PM's conduct questioned in Lake Alice compensation case

 The National Business Review

September 22 2006

PM's conduct questioned in the compensation case 

Labour accused of hiding withholding details of controversial Lake Alice settlement from victims 

by Deborah Hill Cone

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A Wellington District Court judge has exposed a secret deal in which the government took a cut of millions of dollars from compensation payments to former mental hospital patients.

In a bold judgment out this week, Judge Tom Broadmore has criticised what he describes as the "political" decision made at the highest levels of government to secretly take 30% of the compensation payments from victims of mistreatment at government psychiatric institution, Lake Alice, to cover non-existent "legal fees."

The former patients were never told this was happening and the Crown's justification was Kafkaesque, Judge Broadmore said in a judgment that orders the government to pay out the withheld amount to one victim and opens the way for other claims.

Judge Broadmore has chosen his words carefully as the case touches on the conduct of a group of Wellington's most powerful public figures including Prime Minister Helen Clark, former High Court Judge Sir Rodney Gallen, Labour government appointee David Collins QC, now solicitor-general, and Ministry of Health chief legal adviser Grant Adam.

The background to the case is that in 2001 Christchurch lawyer Grant Cameron won a $6.5 million payout for a group of 95 former Lake Alice victims in a class action against the government.

As a result, the government decided to settle with a further 80 or so former patients on the same terms, appointing Mr Collins to help the patients and former High Court judge Sir Rodney Gallen to determine the level of compensation, as he had done for Mr Cameron's clients.

However, the Ministry of Health decided one-third of the sum determined by Sir Rodney would be deducted before the claimants found out, to keep the payouts in line with what it believed Mr Cameron's clients had received.

Mr Cameron's fee, which has never been publicly disclosed, was said to be about one-third of his client's payout, or about $2 million, in compensation for taking the ground-breaking case on a contingency basis.

Judge Broadmore notes that various recipients in Ms Clark's office were kept informed about the Ministry of Health's internal debate over this issue and Sir Rodney's position that he disagreed with having to make deductions.

"As reported by [Ministry of Health lawyer] Christine Lloyd in an email to Mr Adam, counsel at the Prime Minister's Office and one or two others, Sir Rodney told her that he had not appreciated the nature of the instruction, that making any deduction from the amount was a political decision, and he did not have sufficient information about the basis of Grant Cameron & Associates' charging," Judge Broadmore said. He noted that Ms Lloyd's failure to give evidence in the hearing did not help clarify "obscurities."

When Sir Rodney refused to make the deductions, "the responsible ministers," who at that time were Health Minister Annette King and Associate Health Minister Tariana Turia, instructed that 30% should be taken out of the total figure after it had been determined, but the victims were not to be told.

The secret deductions might never have come to light had it not been for a slip-up in which one victim, Paul Zentveld, was accidentally told the full sum to which Sir Rodney had deemed he was entitled.

Mr Zentveld, who had been admitted to Lake Alice as a young person, was told in 2002 he would receive $115,000 in compensation, but later was rung by Mr Collins QC and told there was a misunderstanding and this had been reduced to $80,000.

Mr Zentveld took action in the District Court to recover this money and this week Judge Broadmore ordered the Crown to pay up $35,000.

The judge said it would have been reasonable for the claimant to assume that the issue of costs was taken into account by Sir Rodney in making his determination.

"There was no way he could know how much a class action plaintiff with a similar history to his had received net in the hand. Mr Zentveld said in evidence that he had not known nor had he had any contact with any of the class action plaintiffs. He knew only that he had suffered terribly during his time in the unit ... He simply placed his trust in Sir Rodney to take all relevant matters into account and to ensure that the outcome would be fair."

It was not clear at press time whether the Crown would appeal the decision, but it is likely given the judgment came from the lower court.

And the case's implications could be far-reaching, with the Crown likely to have to pay the second tranche of Lake Alice victims their full entitlement. That may lead to the first tranche of victims, those represented by Mr Cameron, demanding that the Crown cover their legal costs to keep the payouts equitable.

Mr Cameron said the government had behaved in an underhand way to save a couple of million dollars.

"The issue is the extreme lengths to which the Labour administration has gone to keep secret the process to take 30% off the top," Mr Cameron said.