To set the scene, s 105 of the Legal Services Act 2011 provides:

“105    Providers not to take unauthorised payments

“No provider may take payments from or in respect of a person to whom legal aid services or specified legal services are provided unless the payments are—

“(a)    authorised by or under this Act; or

“(b)    authorised by the Commissioner acting under the authority of this Act or the regulations.”

This provision and its predecessors have opened the door to the possibility of so-called “top-up” payments — typically, an (authorised) external payment in addition to the amount of legal aid approved for payment by the Legal Services Commissioner. (Two cases of note under predecessor provisions are Darvell v Auckland District Legal Services Subcommittee [1993] 1 NZLR 111, (1992) 5 PRNZ 208 (HC) and McFarlanes v Canterbury District Legal Services Committee (1997) 11 PRNZ 206 (HC).) Another type of “top-up” is the payment of legal aid at a higher-than-standard rate. (For discussion of this type, see Weal v Legal Services Commissioner [2013] NZHC 744, [2013] NZAR 753.)

Where an aided person succeeds in a case, a potential source of an external top-up is the unsuccessful opponent, by way of a costs award against the opponent that is greater than the amount of legal aid approved for payment. (An older case along these lines in the criminal context is Re Davidson HC Christchurch T9/93, 15 December 1993, although there the top-up issue was ultimately overtaken by the fact that no costs were awarded. A recent case in the civil context with the same outcome is Road Runner 2012 Ltd v Memelink [2022] NZHC 704.)

This type of costs award is currently listed in the “Authorised payments (top-ups)” section of the Ministry of Justice Legal Aid Services: Grants Handbook (available at <www.justice.govt.nz>) as one type of circumstance that “may” lead the Commissioner to authorise a top-up payment:

“[A] court has awarded costs in favour of the client in excess of the total cost of the grant, and the provider has sought permission to retain the difference – the ‘top up’ may be considered on the basis that it is the court’s award in recognition of the clear merit of the case.”

Thus, when costs are addressed in court, it may present an opportunity for an aided person and their legal aid provider to not only recover the existing legal aid costs but also gather “ammunition” for a top-up application under s 105.

This is what occurred in UXK v Talent Propeller. Here the Employment Court “allowed a challenge as to a determination made by the Employment Relations Authority that certain witness summonses should be issued” and “also dealt with an application for non-publication of UXK’s name and identifying details” (at [1]). UXK was legally aided for these matters. While the amount of legal aid likely to be paid out (at $82/hr + GST) was $6,222.39 (incl GST), the aided person’s employment advocate (F) invited the Court to award costs of $19,837, being the amount calculated by F as 2B scale costs:

“[6] [F] invited the Court to find that, but for the constraints of the legal aid grant, the scale sum would have been awarded, so that she can then obtain recompense under s 105 of the Legal Services Act 2011 (the LSA). That section provides that no legal aid provider may receive payment from, or in respect of, a person to whom legal aid services are provided unless authorised under the LSA, or by the Legal [Services] Commissioner. [F] submitted an uplift of the legal aid grant could be approved under this provision, and that a reasonable amount would thereby be reimbursed for services rendered.”

In response, first the Employment Court noted relevant costs principles, including (at [11]–[12]) the following from Curtis v Commonwealth of Australia [2019] NZCA 126 at [22] (re costs in favour of an aided person):

“Costs should be scale costs or the amount paid out by the Commissioner for the appeal, whichever is the lesser figure. Thus costs should not exceed scale, or (if they are less), the amount paid for legal services.”

After determining that UXK was indeed the successful party (at [13]–[26]), the Employment Court continued:

“[27] Turning to the issues raised by [F] as to the legal aid position, I find that prima facie an order should be made that Talent pay UXK a contribution to her costs in terms of the approach she advocated. That is, quantum should be based on the legal aid invoices actually rendered, after a suitable reduction for an application for stay that was not contested, and after allowing for the preparation of the costs memorandum. As mentioned, that totals $6,222.39. Such an approach is in accordance with the Court of Appeal dicta in Curtis.

“[28] More difficult, however, is whether the Court should find that a higher contribution to costs is justified because [F] wishes to make an application to the Legal Services Commissioner under s 105 of the LSA.

“[29] She produced a letter sent from the Commissioner to a practitioner who was involved in another case before the Authority, which outlined the approach the Commissioner said he would adopt when considering an application under s 105. The Commissioner indicated that, at least in that instance, any application would have to be accompanied by the relevant costs decision. That decision would have to confirm the Authority’s awareness of the cost of the grant and set out reasons for an award of costs being in excess of the costs of legally aided representation.

“[30] [F] submitted that, but for the constraints of the legal aid grant, she would have been justified in seeking a costs award based on the Guideline, which she said would total $19,837. She also emphasised there were sound reasons for the Court to take such a step. She argued that providing representatives with an opportunity to apply to the Commissioner for an uplift would be a practical way of addressing the legal aid crisis, as it would encourage more practitioners to become legal aid providers. That all said, her submissions proceeded on the basis that the defendant’s liability should be restricted to payment of the legal aid invoices which had been rendered thus far."

The Employment Court briefly considered what the costs position might have been if legal aid had not been involved, but as there was no evidence before the Court as to F’s usual charge-out rate, an alternative award could not be determined (at [31]–[33]). The Court then continued:

“[34] But more importantly, it is not appropriate for the Court to make a finding as to what costs might have been but for the grant of legal aid. [F] and her client agreed the challenge would be funded via legal aid, which meant [F]’s services were guaranteed for payment by the LSA, albeit at what was likely to have been a modest hourly rate for services rendered on a capped basis. However, there were certain other checks and balances which also applied, such as the protection of the legally aided client from a costs order albeit subject to the provisions of s 45 of the LSA. Moreover, the defendant, as the opposing party, proceeded on the basis that UXK was legally aided, taking any relevant strategic decisions accordingly.

“[35] Finally, it would appear that the Commissioner’s policy with regard to s 105 may turn on whether, notwithstanding a legal aid grant, a judicial body is nonetheless persuaded that a costs liability that exceeds the amount of the legal aid grant is appropriate. It is unclear what circumstances would lead to a finding of an increased costs liability which would then persuade the Commissioner to exercise the s 105 discretion; the section itself does not spell out qualifying criteria.

“[36] Although the Court understands why [F] has raised concerns as to the use of a rate which is subject to significant constraints, in the end, any question of uplift is a matter between her and the Commissioner.

“[37] The Court’s role is to determine the appropriate contribution as to costs which should be made inter partes.”

The final result was that “Talent is to pay UXK the sum of $6,222.39 within 21 days” (at [38]). In other words, there was full recovery of the anticipated legal aid costs — which recovery, incidentally, counts as “proceeds of proceedings” under the LSA 2011 and is automatically subject to a charge in favour of the Commissioner to meet any legal aid debt due — but nothing to support a s 105 top-up application in terms of the Commissioner’s guidance/policy.

It may be wondered from UXK v Talent Propeller (and other cases noted above) whether there is a legislative gap as far as legal aid top-ups and costs are concerned, with the legal aid administrators and the judiciary somewhat “stranded” on either side of the divide.

For more discussion on legal aid top-ups and costs, see Legal Services at [LA105.03] on Westlaw New Zealand.