Costs - Probate

Shovelar and others v Lane and others: Court of Appeal, Civil Division (Lord Justice Ward, Moore-Bick and Lady Justice Arden): 12 July 2011

The claim was issued by A’s descendants, alleging that A and L had made mutual wills, by which A and L's estate was to be shared between all the descendants of their former marriages. The claimants sought a declaration that the executors, the first to third defendants, held L’s net estate upon a constructive trust for those entitled under his will.

The family member descendants were later added as defendants. The first to third defendants accepted service on behalf of all defendants but they assumed the responsibility at first of putting in the only defence. They made no admissions and put the claimants to proof of the agreement to treat the mutual wills as irrevocable. At an early stage, they wrote of their need ‘to steer a median course’ and ‘to be guided by the court’.  

However, they stoutly resisted the claim, and refused a CPR 36 offer made. The judge allowed the claim, and held that the claimants were entitled to the declaration that a constructive trust existed. There was no appeal against that order. The instant appeal concerned the costs of that action.

The judge had ordered that: (i) the defendants were to pay the claimants' costs on the standard basis if not agreed; (ii) that the first to third defendants should be indemnified from the estate to the extent of their own liability for the claimants' costs; (iii) the first to third defendants should be indemnified from the estate to the extent of their own costs.

In relation to the offer to settle, the judge gave three reasons for finding that it would have been unjust for the defendants to have to pay the additional costs penalties set out in CPR 36.14, namely: (i) the size of the costs, being over £320,000 in relation to an estate of £134,000, meant that it was not possible for the defendants to accept the offers made; (ii) the nature of the case was such that the outcome could not be certainly predicted until after evidence had been given; and (iii) the fact that the offer was not accepted could be properly taken into account under CPR 44 when determining what order for costs ought to be made. The applicants appealed. The respondents cross-appealed.

The issues for determination included: (i) whether the ‘rule in probate actions’ applied so that if the testators were really the cause of the litigation, then costs should come out of the estate, or alternatively if the circumstances reasonably led to the investigation of the matter, whether those costs should be left to be borne by those who had incurred them; (ii) whether the first to third defendants, as executors, were entitled to be indemnified by the estate in respect of their own costs and in respect of their own liability for the claimants' costs; (iii) whether it would be unjust to order the defendants to pay indemnity costs and interest on costs pursuant to CPR 36.14; and (iv) whether the order for the interim payment on account of costs was too low.

The court held: (1) In a chancery action for a declaration of constructive trust, the ‘rule in probate actions’ did not apply (see [44] of the judgment).

In the circumstances, the judge had been entitled to find that 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 that costs follow the event. There would be a plain injustice if the claimants were deprived of any benefit of their success. The challenge by the defendants as to what had been said and done and the legal consequences of that behavior did not provide a reason for departing from the general rule (see [44] of the judgment).

It followed that the judge had been fully entitled to order the defendants to pay the claimants' costs (see [45] of the judgment).Evans v Evans [1985] 3 All ER 289 distinguished; Mitchell and Mitchell v Gard and Kingwell33 LJPM & A 7 considered; Beddoe, Re, Downes v Cottam [1891-4] All ER Rep Ext 1697 considered; Twist v Tye [1900-3] All ER Rep Ext 1410 considered; Spiers v English 96 LT 582 considered; Plant, Re, Wild v Plant [1926] All ER Rep Ext 751 considered; Gray v Perpetual Trustee Co Ltd [1928] All ER Rep 758 considered; Cutcliffe's Estate, Re, Le Duc v Veness [1958] 3 All ER 642 considered; Fullard, Re, Fullard v King [1981] 2 All ER 796 considered; Basham, Re [1987] 1 All ER 405 considered; Kostic v Chaplin [2007] All ER (D) 119 (Dec) considered; Olins v Walters [2008] All ER (D) 58 (Jul) considered.

(2) In the circumstances, the executors had not conducted themselves reasonably. There was nothing to distinguish their conduct from the conduct of the family member defendants. Their conduct did not exculpate them from the rigour of the ordinary rule that costs follow the event (see [48]-[49] of the judgment).

(3) Each of the judge’s reasons for finding that it would be unjust for the defendants to have to pay the additional costs penalties set out in CPR Pt 36.14 was flawed. First, the amount of costs which were to be paid were a matter for a costs judge, and not for executors. That assessment would produce the right figure for the claimants’ costs, and the defendants would be properly condemned in that sum and no greater sum.

Secondly, it was almost inevitable in all litigation that the nature of the outcome could not be certainly predicted until after the evidence has been given and even then there was no certainty as to the outcome. Far from uncertainty being a reason not to apply CPR 36, it was all the more reason for parties faced to make or to accept proper offers under CPR 36. Thirdly, CPR 36 was a separate self contained code that could not be taken into account under CPR 44.

If the offer was one to which the costs consequences under CPR 36 applied, then although CPR 44.3(4)(c) required the court to have regard to 'any payment into court or admissible offer to settle', those words were qualified by the words which followed, namely 'which is not an offer to which costs consequences under Part 36 apply'. (see [51]-[55] of the judgment). In those circumstances, it could not be considered unjust to allow the claimants interest on costs and for payment of the costs on an indemnity basis (see [56] of the judgment).

(4) It was settled law that CPR Pt 44.3(8) gave the court a discretion to order an amount to be paid on account before the costs are assessed (see [57] of the judgment).

In the circumstances, allowing the appeal, it would be just and fair to order the defendants to pay £50,000 on account of costs (see [57]-[59] of the judgment).

Grant Crawford (instructed by Humphreys & Co) for the claimants. Richard Dew (instructed by W.F. Smith & Co) for the defendants.