involved some de novo consideration of an applicant's entitlement at and between each stage, so that at those points s 27 was not called into play. [26] Having disposed of this de novo argument, Goddard J turned to the second ground of appeal, the assertion that the respondent had a legitimate expectation that legal aid would continue. Her Honour held in relation to this matter:[51] In the respondent's case, absent application of any of the provisions of s 26(2) of the Act, she was entitled to expect aid to be continued (it having been granted) unless circumstances changed. In her case however, all that has happened is that a reassessment of the same circumstances has caused the Agency to have "second thoughts" about the original grant of aid to her, and to determine that the only part of the proceedings it was prepared to further fund were settlement negotiations (on conditions).[52] I adopt the expression "second thoughts" advisedly because the Agency's reassessment of the overall prospects of success of the respondent's claim seems to have resulted simply from a "better look" at the same circumstances. Therefore it can fairly be categorised as no more than "second thoughts". In stating that, I do not overlook the Agency's duty/entitlement to reassess the situation at each stage of a proceeding before it approves a further grant of aid for the next stage.[27] Goddard J then considered the third ground of appeal, namely that the Agency was not entitled in any event to invoke s 26(2) of the Act. In response to this argument the Agency had submitted that, even if the Panel was right in concluding that the Agency had simply had "second thoughts", if the Agency had as a result of those second thoughts withdrawn or amended the respondent's grant of legal aid, then s 26 applied because the respondent was "no longer" a person entitled to the grant of legal aid simply because the Agency had changed its mind. In this context, the phrase "no longer" could be applicable even where there was no change of circumstances, with the result that the Agency could rely on s 26(2)(a) as a ground for withdrawing or amending legal aid. [28] In response to this argument, Goddard J found as follows:[54] Under this head of appeal I am satisfied that none of the criteria in s 26(2) of the Act apply to the respondent's case. In particular, I cannot find, in the absence of any change in circumstances, that the respondent has become a person who is "no longer" entitled to the grant of legal aid made to her. [56] The expression "no longer" in s 26(2)(a) cannot apply to the situation of mere belated realisation of the prospect of success are not as originally (perhaps mistaken) thought. This is apparent from the Agency's letter of decision dated 13 May 2003 and its reference to "now [being] concerned that any amount obtained as the result of the proceedings may be exceeded by the legal costs incurred". It is also evident from the more detailed reasons for the decision given by the senior grants officer. At the time the initial grant of legal aid was made, the Agency must have been well aware of all the factors set out in the decision and reconsidered decisions.[29] In the course of these comments, Goddard J refers a number of times to circumstances arising where, under s 26(2), the Agency may withdraw legal aid. She does so in a number of different ways, but essentially on each occasion making the same point:a) In para [47] of her judgment she states "it is entirely legitimate to review progress in the light of events since commencement". b) In para [48] she notes that this "is not to say that circumstances may not change necessitating a change to the funding approach". c) In para [52] she comments "in stating that, I do not overlook the Agency's duty/entitlement to reassess the situation at each stage of proceeding before it approves a further grant of aid for the next stage". [30] These comments recognise that for a person to "no longer" be entitled under s 26(2)(a), or to "no longer have reasonable grounds" under s 26(2)(d), there will have to be a change in circumstances consequent upon subsequent events, for example new and highly probative information coming to light. In Black, the Agency had accepted that there had been no such change (other than perhaps in the decision of the Agency itself). [31] In my view, the point Goddard J was making in Black is that where there is no change in circumstances (including known facts) in the course of the proceeding being legally aided, then legal aid cannot be withdrawn simply because the Agency has second thoughts. Having made a decision to grant legal aid, the Agency is stuck with that decision. By the same token, and as acknowledged in Black, the Act provides for grants of aid to be withdrawn where a person is no longer one who would be entitled by virtue of any of the provisions of ss 9, 10 or 11 (s 26(2)(a)), or if the Agency is satisfied that the aided person no longer has reasonable grounds for taking the proceedings in question (s 26(2)(d)). In particular, s 9(4)(d) refers to the applicant's prospects of success not being sufficient to justify the grant of aid. [32] I now turn to consider the decision of the Panel. I note in this context the assistance provided by the submissions of Mr Oliver, who appeared as Amicus. [33] In my view, the key to the Panel's thinking is found in para 24 of its decision, where it said:In its decision of 21 October 2005, which confirmed its earlier decision of 3 August 2005, the Agency's only reason for withdrawing aid amounts to what is essentially "second thoughts" about the merits of the case, prompted by the decision of Noble DCJ in which His Honour dismissed the Police prosecution against Mr XY. However, Noble DCJ's decision cannot be a change in circumstances that affects the prospects of the claim for exemplary damages. That claim has the same prospects it had when the Agency granted aid in February 2004. At best, Nobel DCJ's decision has led the Agency to the belated realisation the prospects of success are not as great as it originally thought. But, as Goddard J found in Black (supra), such a belated realisation is, on its own, not a proper basis for withdrawing aid.[34] On the basis of these comments I consider that the Panel did misinterpret and misapply Black. [35] There can be no doubt that the Agency is entitled to withdraw legal aid if any of the circumstances set out in s 26 of the Act apply. It is also clear from decided authorities, and from the terms of s 9 of the Act, that the Agency is entitled to take prospects of success into account. Further, prospects of success may be considered in the course of proceedings, as the recent decision of Taawha-Falwasser illustrates. [36] The Panel found that the decision of Judge Noble was not something that could be a change in circumstances in terms of s 26 of the Act. With respect, I disagree with the reasoning of the Panel. Taken absolutely objectively in terms of the actual underlying facts and circumstances, it may be true to say that the respondent's claim had the same prospects it had when the Agency granted aid in February 2004. However, the decision of the District Court is very clearly a development in the proceedings which was capable of throwing new light on the respondent's prospects of success. As Mr Taylor submitted, "circumstances" in this context include information relating to the merits of the aided proceedings. That information changes repeatedly as more information about the merits is provided to the Agency, a point Goddard J made at para [48] of her decision in Black. [37] In my view, the phrase "no longer" in s 26(2)(a) as interpreted by Goddard J can take account of the knowledge the Agency had about this case at a given time. This will include new information, (that is, information not known at the time aid was granted in respect of one or more stages of the proceedings), on the basis of which grants officers may reassess the prospects of success for the purposes ofdetermining whether it is appropriate to continue granting aid. In such circumstances, no error of law would be made in invoking s 26(2)(a). [38] I come now to the factual question of whether Judge Noble's decision was a supervening event which justified the Agency's decision to discontinue legally aiding the respondent. In my view the Agency was entitled, and in many ways required (at least in terms of Goddard J's reference to the Agency's duty/entitlement to reassess the situation at each stage of a proceeding before it approves a further grant of aid for the next stage) to review its attitude to the proceedings once it had received the decision of Judge Noble. This decision was important for Judge Noble's dismissal of the criminal proceedings and for his findings as to the conduct of the truck driver. The aided proceedings being for exemplary damages, the unreasonableness of the truck driver's actions were central to the prospect of success. Given Judge Noble's favourable comments on the conduct of the truck driver, I believe that the Agency was entitled to decide that the respondent's prospects of success were no longer sufficient to justify the continued grant of aid. On account of this development it cannot be said that the claim had the same prospects of success as when the Agency had first granted aid in February 2004. I therefore allow the Agency's appeal on both grounds. [39] In the circumstances, I think it is appropriate that the costs of Mr Oliver as Amicus be paid by the Agency. I anticipate that Counsel will be able to reach agreement on costs. __________________________Clifford JSolicitors: Bartleet Partners, Wellington for Appellant Crown Law, Wellington for Respondent