COSTS IN PROBATE AND ESTATE DISPUTES ELIS GOMER Costs in probate and estate disputes: costs will come from the estate and other myths The recent Inheritance Act case of Williams v Martin 1 in which the deceased s long-standing partner and cohabitee received the deceased s share of the property they had owned jointly when his intestacy would otherwise have meant that it passed to the deceased s estranged wife is interesting not merely because of the facts of the case itself but also because of the reaction to the costs position following the successful claim. The losing defendant was ordered to pay 100,000 on account of costs within 42 days. This sum was described as eye-watering by the defendant s counsel (who said that the defendant did not have the means to make the payment on account), while the defendant s daughter stated that the defendant had tried to act reasonably in this matter. This kind of language is common in estate disputes and highlights the misconceptions that continue to exist among litigants and, occasionally, their advisers as regards the costs of estate disputes. It is not uncommon to hear parties blithely asserting that the costs of a probate claim will be paid by the estate regardless of the outcome, or contending that their reasonable belief that a will is invalid should mean that they should not pay the costs even if that belief has proved to be misplaced. This is an exceptionally dangerous position to take. We have all dealt with probate disputes where the parties feel sufficiently strongly about the matter to bet the farm on the outcome. Brennan v Prior and ors (Re Devillebichot), 2 is another recent case with this unhappy outcome; in that case the unsuccessful claimant (who had challenged the will on a number of grounds, including fraud, undue influence, lack of due execution and lack of capacity) contended that her liability for costs should be capped at the amount that she would have received out of the estate as a legacy and no more. Mr Mark Herbert Q.C, who heard the substantive action as a Deputy Judge of the Chancery Division, said: 1 Williams v Martin (Central London County Court, 16 February, 2016) per HHJ Gerald. 2 Brennan v Prior and ors (Re Devillebichot) [2015] EWHC 3082 (Ch); the substantive judgment can be found at [2013] EWHC 2867 (Ch), per Mark Herbert Q.C. (sitting as a Deputy Judge of the Chancery Division).
Very often in probate cases an unsuccessful opponent to a will can have an order that the costs should be paid out of the estate, but those are cases in which there is no real antagonistic litigation. In the present case Mrs. Brennan's case has been to attack the Will on four grounds: lack of due execution; lack of testamentary capacity; lack of knowledge and approval; and undue influence. In the end none of those attacks was successful and, in my judgment, only the third (knowledge and approval) had any chance of success. The litigation has been conducted aggressively on her side, partly in the form of correspondence, emails and such like from her husband. Of the emails I have seen, one of them I commented on in the judgment, another one I was shown today, which contains extremely aggressive, offensive and damaging attacks, and Mrs. Brennan, although she is a different person from her husband, she has not, until today, as I gather, withdrawn those damaging and unpleasant attacks. This is a case where I feel that at least some of the costs should be ordered to be borne by Mrs. Brennan and there are two sets of costs in question, because the first two defendants are nominated as the executors and they have in fact taken a very neutral role in the action, but they were obliged to appear as parties and put themselves at risk as to costs. They have in turn explained their position to Mrs. Brennan that if she insists on making allegations essentially of dishonesty against those two parties, they will be seeking to make her liable in costs Snowden J, who heard the costs argument, concluded that there was no basis to limit the claimant s costs liability to the amount that she received from the estate and that nothing in the Deputy Judge s judgment or order suggested otherwise. In this case as in Williams, the losing party stated that she did not have the money to pay the costs. The quoted passage from the Deputy Judge s judgment could be applied with little amendment to many cases in which I have acted and I suspect that most contentious probate litigators could say the same. Probate and inheritance disputes are very expensive and very few of them run to trial.
For the most part, therefore, the disposal of the case depends not on the Judge making a decision on the law but on the client making a decision on the risk. Costs and the potential downside risk will clearly play a big part in that analysis. All too often this basic tenet is not followed in contentious probate negotiations, because costs are not given the central role their contribution to the overall outcome demands or worse clients are wrongly advised as to the costs risk. Some lawyers (particularly non-specialists in the area) have a regrettable tendency to conduct such negotiations based on the misconception that the costs will fall on the estate. This can cause problems for either side. If representing a claimant in probate or Inheritance Act proceedings, the risk of adverse costs must be canvassed when considering the merits of the claim. If representing the estate, negotiating on the basis that the settlement involves the other side paying costs (even where that would have been highly likely at trial) may well have been a hopeless enterprise, but the potential liability for costs could perhaps have been used to squeeze a slightly better settlement. This is especially relevant given the recent rise in Inheritance Act claims. I regularly advise estates who have been alerted to a possible or actual claim under the Act by a disgruntled family member (often an adult child) who has no identifiable assets and who is unlikely to be able to satisfy a costs order. The case strategy is therefore going to be informed from an early stage by the cost/benefit analysis of litigating the case if the costs will not be recoverable even if successful. A slightly different scenario arises if the claimant has some assets but appears overly bullish given the merits; in that case, the possibility of an adverse costs order for the claimant can be an effective tool to assist settlement. A Part 36 offer can assist greatly in such circumstances but such offers are usually of limited use in probate proceedings, where the result of the case is axiomatically all or nothing with little middle ground, in stark contrast to the multiple shades of grey possible in an Inheritance Act claim. What then are the relevant principles in such cases?
The relevant law: The general rule is the same in probate proceedings as in any other case: costs follow the event under CPR 44.2(2)(a). 3 Since Jackson, the power to make a different order under CPR 44.2(2)(b) has been exercised with enthusiasm by judges and may be thought to have undermined the orthodoxy, but the starting-point remains the same: is there any good reason why costs should not follow the event? What amounts to a good reason is set out in CPR 44.2(5) but will turn on the individual circumstances of the case. The only point peculiar to probate is to be found in CPR 44.2(5)(a) where any relevant pre-action protocol includes the ACTAPS Code, which has been almost universally adopted as a pre-action protocol even though it emanates from the Association itself and not from the Rules Committee. In principle, therefore, the costs of contentious probate proceedings should be paid by one or more of the parties rather than by the estate (personal representatives are generally entitled to their costs from the estate unless they have violated their duties as executors, but this rule may not apply if a PR is also a beneficiary in which case costs would be ordered against the party qua beneficiary or if the court concludes that the executors must have known that the will was invalid). There are three exceptions to this general rule, with the first to be found in the CPR and the other two in Spiers v English, 4 as explained in Kostic v Chaplin and ors, 5 where at [6] Henderson J described the exceptions as neither exhaustive nor rigidly prescriptive...guidelines, not straitjackets. The exceptions are as follows: First, CPR 57.7.5(a) lays down a procedure for requiring a will to be proved without advancing a positive case. A defendant may give notice in his defence that he does not raise any positive case, but insists on the will being proved in solemn form and, for that purpose, will cross-examine the witnesses who attested the will. If a defendant elects to do this the 3 Except in the Court of Appeal: CPR 44.2(3)(b). 4 Spiers v English [1907] P 122. 5 Kostic v Sir Malcolm Chaplin and Mr Martin Saunders (chairman and secretary of the Conservative Party Association) & HM Attorney-General [2007] EWHC 2909 (Ch); [2008] 2 Costs LR 271.
Court will not make an order for costs against him unless it considers that there was no reasonable ground for opposing the will [CPR 57.7.5(b)]. Great caution should be exercised in pleading a case which relies on this rule. There is a fundamental difference between requiring proof of a will in solemn form, on the one hand, and advancing a positive case on something which ostensibly has to be proved by the propounding party, e.g. capacity, on the other. This will is invalid because the testator lacked testamentary capacity, to take one example, would be a positive case and would not fall within the aforesaid exception (although it may fall into one of the other exceptions, below). Second, the first limb of Spiers v English applies where the testator himself has, or the residuary beneficiaries have, been the cause of the litigation: in these cases costs should come out of the estate. The Spiers formulation rests on Mitchell v Gard, 6 in which at 277-8 Sir James Wilde had said the basis of all rule on this subject should rest upon the degree of blame to be imputed to the respective parties. In Kostic at [9], however, Henderson J made clear that blame is being used in a causal rather than a moral sense. Thus the testator s incapacity triggers the exception just as readily as his failure to make a clear will. As Norris J pointed out in Wharton v Bancroft, 7 one unfortunate consequence of the first exception laid down in Spiers v English is in many circumstances to require a beneficiary who succeeds in proving the will to pay the costs of the losing challengers: where, for example, there is no residue. Henderson J noted in Kostic at [21] that the trend of the more recent authorities has been to encourage a very careful scrutiny of any case in which the first exception is said to apply, and to narrow rather than extend the circumstances in which it will be held to be engaged. It would not apply, for example, to a testator who gives beneficiaries a false impression of what is going to be in his will: see Re Cutcliffe s Estate. 8 The second limb of Spiers v English applies where neither the testator nor the residuary beneficiaries are to blame for the litigation, but circumstances lead reasonably to an investigation of the matter: in these 6 Mitchell v Gard (1863) 3 Sw &Tr 275. 7 Wharton v Bancroft [2012] EWHC 91 (Ch). 8 Re Cutliffe s Estate [1959] P.6.
cases there should be no order for costs. In this situation, the Spiers second limb formulation derives from not just from Mitchell v Gard, but also from Davies v Gregory, 9 where it was said that if having taken all proper steps to inform themselves as to the facts of the case the challengers nevertheless bona fide believe in the existence of a state of things which, if it did exist, would justify litigation, then, although no blame should attach to the testator or to the executors and persons interested in the residue, each party must bear his own costs. Conclusions: There is therefore a grain of truth in the contention that acting reasonably can absolve a losing litigant from having to pay the costs, but reliance on it as a rule is very dangerous. The courts have consistently found favour with Henderson J s comment in Kostic (above) and a failed challenge to a will being propounded is likely to attract an adverse costs order in the majority of cases; certainly, the client should be advised that this is the default position and that the exceptions cited above are precisely that. Further, it is highly unlikely that the less benign allegations which can be made in probate proceedings, e.g. fraud, undue influence or fraudulent calumny, will ever be thought to come within one of the exceptions. Clients advised in these terms will hopefully avoid the unhappy fate of the unsuccessful parties in the cases cited above, or at the very least will not be able to say that they were not adequately warned. ELIS GOMER St John s Buildings 25 February, 2016 For further information please contact Elis clerks on 0161 214 1500 or email clerk@stjohnsbuildings.co.uk 9 Davies v Gregory (1873) LR 3 P&D 28.