Costs in Probate Cases Disputes - A Recent Case
An important decision was reported recently in the case of Shovelar & others v Lane & others , when the Court of Appeal confirmed that the general rule in civil litigation that ‘costs follow the event’ (i.e. the loser pays the winner’s legal bill plus his own) applied to a claim for a constructive trust arising out of the execution of mutual wills.
Mutual wills are made where two or more people make wills on agreed terms, on the irrevocable promise to each other that they will never change them without the agreement of the other(s). In this case a husband and wife made mutual wills, by which their estate was to be shared between all the descendants of their former marriages. After the death of the wife, the husband changed his will to the detriment of the wife’s beneficiaries. After the death of the husband, the wife’s beneficiaries sought a declaration that the husband’s executors and other family relatives (together comprising the defendants) held his estate upon a constructive trust for those entitled under the mutual wills.
The declaration was granted - that the terms of the mutual wills still stood - and the defendants were ordered to pay the wife’s beneficiaries’ costs. However, initially they were permitted to pay those costs out of the estate’s assets. The legal costs were £320,000. The value of the estate was £134,000. Therefore, even though successful, by this ruling the wife’s beneficiaries would in effect get nothing, and have to pay their own legal bill.
The decision on costs was appealed, and the Court or Appeal was faced with deciding whether costs should come out of the estate, or whether the usual rule in general litigation cases should apply, whereby the costs would be borne by the defendants who had incurred them.
The Court explained that there was a so-called "probate rule", which sets out two principles:
- If the person who wrote the will (i.e. the testator) or a person interested in the estate has been the reason for the litigation, the estate may bear the costs.
- If there are reasonable and sufficient grounds to question the validity of the will, then the costs may be borne by those who have incurred them.
The Court then went on to consider whether there was an inherent difference between a strict probate action and a Chancery action such as the present case. It found that this particular case was a Chancery action for a declaration of a constructive trust, not unlike any hostile litigation, and not such a case that would enable the Court to move away from the general litigation rule that costs follow the event. The Court’s motive may be discernable by its comment that there would be a plain injustice if the wife’s beneficiaries were deprived of any benefit of their success.
Therefore, the defendants were ordered to pay the costs, and were not entitled to be indemnified by the estate. The professional executor defendants tried to maintain that unlike the family member defendants, they at least should be able to pay their proportion of the costs from the estate, but the Court refused. It found that the executors had not conducted themselves reasonably, and hence would not allow them to escape the rigour of the rule that costs follow the event.
This case contains 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.
If you require advice on a contentious probate issue, Gareth Parry or Rachel Stewart will be glad to advise you of your options and the costs issues which may affect your case.