FEDERAL COURT OF AUSTRALIA

Challenger Life Company Limited v Estate of the Late Robert John Real (No 2) [2017] FCA 1059

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application dated 19 December 2016 be dismissed.

2.    The second respondent pay the costs of the interlocutory application, including the costs of Pamela Grover.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GLEESON J:

1    This is an application by Donna Marea Costigan to vary a costs order made on 5 December 2014 pursuant to the slip rule in r 39.05 of the Federal Court Rules 2011 (“Rules”). Rule 39.05 provides, relevantly:

The Court may vary or set aside a judgment or order after it has been entered if:

…

(e)    it does not reflect the intention of the Court; or

…

(g)    there is a clerical mistake in a judgment or order; or

(h)    there is an error arising in a judgment or order from an accidental slip or omission.

Background

2    On 5 December 2014, Jacobson J gave judgment in Challenger Life Company Ltd v Estate of Real [2014] FCA 1325. At the time of delivering his judgment, his Honour made the following orders:

1.    Pursuant to s 215 of the Life Insurance Act 1995 (Cth):

(1)    Upon the payment into Court by the Plaintiff (Challenger) of the whole of the monies payable by it under Guaranteed Annuity Policy Number 500737931, Challenger is discharged from any further liability in relation to those monies.

(2)    The monies paid into Court in accordance with Order 1 are to be dealt with as follows:

(a)    50% of the monies are to be payable to, or to the order of, the Second Defendant (Ms Donna Costigan);

(b)    the remaining 50% of the monies are to be payable to the First Defendant (the Estate of the late Robert John Real).

2.    Challenger’s costs of this application are, on a trustee basis, payable out of the proceeds of the Policy.

3.    The Third Defendants (the great grandchildren) bear Ms Costigan’s costs of the application.

4.    The Estate’s costs should be payable out of the funds comprising the Estate.

3    Order 3 of these orders is the order which Ms Costigan seeks to have varied. In these reasons, it is referred to as “the costs order”. Ms Costigan seeks an order pursuant to r 39.05 of the Rules varying the costs order to read as follows:

3.    Pamela Grover as the litigation representative and tutor of the third defendants (the great grandchildren) pay [Ms Costigan]’s costs of the proceedings.

4    Pamela Grover is the grandmother of the great-grandchildren referred to in the costs order, and the mother of Shaun Grover, who is the grandson of the late Robert John Real. Pamela Grover opposed the proposed variation to the costs order.

5    The NSW Trustee & Guardian, as executor of the estate of Mr Real, supported the proposed variation. On behalf of the NSW Trustee & Guardian, Mr Skinner submitted that its participation in the application was warranted by reason of the submission, said to have been made on behalf of Ms Grover, that the residuary beneficiaries should bear the burden of the costs order.

6    Jacobson J explained, at [2] and [3] of his Honour’s reasons, that the Court’s jurisdiction had been enlivened by “competing arguable claims” to the proceeds of an insurance policy. Under s 215 of the Life Insurance Act 1995 (Cth), a company that is carrying on life insurance business in Australia may pay into the Court any money payable by the company in respect of a policy for which, in the company’s opinion, no sufficient discharge can otherwise be obtained. Payment of the money into the Court discharges the company from any liability under the policy in relation to the money and money paid into the Court under s 215 is to be dealt with according to the order of the Court.

The “slip” rule

7    In Flint v Richard Busuttil & Co Pty Ltd [2013] FCAFC 131; (2013) 216 FCR 375, a Full Court of the Federal Court said, at [26]-[27]:

[26]    The purpose of the slip rule is to avoid injustice to litigants (Gould v Vaggelas (1985) 157 CLR 215 at 274-5) by ensuring that the court’s judgment or order reflects its intention at the time the order was made or the judgment was published, or reflects the intention that the court would have had but for the failure that caused the accidental slip or omission: Symes v Commonwealth (1987) 89 FLR 356 at 357. It may be exercised to prevent unintended consequences of the order and in this way give effect to the court’s intentions: Newmont Yandal Operations Pty Ltd v The J Aron Corporation and the Goldman Sachs Group Inc [2007] NSWCA 195; (2007) 70 NSWLR 411 (“Newmont Yandal”) at [116], [185], [194]. It is not confined to errors or omissions of the court; it extends to errors or omissions resulting from the inadvertence of a party’s legal representative: L Shaddock & Associates Pty Ltd v Parramatta City Council [No 2] [1982] HCA 59; (1982) 151 CLR 590 (“Shaddock”) at 594-5.

[27]    In Streimer v Tamas [1981] FCA 123; (1981) 37 ALR 211 Shepherd J suggested that the slip rule could be used to retrospectively extend the life of a bankruptcy notice. Later, in DDB Needham Sydney Pty Ltd v Elyard Corporation Pty Ltd (1995) 131 ALR 213 his Honour applied the rule to extend the time in which a winding up application could be determined. The Full Court dismissed an appeal from that decision in Elyard Corporation Pty Ltd v DDB Needham Sydney Pty Ltd (1995) 61 FCR 385 (“Elyard”). On the appeal the Court accepted that the slip rule may be invoked “where the proposed amendment is one upon which no real difference of opinion can exist” but noted that it does not apply if the amendment is a matter of controversy and does not extend to mistakes resulting from a deliberate decision (at 390-1 per Lockhart J, Black CJ agreeing).

8    In Burrell v The Queen [2008] HCA 34; (2008) 238 CLR 218, Gummow ACJ, Hayne, Heydon, Crennan and Kiefel JJ said (at [21]):

The power to correct an error arising from accidental slip or omission, whether under a specific rule of court or otherwise, directs attention to what the court whose record is to be corrected did or intended to do. It does not permit reconsideration, let alone alteration, of the substance of the result that was reached and recorded.

9    In Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446 at 449, McHugh JA said:

[A]lthough the principle of the slip rule is clear enough in conception, its application in practice has often proved difficult. The dividing line between a mistake or error which is the result of an accidental slip or omission and a mistake or error which is the product of a deliberate decision has often been difficult to draw. The difficulty became much greater when it was decided that an error might be the result of an accidental slip or omission even though, because of the inadvertence of the party’s legal representative, the point was not raised at the hearing of the action: cf L Shaddock & Associates Pty Ltd v Parramatta G City Council [No 2] (1982) 151 CLR 590 at 594-595.

10    At 453, McHugh JA continued:

The rationale of the slip rule also requires that an omission or mistake should not be treated as accidental if the proposed amendment requires the exercise of an independent discretion or is a matter upon which a real difference of opinion might exist … In general the test of whether a mistake or omission is accidental is that applied by Lord Herschell in Hatton v Harris (at 558) if the matter had been drawn to the court’s attention would the correction at once have been made?

11    Accordingly, it is necessary to decide whether the costs order reflects Jacobson J’s intention at the time the order was made.

12    Counsel for Ms Costigan, Mr Bolster, argued:

(1)    Jacobson J intended that Ms Grover, the person with the responsibility for conducting the litigation on behalf of the great-grandchildren, bear the costs of the unsuccessful argument made on their behalf;

(2)    there is “no prospect” that Jacobson J intended that the great-grandchildren bear the costs personally; and

(3)    the costs order is in need of correction since, as it stands, it is incapable of being enforced.

13    Similarly, Mr Skinner argued that the intention of Jacobson J was clear, namely that Ms Grover would be personally liable for the costs of the litigation before his Honour. Mr Skinner argued that, to refuse to make the order sought, would result in a continuation of a confusing situation and difficulty in administering the estate.

14    The submissions about Jacobson J’s intention were based on the premise that his Honour must have assumed that the costs order would be immediately enforceable against Ms Grover. Thus, the submissions posed the question that, if it had been drawn to the Court’s attention that the costs order would not be enforceable against Ms Grover, would his Honour have corrected the order to provide that Ms Grover pay Ms Costigan’s costs?

Relevant facts

Parties to the proceeding

15    The applicant (“Challenger”), referred to as the plaintiff in the 5 December 2014 orders, issued Guaranteed Annuity Policy Number 500737931 to Robert John Real.

16    Mr Real died on 9 July 2012. Mr Real’s deceased estate is the first respondent in this proceeding (referred to as the first defendant in the 5 December 2014 orders). Mr Real’s last will, dated 21 February 2012, was admitted to probate in favour of NSW Trustee & Guardian on 21 September 2012. According to Mr Skinner, counsel for the NSW Trustee & Guardian, the first respondent was incorrectly named and should have been named “NSW Trustee & Guardian as executor of the estate of the late Robert John Real”.

17    Ms Costigan, the second respondent (referred to as the second defendant in the 5 December 2014 orders), was nominated as a beneficiary for 50% of the proceeds of the policy. The nomination form left blank the identification of any other beneficiary.

18    The third respondents (referred to as the third defendants in the 5 December 2014 orders) (“great-grandchildren”) are five great-grandchildren and a step-great-grandchild of Mr Real. All of them are persons under the age of 18 years.

19    Under Mr Real’s last will, after certain gifts, 50% of the residue of his estate passed to Ms Costigan and the other 50% of the residue passed to:

(1)    five of the six “third respondents”: Jessica Grover, Hayley Grover, Jackson Grover, Robert Grover and Reyna Phillips (sometimes described as Raina Phillips), who were each named in the will; as well as

(2)    children of Shaun Grover, Mr Real’s grandson, born or adopted after Mr Real made his will.

20    The sixth of the “third respondents”, Hamish Grover, is a child of Shaun Grover who was born after Mr Real’s will was made and after his death. It was submitted by Mr Skinner that Hamish is one of two children of Shaun Grover born after Mr Real’s death (the other not being a defendant in this proceeding). Mr Skinner submitted that these two children are not beneficiaries of Mr Real’s will because they were each born after Mr Real’s death, at which point the class of beneficiaries closed.

21    On Mr Skinner’s submissions and the facts set out above, there are five minors who will share 50% of the residue of Mr Real’s estate, and six minors who are the subject of the costs order.

Resolution of competing claims to insurance policy proceeds

22    Jacobson J identified the competing claims at [5]-[7] of his judgment as follows:

[5]    Ms Costigan contends that the effect of the nomination form was to nominate her as a beneficiary in respect of 50% of the proceeds, with the balance payable to Mr Real’s Estate.

[6]    However, Mr Real’s great grandchildren, who are residuary beneficiaries under his will, contend that the nomination form was invalid. They contend that the effect of the contract under which the Policy was issued was that it is not possible for Mr Real to nominate a beneficiary for less than 100% of the value of the Policy.

[7]    The dispute between Ms Costigan and the great grandchildren puts Challenger in the position that it cannot obtain a sufficient discharge of its liability under the Policy otherwise than by invoking the jurisdiction of the Court under s 215 of the Act.

23    Contrary to Mr Skinner’s written submissions, Jacobson J did not identify the relevant contradictors as Ms Costigan and the tutor for the great-grandchildren. His Honour identified the contradictors as Ms Costigan and the great-grandchildren.

24    Jacobson J accepted Ms Costigan’s contention set out at [5] of his judgment.

25    Mr Skinner’s written submissions stated that the construction of the policy on behalf of the tutor was rejected by Jacobson J as “capricious”. In fact, at [38] of his Honour’s reasons, Jacobson J concluded that the construction “proposed on behalf of the great grandchildren would be capricious”. To the extent that it was suggested that Jacobson J made any adverse finding against Ms Grover or her conduct on behalf of the great-grandchildren, I reject that suggestion.

26    Concerning costs, his Honour said at [41]-[44]:

[41]    Challenger should have its costs of this application on a trustee basis payable out of the proceeds of the Policy.

[42]    The contradictors in the present case were Ms Costigan and the great grandchildren who were represented by their tutor.

[43]    The great grandchildren were unsuccessful in their contentions and in my opinion should bear Ms Costigan’s costs of the application.

[44]    The Estate of Mr Real filed a submitting appearance. The Estate’s costs should be payable out of the funds comprising the Estate.

Ms Costigan’s efforts to enforce costs order

27    On 29 September 2015, the Court issued a certificate of taxation in Ms Costigan’s favour in respect of her costs payable under the costs order in an amount of $21,356.80. Ms Costigan sought to enforce the costs order by issuing a bankruptcy notice against Ms Grover.

28    By letter dated 24 December 2015, the Australian Financial Security Authority (“AFSA”) informed Ms Costigan’s lawyer that the bankruptcy notice for Ms Grover could not be processed for the following reason:

Other – For the purpose of issuing a Bankruptcy Notice (BN), there is sufficient doubt about the personal liability of the tutor and the BN application, with the current debtor description, is being returned. This action is as per recent advice received by the Official Receiver. Please review Morgan v Morgan (1865) 12 LT 199 as this case has been cited in more recent Australian cases and does not appear to have been disputed.

29    On 21 January 2016, AFSA issued a bankruptcy notice directed to the great-grandchildren.

30    By letter dated 12 February 2016, the NSW Trustee & Guardian informed Ms Costigan’s lawyer that there is “no basis for the trust to be established for the great-grandchildren of Mr Real to be held responsible for the payment of your client’s costs”.

31    By letter dated 6 December 2016, Ms Costigan’s lawyers wrote to Brazel Moore Lawyers saying, relevantly, that Jacobson J “intended that your client Pamela pay the costs of our client”. The letter sought Ms Grover’s commitment to pay the costs.

Morgan v Morgan line of cases

32    It is convenient to consider AFSA’s reference to Morgan v Morgan (1865) 12 LT 199 at this point. The report is very short. The stated facts are that the suit was instituted by a widow to obtain dower against an infant, whose guardian ad litem filed an affidavit raising a defence to the claim. The defence failed. The widow sought an order that the guardian ad litem pay so much of the costs of the suit as had been occasioned by his unsuccessful defence. The Vice-Chancellor’s reasons are recorded as follows:

The Vice-Chancellor now said that he considered it was impossible to make the guardian ad litem pay the costs which were asked for. He did not mean to say that there could not be such a case of gross misconduct as to render a guardian ad litem compellable to pay the costs, but such was not the case here. According to the ordinary rule in dower suits, each party would bear his own costs.

33    In Murray v Kirkpatrick (1940) 57 WN (NSW) 162, two guardians ad litem applied for costs incurred by them to be allowed out of the estates of the infants whom they represented. At 163, Williams J stated:

The usual order where there are infants who have been made defendants without any action or fault on their part is that the plaintiff pay their costs, and, if successful, he is allowed to add them to his own…A guardian ad litem instructs a solicitor to act, and, through his solicitor, counsel to appear for the infant in the proceedings, and thereby makes himself liable to the solicitor for costs. He will not be ordered to pay the costs of an unsuccessful defence on behalf of an infant except in case of gross misconduct: Morgan v Morgan.

34    In Australian and New Zealand Banking Group Ltd v Dzienciol by his guardian ad litem Dzienciol [2001] WASC 305 (S), McLure J considered the similarities and differences between a next friend and a guardian ad litem, in the context of the Rules of the Supreme Court 1971 (WA), which made specific provision for the costs of a solicitor appointed by a court as a guardian ad litem or a solicitor who acts without a court order. At [15]-[17], her Honour said:

[15]    It seems there are at least two material differences between the position of a plaintiff/next friend and defendant/guardian ad litem combination. A plaintiff has a choice as to whether or not to bring or continue proceedings with that choice the responsibility of the next friend. Further, a factor in determining whether to take proceedings is usually (albeit not perhaps in this case) the financial capacity of the proposed defendants to pay any judgment and costs awarded against them. On the other hand, a defendant has no real control over his or her involvement in the proceedings.

[16]    Further, and most importantly, it is against a defendant's interest for a next friend to be appointed (thereby enabling suit) whereas it is very much in the interests of a plaintiff for a guardian ad litem to be appointed. Indeed, in the event a guardian ad litem does not (from the plaintiff’s perspective) volunteer to assume the office, a plaintiff may need to secure the services of an independent person who will no doubt seek protection in relation to costs.

[17]    In these circumstances, I see no reason why a guardian ad litem who is in substance and effect defending a claim should be made personally liable for costs orders in favour of a plaintiff unless the guardian has acted unreasonably, whether in the conduct of the defence or otherwise …

35    Earlier, at [8] of her Honour’s reasons, McLure J referred to Morgan v Morgan and Murray v Kirkpatrick as authority for the submission that a court in the exercise of its discretion should only award costs against a guardian ad litem in exceptional circumstances such as for gross misconduct of the defence (although her Honour said that the cases lacked fully reasoned analysis).

36    In Anthony v Vaclav (No 2) [2009] VSC 626, Vickery J stated at [7]-[8]:

[7]    If a proceeding brought by a plaintiff under a disability fails and the defendant is awarded the costs of the proceeding, the litigation guardian becomes personally liable for those costs. Nevertheless, the litigation guardian, provided he has acted properly, is entitled to be indemnified by the plaintiff for the costs.

[8]    Further, except in the case of gross misconduct, a litigation guardian will not be ordered to pay the costs incurred by the plaintiff, consequent upon the defence being unsuccessful: Morgan v Morgan 12 LT 199.

37    In Gissing & Sheffield [2016] FamCA 101, Cronin J said at [17]:

The traditional view seems to have been that if a proceeding in a civil jurisdiction is brought by a plaintiff under disability and it fails, and costs thereafter follow, the litigation guardian is personally liable for those costs but provided that person has acted properly, he or she is entitled to be indemnified for the costs (see Steeden v Walden [1910] 2 Ch 393). On the other hand, if a defendant in civil proceedings is under a disability, the litigation guardian will not be ordered to pay the costs of a plaintiff unless there is misconduct on the litigation guardian’s part (see Morgan v Morgan (1865) 12 LT 199 ).

38    These cases provide a substantial line of authority to the effect that a person who defends an action on behalf of a person under a legal incapacity will generally not be ordered to pay the plaintiff’s costs in the absence of misconduct.

Ms Grover’s role in the proceeding

39    A person under the age of 18 years is a “person under a legal incapacity”, as defined by the dictionary to the Rules. Division 9.6 of the Rules deals with persons under a legal incapacity. Relevantly, r 9.61 provides that a person under a legal incapacity may defend a proceeding only by the person’s “litigation representative”. Rule 9.66(1) provides that anything in a proceeding that is required or authorised by the Rules to be done for a person under a legal incapacity by the person may only be done by the person’s “litigation representative”. “Litigation representative” is defined in the dictionary to the Rules to mean a person who has been appointed for a proceeding as a litigation representative for a person under a legal incapacity.

40    Thus, under the Rules, the great-grandchildren were permitted to defend the proceeding only by their litigation representative(s).

41    Rule 9.63 of the Rules provides that a person or an interested person may apply to the Court for an order appointing a person as a litigation representative. No application was made for the appointment of a litigation representative for the great-grandchildren. Such an application, if made, was required to be accompanied by an affidavit stating, relevantly, that the proposed litigation representative has consented in writing to the appointment: r 9.63(3).

42    Rule 9.64 provides that a litigation representative must not take a step in the proceeding unless specified documents have been filed. As appears below, Pamela Grover defended the proceeding on behalf of the great-grandchildren although the requisite documents were not filed.

43    The originating application, filed on 10 September 2014, named the great-grandchildren as respondents to the proceeding “by their tutor Pamela Grover”. This description is consistent with the terms of a letter from Brazel Moore Lawyers dated 22 August 2014 to the NSW Trustee & Guardian in connection with proceedings in the Supreme Court of New South Wales involving Shaun Grover. In that letter, the lawyers said:

We confirm that we will accept service on behalf of the residuary minor beneficiaries of the Estate.

We advise that Ms Pamela Grover, the grandmother of the residuary minor beneficiaries, is prepared to act as their Tutor in the Federal Court proceedings.

44    Further, on 11 November 2014, Brazel Moore lawyers filed a notice of address for service which stated, relevantly:

Pamela Grover … the Tutor for the Third Respondents, gives notice that the Third Respondents’ address for service is …

45    The Rules do not provide for the appointment of a “tutor”. In contrast, the Uniform Civil Procedure Rules 2005 (NSW) provide, by r 7.14, that a person under legal incapacity may not commence or carry on proceedings except by his or her tutor. There is a body of case law about the status and function of tutors, their liability for costs and their entitlement to an indemnity.

46    The former Federal Court Rules 1979 referred to the appointment of a tutor. By Order 43 r 4(1), subject to the former rules, an order appointing a tutor was not necessary. There is no express provision to that effect in the current Rules.

47    Mr Bolster submitted that Ms Grover was the great-grandchildren’s litigation representative even though there was no order for her appointment as litigation representative. Mr Bolster noted that the judgment adopted the description of the great-grandchildren in the originating application as respondents “by their tutor Pamela Grover”. That description appears immediately above the orders, and immediately above the reasons for judgment.

48    Ms Grover plainly represented the great-grandchildren in the proceeding before Jacobson J and referred to herself as the great-grandchildren’s “tutor”. It is plain that the proceeding was defended by Ms Grover on behalf of the great-grandchildren. Thus, I reject the submission made on behalf of the NSW Trustee & Guardian that Ms Grover was a defendant to the proceeding.

49    In my view, the application should be considered on the assumption, favourable to Ms Costigan, that Ms Grover was the great-grandchildren’s litigation representative for the proceeding, Jacobson J having dispensed with the requirement for an order under r 9.63, as evidenced by the fact that his Honour conducted the proceeding on the basis of Ms Grover’s self-nomination (in the notice of address for service) as the tutor of the great-grandchildren.

Consideration

50    On behalf of Ms Costigan, Mr Bolster submitted that Ms Grover should be regarded as a claimant propounding a claim, while Ms Costigan was defending the nomination of Mr Real in the policy. However, Jacobson J’s judgment indicates that he saw the relevant roles differently, that is, that Ms Costigan and the great-grandchildren were competing claimants and Ms Grover was representing the great-grandchildren in propounding their competing claim.

51    I am not persuaded that Jacobson J’s intention was that Ms Grover pay the costs ordered to be paid by the great-grandchildren, for the following reasons:

(1)    His Honour clearly expressed his intention that the great-grandchildren should bear Ms Costigan’s costs. That entails, at least, the intention that the costs should ultimately be paid by the great-grandchildren. What is unclear is whether his Honour intended that Ms Grover should pay the costs on the basis that she would be entitled to recover them from the great-grandchildren.

(2)    His Honour expressly adverted to the existence of the great-grandchildren’s tutor in the course of his Honour’s reasoning on costs, immediately before ordering that the great-grandchildren should bear Ms Costigan’s costs. This reference tends to suggest an absence of any intention that the tutor should be liable to pay the costs.

(3)    A contrary intention, that is, that Ms Grover should not pay Ms Costigan’s costs, is not implausible in the light of the Morgan v Morgan line of cases. Those cases indicate that his Honour might reasonably have concluded that Ms Grover was providing assistance by enabling the competing claims to be resolved where the great-grandchildren were under a legal incapacity, in the absence of which Challenger may have needed to secure the services of an independent person who would have required protection in relation to costs. His Honour might reasonably have concluded that, in those circumstances, he should not make a costs order against Ms Grover.

(4)    There was no impediment to Jacobson J making the order which he made. As Giles JA noted in Yakmor v Hamdoush (No 2) [2009] NSWCA 284; (2009) 76 NSWLR 148 (“Yakmor”) at [29]:

It does not follow, however, from any legal inability of a person under incapacity to undertake obligations that the person should not be subject to obligations imposed by law, under the general law of the land or pursuant to a court order. In Woolf v Woolf (1899) 1 Ch 343 Kekewich J pertinently suggested that there was “something ... inconsistent, apart from strict law, in saying that the Court can pronounce a decree against an infant and cannot follow it up by ordering the infant to pay costs”, and an order was made against the infant.

(5)    By s 43 of the Federal Court of Australia Act 1976 (Cth) the Court has a very wide discretion to award costs. In DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251; (2004) 51 ACSR 555, Allsop J (as he then was) said at [14] that s 43 is a broad and ample power which is not to be read down otherwise than by judicial principle conformable with its amplitude. There is no evidence that Jacobson J did not envisage that the costs order might be unenforceable for a period (that is, until the oldest of the grandchildren turned 18). Recognising the inconvenience of that result for Ms Costigan, his Honour may have considered that, in all of the circumstances, the proper exercise of the Court’s discretion did not warrant a different outcome.

52    An important purpose, although not the only purpose, for the appointment of a litigation representative to a person under a disability is to ensure that there is a person available to bear the costs of the successful opposing party: cf. Yakmor at [24] and [45]; Fernando (by his tutor, Ley) v Minister for Immigration and Citizenship (No 9) [2009] FCA 833 (“Fernando”) at [15]; Kiefel v Victoria [2014] FCA 604 at [21]; Smith v NRMA Insurance Ltd [2016] NSWCA 250 (“Smith”) at [32]. It is well-established that if an action brought by a plaintiff under a disability is dismissed, and the defendant is awarded costs, the next friend of the plaintiff is personally liable to the defendant for the costs. It is also well-established that if the next friend has acted properly, he or she is entitled to an indemnity from the plaintiff or out of any fund to which the plaintiff is beneficially entitled: Farrell by her next friend Waugh v Royal Kings Park Tennis Club (Inc) [2007] WASCA 173 at [17]; NSW Insurance Ministerial Corp v Abualfoul [1999] FCA 433; (1999) 94 FCR 247 at [28].

53    However, there is no invariable rule that a litigation representative must be ordered to pay the costs of proceedings unsuccessfully brought or defended on behalf of a person under a legal capacity. To the contrary, there are cases where the Court has imposed restraints upon the liability of a tutor for costs: see for example, Jaffari v Minister for Immigration and Multicultural Affairs [2001] FCA 985; (2001) 113 FCR 10; Fernando at [13]; Adams by her next friend O'Grady v State of New South Wales (No 2) [2008] NSWSC 1394 at [7]-[8]; Smith at [37]-[38].

54    Although there was no formal appointment of Ms Grover as litigation representative, it is reasonable to think that Jacobson J considered that Ms Grover’s role as tutor included that she was available to bear Ms Costigan’s costs. Jacobson J may have assumed that the costs order, in the terms that it was made, would be enforceable against Ms Grover. There is authority for the proposition that that an order for costs made against a person who is under an incapacity may be enforced against the person’s tutor: Azar v Kathirgamalingan [2012] NSWCA 429 at [202]; Yakmor at [25] and [28] and State Rail Authority of New South Wales v Hammond (1988) 15 NSWLR 395 at 400. If this was Jacobson J’s assumption, then it was not obviously incorrect having regard to those authorities and despite AFSA’s reference to Morgan v Morgan. If the evidence had demonstrated this assumption, on the balance of probabilities, then I would have accepted that it would be appropriate to make an additional order that Ms Grover pay Ms Costigan’s costs to ensure the enforceability of the costs order: cf. Yakmor at [28] and [30]. However, it is a matter of speculation whether Jacobson J made this assumption.

55    I accept that his Honour made a deliberate decision not to order that Ms Costigan’s costs should be paid either out of the proceeds of the policy (in contrast with Challenger’s costs) or out of the funds comprising the estate of Mr Real (in contrast with the estate’s costs). These orders are not inconsistent with an intention that the great-grandchildren (and not Ms Grover) should pay Ms Costigan’s costs because the effect of the costs order is different from these orders: the costs fall on the six great-grandchildren where, at least on Mr Skinner’s submissions, only five of them are residuary beneficiaries of Mr Real’s estate.

56    Finally, I do not accept the submission, made on behalf of Ms Costigan, that absent the appointment of Ms Grover as a tutor, she would have been spared the costs of having counsel appear to protect her legitimate interest. In my view, it is reasonably likely that independent counsel would have been appointed to represent the great-grandchildren on Challenger’s application to enable the Court to hear and determine the “competing arguable claims”. The cost of independent counsel would have formed part of Challenger’s costs, payable out of the proceeds of the policy.

Conclusion

57    I am not satisfied that the costs order does not reflect Jacobson J’s intention or that there is any relevant injustice that requires the order to be corrected in the manner proposed. I am not persuaded that, if the matters raised on Ms Costigan’s behalf had been drawn to his Honour’s attention, he would have made the order sought in place of the costs order as made.

58    The application will be dismissed. Costs should follow the event.

Associate:

Dated:    7 September 2017