Renehan v Leeuwin Ocean Adventure Foundation Ltd & Anor [2006] NTSC 28

IN THE SUPREME COURT

OF THE NORTHERN TERRITORY

OF AUSTRALIA

AT DARWIN

Renehan v Leeuwin Ocean Adventure Foundation Ltd & Anor

[2006] NTSC 28

No. 33 of 1998 (9803191)

BETWEEN:

TRACEY ANNE RENEHAN by her litigation guardian GERALDINE RENEHAN

LEEUWIN OCEAN ADVENTURE FOUNDATION LIMITED (ACN: 009 105 677)

Second Defendant

CORAM: MILDREN J

REASONS FOR JUDGMENT

(Delivered 4 April 2006)

Mildren J:

[1] On 13 January 2006 I published reasons (the principal judgment) for concluding that the plaintiff was entitled to judgment against the first defendant and that the claims against the second defendant should be dismissed. I also decided that the plaintiff's damages should be assessed at $1,303,686.73 plus a further amount for fund management yet to be assessed. I said I would hear the parties as to the appropriate orders to be made in the light of those reasons and as to costs.

[2] I have since heard extensive submission on these matters. Because there is an application before me by the second defendant for a costs order against the plaintiff which may affect the size of the ultimate fund to be invested, it is preferable that I deal with the costs issues before attempting to quantify the final amount of the plaintiff's judgment. I record however that the plaintiff has elected to take her remedy in contract rather than in tort with the result that there will be no reduction in damages for contributory negligence.

The applications for costs

[3] The plaintiff, having succeeded against the first defendant, seeks the usual costs order against that defendant, but as well seeks a Sanderson order against the first defendant.

[4] The first defendant submits that it should only be ordered to pay an assessed proportion of the plaintiff costs; that the plaintiff should pay the first defendant's costs on certain issues; that no Bullock order or Sanderson order should be made against the first defendant; that as between the defendants, each defendant should bear its own costs, or alternatively that the second defendant's costs should not be awarded against the first defendant in full. It was not in contention that the first defendant's counterclaim against the second defendant's contribution notice should be dismissed.

[5] The second defendant seeks an order that the plaintiff and the first defendant pay its costs on the standard basis up to 29 June 2001 and thereafter on an indemnity basis. Further, the second defendant seeks a judgment or declaration against the first defendant for, in effect, costs on a solicitor/own client basis pursuant to a contractual indemnity. This last issue has been adjourned generally to a later date and has not been argued. I will therefore not consider it and will leave that question open to be raised by the second defendant should it become necessary at a later time. It was not in contention that the second defendant's contribution notice against the first defendant should be dismissed.

[6] The arguments of the parties in relation to costs are extremely complex and were as hard fought as the rest of the issues in this litigation.

The second defendant's application

[7] It is convenient to deal with this application first. There is no doubt that the second defendant is entitled to a costs order. It has succeeded in the litigation in that the action against it must be dismissed as must the counterclaim against its contribution notice.

[8] The first question is whether I should make an order for costs against the first defendant. It was the submission of the first defendant that the decision to join the second defendant and to pursue the second defendant was the plaintiff's that that decision was not reasonable and that therefore the plaintiff alone should bear the second defendant's costs.

[9] Although it is true that it was the plaintiff who first joined the second defendant as a party to the proceedings, it is also true that the first defendant pursued the second defendant for contribution at an early time in the proceedings and maintained its claim for contribution through its counterclaim throughout the trial. The fact that the plaintiff failed against the second defendant meant that there was no basis for any contribution as between the defendants. Looked at in broad brush, both the plaintiff and the first defendant failed against the second defendant. The claims by the plaintiff and the first defendant against the second defendant were based on substantially the same facts. Prima facie the second defendant is entitled to a costs order against both the plaintiff and the first defendant.

[10] The claim by the plaintiff against the second defendant was pleaded in both contract and in tort. The claim in contract was abandoned at a late stage of the trial but the claim in tort was pursued. The nature of that claim is briefly set out at paras [4], [5] and [113] of the principal judgment. That claim failed because even if the alleged duty existed and even if the second defendant breached its duty of care, the suggested breaches of duty did not cause the plaintiff's injuries: see para [114] of the principal judgment.

[11] A great deal of time and expense was taken up during the trial litigating the question of whether or not the second defendant owed the plaintiff a duty of care and whether or not the second defendant breached that duty. It was not necessary to reach any findings on those issues. The issue relating to the existence of a duty of care rested largely upon the proposition that the second defendant knew or ought to have known that the plaintiff was, for various reasons, including her medical problems, obesity and other personal factors, unsuitable for the voyage. I made a finding that the plaintiff's intellectual handicap was not particularly obvious, although I made findings that the first defendant's mate, Mr Cole, was told that the plaintiff was "not quite right" etc: see para [32] of the principal judgment, but beyond that, I did not venture. It was submitted that the second defendant pitched its claim for contribution largely upon a matter which was not relied upon by the plaintiff as against the first defendant but was raised by the second defendant in its contribution notice against the first defendant, namely that the first defendant owed a duty of care to the second defendant to ensure that it selected for the voyage only persons physically or mentally capable; and that the first defendant therefore breached the duty it owed to the second defendant. (This is in broad terms what the first defendant in its submission on costs refers as "the selection issue".) Because of the findings made on the causation issue, it was not necessary for me to reach any findings on the selection issue. Nevertheless, the first defendant submits that I should find that the second defendant failed on that issue, or at the very least, I should award no costs in relation thereto.

[12] There are a number of authorities which deal with the situation where a court is asked to determine cost issues where the action has settled or been abandoned without a hearing. In cases where the subject matter of the litigation no longer exists because of the acts of a third party, it has been held that, as a rule, the court will not decide who might have won or lost had the case gone to trial and the normal order is that there is no order as to costs: see Parap Hotel Pty Ltd and Ors v Northern Territory Planning Authority and Ors [1993] NTSC 37; (1993) 112 FLR 336; Re Minister for Immigration and Ethnic Affairs ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622. Where the parties have settled the action or neither party wishes the action to proceed, again the court will not usually make a costs order because the court will not hear the evidence merely to decide questions of costs: see J T Stratford & Son Ltd v Lindley and Ors (No 2) [1969] 1 WLR 1547; [1969] 3 All ER 1122. There are some exceptions noted in Australian Securities Commission v Aust-Home Investments Ltd and Ors [1993] FCA 585; (1993) 116 ALR 523; Parap Hotel Pty Ltd and Ors v Northern Territory Planning Authority and Ors (supra); Gribbles Pathology Pty Ltd v Health Insurance Commission and Ors [1997] FCA 1414; (1997) 80 FCR 284 at 287; and see Re Minister for Immigration and Ethnic Affairs ex parte Lai Qin (supra); Boscaini Investments Pty Ltd v Kensington City Corporation [1999] SASC 327 (unreported) per Debelle J; those exceptions refer to cases where the Court was able to form a clear view of the merits of the case, e.g. where a claim or a defence was plainly hopeless. But, in this case, I have heard all of the evidence. I am plainly in a position to make findings of fact if it is necessary to do so. Should I now proceed to make findings on issues which are unnecessary to resolve except to make an order as to costs?

[13] The parties were not able to refer me to any authorities which discuss that precise issue. A trial judge is not required to decide and give reasons for every issue that the parties throw up at him, although he must decide and give his reasons for those matters which are necessary for the verdict: see, for example, Pettitt v Dunkley [1971] 1 NSWLR 376; Mombasa Pty Ltd v Nikic (1987) 89 FLR 411; Housing Commission of NSW v Tatmar Pastoral Co and Penrith Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 383. The reason why this is required is, most importantly, to facilitate the parties to properly exercise their rights of appeal. It is for this reason that often judges do give reasons for deciding on an alternative basis in case the principle reason given be found upon appeal to be wrong. In my opinion, a judge has a discretion to deal with issues raised by the parties if it might be helpful to the parties or the Court on an appeal in such circumstances; and in fact it is frequently the case that such issues, whether of fact or law or both are disposed of in that way. But I do not think it is always necessary particularly where the reason for the decision arrived at is most unlikely to be upset on appeal and the subsidiary reasons may take considerable time and effort to resolve. The time and trouble involved in deciding secondary matters has to be balanced against the possibility that such matters might need resolution at some later time and the trouble and expense this will cause the parties in that event, although the appeal court may simply refer the matter back to the trial judge to resolve such an issue if need be.

[14] Thus it seems to me that I have a discretion whether or not to resolve this issue even though it bears only a question of costs. The reasons relevant to a consideration of whether or not to exercise the discretion in this case are: (1) whether the issue was a discreet issue; (2) the time taken up and potential costs involved in litigating that issue at trial; (3) whether it was reasonable to raise the issue at trial even though it failed; (4) whether the issue would be resolved clearly in favour of one party; (5) the time and trouble involved in resolving the issue.

[15] As to the issue itself, the nub of the second defendant's claims against the first defendant was that it was the first defendant and not the second defendant who "chose" the plaintiff to go on the voyage and that the first defendant should have rejected her. There are a number of aspects to this. The first is whether the plaintiff was not fit to go on the voyage. The only evidence of this was evidence from her general practitioner, Dr Mark Young, that if he had been consulted, he probably would have counselled the plaintiff about concerns he had about her fitness to climb the rigging. These concerns related to her level of fitness, general obesity, confidence at heights, mental state and the sedative medication she was on. However, there is no evidence that Dr Young knew anything about the level of fitness required to climb the rigging; or that he even tested her level of fitness; or that he had any understanding of the safety procedures on board the vessel. I am not persuaded that a case was made out that the plaintiff was not fit to fully participate in the voyage assuming proper training and adequate safety equipment was provided by the first defendant. In fact, that very submission was made by the second defendant in its written submissions: see para [214] of the second defendant's written submission on liability.

[16] I consider that it is clear that the second defendant failed to establish a contractual duty on the part of the first defendant to accept only those trainees who were fit to fully participate in the voyage. There is no express term to that effect in the One-Off Agreement; and nor, in my opinion, can one be implied. It is simply not necessary to do so to give business efficacy to the contract: see Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337at 346. To the contrary, clause 4 of attachment B of the One Off Agreement suggests that it was the second defendant who "selected" those to go on the voyage:

4.1

Clients will be selected for assistance in accordance with the selection criteria and procedures development by the Department.

4.2

The Organisation must accept those clients that the CES deems to have priority for assistance.

4.3

The Department will use its best endeavours to replace any clients who withdraw prior to the Training Assistance, and retains the right to replace a trainee at any time deemed appropriate."

[17] Mr Silvester submitted that clause 4.1 when it refers to "selected for assistance" was ambiguous or that it left it open to the parties to have developed their own selection procedures and, to the extent that the first defendant developed criteria, the second defendant, to the first defendant's knowledge, adopted and relied upon them. The evidence never came anywhere near establishing that as a fact.

[18] Nevertheless, I accept Mr Silvester's submission that this issue is not able to be easily isolated from a broad canvas of issues raised by the pleadings in both the primary and contribution proceedings and which were agitated at trial and that it is too difficult to isolate these issues out, particularly as the first defendant not only denied that it had a responsibility to "select" only those fit to on the voyage, but argued a case as against the second defendant that this was the second defendant's responsibility. Moreover, there were very significant issues surrounding that question concerning who knew or ought to have known about the plaintiff's disabilities, how obvious they were, whether the second defendant had knowledge of those matters through the plaintiff's disability support pension, whether because of statutory requirements of confidentiality, that information was unavailable to the plaintiff's case manager, Ms Nuske, the extent to which the second defendant had a duty to pass on that information to the first defendant, whether a practice had developed which enabled the second defendant to rely on enquiries by the first defendant, and whether the second defendant through Mr Cole, knew enough to put him on notice anyway. These were potentially significant issues all potentially bearing on the second defendant's liability if causation had been established, many of which were essential steps in that process, as well as a myriad of other minor factual issues. Not only is it difficult to isolate the "selection" issue in the way the first defendant seeks to do, but the evidence does not permit a clear finding as to who in fact "selected" the plaintiff. True it is that the second defendant gave the plaintiff the opportunity to go on the voyage if she chose to accept that opportunity, but it is not easy to distil in isolation where this might have led. The real question is not who "selected" the plaintiff, but whether the defendants ought to have refused to allow her to go on the voyage, i.e. whether the second defendant had knowledge which, had it been imparted to the first defendant, ought to have caused the first defendant to either refuse to take the plaintiff or to take special precautions for her safety. Of course none of this mattered if, as I have found, none of this was causally relevant. Further the evidence does not satisfy me that had the second defendant known the full extent of the plaintiff's disabilities, the plaintiff could not have gone on the voyage or that any special requirements to climb the mast were in fact warranted.

[19] Having given this matter earnest consideration, I do not consider that any special order as to costs is warranted so as to deprive the second defendant of the fruits of its victory and I consider that costs should follow the event as between the defendants. I am not satisfied that this is a discreet issue which can be conveniently isolated from a number of other issues and I am not satisfied that it could be said that the first defendant was a clear winner vis-à-vis the second defendant.

Plaintiff's application for a "Sanderson" order

[20] The principles upon which the Court may make a Sanderson order or a Bullock order are well established. Very useful guidance is to be found in Gould and Anor v Vaggelas and Ors (1985) 157 CLR 215; Almeida v Universal Dye Works Pty Ltd and Ors (No 2) [2001] NSWCA 156, BC200107129, unreported; and Felk Industries Pty Ltd v Mallet [2003] NSWCA 111, BC200502529, unreported. In Felk, Hunt AJA (with whom Sheller JA and Campbell AJA agreed) said:

"The more complex question which arises is whether the plaintiff is entitled to obtain a "Bullock" order, requiring the unsuccessful defendant to pay him the costs which have been awarded against him in favour of the successful defendant: Bullock v London General Omnibus Co [1907] 1 KB 264. This is a frequently litigated issue, and the cases show many differences in expression and emphasis according to the circumstances of the different cases. The authority most directly relevant is the decision of the High Court in Gould v Vaggelas (1985) 157 CLR 215, where it was held (at 229-230, 232, 246-247, 260) - applying the Bullock case and Johnsons Tyne Factory Pty Ltd v Maffra Corporation [1948] HCA 46; (1948) 77 CLR 544 at 566 , 572-573 - that the test is whether the costs payable by the plaintiff to the successful defendant were reasonably and properly incurred by the plaintiff as between him and the unsuccessful defendant; it must have been reasonable for the plaintiff to have joined the successful defendant by reason of some conduct on the part of the unsuccessful defendant such as to make it fair to impose a liability on it for the costs of the successful defendant. See also Steppke v National Capital Development Commission (1978) 21 ACTR 23 at 30-31, which was approved in Gould v Vaggelas (at 230). Any conduct by the unsuccessful defendant, or any state of affairs in which the unsuccessful defendant is an integral part, which makes it fair and reasonable for the successful defendant to be joined will be relevant to the application of that test: Almeida v Universal Dye Works Pty Ltd (No 2) [2001] NSWCA 156, per Priestley JA at [7]-[8]. The fact that different causes of action were pleaded against each of the two defendants in the present case does not exclude the making of a "Bullock" order: Gould v Vaggelas (at 231, 247)."

[21] Counsel for the first defendant submitted that the causes of action against the defendants were different and there was no conduct on the first defendant's part which required the plaintiff's "overcautious" joining of the second defendant. The first defendant submitted that it did not raise any fresh issues in the proceedings. It merely "reacted" or responded to the issues raised by the second defendant and the plaintiff. Counsel for the plaintiff submitted that it was reasonable to join the second defendant because the first defendant's case was that the plaintiff's fall was not caused by any lack of care on its part, but due to personal factors which made the plaintiff unsuitable for the voyage and about which the first defendant had no knowledge, but which the second defendant knew about or ought to have known about. The plaintiff submitted that the first defendant suggested also that the plaintiff deliberately let go of the futtock shrouds and that this was because of her inability to cope with her anxieties. Further, it was submitted that the first defendant ran a positive case against the second defendant for contribution based on the "knowledge issue" and sought to prove that the plaintiff suffered a psychotic episode which led to her fall by cross-examining her about anxiety and visual hallucinations. Further, the plaintiff submitted that because the first defendant relied upon contractual limitations of liability which could, if successful, have reduced the plaintiff's damages to $50,000 or less, it was vital that the plaintiff pursue its case against the second defendant, particularly as the ultimate outcome in the case would depend upon the interpretation to be given to contested evidence to be given at the trial which, in some respects, was finely balanced, even though in the end the liability of the first defendant was clearly established and the contractual limitations were unsuccessful.

[22] I consider that the plaintiff's submissions are well founded. Although the plaintiff's case against the Commonwealth was never going to be an easy one, it was far from being hopeless. There was much to be said for the argument that the Commonwealth might have owed the plaintiff a duty to take care for her personal safety by not facilitating her to go on a sail-training program because she was, to the Commonwealth's knowledge, likely to be unable to cope with the program and that the Commonwealth breached that duty by not restricting her participation to "on-deck" duties, or at least, advising the first defendant of the nature of her difficulties so that it might decide whether or not she was fit only for "on-deck" duties. A key question was what caused the plaintiff to fall and if this question had been answered by reference to her personal factors even as a contributory factor, causation could have been established. Although the plaintiff's evidence was consistent with her losing her grip because she became too tired to hang on any longer (Ext P2 paras 268-271) the first defendant tried to establish that she let go deliberately: see the statements of Baker (Ext L14 para 87) and Bale (Ext L28 paras 204, 205, 207 and 208). The purpose of this was to explain the fall by personal factors. The plaintiff submitted that this was made very clear by two medical reports from Dr McCarthy, a Perth psychiatrist engaged by the first defendant, who opined that "a more likely hypothesis is that finding herself in a situation in which she feels anxiety, Ms Renehan coped as she has coped with anxiety in other circumstances by simply letting go, i.e. by regression or abandoning efforts to cope. In other circumstances of stress she also has a history of regression although letting go in those other circumstances means abandoning her responsibilities..." (Ext P93, attachment I, report 7/4/05, p 2, see also Ext P93, attachment I, report 24/3/05, pp 3-4). These reports were not tendered in evidence at the trial and nor did the first defendant call Dr McCarthy as a witness but were admitted only for the purposes of deciding questions of costs. I strongly suspect Dr McCarthy would not have been permitted to give this evidence in any event. Mr Reeves QC submitted that these reports, which were obtained during the course of the trial, were delivered to the plaintiff's solicitors because they were required to be served by O 33.06(b) even if the first defendant did not intend to rely upon them. This may be so, but the first defendant did not advise the plaintiff that it was not intending to call Dr McCarthy at that time. Nevertheless, I do not place any weight on this because it is plain that the first defendant denied its liability and was actively running a claim for contribution against the second defendant: see also the first defendant's written submissions on contribution especially para 3.1.5 at p 89 to para 3.4.9.13 at p 108. The medical reports, in my opinion, ought not to have any influence on the outcome of my decision because in the scheme of things they added little and I consider that the opinions were most unlikely to have been admitted into evidence. Leaving that material aside, I nevertheless consider that in the circumstances it is just to make a Sanderson order.

Should the plaintiff be deprived of part of her costs by late amendment to the Statement of Claim or Reply?

[23] It was submitted by the first defendant that the plaintiff was permitted to amend the Statement of Claim on the eve of trial and outside the limitation period to plead a new cause of action that defeated the first defendant's defence which would have limited her damages to $50,000. Therefore, so it was submitted, the plaintiff should not be entitled to any costs in relation to damages issues up to that time.

[24] The relevant amendments to the Statement of Claim and the plaintiff's Reply were permitted to be made on 18 March 2005. The trial itself commenced on 21 March 2005. When I granted leave to the plaintiff to amend I said that the first defendants had not satisfied me that there was any prejudice that could not be cured by an order for costs even though the amendments were very late.

[25] I do not accept that the amendment to the Statement of Claim defeated the first defendant's defence based on the contractual limitation of $50,000. The first defendant pleaded that the plaintiff was onboard the vessel pursuant to the written agreement contained in the Reservation Form, an express term of which limited its liability to $50,000: see paras 18-19 of the Sixth Further Amended Defence of the First Defendant. The reason why this claim failed was because the term relied upon was, by virtue of the operation of s 68 of the Trade Practices Act (Cth) void and unenforceable: see the principal judgment para [81]. That question was raised by the plaintiff's Amended Reply. However I do accept that leave to amend the Reply to raise the Trade Practices Act "defence" was not formally sought until 18 March 2005, although notice that it was to be raised was given to the first defendant probably on 1 or 2 March 2005.

[26] There is much force in the plaintiff's submission that this was not like raising a limitation defence; it did more than raise a procedural bar. It raised a question of substantive law as to whether or not the clause was illegal and void. Nevertheless that was a matter which had to be expressly pleaded: see O 13.07(1)(a), O 13.07(1)(b) and O 13.02(2). On 2 March 2005 the first defendant made an offer of compromise of $600,000. Up to then the only offer made was one of $50,000 on 18 January 2005: see Ext L52. Despite Mr Maurice QC's submission, I think I should draw the inference that the change in the size of the offer was very much the result of the first defendant becoming aware of the Trade Practices Act "defence". But it does not follow that any cost consequences necessarily follow as a result.

[27] Even making every favourable assumption to the first defendant that might be made - by which I mean, for example, that the first defendant, in ignorance of the law, did not know that the limitation clause breached Federal law - what is clear is that when this matter was raised it resulted, at best, only in an offer of $600,000. If the offer had been closer to $1.3m the first defendant might have been able to complain that if that matter had been raised sooner, they could have made a realistic offer much sooner in order to protect their position on costs. That the offer made was well below the ultimate verdict shows that no prejudice flowed in allowing that matter to be raised when it was. I see no reason to deprive the plaintiff of any of its costs on that basis.

[28] The same considerations apply to the late amendment to the Statement of Claim, the effect of which was to preclude the first defendant from relying on the plaintiff's contributory negligence. I have found that the plaintiff was guilty of contributory negligence and would have reduced her damages by 20 per cent: see the principal judgment at paras [104]-[110]. Such a reduction would not have reduced the ultimate judgment sum to a figure of or below $600,000. There is therefore no reason to disallow any of the plaintiff's costs on this basis.

[29] Mr Reeves QC complains that the plaintiff's main position at trial was that there was never a binding contract and that the plaintiff won on that issue by 'default'. It is true that the plaintiff's principal argument was that there was no contract and it is also the case that neither party argued that the contract had been frustrated. I do not see how these matters, although no doubt disappointing to the first defendant, bear on the question of costs. I was referred by Mr Reeves QC to Norwegian American Cruises A/S (formerly Norwegian American Lines A/S) v Paul Mundy Ltd (1988) 2 Lloyds Rep 343. In that case the defendant won on an issue which was raised by an amendment to the pleadings at a very late stage. The trial judge reduced the defendant's costs to an amount of one quarter of their taxed costs because, so he thought, the case had been 'transformed' by the late amendment. On appeal, the Court of Appeal held that this was an exaggeration, that the new defence was merely a different means of presenting the same case which had already been pleaded. In the result the court allowed the appeal and awarded the defendant 75 per cent of its costs. But the reason it did not get all of its costs was because it had failed on other issues: see O'Connor LJ at 356. I do not see how this case assists the first defendant. As was said by Taylor LJ at 355, this was not a case in which the court could conclude that the plaintiff would not have contested the case if the new defence had been pleaded from the outset. In my opinion, even if the plaintiff's amendments of 18 March 2005 had been in the pleadings as originally drawn, there is nothing to show that the first defendant would not have continued to contest the action; nor that it would have made an earlier and more realistic offer, such as might have resulted in either settlement or the plaintiff receiving an award less than what was offered.

Should the plaintiff be deprived of costs on issues which it lost?

[30] It was submitted that an important issue which the plaintiff failed to establish was that either defendant knew that she was at potential risk in climbing the mast because of her "personal factors". So far as the first defendant is concerned, my finding was that Mr Cole, the first mate, was told that the plaintiff was "not quite right" as a result of which he spoke to the plaintiff and formed the view that she was capable of coping with the program. There is nothing in the evidence to suggest that the opinion of Mr Cole was wrong, or that he ought to have attempted to obtain an expert opinion at that stage. I accept that the plaintiff failed to prove that the first defendant knew of, or ought to known of, the plaintiff's personal disabilities. Although the plaintiff did assert, as part of her case, that the first defendant ought to have taken special care or steps to ensure her safety because of her personal disabilities, this did not occupy sufficient of the Court's time to warrant the making of a separate costs order. In my view, apart from one witness, Dr Young, called by the second defendant (whose evidence was relevant to other issues in the case in any event) no witness was called to give evidence solely on that issue, although a number of witnesses were asked about that matter, particularly in cross-examination. The plaintiff's personal disabilities had to be explored in any event as these were very relevant to the assessment of her damages. I do not consider I would be justified in making any special order as to costs because of the fact that the plaintiff failed on this issue.

Should the plaintiff be deprived of any costs because the damages claim was inflated?

[31] Mr Reeves QC's submission was that the plaintiff initially claimed approximately $3.2m. This was reduced to approximately $2.4m at the time of final submissions and succeeded as to approximately $1.3m. He submitted that in the principal judgment I disallowed items claimed for equipment and building modifications except for a small amount for the purchase of a scooter: see the principal judgment, item 18.2. I also found that the claim for orthotics and OT aids was inflated: see the principal judgment, item 20.3. Furthermore, Mr Reeves QC points out that I found that the plaintiff's claim for Griffiths v Kerkemeyer damages was inflated and not supported by the evidence: see principal judgment para [266]. Consequently it was submitted that I should award no costs for these issues.

[32] I note also that I rejected the claim for case management fees and rejected the evidence of Ms Roberts in relation to the plaintiff's future needs: see principal judgment para [230].

[33] Mr Maurice QC submitted that a discount for an exaggerated claim, absent on offer of compromise, is unheard of, but, in any event, all of the evidence put by the plaintiff on damages would have been called whether the plaintiff's particulars of damage totalled $1.5m or whether they totalled $3.2m. Mr Maurice QC pointed to the diversity of opinion among the expert witnesses about the plaintiff's future needs and prognosis, as well as her past and future earning capacity and that there were difficult questions concerning contingencies. He submitted that the plaintiff should not be mulcted in costs merely because she particularised her damages claim on the best possible damages outcome her evidence was capable of supporting and that the course the plaintiff took did not add to the cost of the trial.

[34] The Supreme Court Rules provide for the making of offers of compromise, but the Rules make no provision for the making of an offer to settle quantum where liability is in dispute: see O 26. The Rules provide that costs are in the discretion of the Court: see O 63.03(1). The Court may, in the exercise of its general discretion as to costs, make an order as to costs in relation to a particular question in, or a particular part of, a proceeding: see O 63.05. There is no specific rule dealing with an inflated damages claim. In my opinion, the court in the exercise of its general discretion as to costs could disallow the costs of item unsuccessfully claimed for, or could reduce the plaintiff's overall claim for costs if the claims were inflated and if the trial was prolonged because of that fact.

[35] In my opinion, the plaintiff should not recover any costs for the items I have disallowed and the trial was prolonged to some extent by the exaggerated nature of the Griffiths v Kerkemeyer claim. In all I consider that the trial was probably prolonged by about three days to deal with these items. Rather than disallow specific items which will make taxation of the costs difficult and contentious, I think justice will be done if I reduce the plaintiff's overall claim for costs by 7.5 per cent.

The second defendant's claims for indemnity costs

[36] On 18 May 2001, the solicitors for the Commonwealth wrote to the solicitors for the plaintiff, the essential terms of which was that they believed that the claim against the Commonwealth must fail and the Commonwealth offered to accept withdrawal of the proceedings against it on the basis that each party bear its own costs. The offer was subject to the first defendant agreeing to withdraw all contribution proceedings against the Commonwealth on the same basis. A similar letter was written to the first defendant's solicitors. The letters are in the form of a "walk away" Caldebank offer.

[37] As neither the plaintiff nor the first defendant indicated an interest in the offer the second defendant now seeks an order for indemnity costs as from the time of the expiry of the offer, i.e. as from 29 June 2001 when the offers, which were extended, expired.

[38] I accept that a Caldebank offer can be made by a defendant on a "walk away" basis. That is not necessarily inviting capitulation, because the offer, if accepted, would mean that the offeror would be giving up costs, which, if the offeree discontinued, would otherwise be payable: see the discussion by Santow JA in Leichhardt Municipal Council v Green [2004] NSWCA 341, BC200406280, unreported. Whether or not indemnity costs should be awarded when the defendant's offer is not accepted depends upon a number of factors, the principal question being whether it was unreasonable to refuse the offer at the time it was made. In determining this question it is relevant to consider the conduct of the plaintiff and whether or not the plaintiff peremptorily dismissed the offer, or whether the plaintiff sought counsel's advice. In this case the plaintiff sought the opinion of senior counsel whose advice was to reject the offer.

[39] What is put on behalf of the second defendant is that the Caldebank offer set out in some detail why the claim against the Commonwealth would fail and in particular it submitted: (1) that the claim in contract could not succeed; and (2) the case in negligence would fail. One of the arguments suggested that the case would succeed against the first defendant essentially for the reasons which I found at trial. Further it was submitted the letter suggested there was no evidence that the fall was caused or contributed to by any mental illness or limitation of physical capacity. It was put that the advice of the plaintiff's counsel conceded that the contract claim would fail but did not address the issue of causation. I do not accept this argument. The causation issue on which the plaintiff failed was not clearly raised in the Caldebank letter; but in any event, I do not consider that it is proper to dissect the opinion of senior counsel to see if all the issues which should have been addressed were properly addressed. The opinion given was not such, in any event, as to be glaringly wrong. I consider that it was not unreasonable for the plaintiff to act on that advice. Given all the circumstances, the nature of the offer and the advice given I do not consider it can be said that it was unreasonable for the plaintiff to have refused the offer. As the second defendant's offer to the first defendant was contingent on the plaintiff's acceptance of the second defendant's offer, it would not be proper to award indemnity costs against the second defendant either.

Conclusions as to costs

[40] In my opinion, the plaintiff is entitled to an order for costs against the first defendant as to 92.5 per cent of its costs to be taxed or agreed and the costs of joining the second defendant and the first defendant should be ordered to pay the second defendant's costs to be taxed or agreed, in each case on the standard basis. (By "costs" I mean to include disbursements as well.)

Fund management

[41] On 7 November 2002 an order was made by the Master appointing Geraldine Renehan as the plaintiff's litigation guardian. Such an order can only be made if the plaintiff is a "person under disability" within the meaning of O 15.01 of the Supreme Court Rules. Pursuant to O 15.08(1) no compromise of the plaintiff's claim is valid without the approval of the Court. Form 15B, which is the appropriate form to be used where an order is made approving a compromise, envisages that the monies to be paid by the defendant under the terms of an approval by the Court will be paid in part to the solicitors for the plaintiff with the balance to be paid to the Public Trustee for the benefit of the plaintiff. The Rules are silent as to the form of the order to be adopted by the Court where the plaintiff's claim proceeds to judgment following a hearing, as in this case.

[42] The plaintiff seeks a protection order to ensure that the fund is administered by the Public Trustee of Western Australia. The reason for appointing the Public Trustee of Western Australia is because that is where the plaintiff and her parents live - it is a question of easy access to the fund manager. The first defendant denies this Court's jurisdiction to make the order sought and says that, in any event, there is no factual foundation for the making of such an order.

[43] Unlike other jurisdictions, there are no statutory provisions requiring judgment monies payable to a person under disability suing by a litigation guardian to be paid into court. Order 79.05(1) of the Rules provides:

"Where an order is made that money in court or to be paid into Court be held for the benefit of a person under a disability and that order does not direct by whom the money is to be held, the Master shall pay the money to the Public Trustee who shall hold it on trust for the benefit of the person under a disability."

[44] This rule envisages that the Court not only may order that monies to be paid to a person under disability must be paid into Court, but also envisages that the Court may order the money to be held by a person other than the Public Trustee.

[45] There is nothing in O 79.05(1) to indicate that the beneficiary to the trust envisaged by that rule cannot demand that the trust fund become vested in the beneficiary.

[46] Section 11 of the Aged and Infirm Persons' Property Act enables this Court to make a protection order in respect of the estate or part of the estate of a person. Section 7(3) enables the Court to make such an order of its own motion in any proceedings in respect of the estate of any party to the proceedings. The Court has wide powers to make such an order where the Court is satisfied that it is necessary in the interests of the person concerned that his estate be protected. The Court, before making such an order, is required to take into account whether the person concerned is unable, wholly or partly, to manage his or her affairs or is subject to or liable to be subject to undue influence in respect of his or her estate or the disposition thereof: s 12(2). The Court may appoint the Public Trustee or anyone else whatsoever to be the manager of the estate (s 13) and the order may be made subject to such terms and conditions as the Court thinks fit (s 16(1)).

[47] Initially counsel for the plaintiff, acting on instructions, asked for a protection order under s 11 and for an order appointing Public Trustee of Western Australia to be trustee of the fund. However, I was subsequently advised that Public Trustee of Western Australia would not consent to such an order being made, but was prepared to accept an appointment as trustee of the plaintiff's award on terms inter alia, that the monies be paid to the Trustee be held on trust for investment on behalf of the plaintiff until further order of the Supreme Court of Western Australia and that the trust be administered in accordance with the laws of Western Australia. A letter from the Department of the Attorney-General, signed by a principal legal officer purportedly on behalf of Public Trustee of Western Australia was tendered as evidence of that consent. It was submitted that the Court had power to make such an order under its parens patriae jurisdiction.

[48] Mr Reeves QC for the first defendant submitted that there was no factual basis for a protection order. In my opinion there does not need to be any factual basis other than the Master's order. But, in any event, there is ample material before me to show that the plaintiff is a person incapable, by reason of mental infirmity, of managing her own affairs in relation to this proceeding and is incapable of investing the judgment sum as a result. I have already found that this is so: principal judgment, para [270]. The evidence in support of that finding is that the plaintiff's verbal comprehension and reading age is that of a child at about grade 4 level which is consistent with her overall intellectual capacity: see the report of the psychologist, Jo-Ann Delahunty, Ext P20, pp 3 and 4; statement of the neuropsychologist, Mark Reid, Ext p19, para 42. Her ability at arithmetic was below her average level of functioning. Mrs Renehan's evidence demonstrated that she needed considerable assistance to operate an ATM machine or a computer. I reject this submission.

[49] Mr Reeves QC submitted that this Court does not have the power to establish a trust in relation to the plaintiff's award and appoint the WA Public Trustee as the trustee thereof. It was not suggested that if such power existed it would be wrong to make the orders sought, bearing in mind where the plaintiff now resides. In my opinion, this Court does have the power arising from its parens patriae jurisdiction to order that the award be held in trust: see Cadwallender v The Public Trustee [2003] WASC 72, BC200301779, unreported, at 27-31 and the cases therein referred to: Willett v Futcher [2005] HCA 47; (2005) 221 ALR 16 at 23-24, para [28]. Clearly, O 79.05(1) contemplates such a power. That rule was ratified by the Supreme Court (Rules of Procedure) Act 1987, s 6.

[50] I do not see any reason why the Court cannot establish a trust and appoint a trustee outside of the jurisdiction but within Australia to act as trustee. I was referred to Spencer v Williams [1984] VicRp 9; [1984] VR 120 at 126-127 where Murphy J indicated that the Master could transfer monies held by the Court in trust for a person under disability to another trustee in the Channel Islands. But, in this case, if need be, this Court has the powers of the Supreme Court of Western Australia under the cross-vesting legislation: c.f. Scott v Northern Territory of Australia and Ors [2005] NTCA 4; (2005) 15 NTLR 158. There is no doubt that the Supreme Court of Western Australia could make an order in relation to a fund to be paid by a defendant to a plaintiff under disability residing in Western Australia. Clearly such an order, whether made by this Court under its parens patriae jurisdiction or under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (WA) and the Jurisdiction of Courts (Cross-Vesting) Act (NT) would bind the Public Trustee of Western Australia: see Public Trustee Act 1941 (WA), s 7(1). The powers and duties of the Public Trustee are governed by Western Australian law, especially the Public Trustee Act 1941 (WA) and the Trustees Act 1962 (WA).

[51] As to quantum, the question is what amount should be assessed for remuneration and expenditures properly charged or incurred by the administration of the fund during the intended life of the fund: see Willett v Futcher (supra) at 29, para [49]. The starting point is to estimate the size of the fund to be administered. The plaintiff's counsel have estimated this sum at $1m to allow for amounts which must be repaid to the Commonwealth, for medical expenses remaining unpaid and for the difference between party/party and solicitor/own client costs. Mr Reeves QC submitted that a more appropriate figure might be $800,000 depending on the extent to which the plaintiff was successful in obtaining an award of costs. Although I have not ordered that the plaintiff recover all of her costs on a party/party basis, I think $1m is a reasonable starting point. Some deduction for the contingency that the fund may be a little less than $1m is appropriate.

[52] The figures placed before me indicate that, allowing for the fees properly to be charged by Public Trustee and making the calculation according to the method discussed in Willett v Futcher, a sum of $161,962 is arrived at. The first defendant submits that only those items of the award that relate to the future aspects of the award should be included in the calculation. That submission cannot be accepted. It is the entire fund which is the subject of the calculation: see Willett v Futcher (supra) esp at 29, paras [49]-[50]. Next it was submitted that the calculation should be made to the time when the plaintiff is aged 60. I reject that contention. The calculation must be made for the life of the fund, which, unless by some miracle the plaintiff's mental capacity improves such that the order for administration is discharged, will last until her death. Thus the calculation must be based upon a life expectancy of about another 35 years: see the principal judgment at para [159].

[53] Next it was submitted that a discount rate of three per cent should be adopted. I accept that this is the appropriate rate. I note that that discount rate was used by the Public Trustee in its calculation: see Ext P91.

[54] It was submitted that the claim for taxation returns should be excluded because a return would always have been required. It is my understanding that the trustee would need to prepare a separate trust return in relation to the fund in addition to any return required by the plaintiff as beneficiary of the fund. Some deduction on this account should be made. Allowance must also be made for contingencies including capital withdrawals for special needs during the lifetime of the fund. Some of these have been identified in the principal judgment, e.g. motor vehicle expenses, on-going medical expenses, future surgical procedures. The plaintiff may need to purchase a house to live in after her parents' death. There may be other needs, such as holidays. Other factors which can impact on the total fees payable by the trust over its lifetime are the annual investment performance of the fund, the plaintiff's longevity (i.e. early death) and changes to taxation rates. Not all of these contingencies are necessarily unfavourable but overall I consider that there should be a reduction in the order of 20 per cent. Bearing in mind the rough and ready nature of the initial figure of $161,962, I consider that an appropriate award is an amount of $130,000.

Orders

[55] Accordingly I make the following orders:

There be a judgment for the plaintiff against the first defendant in the sum of $1,433,686.73.

The plaintiff's claim against the second defendant is dismissed.

There be judgment for the second defendant on the first defendant's counter-claim for contribution against the second defendant.

The second defendant's claim for contribution be dismissed.

The first defendant is to pay 92.5 per cent of the plaintiff's costs and disbursements, certified as fit for two counsel, and the costs of joining the second defendant, to be taxed or agreed or otherwise as determined by the Court.

The first defendant is to pay the second defendant's costs certified as fit for two counsel to be taxed or agreed or otherwise as determined by the Court.

The first defendant is to pay the amount in paragraph 1 of this order and interest thereon pursuant to O 59.02(3) to Cridlands Lawyers, solicitors for the plaintiff, to be held in trust for the benefit of the plaintiff.

Cridlands Lawyers must pay the amount ordered to be paid by paragraph 1 of this order, less any statutory payments and past unpaid special damages and, subject to the solicitor's lien, to Public Trustee of Western Australia, such sum to be held on trust for investment on behalf of the plaintiff.

The money so held by Public Trustee of Western Australia shall be held and applied in such manner as he thinks fit for the maintenance, education, welfare, advancement and benefit of the plaintiff.

The Public Trustee of Western Australia may apply from time to time the whole or any part of the income or capital of the trust for the maintenance, education, welfare, advancement and benefit of the plaintiff.

The trust is to be administered in accordance with the laws of Western Australia.

Investment by the Public Trustee of Western Australia pursuant to paragraph 8 of these orders is not restricted to the common fund(s).

Further consideration of the second defendant's claim to be indemnified by the first defendant for costs to be paid on a solicitor and own client basis is adjourned sine die.

Liberty to apply.