New South Wales Supreme Court CITATION : Adams by her next friend O'Grady v State of New South Wales (No 2) [2008] NSWSC 1394 HEARING DATE(S) : Written submissions JUDGMENT DATE : 23 December 2008 JURISDICTION : Common Law JUDGMENT OF : Rothman J (i) The plaintiff pay the defendant's costs of and incidental to the proceedings, as agreed or assessed; DECISION : (ii) Notwithstanding the foregoing, the defendant be restrained from executing said costs order against Ms Paula O'Grady in relation to funds or property other than funds or property of the plaintiff or for which the plaintiff has the legal or beneficial title. CATCHWORDS : COSTS – principle that costs follow event – broad discretion – costs ordered, but not to be enforced against tutor for compelling discretionary reasons LEGISLATION CITED : Civil Procedure Act 2005 CATEGORY : Consequential orders Adams v State of New South Wales [2008] NSWSC 1257 CASES CITED : Hunter Area Health Service v Presland [2005] NSWCA 33; (2005) 63 NSWLR 22 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 PARTIES : Debbie Marie Adams by her next friend Paula O'Grady (Plaintiff) State of New South Wales (Defendant) FILE NUMBER(S) : SC 20319/2005 COUNSEL : J B Turnbull / T D Anderson (Plaintiff) P W Taylor SC / J L Lonergan (Defendant) SOLICITORS : Adamson Solicitors (Plaintiff) Crown Solicitor's Office (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ROTHMAN J 23 DECEMBER 2008 20319/05 Debbie Marie Adams by her next friend Paula O'Grady v State of New South Wales (No 2) JUDGMENT 1 HIS HONOUR: On 28 November 2008, the Court issued orders and published reasons in the substantive proceedings to which this judgment relates: Adams v State of New South Wales [2008] NSWSC 1257 ("the earlier judgment"). The Court dismissed the proceedings and granted liberty to the parties to approach the Court for any consequential order, or order for costs. The defendant, being the successful party, seeks its costs on particular bases. 2 First, the defendant seeks its costs on the basis that it was (and is) the successful party. Secondly, it seeks indemnity costs on and from 22 November 2005 on the basis of a Calderbank offer, being a letter offering a "compromise", namely, that the defendant would forego its costs up to and including the date of the offer in return for the plaintiff withdrawing the proceedings. 3 The plaintiff opposes the orders on the basis that the Court should exercise its discretion not to make any order as to costs, and, in particular, ought not make an order as to costs on an indemnity basis. It does so for three fundamental reasons: (a) The legal incapacity of the plaintiff who was, at all times, acting through a tutor. The tutor was not her natural mother, but a person granted the responsibility of caring for the plaintiff by the State, and would receive no direct or personal benefit from the proceedings; (b) The costs order would be ineffectual or futile; (c) The public interest element to the case was such that costs ought not follow the event. Principles 4 Section 98 of the Civil Procedure Act 2005 provides that the Court has a discretion in the awarding of costs and has full power to determine by whom, to whom and to what extent, costs should be paid. It also grants the power to award costs on an ordinary or indemnity basis. Otherwise, as a superior court of record, the Supreme Court has inherent jurisdiction to grant costs. Notwithstanding its inherent jurisdiction, s 98 establishes a wide discretionary power, but it is a discretion that must be exercised judicially. 5 The Uniform Civil Procedure Rules, and in particular Part 42 thereof, provide that the ordinary rule is that costs follow the event, unless it appears that some other order should be made. While the discretion conferred by s 98 ought be given a broad construction (Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [21]), the rule provides that the discretion to award costs will ordinarily require an order that the successful party's costs will be paid by the unsuccessful party. This discretion is not exercised for the purpose of punishment of the unsuccessful party, but as compensation to the successful party, for the reasonable costs of enforcing or defending its rights. 6 In relation to a Calderbank offer, the offer must be, in the true sense, an offer of compromise, the rejection of which is unreasonable, in which circumstances the party making the offer, which party is more successful (or less unsuccessful) in the judgment, than would have been the case had the offer been accepted, is entitled to indemnity costs. Application of the Principles 7 The plaintiff is under a legal incapacity and was represented, throughout the proceedings, by her tutor. It is also the case that the tutor is not biologically related to the plaintiff and assumed the care of the plaintiff at the request of the State. By all accounts, that responsibility has been taken seriously and has been undertaken most appropriately, and often to the detriment of the tutor's own interests. It would be a travesty of justice, if the State of New South Wales were to pursue the tutor for costs, separately and distinctly from the plaintiff. 8 That it would be a travesty of justice derives from a number of factors. Firstly, the tutor, having had the plaintiff placed in her care by the State, would necessarily feel a certain obligation to ensure that the plaintiff's interests were fully protected and to embark upon litigation that was reasonably arguable. Secondly, from the perspective of encouragement of persons to undertake such care, it would be a disincentive, to the undertaking of a public service, for the Courts to permit a tutor, who feels obliged to act in that capacity, because of her or his position as a foster parent, to be pursued for costs. It is also true that the plaintiff is unlikely ever to have the resources to meet any costs order. These proceedings, from the tutor's perspective, were not unreasonably commenced and, it seems, were commenced in a "protective" capacity, somewhat akin to a trustee, in the belief that the interests of the plaintiff had to be determined or protected. 9 On the other hand, a tutor must know that, generally, if proceedings are taken on behalf of a plaintiff, who does not have, and is unlikely to have, the resources to pay the costs, the tutor will be responsible for those costs. 10 A costs order against the plaintiff, expecting or requiring that the costs be paid only by the plaintiff, would not be wholly ineffectual or futile. It may not result in the payment of the costs to the State, but the effect of a costs order is not only the payment of costs. Its effect includes: the issue of principle associated with the determination of costs; recognition of the appropriateness of the defendant's conduct; and, to the extent that the costs remain unpaid, consequences associated with the plaintiff's capacity to take other proceedings of like kind. 11 Lastly, I deal with the public interest issue. The defendant submits, partly correctly, that the judgment of the Court of Appeal in Hunter Area Health Service v Presland [2005] NSWCA 33; (2005) 63 NSWLR 22, was a complete answer to the claim by the plaintiff. In that regard, the defendant is correct. But it is correct, only in circumstances where some significant analysis of the law was required. Unlike Presland, the plaintiff in these proceedings was under the control of the State, at the time of the conduct. On one view of Presland, that circumstance would have been a distinction to the benefit of the plaintiff. That was certainly an issue reserved, expressly, in Presland. It is certainly a distinction that warranted testing. Ultimately, the cause of action was unarguable, or held to be so. Conclusions 12 In the circumstances, the Court considers that it was not unreasonable of the plaintiff (or her tutor) to reject the Calderbank letter made on 22 November 2005, and also considers that it would be an inappropriate exercise of the discretion of the Court to allow the State to pursue the tutor for costs. 13 The Court, therefore, makes the following orders: (i) The plaintiff pay the defendant's costs of and incidental to the proceedings, as agreed or assessed; (ii) Notwithstanding the foregoing, the defendant be restrained from executing said costs order against Ms Paula O'Grady in relation to funds or property other than funds or property of the plaintiff or for which the plaintiff has the legal or beneficial title. ********** 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.