Appointing a tutor and protecting her from a costs order

Smith v NRMA Insurance Limited  [2016] NSWCA 250


(a)   Power to make a protective costs order

29           Although the Court’s power to make a protective costs order was acknowledged by the insurer, it is appropriate to say something briefly about the source of that power.

30           In NSW Insurance Ministerial Corporation v Abualfoul (1999) 94 FCR 247; [1999] FCA 433, Sackville J examined the nature of the office of next friend under the general law. The expression “next friend” has been replaced under the UCPR by the expression “tutor”. Sackville J explained the position as follows:

27   … Under the general law, because of an infant’s inability to bind himself or herself, or to incur liability for costs, the infant was incapable of bringing an action without the assistance of some other person responsible to the court for the proper conduct of the suit: Daniell’s Chancery Practice (7th ed, 1901), 116. This person was known as the next friend (or “prochein amy” in the earlier cases), apparently because he or she was usually a near relative of the plaintiff. If an action was instituted by an infant without a next friend, the defendant could apply to have the action dismissed: ibid. The limitation on the capacity of infants did not extend to matters of substantive entitlement or liability, since at common law an infant could sue and be sued: Haines v Leves (1987) 8 NSWLR 442 (CA), at 449, per Street CJ. The limitation on capacity was procedural.

31   One reason for requiring an infant plaintiff to sue by a next friend was so that there would be a person answerable to the defendant for the costs of the litigation, although the defendant could waive this benefit: Daniell’s Chancery Practice, at 116; Ex parte Davis [1901] NSWStRp 71; (1901) 1 SR (NSW) 187, at 189. The next friend was liable for all costs incurred in the actions brought by the infant, until the infant attained his or her majority: Bligh v Tredgett [1851] EngR 903; (1851) 5 De G & SM 74; 64 ER 1024; Simpson on the Law of Infants (3rd ed, 1909), 391. The next friend could be attached for the non-payment of the costs of an action in which the defendant obtained a verdict: Radford v Cavanagh [1899] NSWLawRp 11; (1899) 15 WN (NSW) 226. However, the next friend was ordinarily entitled to recover the costs from the infant’s estate (if there was one), provided he or she acted bona fide: Pritchard v Roberts (1873) LR 17 Eq 222.

32  The next friend was regarded as an officer of the court appointed to safeguard the interests of the infant: Rhodes v Swithenbank (1889) 22 QBD 577, at 579, per Bowen LJ; Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62, at 113-114, per Williams J; Ex parte Davis. The conduct of the proceedings was in the hands of the next friend: Rhodes v Swithenbank, at 578, per Lord Esher MR. The next friend was not, however, a party to the action: Pink v J A Sharwood & Co Limited [1913] 2 Ch 286, at 289, per Eve J. The next friend derived his or her authority from the court, not the infant, and could be removed if, for example, he or she acted improperly or had an interest adverse to that of the infant: Stephenson v Geiss [1998] 1 Qd R 542, at 557, per Lee J; Simpson on the Law of Infants, at 384-385.

32 It has been said that the appointment of the litigation representative, such as a tutor, serves two protective purposes – the protection of the person with the disability and of the processes of the Court: Goddard Elliott (a firm) v Fritsch [2012] VSC 87 at [552] (Bell J). The tutor is appointed to safeguard the interests of the person under a legal disability and to ensure that such person is bound by the outcome of the proceedings or any settlement: Azar at [185] – [197]; Yakmor at [44] – [45].

33           Further, it may be accepted that one of the reasons for the appointment of the tutor is to have a person on the record that is personally liable for the costs of the litigation. Nonetheless, as the insurer correctly acknowledged, that is not the sole function or purpose of the appointment of the tutor.

34           Nor did the insurer submit that the Court cannot make an order protecting the tutor from personal liability for costs. While there is no explicit provision to this effect in Div 4 of Pt 7 UCPR, the Court’s power to make such an order arises as an incident of its jurisdiction to do whatever is necessary to enable it to act effectively within that jurisdiction and to control its own process and proceedings. As Allsop P said in State of New South Wales v Public Transport Ticketing Corporation (No 3) [2011] NSWCA 200, this power is incidental (or implied) and it is subsumed in the Court’s inherent power that all courts can be seen to have: at [15].

35           In Newcastle City Council v Batistatos; Roads & Traffic Authority of NSW v Batistatos [2005] NSWCA 20 this Court held, referring to Gaudron J’s judgment in Jago v District Court of New South Wales & Ors (1989) 168 CLR 23, that the Court’s power to control its own process and proceedings is such that its exercise is not restricted to defined and closed categories, but may be exercised as and when the administration of justice demands: at [20] per Bryson JA (Mason P and Giles JA agreeing). These principles are reflected in s 23 Supreme Court Act.

36           Reference also should be made to the Court’s power under UCPR, r 2.1 to “give such directions and make such orders for the conduct of any proceedings as appear convenient (whether or not inconsistent with these rules or any other rules of court) for the just, quick and cheap disposal of the proceedings.” That rule reflects the statutory command in s 56 of the Civil Procedure Act 2005 (NSW) that the overriding purpose of the Act, and of the rules of Court, is to facilitate the “just, quick and cheap resolution of the real issues in the proceedings”.

37           In my view, an order protecting a tutor from personal liability for costs may be made as an incidental term of an order appointing a tutor under UCPR r 7.18(1)(b), or in reliance on the power conferred by UCPR r 2.1. Alternatively, if there be any doubt as to power to make such an order, it is not in dispute that the Court has inherent power under its parens patriae jurisdiction to appoint a tutor on terms protecting the tutor from personal liability for costs.

(b)   Should a protective costs order be made?

38           Mr Gross QC referred to cases in the Federal Court as supporting the making of a protective costs order in the present case. In Jaffari v Minister for Immigration and Multicultural Affairs (2001) 113 FCR 10 (Jaffari), French J made a protective costs order for pro bono counsel representing persons under a disability, in that case minors, who did not require the appointment of a tutor for the continuation of his proceedings, because the Federal Court Rules, O 43, did not (at that time) impose a requirement on a minor to sue by a next friend. French J held that O 43 was facultative and while the common law prescribed such a requirement (that is, the appointment of a tutor for a minor), where jurisdiction is statutory, the statute may expressly or by implication displace the common law rule, referring to Haines v Leves (1987) 8 NSWLR 442, 465 – 466. There, Kirby P held that it would be to undermine and frustrate, and not to further, the purposes of the Anti-Discrimination Act 1977 (NSW) to require that a tutor be appointed to a minor as a precondition to her being a party to an inquiry before the Equal Opportunity Tribunal.

39           In Fernando (by his tutor, John Ley) v Minister for Immigration and Citizenship (No 9) [2009] FCA 833, Siopis J referred to the reasoning in Jaffari and accordingly ordered the terms of an earlier appointment of a tutor to a party with a mental incapacity be varied to protect the tutor from personal liability for costs.

40           The insurer submitted that these decisions are of limited assistance since O 43 of the Federal Court Rules 1979 did not make litigation through a tutor mandatory. That distinction (which is no longer the case under the current Federal Court Rules 2011) may be accepted, nonetheless, the Federal Court cases highlight that a protective costs order incidental to the conduct of proceedings may be appropriate in the circumstances of a particular case.

41           Thus, in Jaffari, the Court was concerned to ensure that the pro bono legal representatives of the applicants should not be exposed to any risk of costs on the basis that, as minors, they lacked capacity to instruct counsel. In Fernando, the Court was concerned to ensure that the tutor for the applicant, who was acting pro bono for a person under a mental incapacity, not be exposed to a personal liability for costs.

42           What should be done here to resolve the current impasse? Counsel for the insurer fairly acknowledged in argument that achieving a balance between the competing interests of the appellant and the insurer was not easy. A balance must be struck between the interests of the appellant in prosecuting his appeal – presently stayed in the absence of a tutor being appointed – and the interests of the insurer who was successful at trial, in having a person against whom a costs order can be made if the appeal proceeds and is unsuccessful.

43           For the reasons that follow, I am persuaded that, in the unusual circumstances of the present case, a protective costs order should be made, and that it is unnecessary to impose a condition on the appointment of the tutor requiring the tutor to obtain independent advice that the appeal has real prospects of success.

44           First, although an important purpose of the appointment of a tutor is to have a person on the record who is personally liable for costs, in the present case, the other important purposes served by the appointment of a tutor – the protection of the person under a disability and the protection of the processes of the Court – should be given greater weight because the interests of the appellant in prosecuting the appeal will be stifled by the existing stay unless the proposed tutor is appointed on terms protecting her personally as to costs.

45           Secondly, absent the appointment of a tutor on the terms proposed by the amicus, the appeal will remain stayed as no other person or entity has indicated a willingness to consent to appointment as tutor without protection from personal liability for costs. The suggestion by the insurer that the NSW Trustee and Guardian might be prepared to accept an appointment, such as in Guler v NSW Trustee and Guardian [2012] NSWSC 1369, if a management order is also made in respect of the appellant’s estate is speculative. There is no basis for inferring that the NSW Trustee and Guardian would consent to an appointment as tutor of the appellant in circumstances where there is no evidence of any assets of the appellant (other than a contingent asset in the form of his right of appeal) against which it might be able to claim an indemnity for its fees and any personal liability for costs in the event that the appeal is unsuccessful.

46           Further, and contrary to the insurer’s submission, there is no basis for inferring that the NSW Trustee and Guardian would be prepared to personally incur the cost of obtaining its own legal advice as to the merits of the appeal before consenting to an appointment as tutor without any protection against personal liability for costs. Accordingly, the appointment of Ms Daley as tutor should not be deferred until after that alternative course has been pursued.

47           Thirdly, the limitation period does not run while a person is a minor: see Limitation Act 1969 (NSW), s 52 (1)(d) and the definition of “a person under a disability” in s 11(3), which includes a person under the age of 18 years: s 11(3)(a). Accordingly, if the appellant had waited until he was an adult to bring his claim, and assuming (it being common ground this is not the present case) that he was not incapable of managing his affairs when he turns 18 years of age, the insurer would be in no worse a position as to its right to obtain a costs order against the appellant carrying on proceedings without a tutor, than if the appeal is carried on by a tutor with a protective costs order.

48           Fourthly, whilst I am not in a position to express a view on the merits of the appeal, it is of some significance that no submission is advanced by the insurer that the appeal is not bona fide, nor is it suggested that the appeal is weak or unarguable.

49           Fifthly, I am satisfied that it is preferable to make a protective costs order rather than a maximum costs order along the lines which the Court raised with the amicus and the insurer for consideration because no person has been identified who would be prepared to consent to being appointed tutor on terms that a maximum costs order be made in advance of the outcome of the appeal. In supplementary written submissions, Mr Gross QC confirmed that Ms Daley would not consent to appointment as tutor, even if a maximum costs order was made under UCPR r 42.4, such as in the amount of $10,000. Ms Daley’s position is understandable given that she is an independent solicitor with no connection to the appellant or interest in the outcome of the appeal.

50           Sixthly, I am also not persuaded that the Court should impose a condition on Ms Daley’s appointment as tutor that she files an affidavit stating that she has received written advice from independent senior counsel that the appeal has real prospects for success. Such a condition might be appropriate if an appeal were either not bona fide or appeared to lack real prospects of success. However, counsel for the insurer expressly disavowed making any such submission along those lines in the present case.

51           Moreover, it can be expected that if appointed as tutor, Ms Daley, as an independent solicitor experienced in personal injuries litigation, will carefully consider the legal advice given by the appellant’s solicitors on the record, including counsel’s advice as to the merits of the appeal, before pursuing the appeal. This is not to suggest that those solicitors and counsel as amicus would not give full and frank advice to the tutor as to the merits of the appeal; rather that the concern raised by the insurer of the potential for a conflict in Ms Daley accepting the advice of the present solicitors and senior counsel for the amicus given their prior formation of a view as to prospects, is not of sufficient weight to warrant the imposition of a condition requiring that the tutor obtain such advice.

52           The amicus raised a further, practical consideration which also tends against imposing such a condition. There is no available fund with which the tutor could pay for independent legal advice. To this it should be added that the insurer did not offer to fund the tutor to obtain such advice. That is not to suggest that there is any obligation of the insurer to do so; rather it is simply to observe that, while embracing the imposition of such a condition on the tutor’s appointment, the insurer has not offered to fund the tutor to obtain independent advice as to the prospects of the appeal.

53           One further matter should be mentioned. The insurer argued that if the appeal fails, a costs order against the appellant only would be wholly futile or ineffective, since he is a minor and without any apparent assets. That submission should be rejected for the reasons given by Rothman J in Adams by her next friend O’Grady v State of New South Wales (No 2) [2008] NSWSC 1394 (Adams) at [10]. As Adams demonstrates, the general position is that a tutor will be personally responsible for costs together with the person under legal incapacity should the action be unsuccessful (Ashton v Pratt (No 2) [2015] NSWCA 134 (Ashton) at [6] – [8]). However, if the Court determines that a tutor should be immune from costs, having regard to the circumstances of the particular case, the successful party can still expect to obtain an order for costs against the person under legal incapacity: Adams at [10]. As cases such as Ashton and Sophie Fegan by her tutor Inga Rozenauers v Lane Cove House Pty Limited [2007] NSWCA 88 demonstrate, persons under legal incapacity who may be subject to such costs orders include children.

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