Cost in Probate Cases: A case update
This article takes a closer look at two recently decided cases-Shovelar v Lane and Perrins v Holland- in which the Court of Appeal held that the parties were not entitled to rely on the Probate Rules so as to justify from a departure of the usual cost rules.
Under Part 44 of the Civil Procedure Rules the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. In probate actions, however, the court has laid down two main principles (“the Probate Rules”) as to the circumstances which justify the court in departing from this rule. They are:
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- where the testator or those interested in the residue, have been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate, and
- where the circumstances led reasonably to an investigation in regard to a propounded document, the costs may be left to be borne by those who incurred them
- In two cases- Perrins v Holland and Shovelar v Lane– where costs exceeded the value of the net estate, the Court of Appeal held that the Probate Rules did not apply so as to justify a departure from the usual cost rules. These decisions suggest that in cases concerning spiralling litigation costs, the court will heavily scrutinise the conduct of the parties and tend to narrowly construe the exceptions applied in Probate cases to the usual costs rule.
- The case of Perrins v Holland will be familiar to most practitioners when considering issues of testamentary capacity. In that case howvever, the court was also concerned with whether a costs order should be made against a party unsuccessfully opposing probate in circumstances where it was found the matter required investigation.
- The late Robert Perrins (“the testator”) suffered from Diabetes and in later years, Multiple Sclerosis. In 2000 he instructed solicitors to make a new will leaving his entire estate to his carer Anne, a woman he met in 1994 and wanted to marry. A will was drafted but not executed until 17 months later.
- Following Robert’s death, David, his son, commenced an action against Anne and the executors, challenging the new will by contesting his father’s testamentary capacity and seeking to propound an earlier will in his favour. At first instance, the trial judge, Lewison J, pronounced for the force and validity of the new will.
- On the issue of costs David submitted that Anne should pay his costs notwithstanding that he had lost his action. The trial judge rejected this, stating that the litigation had not been caused by Robert’s mental capacity or any conduct of the executors but by “David’s refusal to understand or acknowledge the character and depth of the relationship between his father and Anne”.
- The judge went on to deal with the question of whether there should be no order for costs. In that respect the judge found that there was justification for an investigation of the matter as the circumstances of Robert’s disability coupled with information given to David raised a reasonable suspicion about the validity of the will. He stated that all other things being equal this would have led him to make no order for costs.
- The judge, however, went on to consider an offer (which did not comply with Part 36) made by Anne to settle for a payment of £10,000. In that respect he noted that costs incurred by the estate and by Anne at the time the offer was made stood at £12,000 and the estate’s solicitors predicted (rightly) that if the dispute went to trial it was likely that the costs of the parties would exceed the sums available in the estate.
- The judge held that “although… there.. is… a public interest where reasonable suspicions about the validity of a will are raised…that public interest cannot justify the potential exhaustion of the state in legal costs. Even in the case of a contested probate action there is also a public interest in encouraging sensible statements. In my judgment the making of that offer was a reasonable offer and one which David ought to have accepted”. As David was in receipt of Legal Services Commission funding he ordered that he pay Anne such sum as was reasonable in respect her costs pursuant to s11 Access to Justice Act 1999, such amount to be determined by a costs judge.
- David appealed against this order submitting that as the Judge had rightly decided that the matter of testamentary capacity required investigation and therefore there should be no order as to costs he was wrong to hold that (1) Anne’s offer was reasonable and that (2) David should have accepted it and (3) David’s refusal was unreasonable and should therefore pay Anne’s costs. In support of the first point, David submitted that given the costs involved the offer valued David’s prospects in both actions as nil. In relation to the second point, David relied on the fact that medical records and social services records relating to Robert had not been made available for David. Further David submitted that the observation of the trial judge that there was a public interest in encouraging sensible settlements was wrong in law as it re-wrote an earlier observation of Sir James Wilde in Mitchell & Mitchell v Gard & Kingswell (1863) 3 Sw &Tr 75 that “doubtful wills should not pass easily into proof because of the cost of proving them”
- The Court of Appeal dismissed David’s appeal. The Chancellor of the High Court, Moore- Bick LJ, giving the lead judgment, found it remarkable that there was no evidence that the enquiry directed by the costs order had taken place nor any indication that if it had David would in fact be ordered to pay any amount towards Anne’s costs. He stated that in those circumstances it would be open to the court to dismiss the appeal as academic.
- The Court of Appeal nevertheless went on to consider the merits of the appeal and David’s submissions. The Court found that the decision of the trial judge demonstrated that David’s case had no value; no further evidence had been adduced on appeal to indicate the judge’s evaluation was wrong. Further, at the time the offer was made it was reasonable and David’s failure to accept it because he wanted to see the medical and social service records did not undermine the reasonableness of the offer when it was made. He concluded that “implicit in David’s decision not to accept the offer pending receipt of the records was the acceptance of the risk as to costs if they did not in the event assist the claim”
- The Court of Appeal had no difficulty in upholding the trial judge’s observations that there was a public interest in encouraging sensible settlements, finding that the overriding objective “enjoins the court to deal with cases justly by saving expense”. In addition the Court of Appeal noted that a court was required by rule 44.3(4)(c) to have regard to any admissible offer to settle to which Part 36 did not apply. The Court found that there was the very real concern that the cost of proceedings was inhibiting access to justice to all parties, not just to one who sought to require a will to be proved in solemn form. The judge was right to consider both of them, and he had struck the right balance. The Court of Appeal dismissed David’s appeal.
- In Shovelar v Lane the Court of Appeal considered whether the rule in probate actions, that if the testator was the cause of the litigation, costs may be paid out of the estate, applied to a situation in which a party alleged that executors held the deceased’s estate on trust for those entitled under the terms of earlier mutual wills.
- Les and Alma had both been married previously and both had children from those marriages. They married each other and during the course of their marriage made wills in identical form leaving his or her residuary estate to the other if she or he survived by 30 days and otherwise to both sets of children. Alma died and a couple of years later, Les made a new will leaving his estate to his descendants; no provision was made for Alma’s children (“the Appellants”). Les appointed two members of his solicitor’s firm and his son-in-law to be executors (who together with Les’ descendants were “the Respondents”). Les later died.
- The Appellants brought a claim alleging that Les and Alma had made mutual wills and claiming a declaration that the executors of the later will held Les’s estate on trust for those entitled under the terms of the earlier mutual wills.
- The Judge at first instance found for the Appellants and held that they were entitled to the declaration sought. She then made various consequential cost orders including an order that the Respondents pay the Appellants’ costs. (However she ordered that the Respondent executors be indemnified from the estate to the extent of their own liability for the Claimant’s costs and their own costs.). Having reviewed the authorities, the judge concluded that this was not a case in which the exception to the general rule ought to be applied by analogy. She stated that:
“The law relating to mutual wills is settled: the [Appellants] were asserting rights under a constructive trust, which constructive trust was being denied by the [Respondents]. The contention between the parties was not unlike any other hostile litigation and not such that would enable the court to move away from the general rule… The [Respondents] were putting the [Appellants] to proof of their contentions”. The Judge went on to find that “there would be a plain injustice for the [Appellants], who were successful in their claim for a constructive trust, were deprived of any benefit of that success by reason of an order for costs being made out of the estate…”
- The Appellants appealed the cost orders. One of the issues arising in the appeal was whether the Respondents should pay the Appellants’ costs or did the rule in probate actions apply. The Court of Appeal reviewed the court’s approach to costs in contentious probate actions and cases in which the dispute was not as to validity. It concluded that the Probate Rule did not apply to this case and endorsed the findings made by the Trial Judge in that regard. Ward LJ with whom the others agreed stated that:
“the probate rule is rooted in the inquisitorial exercise that was conducted by the Ecclesiastical Courts and the Probate Division where the court had to be satisfied of the validity of the will before it could pronounce for the will and admit it to probate. The effect of mutual wills upon the distribution of the estate and under a later will which is admitted to probate is a matter for the chancery Division applying the law of trusts; it is not a matter of probate law and practice. The nature of that litigation is not inquisitorial; it is adversarial and, not infrequently, very adversarial as the two families disunited by death battle for their perceived true inheritance. That is exactly what happened here.”
- Both of these cases contain an important lesson for those involved in contentious probate cases, as executors, beneficiaries or other interested parties. It cannot be assumed that legal costs will be borne by the estate, and parties might instead be required to make provision for the payment of costs by other means. Save to say these decisions demonstrate continued judicial pressure not to embark on costly litigation and resolve matters by agreement where possible.
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