Posted on 7th February 2014

This article is concerned with costs in both inheritance and probate proceedings. It looks at both the general framework and how the principles have been applied recently by the Courts.

The general rule

The starting point in any costs issue is the procedural rules. These cases are considered under the CPR and so it is the CPR that applies.

The general rule to costs is set out in CPR 44.2, which states generally the unsuccessful party pays the successful party’s costs, though the court can make a different order. The factors that might suggest a different order are set out in CPR 44.2(4) and (5). These include offers to settle, conduct before and during the proceedings, the extent to which a party succeeded, whether it was reasonable to raise an issue and the manner in which a party pursued an issue.  The Court can also take into account mediation and failures to mediate:  Halsey v Milton Keynes NHS Trust [2004] 1 WLR 3002. It is important to remember however these are factors – no more and no less. They are not the trump cards.

Applied to trusts and administration proceedings

Re Buckton [1907] 2 Ch 406 is the starting point for the exercise of costs in trusts and administration proceedings.  There Kekewich J noted that he felt that there were 3 typical types of case, each calling for its own typical outcome on costs:

1.  where the trustee seeks the court’s guidance on the construction of the trust document or its administration, that is for the estate’s benefit so  it is therefore an expense of the estate and the estate should therefore pay. Though in some cases it may be plain what to do, the court should readily protect administrators;

2.   similarly where the applicant is a beneficiary but the issue is really about guidance on how to proceed: it is for the estate’s benefit and the estate should pay;

3.   however where a beneficiary has made some claim adverse to the estate  and is seeking to claim something that would ordinarily require a “writ”, but seeks to take advantage of a summary procedure, the normal rule in adversarial litigation is to be applied in full. By “writ” the Judge was referring to contentious litigation: for example probate proceedings or perhaps a debt claim.

Though Re Buckton is over 100 years old, it still applies albeit with more deference to overriding objective of the CPR: see D’Abo v Paget [2000] W.T.L.R. 863.

The Re Buckton categories are not closed. For example, Singapore Airlines v Buck Consultants [2012] 2 Costs LO 132 concerned a negligence claim in relation to pensions where a party’s interest in the construction of the pension trust deed was motivated not only by a desire to find out what it meant for proper administration but to promote its case as to liability for negligence.

Occasionally there are exceptional cases. One example is IBM United Kingdom Pensions Trust v Metcalfe [2012] 3 Costs LO 420 in which a beneficiary, who was to become a potential representative of all other beneficiaries and as such monitor proceedings and feed back to other beneficiarie, had a prospective costs order made in his favour.

Re Buckton was also seen at work in Green v Astor [2013] W.T.L.R. 1489 where M had died and A was an executor and beneficiary. A was later removed and replaced by G, as administrator.

The estate became involved in numerous claims concerning misappropriated assets. G compromised them in a Tomlin Order. At the time, G did not seek the Court’s approval. A refused to accept any settlement in a separate partition dispute, became obstructive and hostile and wrote voluminous offensive emails. He also accused G of acting fraudulently.

G brought a claim under Part 64 to approve the Tomlin Order 29 months after it was signed. G also sought the making of the partition agreement.

In relation to the Tomlin Order, the court ruled that G could not recover her costs from either A or the estate. She was in fact trying to dispose of the allegation of fraud and negligence in relation to it. The court would not retrospectively approve the settlement to provide that immunity. It is not the purpose of Part 64.

As for the partition agreement, A could not expect immunity from costs. His insulting language in correspondence was one thing. A’s conduct and obstruction forced G to seek approval of the partition agreement. It did not fit neatly into any Re Buckton category but was closer to hostile litigation than any of the others. A therefore had to pay the costs.

Costs in probate proceedings – generally

The general rule is that costs follow the event. This is illustrated in Morris v Davies [2012] W.T.L.R. 1569. X died in France but had lived in Belgium. His will was 12 years old. M sought to prove the will. The family defendants [D] challenged the grant of probate on the following bases:

1.  the will was a sham;

2.  the will was void under English law; and

3.  the will was procured by undue influence.

The court decided a preliminary issue against D on the question of domicile. D’s application for permission to appeal was refused. D then sought permission to discontinue the counterclaim and said they would not contest probate. The issue was costs.

Ordering D to pay the costs, the court noted that, at its lowest, D’s case was problematic:

1. there was no exclusive governance of the will by one legal system;

2. undue influence was equivalent to fraud and had to be fully particularised but had not been. There was merely an assertion the court’s suspicion should be aroused;

3. there was no link between C’s conduct and the course of the litigation – it was a 12 year gap between the will and death; and

4. D had raised no issues if substance to warrant litigation.

The result was that D had to pay.

CPR 57.7(5)

There is an exception to the general rule that costs follow the event, which is found in CPR 57.7(5), which provides:

“(5) (a) 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.

(b) If a defendant gives such a notice, the court will not make an order for costs against him unless it considers that there was no reasonable ground for opposing the will.”

Those words “no reasonable grounds” were considered very recently by Norris J in Wharton v Bancroft [2012] W.T.L.R. 727.

M had sued and proved the will of W. W’s daughters [D] had challenged the will on the grounds of undue influence. It was a deathbed will that left a substantial estate to M. They lost. D sought to argue against the usual rule that costs follow the event, relying amongst other grounds on CPR 57.7(5). Norris J said at [13]

“[O]ne must not confuse the concept of “reasonable cause for enquiry” with “an assertion of undue influence which cannot be struck out as having no real prospect of success” or even “an arguable case of undue influence”. The circumstances have to be such as to have lead [D] reasonably to the bona fide belief that there were good grounds for impeaching the Will for want of knowledge and approval or for undue influence.”

The case is a reminder of the limit of CPR 57.7(5). It serves only to emphasise the costs risks in probate proceedings and that one cannot expect the costs as a matter of routine to come from the estate.

Part 36 Offers and non-acceptance

Wharton v Bancroft also considered an argument that the paying party should be relieved from the consequences of Part 36 even though they failed to beat a Part 36 offer and the offer was a merely tactical and not a real opportunity for settlement. It is perhaps an odd proposition since the whole point of using Part 36 is to gain a tactical advantage. However in Huck v Robson [2002] 3 All ER 263, the Court of Appeal made comments that suggested plainly tactical offers (such as an offer to 99.9% of the value of the claim) could justify departure from the effects of Part 36. Here that argument did not succeed. Norris J said:

“The concept is not an easy one to apply. All Part 36 offers are tactical in the sense that they are designed to take advantage of the incentives provided by Part 36. A low offer in a case where the offeror considers that the offeree’s position has no merit cannot be written off as self-evidently “merely a tactical step”. But the principle has no application here. The sum to be received by each of the Daughters was small. But the offer was not derisory.”

Inheritance Act claims

The general rule that costs follow the event applies in these claims also. Recent cases are warnings to those who litigate while entrenched in their position or do not think about the case in a commercial or dispassionate way.

Thomas v Jeffrey [2012] 4 Costs LR 718 concerned a case where T had brought a 1975 Act claim, having been left no provision in his father’s estate. J were the executors and residuary beneficiaries. It was T’s case that he had spent a material part of his childhood on his father’s farm, and had been assured that one day it would be his. The farm had been sold but he still expected to inherit to recognise his contribution.

T could earn a living. He had no property. Upon questioning from the trial judge, it emerged that T had debts of £36,470. T sought 50% of the estate (£100k).

The judge awarded T £36,475 to cover his debts. The executors were to pay T’s costs out of the estate on the standard basis.

On a second appeal to the Court of Appeal, the trial judge’s decision was confirmed as correct. J had argued that, relying on Ford v GKR Construction [2000] 1 All ER 802, there is a need to encourage efficient litigation and the late disclosure had had a substantial impact on the case and so T should be penalised in costs. While the Court of Appeal agreed it was a factor, Rimer LJ held that Ford did not dictate particular consequences for shortcomings. Here the trial judge had not erred in principle, because he was satisfied that the late disclosure had made no difference. J was so entrenched in ensuring that no order was made in T’s favour, they would have fought anyway even if the disclosure had come earlier. J said that the claim should be rejected at stage one – i.e. there was no failure to make reasonable provision. They made no inquiry about his indebtedness. They made no offers to settle. It could not be said T would have failed without the disclosure.

Lilleyman v Lilleyman [2013] 1 All ER 325 was a claim brought by a wife in which she successfully claimed an award from her late husband’s estate.

During the proceedings the defendants had made several offers: a Part 36 in July before trial; a later without prejudice except as to costs offer; and a third offer in the subsequent January before trial. The claimant did not beat the Part 36 offer.

Reminding everyone that a Part 36 offer does not lapse until expressly withdrawn, it was held the Part 36 consequences followed.

There are 2 interesting points in this case. The first is the judge held that Part 36.14(4) allowed the court to consider the conduct of the parties and their unhelpful approach. Deprecating a “no-holds barred” approach under 1975 Act litigation, he reduced the costs payable to the Defendants by 20% to show his displeasure that they had conducted themselves in such a way.

The second was the Claimant pointed out that the award of reasonable financial provision would be undermined by the costs order. The courts noted that while true, it is not a factor against a costs order: she had played for high stakes but had lost.

Written by Richard Adkinson, barrister at No5 Chambers

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