Costs in Probate Proceedings

In Bleak House Dickens takes a satirical swipe at the court system.

Jarndyce v Jarndyce is a probate action which is not understood by the litigants and which devours the whole estate in costs. Jarndyce is not dissimilar to a number of recent probate cases.

The legal costs position in probate claims is often misunderstood.

This article looks at

1. The costs in probate proceedings relating to the validity of the will and

2. Claims under the Inheritance (Provision for Family and Dependants) Act 1975 (“75 Act”).

The Starting Point – The General Rule

The most common misconception is that the costs of the litigation will be paid by the estate. They are not.

CPR 44.2 applies to probate proceedings and 75 Act claims. Costs follow the event.

An unsuccessful litigant can expect to be ordered to pay some or all the successful parties costs (CPR 44.2 a) subject to the courts discretion. That discretion allows the court to look at conduct. Conduct (CPR 44.5) includes

(a) Conduct before and during the claim including the extent to which any pre action protocol has been followed.

There is no pre action protocol for probate or 75 Act claims. Practitioners should consider the Protocols Practice Direction on Pre Action Conduct and the ACTAPS Practice Guidance for the Resolution of Trust and Probate Disputes (“the Code”).

The Code can be downloaded at http://www.actaps.com/draft.cfm

The Code provides helpful guidance as to reasonable pre action steps and disclosure obligations along with precedent letters.

All practitioners should consider the sanctions which may be applied for a failure to engage in reasonable pre action conduct. They include (Para 16 of the PD Pre Action Conduct)

An order that the party at fault pays the costs of the proceedings or part of the costs
An order that the party at fault pays those costs on the indemnity basis
If the party at fault is the Claimant an order depriving that party of interest or imposing a lower rate than would otherwise have been ordered
If the party at fault is a Defendant and the Claimant has been awarded a sum of money, an order that interest is paid at a higher rate (not exceeding 10% above base rate).

The court has clearly set out that the parties should consider the early mediation of probate disputes. In making an order that gave him ‘..no pleasure’ Lord Justice Ward (in Shovelar v Lane [2011] EWCA Civ 802 emphasised that

“One answer has to be to engage in mediation constructively and at the very earliest stage’

(b) Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue

(d) Whether a claimant who has succeeded in the claim, in whole or in part exaggerated its claim.

The Exception to the General Rule

Each case of course turns on its own facts and a positive case needs to be made out for the exceptions to apply. As Sir James Wilde points out in Mitchell v Gard (1863) the

“..rules were designed to strike a balance between two principles of high public importance, the first being that “parties should not be tempted into a fruitless litigation by their knowledge that the costs will be defrayed by other” and the other being that “doubtful wills should not pass easily into proof by reason of the costs of opposing them”.

The exceptions apply to claims relating to the validity of wills.

1. The Testator or the residuary beneficiaries have been the cause of the litigation

This is the first limb in Spiers v English [1907]. Under this limb the court may order that the losing party’s costs are paid out of the estate.

In Wharton v Bankroft [2012} EWHC 91 the unsuccessful Claimant argued that the first limb should apply as the deceased made a death bed will and had made confusing statements to third parties about the provision that had been made. It was also argued that there had been a failure to make disclosure by the beneficiary that had caused the litigation. Both arguments were rejected. Rimer J was conscious that

[3] “..the reality of such an order would be that Maureen (who had succeeded in proving the 2008 Will) would pay to the Daughters their costs of unsuccessfully challenging it’

2. The circumstances lead reasonably to an investigation of the validity of the will.

This is the second limb of Spiers. Under this limb the court may order that each party bears their own costs

This principle was detailed in Davies v Gregory (1873) LR 3 P&D 28 in which it was stated that:

“Where the facts show that neither the testator nor the persons interested in the residue have been to blame, but where the opponents of the will have been led reasonably to the bona fide belief that there was good ground for impeaching the will, there will be no order as to costs. Of course the opponents must have taken all proper steps to inform themselves as to the facts of the case, but if, having done so, a bona fide belief 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.”

In the author’s experience such cases tend to have a ‘cut off’ as to costs. It may for example be reasonable to investigate the claim. Once those investigations are complete the Claimant should be fixed with the necessary knowledge to decide whether there is justification to issue proceedings or to continue to litigate. At that point the Rubicon is crossed and the general rule applies. This was the approach taken in Kostic v Chaplin [2007] in which the testator had suffered from delusions. The court ordered that each party should bear their own costs up to the exchange of expert evidence thereafter costs followed the event.

In James v James [2018] EWHC 242 HHJ Paul Matthews applied the second limb so as to make no order as to costs. The Claimant’s challenge to the validity of the will failed. The Defendant argued that the general rule should apply. The court accepted in this case that there was a ‘reasonable belief’ for challenging the will as:

The medical and factual evidence as to the deceased’s capacity was doubtful—the deceased was suffering from Alzheimer’s disease
Both medical experts (Professor Howard and Professor Jacoby) agreed that this was a case which was close to the line
The solicitor taking instructions for the will had failed to follow the golden rule in Kenward v Adams as she had failed to obtain a medical opinion at the time of making of the will.

The interesting point from James is whether the beneficiaries who did not recover their costs from the Defendant will seek to recover from the solicitor who prepared the will in dispute. The judge was critical of the failure to obtain a medical opinion stating

‘..it is a rule of practice, the following of which generally has a prophylactic effect in that it is much less likely that there will be a long and expensive dispute as to testamentary capacity. Re Key deceased [2010] EWHC 408 (Ch) WTLR 632 [8] per Briggs J. In the light of what has happened subsequently in this case, it is obviously regrettable that a medical opinion was not obtained.

In relation to both 1 and 2 above the Court of Appeal in Shovelar & Ors v Lane [2011] EWCA Civ 802 found that a dispute relating to a mutual will was not a probate claim but the assertion of rights under a constructive trust.

3. Notice to Cross Examine the witnesses (CPR 57.7.5)

Rather than challenging the validity of the will a Defendant may insist that the will is proved in solemn form and for that purpose cross examine the witnesses who attested the will.

The benefit of this approach is that the court ‘..will not make an order for costs against him unless it considers that there was no reasonable ground for opposing the will’

In Elliot v Simmonds [2016] the Claimant sought to wear the cloak of costs protection provided by CPR 57.5. The Claimant who benefitted from an earlier will but was disinherited in the final will cross examined the solicitor who had taken instructions for the final will. The line of cross examination sought to establish that the final will was invalid (a positive case had not been pleaded). The court accepted the solicitors evidence that there were no reasonable grounds to oppose the will.

The court ordered that the Claimant should bear the costs notwithstanding the general rule. The court took the view that the course taken by the Claimant was a positive challenge to the validity of the will.

Undue Influence

The courts may penalise a party in costs if they unsuccessfully plead undue influence. As Hodson LJ stated in Re Cutcliffe’s Estate

“it must surely be obvious to anyone who has studied the history of litigation in the Probate Division…that where pleas of undue influence and pleas of fraud are made, that the probability at any rate, if they are unsuccessfully made, is that people who make such charges and fail will be condemned not only of that charge but of the whole action”

In Wharton v Bankroft Rimner J ordered the unsuccessful party to pay the costs on the indemnity basis his justification being (in part that)

‘..it is not unfair to put upon them (particularly having regard to the way they conducted the case) the task of demonstrating that a response to their aggressively pursued case was in some measure unreasonable’

Part 36

Part 36 offers apply to probate and 75 Act claims.

It is arguable that greater thought may be required in the pitching of a part 36 offer in a 75 Act claim since such claims are usually for a monetary sum and subject to significant judicial discretion in the application of the s.3 criteria.

Probate claims on the other hand are usually ‘all or nothing’ in terms of outcome. In Perrins v Holland [2010] EWCA Civ 1398 the judge was going to apply the second limb in Spiers and make no order. He did not do so as a pre trial offer (not a part 36 offer) had been made. The judge felt the offer should have been accepted and that there was a public interest in encouraging sensible settlement discussions. The Court of Appeal agreed.

Who else could be ordered to pay?

In the case of a successful will challenge the solicitor/or will writer who was the cause of the litigation may be ordered to pay the costs or be pursued in a subsequent negligence claim for the loss caused to the estate.

In Key v Key [2010] EWHC 408 a successful probate action was pursued to set aside a will made shortly after the testator had been bereaved. The court was critical of the timing of the will and the failure of the solicitor to observe appropriate caution and practices when taking instructions for the will. The solicitor was joined to the claim after judgment to show cause as to why a costs order should not be made against them. It is understood that the claim was settled before the costs hearing.

In Marley v Rawling [2014] UKSC 2 (a rectification claim) the solicitors who had supervised the execution of the erroneous wills were ordered to pay the costs.

In Feltham v Freer Bouskell [2013] EWHC 1952 (Ch) a solicitor’s delay in obtaining medical evidence led to the deceased executing a home made will which was subsequently challenged by the beneficiaries of an earlier will. That probate claim was compromised. The Claimant in the negligence claim successfully recovered the sum paid to ‘buy off’ the probate claim and the costs incurred which had eroded the estate value.

The Position of an Executor

The Executor’s role is to gather in the assets, to protect the estate, to pay the liabilities and to distribute to the beneficiaries. Litigation holds up this process.

An Executor is entitled to be paid their costs from the estate on the indemnity basis (CPR 46.3). This assumes that the will is admitted to probate. If the will is not admitted to probate then his right to costs falls away.

An Executor however must tread with care. Alsop Wilkinson v Neary [1996] sets out that the litigation should be run by those with a financial interest in the dispute. An Executor’s proper role is to ‘hold the ring’ until the dispute has been resolved by consent or court order. If an Executor adopts a partisan stance he becomes subject to the general cost risks.

An Executor should keep the residuary beneficiaries informed of the costs incurred. Those beneficiaries who are ultimately ‘footing the bill’ have a right to assess the Executor’s costs.

A party can act as Executor and beneficiary so long as there is no conflict. A professional Executor who prepared the will should consider the Law Society Guide on Disputed Wills. It is prudent for the cost incurred in the two roles to be kept separate.

In a 75 Act claim the Executor is obliged to provide written evidence to the court as outlined at CPR 57.16 (5). It is anticipated that the Executors costs of the litigation will be modest. There is nothing to prevent a solicitor being instructed by both Executor and the beneficiary defending the claim (see Re Parnall [2003].

There may be occasions when the Executor has to run litigation. As a starting point the Executor should seek an indemnity from the beneficiaries of the estate. If the indemnity is not provided the Executor will only be entitled to an indemnity for their costs by obtaining court approval of the steps to be taken by making an application for a Beddoe Order.

Conclusion

Probate litigation should be pursued and defended with the same degree of caution as all litigation.

An unsuccessful litigant can be faced with a potentially ruinous costs bill should they fail. The court has shown that it will impose the costs consequences that flow from CPR 36, a failure to observe reasonable pre action steps or the pleading of an unsuccessful allegation of undue influence or fraud.

A Claimant may be able to take advantage of the exceptions up to the point of finalising investigations. However it will be an exceptional case which affords the benefit of them at trial. Whilst probate litigation is emotionally charged the parties to the litigation should aim as far as they can to adopt a commercial approach which appropriately values the costs and risks of the litigation. In the writer’s opinion all probate cases are suited to an early mediation.

Adam Draper

Partner

Rothley Law