Pickard v Ambrose HC Wellington CIV-2003-091-143 [2011] NZHC 1196 (6 October 2011)

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_{I direct the Registrar to endorse this judgment with a delivery time of
11.45am on the}

Introduction [1] Scope of relevant material [3] Principles to be applied [4] The effect of legal aid on the plaintiffs’ liability for costs [6] Costs in the legally aided period [18] Costs in the post legal aid period [24] The liability for the costs award [33] (a) Ms Pickard [33]

[1] In my judgment delivered on 21 December 2009, I gave judgment for both defendants in respect of the plaintiffs’ claims. I reserved costs. By memorandum dated 13 August 2010, the second defendant sought orders as to costs. They sought costs against both plaintiffs, Mr Pickard as former litigation guardian of the second plaintiff, and the third party who had funded the plaintiffs’ costs at trial.

[2] I gave certain timetabling directions by minute dated 7 September 2010. That minute provided for the filing of submissions in support of, and in opposition to, the application for costs, on a timetable to be completed by 5 November 2010. By a further minute issued on 15 December 2010, I gave additional directions and the timetable for submissions was extended so that the final memorandum was due by 4 February 2011. By two minutes dated 10 March 2011, I sought further submissions on two issues. The final memorandum from counsel for the first defendant dealing with those issues was filed on 26 May 2011. The plaintiffs have filed various memoranda and communications with the Registrar throughout the period. I am now in a position to determine costs.

[3] In the submissions filed by or on behalf of Ms Pickard, Troy, and Mr Pickard, there is much material which seeks to revisit aspects of issues which were addressed at trial. I should explain at the outset that there are severe constraints on the extent to which I can properly have regard to much of that material in considering the defendants’ applications relating to costs. So far as the issues which were raised at trial are concerned, I have delivered my judgment. My function in respect of those issues has ended. I have no power or jurisdiction to revisit any aspects of that judgment. That limits the matters to which I may properly have regard in considering costs. I make these observations at the outset to explain why I do not, in the course of this judgment, address much of what Ms Pickard in particular has raised. It would not be proper for me to do so. I must approach all questions relating to costs on the basis of the findings in my judgment.

[4] The principles on which costs are to be determined are set out in part 14 of the High Court Rules. Under r 14.1, all matters relating to costs of a proceeding are at the discretion of the Court. However, the broadly expressed discretion is qualified by a number of specific rules. In 4.2 there are a number of general principles which apply to the determination of costs. The first is that the party who fails with respect to a proceeding should pay costs to the party who succeeds. So far as possible, the determination of costs should be predictable and expeditious. That means that, if there is to be a departure from the general principle that the party who fails should pay costs to the party who succeeds, there must be a proper and principled basis for that departure.

[5] In this case, the plaintiffs have failed and the defendants have succeeded. That outcome is expressed in para [147] of my judgment. In reaching that result, I have made a number of findings favourable to the plaintiffs and adverse to the defendants. Those findings do not, of themselves, justify a departure from the general principle. I take those matters into account as appropriate in assessing the quantum of costs, and other issues, but it is the ultimate outcome which must govern the question of whether costs should be awarded.

[6] The plaintiffs were legally aided for part of the proceedings. Legal aid was withdrawn on or about 22 September 2008, just before the scheduled trial, which was then unable to proceed. They successfully applied to the Legal Aid Review Panel for a review of that withdrawal. The Legal Services Agency sought judicial review of the LARP decision, and by a judgment delivered in 3 July 2009, the Agency’s withdrawal of aid was reinstated. The plaintiffs were not legally aided at trial. I must address the implications that flow, for costs purposes, from the fact that the plaintiffs were legally aided for part of the proceedings, but not for all.

[7] Section 40 of the Legal Services Act 2000 which governs awards of costs against legally aided litigants, was amended by the Legal Services Amendment Act

2006, which came into force on 1 March 2007. That Act also amended the definition

(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.

(5) If the aided person is aged under 20 years, then for the purposes of this section that person's means include the means of any person whose disposable income or disposable capital has been included in calculating the minor's disposable income and disposable capital.

(6) If an order for costs is made against a next friend or guardian ad litem of an aided person who is a minor or is mentally disordered, then—

(b) the means of the next friend or guardian ad litem are taken as being the means of the aided person.

[9] In s 4(1) an ―aided person‖ was defined as a ―person who is or has been

(1) If an aided person receives legal aid for civil proceedings, that person's liability under an order for costs made against him or her with respect to the proceedings must not exceed an amount (if any) that is reasonable 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) No order for costs may be made against an aided person in a civil proceeding unless the court is satisfied that there are exceptional circumstances.

(3) In determining whether there are exceptional circumstances under subsection (2), the court may take account of, but is not limited to, the following conduct by the aided person:

(d) any unreasonable pursuit of 1 or more issues on which the aided person fails:

(e) any unreasonable refusal to negotiate a settlement or participate in alternative dispute resolution:

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

(5) If, because of this section, no order for costs is made against the 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.

(6) If an order for costs is made against a next friend or guardian ad litem of an aided person who is a minor or is mentally disordered, then—

(b) the means of the next friend or guardian ad litem are taken as being the means of the aided person.]

(a) means a person who is or has been granted legal aid under this Act or the former Act; and

(b) includes a person whose grant of legal aid has been withdrawn under section 27 of this Act]

[12] I sought further submissions as to the application of s 40 in the light of those changes. Counsel for the defendants submit that the original provisions, that is those in place prior to the 2006 Amendment Act, apply.

Applications for legal aid and grants of legal aid made before commencement of this Act

(2) The provisions of the Legal Services Amendment Act 2006 do not affect applications for legal aid or grants of legal aid made before the commencement date, except as provided in this section and section

(3) Sections 40 and 41 of the principal Act (as substituted by section 28 of the Legal Services Amendment Act 2006) apply to any proceeding for which legal aid has been granted on or after the commencement date.

(4) Section 116A(2) of the principal Act (as substituted by section 43 of the Legal Services Amendment Act 2006) applies to all charges created by or under the Legal Aid Act 1969.

[14] In this case, legal aid had been granted in 2001. The grant of aid was still in place when the 2006 Amendment Act came into force, and was withdrawn in 2008. Under s 47(2) the provisions of the 2006 Amendment Act do not apply to grants of legal aid made before the commencement date. This case falls squarely within that provision. There is nothing in ss 47 or 48 which alters that position, as contemplated by the final words of s 47(2). Section 47(3) makes it clear that the amendments to s 40 apply only to a proceeding for which legal aid has been granted on or after

1 March 2007. Those provisions were considered by this Court in Fielding v Burrell.1 In that case, Venning J held that the amended provisions did not apply where the grant of aid was made before 1 March 2007. I respectfully concur with that view.

[15] For these reasons, I consider that the making of a cost award against the plaintiffs is to be determined by reference to s 40, and the definition of ―aided person‖, as those provisions stood prior to the 2006 Amendment Act.

[16] The position under those earlier provisions was considered by this Court in

[23] Seen in that light, there can be little doubt that when s40 speaks of liability for costs orders made "with respect to the proceedings" it must be taken to refer to that part of the proceedings for which the litigant is an "aided person" and not to the whole of the proceedings irrespective of when legal aid is granted. The definition of "aided person" must be read in the same light. Indeed, when the definition of "aided person" refers to a person "who is or has been" granted legal aid, that must refer to the period when legal aid remains extant and not to the period which commences when the proceedings are filed and ends when they are finally concluded.

[24] That is consistent with the terms of the statute, the purpose of which is to enable access to justice by "people who have insufficient means to pay for legal services" (s3(a)) which suggests that protection from costs orders should be coterminous with an inability to meet legal costs. While s7 empowers the grant of civil legal aid for various civil proceedings, the Legal Services Agency has power to limit its support to interim grants, conditional grants, maximum grants and other conditions (ss14, 15 and 20). It has power to increase the amount of contributions required (s 17) and it has power to amend or withdraw grants (ss24, 26 and 27). It follows that the scheme of the Act is, as might be expected, one where, to preserve the rights of indigent citizens to justice, legal aid is provided but provided only to the extent they are unable to meet legal costs and thus remain entitled to legal aid (and, of course, with a charge on the proceeds of successful proceedings, s32).

[25] It must follow that, even though grants of legal aid are retrospective from the date of the application, there is no basis in statute to take the view that once litigants are granted legal aid they are immune from orders for costs at any stage of the proceeding, either before or after the grant begins or terminates. Put another way, while the statute understandably limits litigants' liability for costs otherwise payable to them during the period when they have "insufficient means to pay for legal services", there is no reason to conclude that the liability of a litigant for costs does not operate in the normal way when the insufficiency ceases.

[17] It is to be noted that Williams J, in paras [24] and [25] of his decision in

Carter v Western Viaduct Marine Ltd considered that the approach in para [23] was

consistent with a limitation of a litigant’s liability for costs during a period when they have insufficient means to pay for legal services. That rationale does not apply in this case. The withdrawal of legal aid was not based on a reassessment of the plaintiffs’ means. The withdrawal was based upon the refusal of a settlement offer. However, the liability to an award of costs, when a grant of legal aid is withdrawn, must, in terms of s 40, be consistent, regardless of the reason for the withdrawal of

Accordingly, I consider that the approach set out on para [23] is the correct approach to be followed in this case. On that approach, s 40 (in its unamended form) applies to limit an award of costs in respect of steps in the litigation taken during the period when legal aid was in place, but not to steps after legal aid was withdrawn. That happened in September 2008. The subsequent reversal of that decision by LARP, which was in turn set aside by this Court, is not to be taken into account for this purpose. For costs in the period after September 2008, s 40 (in either its unamended or amended form) has no application. Costs are to be assessed without reference to legal aid.

force, the plaintiffs’ liability to costs is governed by s 40 of the Legal Services Act

2000. As I have noted, the unamended section, applicable before the coming into force of the 2006 Amendment Act, applies. Under subs (2) the liability for costs must not, except in exceptional circumstances, exceed the amount of the plaintiffs’ legal aid contribution. Under subss (3) or (4), the Court may specify the amount that would have been awarded if the restriction in s 40(2) had not applied. Both defendants submit that the plaintiffs’ misconduct during the legal aid period, in failing to negotiate settlement and in breaching procedural obligations, provide a basis for a finding that there are exceptional circumstances for the purposes of

_{s 40(2). Alternatively, they submit that that misconduct
provides a basis for}

3 Ngati Apa Ki Te Waipounamu Trust v Attorney-General HC Wellington CP 115/98, 4 February

2004; Goodman v McKenzie HC Auckland CIV-2003-404-6157, 10 June 2004; Southern Cross

specifying that the plaintiffs would have be liable to increased costs had they not been aided.

[19] In the earlier version of s 40, which applies here, the term ―exceptional circumstances‖ was not defined. The term exceptional circumstances is defined in the new version of s 40, in subs (3). Because it is the previous version of s 40 which applies, I do not consider it appropriate to have regard to the instances of exceptional circumstances specified in the later version of the section. In Awa v Independent

News Auckland Ltd (No 2),4 this Court held that, for circumstances to qualify as

exceptional, they have to be ―quite out of the ordinary‖. In Laverty v Para Franchising Ltd,5 the Court of Appeal held that exceptional circumstances are not confined to cases where the aided party’s conduct of the litigation warranted a mark of disapproval.

[20] In holding that exceptional circumstances are not confined to cases where the aided party’s conduct of the litigation warranted a mark of disapproval, the Court of Appeal is not, in my view, to be taken as holding that every case where the aided party’s conduct of the litigation warrants a mark of disapproval will necessarily constitute exceptional circumstances. The conduct of the litigation must be quite out of the ordinary before that will be so. In this case, the defendants rely upon a number of breaches of timetable orders, and incomplete or reluctant compliance with discovery obligations. The instances relied on are comprehensively set out in an affidavit by Ms Daniell Smith sworn in support of a pre-trial application for orders for security for costs, referred to by counsel for the second defendant on this application. I do not propose to recount the procedural history. Without in any way minimising the seriousness of breaches of timetable orders and the other matters to which the defendants have referred, I do not consider that the matters relied upon fall within the class of circumstances which are ―quite out of the ordinary‖ and which should deprive the plaintiffs of the protection against costs which the scheme of the Act is designed to provide to legally aided litigants. The defendants also rely upon the plaintiffs’ refusal to accept a settlement offer made in May 2007. The defendants

_{jointly offered to settle the claims of both plaintiffs for the sum of
$200.000. I do not}

consider that the refusal to settle the matter at the comparatively early point in the litigation amounts to exceptional circumstances.

[21] Accordingly, I consider that, so far as an award of costs against the plaintiffs is concerned, the limitation in s 40(2) applies. Any award must not exceed the amount of Ms Pickard’s initial contribution under s 15. I do not have readily available the amount of the initial contribution. In the present context, it is likely to be inconsequential. There will be no award for that period.

[22] As to the amount of costs which would have been awarded if s 40 had not applied, I do not consider that it is appropriate, in the circumstances, to specify a sum greater than the scale costs otherwise applicable. The purpose of an order under s 40(4) is to enable an application to be made under s 41 to the Legal Services Agency for some recompense for the fact that the defendants’ ability to recover costs has been restricted by the Act. I have held that the manner of conduct of the litigation does not amount to exceptional circumstances for the purposes of s 40(2). In those circumstances, I do not think that the public purse should be potentially exposed to a greater liability than would otherwise apply. For that reason, I do not consider it appropriate to revisit the conduct of the litigation during the legally aided period to consider whether the circumstances for an award of increased costs might have arisen.

[23] Scale costs for the legal aided period, on a 2B basis, are calculated by the defendants at $12,550 for each defendant. In addition, the second defendant claimed disbursements in this period of $24,147.05. I specify those sums for the purposes of s 40(5).

[24] For the post legal aid period, the defendants are entitled on the ordinary principles to an award, at the least, of scale costs. Scale costs have been calculated, on a 2B basis, at $102,560 for the first defendant and $100,480 for the second defendant. Disbursements, also for that period, are $36,122.29 for the first defendant and $46,033.79 for the second defendant. As I have earlier noted, the plaintiffs

succeeded on some of their allegations against the first defendant. I discussed these at paras [22] to [27] of my judgment. Those findings did not result in the plaintiffs succeeding on any aspect of their claim. They do not justify any reduction from scale costs.

[25] The defendants also claim increased costs for the post legal aid period. The claim is based on r 14.63(b)(v) which provides that the Court may order increased costs if a party fails, without reasonable justification, to accept a settlement offer. The defendants have produced a letter dated 12 September 2008 making a joint settlement offer of $350,000. The plaintiffs’ failure to accept that offer led to the withdrawal of legal aid. The defendants assert that the failure to accept the offer was without reasonable justification. They further submit that the offer was the culmination of a number of attempts at settlement, including the joint settlement offer in May 2007, to which I have earlier referred. The plaintiffs’ response to the offer of $350,000 was an offer to accept $1,000,000. The defendants refused that offer and renewed their earlier offer of $350,000.

[26] I consider that the plaintiffs’ refusal of that offer was unreasonable. I consider that the refusal to accept the offer, or to negotiate in any meaningful way following its receipt, was a reflection of Ms Pickard’s obsession, and her determination to expose what she regarded as the defendants’ misconduct. I do not doubt the sincerity of Ms Pickard’s views. However, those views had only limited relevance to the question whether or not the settlement offer should have been accepted. This was an action for damages. That is the only remedy that the Court could have granted, if the plaintiffs had been successful. The proceedings could not properly be pursued for any other purpose. The fact that, as noted above, some of the allegations against Mr Ambrose were made out does not affect my conclusion that the decision to reject the settlement offer was unreasonable. The prospects of obtaining damages in excess of the figure offered were remote. My decision on liability meant that I did not consider the evidence as to quantum in my judgment. It suffices to observe that the evidence which Ms Pickard was able to adduce at trial fell far short of justifying a substantial award of damages had her claim succeeded as to liability.

[27] In case it might be thought that my assessment is affected by hindsight, and the knowledge that Ms Pickard’s claim has in fact failed, it is relevant to refer to the observations of Ronald Young J in his judgment of 3 July 2009, on the appeal by the Legal Services Agency against the decision of the Legal Aid Review Panel. He said:6

[65] In my view, this is determinative in this appeal. After all, the pivotal reason for withdrawal of aid was that the Pickards had received and rejected an offer of settlement, which their own lawyers had recommended accepting and where an independent assessor had agreed with the analysis. Given that position, the Panel could not have concluded that it was manifestly unreasonable for the Agency to withdraw aid.

[28] In these circumstances, I consider that an award of increased costs for the period subsequent to the withdrawal of aid (which followed shortly after the rejection of the settlement offer) is justified. I consider that the defendants are entitled to an award of increased costs.

[29] In calculating an appropriate award by way of increased costs, this Court is guided, in the approach to be adopted, by the decision of the Court of Appeal in Holdfast NZ Ltd v Selleys Pty Ltd.7 Counsel for the defendants refer to paras [46]-[48] of that decision which say:

[46] Where subcl (3)(b) conduct is made out, the court’s normal response should be to provide an uplift on scale costs to what the rules contemplate a reasonable fee for that step to be. Mr Marriott submitted that logically an uplift under r 48C(3)(b) should not be more than 50%. That is because the Rules Committee has determined what, for costs purposes, the appropriate "daily rate" is: it is the "daily recovery rate" in Schedule 2 to the High Court Rules, plus 50%. The current daily recovery rate for category 2 proceedings is $1,450 a day. We know, by reason of r 47(d), that that represents "two-thirds of the daily rate considered reasonable in relation to [a category 2] proceeding". That in turn means that the underlying daily rate was $2,175 ($1,450 plus 50%).

[47] An increase of 50% on scale costs should therefore grant the costs- claiming party a fair recovery for the step unnecessarily forced on it, assuming that the time allocated to the step has been reasonably calculated under the bands or under r 48C(3)(a). Any greater recovery than that would mean that the party paying costs is contributing to the other party’s choice of special counsel.

6 _{Legal Services Agency v Pickard HC
Auckland CIV-2009-404-1230, 3 July 2009, at [65].}

[48] We are not to be taken as saying that an uplift of more than 50% can never be justified under r 48C(3)(b), as there may be circumstances where the court considers a higher award to be justified. What we are saying is that the above approach is what is logically required by the scheme of the rules, and in particular by the principles applicable to every determination of costs. Awards of increased costs must comply with the general principles in r 47, except to the extent that the specific requirements of r 48C dictate otherwise. The principles in r 47(c) and (d) are clearly modified by r 48C(3)(b), but r 47(e) is not so modified. Where increased costs (as opposed to indemnity costs) are being considered, the focus remains on the notional solicitor or counsel appropriate for the category of proceeding, not the actual solicitor or counsel involved or the costs actually incurred by the party claiming costs.

[30] On the basis of those observations, counsel seek an uplift of 50 per cent on the scale costs claimed. For the first defendant it amounts to an additional $51,280. For the second defendant, that amounts to increased costs of an additional $50,240. I consider that is an appropriate award in the circumstances of this case.

[31] In addition, I consider that an allowance for the preparation of submissions on costs is appropriate. Counsel for the second defendant has borne the major burden on some aspects of the submissions. In the circumstances, I award $3,000 to the second defendant and $2,000 to the first defendant in respect of all matters relating to the applications for costs.

[32] I therefore calculate the costs to which the defendants are entitled as follows.

(a)	First defendant Scale costs	$ 102,560
	Increased costs	$ 51,280
	Costs on this application	$ 2,000
	Disbursements	$ 36,122.29
(b)	Second Defendant Scale costs	$ 100,480
	Increased costs	$ 50,240
	Costs on this application	$ 3,000
	Disbursements	$ 46,033.79

[33] The total amounts of costs to be awarded pursuant to this judgment is almost

$400,000. A costs order of that magnitude will be disastrous for Ms Pickard. That makes it necessary for me to stand back and consider whether such an award is appropriate. Under r 4.1, all matters of costs are at the discretion of the Court. However, as the decision of the Court of Appeal in Glaister v Amalgamated Dairies

Ltd8 makes clear, that general discretion is qualified by the specific costs rules and is

exercisable only in situations not contemplated by those specific rules, or which are not fairly recognised by them. The costs regime is of a regulatory character and it is important that the integrity of that scheme be maintained. Any departure must be done in a particularised and principled way. Applying those principles, I see no basis on which I can properly ameliorate the disastrous situation which the pursuit of this litigation has caused for Ms Pickard. The positions of the defendants are to be considered. I have no information as to how the costs which are not recompensed by a cost award will impact on the defendants. Considerations of the ability to bear the costs of litigation, as between the respective parties, are not a relevant factor in the exercise of the discretion as to costs, in accord with principle.

[34] Accordingly, there must be an award of costs as set out in para [32] in favour of each defendant against Ms Pickard.

[35] The second plaintiff, Troy, was a minor for most of the period of these proceedings. He turned 18 during the trial, on 4 November 2009. His grandfather, Mr Allen Pickard, was his litigation guardian during that period. Under r 4.48(2) of the High Court Rules, the appointment of Mr Pickard as Troy’s litigation guardian ended from the date Troy turned 18. Under r 4.41 (which applies by virtue of

_{r 4.33), the fact that Troy has been represented by a litigation
guardian must be}

disregarded in making an award of costs against him. Under r 4.42(1)(a), any award against Troy may be enforced, unless the Court otherwise orders, against Troy. It may also be enforced, under r 4.42(1) (c), against Mr Pickard as his former litigation guardian, if an order is made under r 4.43.

[36] This proceeding has been the result of strongly held views, which may properly be described as an obsession, on the part of Ms Pickard. That is very apparent to me from hearing this case, including hearing Ms Pickard give evidence over an extended period. I adverted to this aspect in my judgment, at [106]–[107]. The strength of Ms Pickard’s views was also commented on by the Court of Appeal.9

When the proceedings were instituted, and through to the time of the hearing, it

would not have been reasonable to have expected that Troy would bring an independent mind to the appropriateness of the proceeding. He was too young to form his own view. I consider that the strength of his mother’s conviction is such that it would not be reasonable to expect that at any time before the hearing he should have formed an independent view of the merits of the claim. I am required by r 4.41 to disregard the fact that he was represented by a litigation guardian. I do not consider that I am required to disregard the proposition that he could not have made an independent decision to pursue his claim, because of his age. He is a young man who could be seriously prejudiced, potentially for a long time, by a substantial award of costs. I bear in mind that an award of costs is compensatory, and that the interests of the defendants must be weighed in my assessment. Taking all those matters into account, I do not consider that it would be just to make an award which would be enforceable against Troy personally.

[37] Under r 4.42, I order that there should be no award of costs enforceable against Troy.

[38] Mr Pickard’s position is different. It was his responsibility, as litigation

_{guardian, to bring an independent mind to the conduct of the proceeding
on behalf of}

Troy. I do not consider that he has done so. There is, for example, nothing which indicates that he brought an independent mind to bear on the settlement overtures which were made by the defendants. The settlement offer in September 2008 had been recommended by their lawyers and an independent assessor had agreed with that recommendation. It was Mr Pickard’s responsibility to ensure that advice was properly considered. There is no evidence that he did so. His position as litigation guardian was severely compromised by his family involvement. It seems to me that he must have allowed the strength of his daughter’s convictions to overwhelm his own judgment.

[39] I see no reason why Mr Pickard should be spared the costs consequences of the pursuit of the claim on Troy’s behalf, to the extent that he can properly be regarded as having contributed to increasing the costs incurred by the defendants. But, because he had no personal interest in the claim, I do not consider that he should bear a joint responsibility for the costs which would in any event have been necessarily incurred in the defence of Ms Pickard’s own claim.

[40] On my assessment, Mr Pickard has not substantially contributed to the incurring of costs. The strength of Ms Pickard’s conviction as to the merits of her case was such that in my view no settlement of her claim short of a Court determination was possible. If Mr Pickard had taken the view that Troy’s claim should not have been pursued, or that it should have been settled on the basis of the settlement offer in September 2008, then that would not have brought the proceedings to an end, unless Ms Pickard also withdrew her claim or accepted the offer. I am quite sure, having presided over this trial, that whatever view Mr Pickard might have taken, Ms Pickard was determined to proceed. Nothing which Mr Pickard could properly have done in his capacity as litigation guardian for Troy could have materially reduced the total costs incurred by the defendants in the pursuit of the litigation. The settlement offer was not able to be separately accepted. The only step which he could have taken independently of Ms Pickard was to discontinue Troy’s claim. Had he done so, there might potentially have been some minimal saving. Any such saving would have related mainly to the medical evidence concerning Troy. But I do not think that is likely. The medical evidence which was adduced in respect of him would have been relevant also to Ms Pickard’s

own claim, since it was adduced to support the claim that the heater had caused carbon monoxide poisoning. So, I do not think that the pursuit of Troy’s claim is likely to have added materially to the defendants’ costs.

[41] I also take into account, in considering whether an award should be enforceable against Mr Pickard, his personal position. The material which he has filed in relation to the costs applications indicate that he and his wife are not of substantial means. A costs award would be potentially ruinous for both of them. Again, I do not overlook the principle that costs awards are compensatory. But, because the defendants are entitled to an award against Ms Pickard, the issue in relation to Mr Pickard is not whether there should be an additional amount awarded, but whether the defendants should have additional recourse for recovery. I do not consider that, in determining costs, the Court must necessarily do so in a way which will maximise the prospects of recovery. On that basis, I consider that the considerations to which I have referred may properly be taken into account.

[43] After the withdrawal of legal aid had been confirmed, the plaintiffs were faced with the need to fund the case to trial. They came to the attention of a person who agreed to fund them to trial. This person, whose identity is known to the Court and to the defendants, but who has expressed a wish to remain anonymous, has explained the background, and the reasons for his involvement, in an affidavit which he swore in August 2009 in opposition to the applications by the defendants for further security for costs. He explained that he was from a professional background but effectively retired. He had been diagnosed with toxic encephalopathy as a result of chemical poisoning by halogenated hydrocarbons. That was work related. He suffered neurological damage which he believed was similar to that which the plaintiffs reported to him having suffered. He said that as a consequence of his own experience with chemical poisoning and brain injury he now spends much of his time helping others in a similar predicament. He spoke with the plaintiffs and felt a great deal of empathy for them. He is conscious of the disabling effect of a loss of

brain function. He considers himself fortunate to have received compensation for his toxic poisoning injury and said ―the thought of the plaintiffs in this case being deprived of compensation for theirs is abhorrent to me and this is why I agreed to fund their case to a trial‖.

[44] In a subsequent statement filed in response to the application for costs, he has provided more detail on the amount of financial assistance provided. He was able to agree to make $120,000 available, for payments for counsel’s fees. He was then to pay directly some miscellaneous expenditure for witness’s expenses, specialist reports and so on. The expenses exceed the amount originally advanced and he has paid some additional expenses. In describing his present position, and the stoicism with which he bears it, I can do no better than quote his own words:

In sum, I have met plaintiff’s costs to the extent of $210,309.58 by borrowing a further $90,000 and am now hopelessly in debt to friends and my bank. I am, in a word, ruined, but I have had worse setbacks on a rich and rewarding life. As I have done before, I will pick myself up, continue my voluntary work for the disabled and have little to say of my loss. I am older and wiser for the experience. With the best will in the world, that I wished I could do more for her and her son, I told the plaintiff I was spent, the day the trial ended and have contributed nothing since.

[45] It is clear that the broad general discretion as to costs in r 14.1 is broad enough to permit the making of an order against a person who is not a party to the litigation. The principles for exercising the discretion to award costs against a non party are set out in the decision of the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd Ltd (No 2), as follows:10

A number of the decided cases have sought to catalogue the main principles governing the proper exercise of this discretion and Their Lordships, rather than undertake an exhaustive further survey of the many relevant cases, would seek to summarise the position as follows:

outside the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense. The ultimate

circumstances it is just to make the order. It must be recognised that this is inevitably to some extent a fact-specific jurisdiction and that there will often be a number of different considerations in play, some militating in favour of an order, some against.

10 Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2005] 1 NZLR 145 (PC) at [25].

(2) Generally speaking the discretion will not be exercised against ―pure funders‖, described in para [40] of Hamilton v Al Fayed as ―those with no personal interest in the litigation, who do not stand to benefit from it, are not funding it as a matter of business, and in no way seek to control its course‖. In their case the Court's usual approach is to give priority to the public interest in the funded party getting access to justice over that of the successful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights.

(3) Where, however, the non-party not merely funds the proceedings but substantially also controls or at any rate is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is ―the real party‖ to the litigation, a concept repeatedly invoked throughout the jurisprudence – see, for example, the judgments of the High Court of Australia in Knight and Millett LJ's judgment in Metalloy Supplies Ltd (in liq) v MA (UK) Ltd [1997] 1 WLR 1613. Consistently with this approach, Phillips LJ described the non-party underwriters in TGA Chapman Ltd v Christopher [1998] 1 WLR 12 as ―the defendants in all but name‖. Nor, indeed, is it necessary that the non-party be ―the only real party‖ to the litigation in the sense explained in Knight, provided that he is ―a real party in . . . very important and critical respects‖ – see Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, referred to in Kebaro at pp 32 – 33, 35 and 37. Some reflection of this concept of ―the real party‖ is to be found in CPR 25.13(1)(f) which allows a security for costs order to be made where ―the claimant is acting as a nominal claimant‖.

(4) Perhaps the most difficult cases are those in which non-parties fund receivers or liquidators (or, indeed, financially insecure companies generally) in litigation designed to advance the funder's own financial interests. Since this particular difficulty may be thought to lie at the heart of the present case, it would be helpful to examine it in the light of a number of statements taken from the authorities. First, Tompkins J's judgment in Carborundum at p 765:

―Where proceedings are initiated by and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in their result, such as a receiver or manager appointed by a secure creditor, a substantial unsecured creditor or a substantial shareholder, it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or be discontinued. That will be so whether or not the person is acting improperly or fraudulently.

In many cases a major consideration will be the reason for the non-party causing a party, normally but not always an insolvent company, to bring or defend the proceedings. If a non-party does so for his own financial benefit, either to gain the fruits of the litigation or to preserve assets in which the person has an interest, it may, depending upon the circumstances, be appropriate to make an order for costs

against that person. The relevant factors will include the financial position of the party through whom these proceedings are brought or defended and the likelihood of it being able to meet any order of costs, the degree of possible benefit to the non-party and whether, in all the circumstances, the bringing or defending of the claim - although in the end unsuccessful - was a reasonable course to adopt.

The directors of a company may frequently be in a position different from other non-parties with a direct financial interest in promoting or defending proceedings. Even where a company is in receivership, directors may have a duty to prosecute or defend a claim through the company in the interests of creditors other than the creditor that had appointed the receiver, or in the interests of the shareholders. Other creditors and shareholders are entitled to expect that those responsible for the management of the company will use all proper endeavours to ensure that their financial interests are protected or that there is a fund out of which such creditors can be paid . . . ‖

[46] The third party here falls in the category described in (2) as a ―pure funder‖. The third party has no personal interest in the litigation, does not stand to benefit from it, and is not funding it as a matter of business. Those points are clear from the matters I have described. There is no evidence which suggests that the third party sought to control the course of the litigation. In his statement he describes providing assistance to Ms Pickard in her preparation, and discussions with her counsel. His descriptions are indicative of an intention to assist the plaintiff rather than to seek to control the conduct of the litigation. I take into account that the plaintiff’s determination in her pursuit of the claim is such that I may properly infer that an attempt to assert control over the way the case was conducted would not have been countenanced by her.

[47] As the Privy Council noted, the usual approach in such a case is to give priority to the public interest in the funded party getting access to justice over that of the successful unfunded party recovering his costs and so not having to bear the expense of vindicating his rights. That approach had been discussed in more detail

in Hamilton v Al Fayed (No 2).11 After discussing the competing principles Simon

In expressing my conclusions thus far I have intentionally spoken in very general terms and sought to deal with pure funding cases as a broad category. It seems to me that nothing could be more inconvenient and productive of satellite litigation than to hold that some pure funding cases are likely to attract s 51 orders, others not, depending merely on the sort of considerations which moved Judge Hicks to decide against the funder in Thistleton v Hendricks (1992) 32 Con LR 123. For my part, therefore, whilst I am disposed to accept Miss Gloster's argument that hitherto the courts have not clearly laid down a rule that pure funders are generally to be regarded as exempt from s 51 orders, I am against her submission that they should ordinarily be held liable. So long as the law continues to allow impoverished parties to litigate without their having to provide security for their opponent's costs, those sympathetic to their plight should not be discouraged from assisting them to secure representation. Thus is access to justice promoted and, another benefit too—fewer litigants in person.

[48] It is worthy of note that, in reaching that position, namely that priority is generally to be given to the public interest in the funded party getting access to justice, the law has undergone a considerable transformation. In centuries past, the funding of litigation by persons who had no interest in the outcome was seen as undesirable, and was proscribed by the torts of maintenance and champerty. The changing attitude of the law to such arrangements was noted in Trendtex Trading v

Credit Suisse13 where Lord Roskill, after referring to the statutory abolition of the

My Lords, it is clear, when one looks at the cases upon maintenance in this century and indeed towards the end of the last, that the courts have adopted an infinitely more liberal attitude towards the supporting of litigation by a third party than had previously been the case. ...

My Lords, the crimes of maintenance and champerty are so old that their origins can no longer be traced, but their importance in medieval times is quite clear. The mechanisms of justice lacked the internal strength to resist the oppression of private individuals through suits fomented and sustained by unscrupulous men of power. Champerty was particularly vicious, since the purchase of a share in litigation presented an obvious temptation to the suborning of justices and witnesses and the exploitation of worthless claims which the defendant lacked the resources and influence to withstand. The fact that such conduct was treated as both criminal and tortious provided an invaluable external discipline to which, as the records show, recourse was often required.

As the centuries passed the courts became stronger, their mechanisms more consistent and their participants more self-reliant. Abuses could be more easily detected and forestalled, and litigation more easily determined in accordance with the demands of justice, without recourse to separate proceedings against those who trafficked in litigation. In the most recent decades of the present century maintenance and champerty have become almost invisible in both their criminal and their tortious manifestations.

I agree with Gault J, in First City, that there was ―considerable liberalisation‖ of this area of law in the twentieth century. That trend is directly opposed to the narrow view of the recognised exception of a

―genuine commercial interest‖ in Citibank. Based on the authority supporting that trend, I can see no reason to justify continued use of these

defences in modern conditions. The court has ample jurisdiction to prevent an abuse of its processes to address perceived exploitation of the vulnerable,

without recourse to such ancient remedies (see, generally, Lai v Chamberlains [2007] 2 NZLR 7 (SCNZ) at paras [61] – [64] per Elias CJ, Gault and Keith JJ, paras [162] – [167] per Tipping J and paras [219] – [221]

[51] The priority now given to the public interest in access to justice is evident from other developments, as well as the desuetude of those ancient torts. The statutory scheme for the provision of legal aid to civil litigants is at least in part premised on the public interest in ensuring that parties who are unable to fund litigation have access to justice. The protection of legally aided persons and the legal aid fund itself from adverse costs orders reflects a balancing of the respective interests which is analogous to that in issue here.

[52] The fact that the third party in this case is a pure funder makes it unnecessary to consider or discuss the issues which may arise in other funding arrangements.17

[53] Applying the principles in Dymocks to this case, and giving priority to the public interest in access to justice, I consider that this is not a case where an order

_{against the third party is appropriate. While the Courts have declined
to lay down}

16 _{Auckland City Council v Auckland City
Council [2008] 1 NZLR 838 (HC) at [45]-[46].}

any general principle that a pure funder should never be held liable for costs, the remarks of Simon Brown LJ set out at [47] suggest that there would need to be exceptional circumstances to make such an order appropriate. I do not consider that there are such circumstances here. As I have said, I regard it as clear that this case had to proceed to trial. The strength of Ms Pickard’s conviction was such that no other resolution would have been possible. An inability by Ms Pickard to go to trial through lack of means would have created an even greater sense of injustice on her part, and the defendants are unlikely to have achieved finality through that outcome. I therefore do not consider that it can properly be said that the actions of the third party funder have contributed to costs which could have been avoided.

[54] Also, any hardship which may be caused to the defendants by an inability to recover costs must be balanced against any hardship which an award would cause to the third party. It is clear that the third party is not a person of substantial means, and that the imposition of a costs award could involve significant hardship to him. There is on my assessment nothing in the circumstances of the case which would justify this Court in imposing such hardship.

[55] There will be costs orders against the first plaintiff, in favour of the first defendant for $155,840 plus disbursements of $36,122.29 and in favour of the second defendant for $153,720 plus disbursements of $46,033.79.

High Court of New Zealand Decisions

Pickard v Ambrose HC Wellington CIV-2003-091-143 [2011] NZHC 1196 (6 October 2011)