On 18 September 2014, Lord Neuberger of the Supreme Court handed down his judgment (with whom Lords Clarke, Sumption, Carnwath and Hodge agreed) in relation to how the costs of the proceedings should be allocated following the Supreme Court's landmark judgment overturning the High Court and Court of Appeal's decisions in the case of Marley v Rawlings [2014] UKSC 2.
The Facts
The case of Marley v Rawlings concerned the execution of Mr & Mrs Rawlings' wills. Mr & Mrs Rawlings instructed their solicitor to prepare simple mirror wills for them which would benefit the survivor of them and thereafter, Mr Marley who they treated as an adopted son. The wills excluded their two biological sons leaving nothing to them. However, on Mr Rawlings death (his wife having predeceased him) it was discovered that when the solicitor attended the couple's home to execute the wills, he mistakenly handed Mr Rawlings' will to his wife to sign, and vice versa and the couple therefore inadvertently signed each other's wills.
This discovery lead to the couple's sons seeking to challenge the validity of Mr Rawlings' will, as if it were held to be invalid they would benefit through the intestacy rules. Mr Marley commenced probate proceedings seeking to rectify the will and seeking probate to be granted of the rectified will.
Mr Marley's claim was dismissed at first instance, in the High Court by Proudman J on the grounds that (i) the will did not satisfy the formalities laid down in section 9 of the Wills Act 1837 ("the Wills Act") and (ii) even if it had done so, it was not open to her to rectify the will (on the basis that the error was not one of a "clerical" nature) under section 20 Administration of Justice Act 1982.
Mr Marley appealed to the Court of Appeal, who upheld Proudman J's decision on the first ground (that the will failed to comply with the Wills Act formalities), and so found it unnecessary to consider the point on rectification. Mr Marley then appealed to the Supreme Court which overturned this decision, finding that (i) Mr Rawlings' will did in fact satisfy the formalities of the Wills Act so as to be a "will" within the scope of section 20 and (ii) that it could be rectified to allow the deceased couple's testamentary wishes to come in to effect. Further details of the Supreme Court's landmark judgment can be found here. All that remained was for the Supreme Court to consider the allocation of costs in the proceedings.
Decision
As Lord Neuberger confirmed, he took "an unusual approach in order to achieve a just result" in relation to the allocation of costs.
Mr Marley argued that as he was the successful party, the sons (who had lost in the Supreme Court) should pay his fees as well as their own. Conversely, the sons argued that as it was not unreasonable for them to have brought a claim, their costs and those incurred by Mr Marley should be paid by the estate or in the alternative, by the insurers of the solicitor who was responsible for the unfortunate error.
Not unsurprisingly, the solicitor's insurers agreed with Mr Marley and argued that Mr Marley's costs should be paid by the sons.
Lord Neuberger considered each of the arguments above and acknowledged that whilst the usual rule was that the "loser pays", the authorities also reveal that where there has been a reasonable challenge to a will based on an error in drafting or execution, the court will often order that all parties' costs are paid from the estate.
The difficulty with this approach in this particular case was that the estate was only worth £70,000 which would be consumed by the parties' costs depriving Mr Marley of any benefit he would have received from the estate.
This left the court with the option of making an order against the solicitor's insurers, a third party to the proceedings. The insurers argued that it would be odd to require them to pay the sons costs given that the solicitor did not owe a duty to them and that it was not the solicitor's fault that the sons had chosen to pursue the case to the Supreme Court, or at all. The Supreme Court dismissed these arguments as it was the error of the solicitor which gave rise to the proceedings and the insurers had required Mr Marley to bring proceedings to seek to have the will upheld as valid.
A further complication arose as a result of the conditional fee agreements ("CFAs") which had been entered into by the sons with their solicitors and counsel. As the sons had lost the case, the CFAs provided that they were not required to pay their solicitors' fees. However, the sons' solicitors' CFAs did require the sons to pay the disbursements incurred by the solicitors, including counsel's fees. The court examined counsel's CFAs in detail and determined that an uplift (which is traditionally an additional payment on success) could be applied despite the result, if it was ordered that the sons' fees be paid by the estate or an opposing party.
The Supreme Court therefore invited the sons' counsel to disclaim their entitlement to the uplift of 100% as the court did not consider it appropriate for counsel to receive this additional payment in circumstances where they had not been successful. If counsel disclaimed their entitlement to the uplift, the court confirmed that it would order that the solicitor's insurers should pay the following:
- Mr Marley's costs up to and including the Supreme Court;
- the sons' solicitors' fees up to and including the Court of Appeal;
- the sons' solicitors' disbursements; and
- the sons' counsel's fees in relation to the appeal to the Supreme Court.
If however, the sons' counsel refused to disclaim their entitlement to the uplift, the court confirmed that it would order that the insurers pay the costs at 1 to 3 above leaving the costs at 4 to be paid by the sons themselves. As anticipated, before judgment was handed down the sons' counsel confirmed that they would disclaim their entitlement to the uplift. Accordingly, the solicitor's insurers were ordered to pay all of the costs at 1 to 4 above.
Comment
The Supreme Court has, by its own admission imposed a "practical short-circuiting of an order that (a) the estate pays the costs, (b) the estate be reimbursed by the solicitor, and (c) the solicitor be reimbursed by the insurers".
Costs are a key consideration in any litigation, which should not be entered into lightly. Strictly speaking the court could have required the parties to recover their costs in the manner detailed above i.e. that the estate pay the parties' costs, necessitating a claim against the solicitor to recover those costs and thereafter a claim by the solicitor to his insurers for reimbursement under his insurance policy.
However, this would have prolonged the litigation process for the parties and the Supreme Court appears to have taken the view that further litigation and delay would only serve to increase costs yet further in relation to an estate of extremely modest value. The solicitor's insurers had required Mr Marley to bring the claim and fight it through to the Supreme Court which was a key factor in the court's approach to the allocation of costs.
When facing an estate or trust dispute, it is essential to seek specialist expert advice sooner rather than later.
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