Six claimants, seven defendants. You just know when you see that that costs will be a problem. Throw in it’s a will dispute and you’ve got emotion as well.
Facts are, as so often, simple. In 1996 a widower married a widow. In 1999 they made mutual wills. Half to the widow’s sons, the other half split between all the other descendants. In 2001 the widow died. And then in 2003 the twice-widower changed his will; he cut out the widow’s children and grandchildren entirely. Needless to say the widow’s children and grandchildren – the Shovelars – sued the executors and widower’s descendants.
Mutual wills work like this. A marries B, they have children, and they build up a portfolio of assets. A worries that if he dies B will re-marry, have more children (or worse, step-children), and A’s children will be disinherited in favour of B’s new family (I cite the precedent of Cinderella). B has the same fear if she dies first. So they make mutual wills. A’s will says the same as B’s. There is a mutuality of interest there. What it means is that when one dies, it is unconscionable for the other to change their will. It would mean that the pre-deceased’s dying wish would not be fulfilled.
And this is pretty much the scenario here; the survivor changed his will, and the court decided that he could not do that. There were mutual wills, therefore the executors had to follow the previous will. The 2003 change was nugatory. (The executors, being smart, had not paid out the estate.)
The claimants won. They asked for their costs. The judge therefore went through the procedural history.
The starting point was easy enough; the claimants had won. The defendants should pay. The executors took a fairly limited part in the action, so they got their limited costs out of the estate first.
As for the rest, the judge looked at the usual factors to see whether she should be swayed from the initial starting point. And those all worked in the claimants’ favour. They had been open to mediation from the start. They suggested a stay in the case for alternative dispute resolution. They offered a without prejudice meeting when their costs were £25k. The defendants batted it off throughout. The only time they agreed to a mediation, they said it couldn’t take place because one of them was in the Caribbean.
There were, eventually, offers of settlement. The claimants offered to take £98k plus costs (later reduced to £84k). The defendants offered a split between the wills, which would have left the defendants receiving nearly £70k with the claimants paying £25k. Only right at the end, just before trial, when the claimants had gone to considerable expense to proving their claim, did the defendants offer a split – and that was subject to each side paying their own costs. The defendants came up with 1 witness statement at trial; they hardly had any costs...
So in terms of fighting the case the claimants had done everything the court likes – made offers, suggested settlement meetings, kept the other side informed of their costs. The defendants had done sweet nothing.
And at trial the claimants had done even more. They had beaten their offers.
So the costs should have been easy. The claimants get costs – with punitive interest/indemnity rates being paid. Because they had beaten their offers.
The problem that stuck in the judge’s throat was that they were HUGE. £160k costs for a £132k estate.
And that’s just the base costs. The claimants were working under a conditional fee. So take those costs and double them. Ouchie.
So the judge looked around for ways in which she could somehow lessen the blow. Firstly, those offers. They came too soon, she said. Before exchange of evidence. Defendants could not suss out how good those offers were. So unfair to award the indemnity costs and punitive interest.
Secondly, the defendants argued that the costs should come out of the estate. It wasn’t their fault that they were brought into the action; it was as a result of the change of wills. Really this was the estate’s fault. Ergo the costs should come out of the estate.
You can see the problem with this. The successful claimants would get nothing. It would cost them the thick end of two hundred grand to be proved right. Whereas the defendants would walk away being responsible for their own, nugatory, costs. There would be no incentive for early settlement. After all, the defendants could have said “OK, you win, we won’t make our claim” on day one. Not doing so would have meant the estate went to lawyers rather than the Shovelars.
So the judge ordered that the defendants bear the costs. Other than the executors – their fees would come out of the estate. As to the level of costs? The judge said that was a matter for assessment. Not for her. But she gave a strong indication by ordering only £30k to be paid on account – normally you’d get maybe half of what you’d expect to get on assessment.
Everyone appealed. The Court of Appeal took the opportunity to make a few statements.
1. This wasn’t a question over will validity per se; it was old-fashioned litigation. The claimants took up one position, the defendants another. In these circumstances loser pays. That had to be the result here.
2. Just how limited WAS the executors’ part in the action? They filed a defence and they cross-examined the claimants. They took an active part in the litigation and did not seek an indemnity BEFORE taking action, which is what any decent trustee should do. Therefore they were a party like any other. They do NOT get an indemnity from the estate; they are just as liable for costs as the other defendants.
3. The judge should not have ruled against the claimants’ offers. They were reasonable, done at reasonable times, and the claimants had behaved reasonably throughout. They were the poster children for reasonable litigants. OK, the offers were pretty early, but every litigation has to have parties taking a view at some stage, and the defendants made no move to accept when they saw the claimants’ case in full. If these claimants did not get the full indemnity consequences, who would?
So the appeal was disastrous for the defendants. Indemnity costs, interest (at 3.5% above base), executors just as liable. Even the amount on account was bumped up to £50k.
The Court of Appeal finished with a stark warning. Ward LJ said:
“Making those orders gives no pleasure. If the claimants are right in their assessment of their costs, then, even without a success fee, the costs incurred by them exceed the sum over which battle has been joined. The great British public must think that something has gone wrong somewhere if litigation is conducted in that way. I share that sense of horror. One answer has to be to engage in mediation constructively and at the very earliest stage. ... A thousand pities that that was not done but the awful costs consequences which have followed do lie at the defendants' door.”
Make love, not war.
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