[1] The Official Assignee and Mrs Harley appeal against a decision of Simon France J, in which he allowed an appeal against the decision of the Official Assignee to accept a proof of debt from Mrs Harley which included a claim for $109,811.68 plus interest for barrister’s fees said to be owing to her by Mr Erwood.[1]
[2] The essence of the dispute about the proof of debt was that Mr Erwood claimed that his obligation in respect of those fees (which were included in a bill to him from Glasgow Harley, the solicitors who instructed Mrs Harley to act on Mr Erwood’s behalf in the litigation for which the bill was rendered) was the subject of a settlement agreement under which Glasgow Harley and Mrs Harley agreed not to pursue Mr Erwood for the debt. Simon France J accepted that was so. Both the Official Assignee and Mrs Harley now contest that conclusion.
[3] The resolution of the appeal requires us to consider in some detail the nature of the settlement agreement, the circumstances which led to its execution and the nature of the proceedings between Mrs Harley and Mr Erwood bearing on the disputed debt.

The settlement agreement

[4] The settlement agreement was reflected in a consent order made by Frater J on 25 November 2003. At the time of the settlement, Mr Erwood was represented by a litigation guardian (Mr Minchen). The terms of Frater J’s order mirrored the terms of an agreement signed by Mr Erwood’s litigation guardian, counsel for Mrs Harley and counsel for Glasgow Harley. For present purposes the key terms are cls 1 and 2 which provide:

1. The Defendants [Glasgow Harley and Mrs Harley] are to pay to the Plaintiff [Mr Erwood] through his solicitors the sum of $45,000 (free of any set-off,

charge or other claim including any of the unpaid costs owing by the Plaintiff to the Second Defendant [Mrs Harley] as listed in the schedule marked D to this Order but without admissions as to liability within 60 days of this Order).

2. The claims and orders listed in the Schedule marked E to this Order and any claim that the First Defendant [Glasgow Harley] may have in respect of any fees or costs that may be owing to them are released and discharged.

[5] Schedule D was headed “Unpaid Costs Owing by Mr Erwood to Mrs Harley”. It referred to costs from three different proceedings, one of which was described as “AP120/00: cost revision”. That proceeding was an application by Mr Erwood to review a decision of the Registrar of the High Court which substantially confirmed a cost revision by the Cost Revision Committee of the Wellington District Law Society. The amount of the costs referred to totalled $72,646.22.
[6] Schedule E to the consent order was headed “Unpaid Fees and Costs Owing by Mr Erwood to Glasgow Harley/Mrs Harley”. This schedule referred to fees owing in respect of three different proceedings, one of which was described as: “CP22/98: Summary Judgment”. The entry in respect of that judgment was as follows:

CP22/98: SUMMARY JUDGMENT

On 24 May 2002: Mrs Harley fees $290,023.38

On 25 February 1999: Costs 2,999.20

On 24 May 2002: Costs 12,046.48

On 21 February 2003: Costs 10,001.10

Sub-Total 25,046.78

Total fees and costs 315,070.16

Interest on fees to 25/11/03 38,719.10

Interest on costs to 26/11/03 3,440.08

Total fees, costs and interest 357,229.34

Less fees and Costs Paid 205,258.48

Less Interest Paid 41,944.25

OUTSTANDING FEES, COSTS
AND INTEREST $110,026.61

[7] Schedules D and E are set out in full in the judgment under appeal.

The earlier proceedings

[8] CP22/98 was an application by Glasgow Harley for summary judgment against Mr Erwood, for fees owing to Glasgow Harley (including fees owed to Mrs Harley for which Glasgow Harley was responsible as instructing solicitor). The summary judgment proceedings coincided with Mr Erwood’s efforts to have Mrs Harley’s fees revised by the Law Society. Ultimately summary judgment was entered in favour of Glasgow Harley as to liability, but not to quantum.
[9] The cost revision was dealt with by the Wellington District Law Society Cost Revision Committee, and then appealed to the Registrar of the High Court whose decision was the subject of an application for review by a High Court Judge, Ronald Young J. The review proceeding was AP120/00. The outcome of the cost revision was that the fees charged by Mrs Harley were reduced. However, because the application for review by the High Court Judge was unsuccessful, in that he essentially upheld the decision of the Registrar, costs were awarded by the High Court Judge to Mrs Harley. Those costs were the $72,646.22 referred to in schedule D to the consent order. Of course, they were an award to Mrs Harley herself as a party to the cost revision review proceeding, and therefore claimable by her against Mr Erwood directly.
[10] There was no dispute that the amount owing to Mrs Harley in respect of the fees for which summary judgment was granted as to liability in favour of Glasgow Harley in CP22/98 were included in the sum provided for in respect of that proceeding in schedule E. Equally, there was no dispute that the reference to outstanding costs and interest relating to AP120/00 in schedule D did not include the fees for the amount confirmed by Ronald Young J on reviewing the Registrar’s decision in respect of the cost revision.
[11] The only relevance of schedule D was that it set out a number of amounts which were owing by Mr Erwood to Mrs Harley which, pursuant to paragraph 1 of the consent order, she was not permitted to set-off against her share of the $45,000 payment she was required to make under that paragraph to Mr Erwood.
[12] The case for Mrs Harley is that the consent order settled the obligation of Mr Erwood to Glasgow Harley in respect of CP22/98, but did not compromise her rights to seek payment of the amount of costs confirmed by Ronald Young J in the cost revision review proceeding, AP120/00. Thus, while Glasgow Harley could not now claim those fees from Mr Erwood because of the settlement evidenced by the consent order, she could do so directly under AP120/00.

Cost revision review proceeding

[13] The review of the Registrar’s decision was conducted under s 149 of the Law Practitioners Act 1982. Section 149(2) provides:

On hearing the application, the Court may—

(a) make such order by way of confirmation, variation, or reversal of the decision or any part of it as the Court thinks fair and reasonable;

(b) in the case of a revision by order of the Court, make such other order in relation to the revision as it thinks fit, including, in a case where the retainer is not disputed, an order that judgment be entered for the amount found to be due with costs.

[14] As the revision in this case was undertaken by order of the Court, s 149(2)(b) applied. Thus, having decided to confirm the decision of the Registrar, Ronald Young J could have ordered that judgment be entered for the amount found to be due by Mr Erwood with costs. It was common ground that Ronald Young J did not, in fact, do this, but Mr Carruthers QC for Mrs Harley said that the existence of the power to do so was significant. In particular, it meant that the decision of Ronald Young J was equivalent to an order that judgment be entered for the amount of fees owing ($109,811.68) and costs. He invited us, in our capacity as High Court Judges, to enter judgment for that amount. Alternatively, he argued that the fact that judgment could have been entered for that amount was sufficient to provide the basis for a claim under the proof of debt, and that that claim should therefore be upheld.
[15] It is not clear that the effect of s 149(2)(b) is to empower the High Court to enter judgment in favour of a barrister for a fee which was initially charged to an instructing solicitor and thereafter included in the instructing solicitor’s bill as a disbursement. It seems unlikely to us that that was the intention of s 149(2)(b), though we accept that on the plain wording of the section that is a possible interpretation. But, more importantly for present purposes, it is clear that Ronald Young J did not, in fact, make such an order. Until he did so there was no basis on which Mrs Harley could have sued Mr Erwood for the amount of the fees confirmed by Ronald Young J. She did, however, have the benefit of the costs award made in her favour by Ronald Young J in the cost revision review proceeding, and that is referred to in schedule D and has subsequently been claimed and paid.

The effect of the consent order

[16] Mr Carruthers’ argument did not depend on Ronald Young J having made such an order, however. His position was that Ronald Young J could have made such an order and that this was a sufficient basis for a proof of debt claim. However, the proof of debt could be accepted only if the claim amount had not been compromised in the settlement evidence by the consent order. We now therefore revert to that order and consider what was settled by it.
[17] Paragraph 2 of the consent order provided that the following were released and discharged:

(a) the claims and orders listed in schedule E; and

(b) any claim that the First Defendant [Glasgow Harley, but not Mrs Harley] may have in respect of any fees and costs owing to them.

[18] Mr Carruthers pointed out that paragraph 2 referred to “claims and orders” in schedule E, rather than the amounts owing in respect of those claims and orders. We do not consider that this is significant. The only detail given in schedule E about the claims and orders is the amount owing. In those circumstances, paragraph 2 must have released and discharged the obligation to pay those sums.
[19] There is no doubt that the amount owing to Mrs Harley (through Glasgow Harley) for which summary judgment had been entered as to liability in CP22/98 was included in schedule E. On that basis the intention appears to be that it was released and discharged and therefore could not be claimed against Mr Erwood again. Mr Carruthers argued that Mrs Harley did not intend to compromise her claim for fees. He said she accepted that she could not claim those fees through Glasgow Harley by reactivating the summary judgment proceeding and obtaining summary judgment for the amount owing after the revision and the various reviews of that revision. However, that did not compromise her right to claim the amount directly by obtaining an order in CP120/00 (the cost revision review proceeding).
[20] If Mrs Harley retained the right to recover her fees in CP120/00, there would be a number of odd consequences. In particular:

(a) The total amount owing as unpaid fees and costs referred to in schedule E is $151,646.50. Of this, $110,026.61 was owing in respect of CP22/98. If the compromise in respect of that latter sum were only a compromise as to one route of its recovery, but not any other route, then very little was compromised by Glasgow Harley and Mrs Harley in exchange for the settlement agreed to by Mr Erwood’s litigation guardian.

(b) If Mr Erwood still remained indebted to Mrs Harley in respect of the $110,026.61 referred to in schedule E, there would have been nothing to stop Mrs Harley setting that off against her share of the $45,000 she was required to pay under cl 1 of the consent order, because her claim in that regard was not included in schedule D and therefore not caught by the prohibition on set-off set out in that clause. She did not, however, exercise any such set-off.

(c) Mr Erwood would be indebted directly to Mrs Harley even though she had not billed him for the amount of the indebtedness, and even though the party that had billed him for that sum, Glasgow Harley, had agreed to release and discharge the obligation created by the bill.

[21] We do not consider that this is a tenable interpretation of the agreement which led to the consent order or of the consent order itself.

Further memoranda

[22] After the hearing, Mr Carruthers filed a memorandum dated 21 June 2010 concerning certain issues raised at the hearing. This memorandum provided some background to Schedules D and E to the Order of the High Court. Copies of the Summary of Issues for Mrs Harley that was prepared for the judicial settlement conference that led to the 2003 consent order, and of a similar document submitted to that settlement conference by counsel then acting for Mr Erwood were attached to the memorandum.
[23] The Court issued a minute dated 23 June 2010 seeking confirmation that this memorandum had been served on both Mr Erwood and Ms Levy and requesting their submissions on whether the Court should give leave for the further material to be filed and if so, what relevance the material had to the case.
[24] Ms Levy made able submissions on the point and the Court is satisfied that nothing in the additional memorandum affects the outcome of this appeal. In particular, we accept Ms Levy’s submission that the words “recovery of the balance can be enforced”, included at page 10(c) of the Summary, referred to the pre-settlement position, not the post-settlement position.
[25] We are satisfied that in filing the further memoranda, Mr Carruthers was not seeking to add to the evidence at trial, rather he was isolating the parts of the High Court file that he thought were relevant for his case. Hence, leave was not required. However, there is nothing in what was filed to suggest the settlement preserved Mrs Harley’s right to recover the costs she now claims. None of the issues raised by the memoranda affect the result of this judgment.

Result

[26] We conclude therefore, for essentially the same reasons as Simon France J, that the claim for $109,811.68 plus interest referred to in the proof of debt was compromised by the consent order and should not have been included in the proof of debt. We uphold the decision of Simon France J to allow the appeal against the decision of the Official Assignee to accept that aspect of the proof of debt.

Costs

[27] As a litigant in person, Mr Erwood is not entitled to costs. His interest in this appeal was essentially represented by Ms Levy as counsel assisting the Court, and we express our gratitude to her for the assistance she gave us. Her costs will, of course, be met by the Ministry of Justice. Mr Erwood is, however, entitled to usual disbursements.
[28] Ms Levy argued that the Official Assignee should not be permitted to meet the costs of its counsel from the bankrupt estate of Mr Erwood, because it should not have pursued these proceedings, given that Mrs Harley had the carriage of the appeal and that the submissions of the Official Assignee largely adopted the submissions of Mr Carruthers. Counsel for the Official Assignee, Mr Chisholm, said that his instructions were that the Official Assignee would not seek reimbursement of the costs of the conduct of the appeal from Mr Erwood’s estate. Ms Levy suggested that the Court should order that the costs of the High Court proceedings should not be met from the estate either. We are not prepared to make such an order. Simon France J found that the Official Assignee’s acceptance of the proof of debt was not unreasonable, and in those circumstances we do not see that it was unreasonable for the Official Assignee to be represented in the High Court. Given the stance taken by the Official Assignee in relation to the cost of the appeal, we do not see any need for any order to be made by this Court.
[29] In the circumstances we make no orders as to costs, but order Mrs Harley to pay Mr Erwood’s usual disbursements.

Solicitors:
Mairehau Law Centre, Christchurch for Second Appellant

[1] Erwood v Official Assignee HC Wellington CIV-2008-442-449, 9 April 2009.

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