Smith v NRMA Insurance Limited

Persons under legal incapacity

1. A person under legal incapacity may not commence or carry on proceedings except by his or her tutor: Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 7.14(1). The expression "person under legal incapacity" is defined in s 3 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act) as any person who is under a legal incapacity in relation to the conduct of legal proceedings and includes, relevantly, in sub-par (a) "a child under the age of 18 years".
2. UCPR r 7.13 provides that, in Div 4 of Pt 7, the expression "person under legal incapacity" includes a person who is incapable of managing his or her affairs. It is not in dispute that the appellant is a person under legal incapacity as referred to in that Division. In addition to the appellant being a child under the age of 18 years, counsel for the insurer accepted that the appellant, by reason of his severe traumatic brain injury, suffers from cognitive difficulties and even if he was not under incapacity as a minor, is incapable of managing his affairs.
3. UCPR r 7.15(5) provides that "[a] person may not replace another person as tutor of a person under legal incapacity except by order of the court".
4. UCPR r 7.16 provides that a tutor may not commence or carry on proceedings on behalf of a person under legal incapacity unless there has been filed the tutor's consent to act as tutor and a certificate, signed by the tutor's solicitor in the proceedings, to the effect that the tutor does not have any interest in the proceedings adverse to the interests of the person under legal incapacity.
5. Although there is no suggestion that Ms Daley has any interest in the proceedings adverse to the interests of the appellant, the evidence on the present application did not include the written consent of Ms Daley in the approved form, being UCPR Form 30. Any order appointing Ms Daley as tutor should not take effect until a written consent in the approved form has been filed.
6. UCPR r 7.18 relevantly provides: (1) In any proceedings in which a party is or becomes a person under legal incapacity: ... (b) if the person has a tutor, the court may remove the party's tutor and appoint another tutor. … (3) If the court removes a party's tutor, it may also stay the proceedings pending the appointment of a new tutor. (4) Subject to any order of the court, notice of any motion under this rule is to be served on the person under legal incapacity and, if it proposes removal of the person's tutor, on the tutor. (5) In proceedings on a motion for the appointment of a tutor, evidence in support of the motion must include: (a) evidence that the party for whom a tutor is to be appointed is a person under legal incapacity, and (b) evidence that the proposed tutor consents to being appointed and does not have any interest in the proceedings adverse to the interests of the person under legal incapacity. (6) An application for appointment as tutor under this rule may be made by the court of its own motion or on the motion of any other person, including the proposed tutor.
7. The appointment of Ms Daley as tutor of the appellant is sought pursuant to UCPR 7.18(1)(b). Alternatively, reliance is placed upon the court's inherent power to appoint a tutor for the purposes of particular litigation under its parens patriae jurisdiction: Bobolas v Waverley Council [2012] NSWCA 126 at [60]; Re P [2006] NSWSC 1082 at [8] (Young CJ in Eq). There is no limitation on this jurisdiction: Secretary of Department of Health and Community Services v JWB and SMB (1990) 175 CLR 218 (Marion's Case), 258. As the High Court explained, the court's jurisdiction springs from the direct responsibility of the Crown for those who cannot look after themselves; it includes infants as well as those of unsound mind: Marion's Case, 259 (Mason CJ, Dawson, Toohey and Gaudron JJ).

Submissions

1. Mr Gross QC submitted that it is in the interests of justice that Ms Daley be appointed as tutor on terms protecting her from personal liability for costs because, without the appointment of a (replacement) tutor, the interests of the appellant in prosecuting the appeal would be stifled by the stay presently in place.
2. Mr Gross QC emphasised that the responsibility of a tutor, formerly known as a "duly appointed next friend", is "not merely one for costs but is a responsibility to guard their interests": Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 (Dey v Victorian Railways), 85 (Rich J). He submitted that the interests of the appellant, in having a replacement tutor appointed with the benefit of a protective costs order, outweighed the insurer's interest in having a person against whom a costs order could be made if the appeal is unsuccessful.
3. The insurer submitted that a primary feature of the appointment of a tutor is to have a person on the record that is personally liable for costs. Counsel for the insurer acknowledged, however, that the authorities also clearly indicate that this is not the sole function for the appointment of a tutor: Dey v Victorian Railways; Yakmor v Hamdoush (No 2) [2009] NSWCA 284 (Yakmor); Azar v Kathirgamalingan [2012] NSWCA 429 (Azar).
4. The insurer accepted that the Court has inherent power under its parens patriae jurisdiction, if not under the UCPR, to make a protective costs order for the tutor but contended that it is inappropriate to make such an order here in advance of the outcome of the appeal. The insurer submitted that, having obtained a verdict below, it should not be required, effectively, to fund an appeal against its own interests, assuming the appeal is unsuccessful.

(a) Power to make a protective costs order

1. 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.
2. 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. 28 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. 29 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.
3. 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].
4. 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.
5. 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].
6. 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.
7. 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".
8. 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?

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
15. 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.
16. 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.

(c) Power of a single Judge of Appeal to make a protective costs order

1. It became apparent on the hearing of the motion that neither the amicus nor the insurer had given consideration to the question of whether a single Judge of Appeal had power under the Supreme Court Act, s 46, to make a protective costs order as a term of any order appointing Ms Daley as tutor. The Court has now received written submissions on that topic. The amicus and the insurer took opposing positions.
2. The powers of a single Judge of Appeal are set out in s 46 of the Supreme Court Act as follows: (1) A Judge of Appeal may exercise the powers of the Court of Appeal: (a) to give any judgment by consent or make any order by consent, (b) to dismiss an appeal or other proceedings for want of prosecution or for other cause specified in the rules, (c) to dismiss an appeal or other proceedings on the application of the appellant or plaintiff, or (d) to deal with costs and other matters incidental to the matters mentioned in paragraphs (a), (b) and (c). (2) A Judge of Appeal may exercise the powers of the Court of Appeal: (a) to make an order or give any direction concerning the institution of an appeal or other proceedings in the Court of Appeal, or (b) to make any order or give any direction in any appeal or other proceedings, but not an order or direction involving the determination or decision of the appeal or other proceedings.
3. The following observations can be made. First, the express power given to a single Judge of Appeal to deal with costs in respect of matters identified in s 46(1)(a) - (c), is not engaged in the present case. The Court is not dealing with an order appointing a tutor by consent. Nor are the powers given in s 46(1)(b) and (c) engaged.
4. Secondly, the better view seems to be that the power given to a single Judge of Appeal in s 46(2)(a) to make an order or give any direction concerning "the institution of an appeal" is not engaged. Here, the appeal was properly instituted by a tutor of the appellant, who has since been removed by court order.
5. Thirdly, the debate in the present case was directed to the power expressly given to a single Judge of Appeal in s 46(2)(b) to make any order or give any direction in any appeal, but not an order or direction "involving the determination or the decision of the appeal".
6. Mr Gross QC submitted that a protective costs order does not determine the underlying merits of the appeal. It was submitted by drawing analogies to authorities that the procedural steps as to the institution of the appeal do not involve a determination of the appeal: Macatangay v State of New South Wales (No 2) [2009] NSWCA 272 at [15], and that the procedural steps required to enable the appeal to continue to hearing do not involve the determination of the appeal.
7. It was further submitted that what is being sought here is not an order in advance of the outcome of the appeal that one party should pay the other party's costs, but rather that, as a term of the new tutor being appointed, the tutor is excused in advance from exposure to the risk of a personal costs order should the substantive appeal fail.
8. The insurer submitted that orders achieving the outcome for which the amicus contends cannot be made by a single Judge of Appeal because the practical effect of that relief is "arguably to determine, prior to the hearing of the appeal, the costs of the appeal".
9. The insurer further submitted that a costs order that immunises a party from costs should be properly categorised as a matter incidental to a judgment given after a disputed hearing because it determines at the conclusion of the appeal there will be a pre-determined costs order. Reference was made to Cai v Zheng (No 2) [2009] NSWCA 317 (Cai v Zheng (No 2)).
10. Counsel for the amicus submitted that Cai v Zheng (No 2) has no application to the present case.
11. Cai v Zheng (No 2) concerned the power expressly given to a single Judge of Appeal to deal with costs only by reference to specified judgments identified in s 46(1)(a) - (c) and to deal with "other matters incidental to" those matters. It was held (at [19]) that the express power speaks against there being any general power in any a single Judge of Appeal to deal with issues of costs, or indeed "other matters incidental to" judgments given after a disputed hearing.
12. Counsel for the amicus correctly submitted that s 46(1)(d) is directed to the circumstance of costs orders incidental to "judgments given after a disputed hearing" and is not authority for the proposition that a single Judge of Appeal has no power to make ancillary costs orders incidental to procedural directions relating to progressing proceedings prior to the hearing. It is not in doubt that a single Judge of Appeal has incidental power to make costs orders when dealing with interlocutory applications relating to the appeal, such as security for costs, or a stay of enforcement of the judgment below.
13. The insurer accepted that a single Judge of Appeal can exercise the Court's powers under UCPR r 7.18 to appoint a tutor to the appellant. That the Court may also make an order protecting the tutor from any personal liability for costs does not, in my view, involve the determination or decision of the appeal.
14. In the circumstances, and although the parties were content, if it were deemed necessary, for the application to be referred to a bench of three Judges of the Court and decided on the papers without the need for any further oral hearing, that step is, in my view, unnecessary. A bench of three Judges should not be convened to deal with an interlocutory application which can be dealt with by a single Judge of Appeal merely because one party contends that it is "arguable" that a single Judge of Appeal lacks power to make the order sought.

Conclusion and orders

1. For the reasons given above, in the unusual circumstances of the present case the appointment of Ms Daley as tutor should be on terms including a protective costs order. That appointment should take effect when the written consent in the approved form is filed: UCPR r 7.16. As no order for costs was sought in the motion filed by the amicus and no submissions were made concerning costs, I make no order as to costs of the motion.
2. The orders of the Court are as follows: 1. That Ms Geraldine Daley be appointed to act as tutor of the appellant in these proceedings, such order to take effect upon the filing of a Consent to act as tutor in the approved form (UCPR Form 30). 2. The respondent is precluded from seeking any recourse to Ms Geraldine Daley for the payment of any costs order made in its favour in these proceedings and Ms Daley is not personally liable in respect of any such costs order.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 12 September 2016