Raymond Saul & Co (A Firm) v Holden & Anor

Where an executor or trustee brings proceedings to resolve rival claims to estate or trust assets, the proper role is ordinarily neutral. The claimant should place the issue before the court and submit to its decision, leaving the rival claimants to present their respective cases. A solicitor acting as the executor’s surrogate is subject to the same principle. If the solicitor adopts a partisan position and loses, the ordinary costs rule will generally apply, even though the solicitor had no personal interest in the dispute. The court may depart from that rule where justice requires, having regard particularly to the parties’ conduct and the manner in which the litigation was pursued. A person who adopted the underlying legal argument but did not choose, conduct or substantively participate in the proceedings need not bear the resulting costs.

The claimant solicitors acted for the executor of an estate and held proceeds potentially payable either to the deceased executor’s estate or to his trustee in bankruptcy. They commenced proceedings under CPR Part 64 to determine entitlement to the residuary estate, but pursued the claim by supporting the personal claim of the bankrupt residuary legatee rather than adopting a neutral stance.

The court had previously determined that the trustee in bankruptcy was entitled to the residuary estate in [2008] EWHC 2731 (Ch). The present judgment concerned costs. The central issues were whether the solicitors should pay the trustee’s costs personally and whether any part of those costs should be paid from the bankrupt’s estate.

1. The trustee was the successful party. Under CPR Part 44.3(2)(a), the unsuccessful party will ordinarily pay the successful party’s costs, subject to the court’s power under CPR Part 44.3(2)(b) to make a different order where application of the general rule would be unjust.

2. An executor or trustee faced with rival claims to a legacy or trust fund should ordinarily remain neutral. The executor may invite one rival to sue the other, or issue proceedings joining both rivals as defendants and submit to the court’s decision. The same principles apply where solicitors act as a surrogate for the executor.

3. The claimant solicitors had acted reasonably and in good faith in initially raising the legal issue. They were not criticised for taking the initiative to issue proceedings because the executor was himself one of the rival claimants in another capacity. Their difficulty was that they had adopted a partisan position in the evidence and conduct of the proceedings.

4. The solicitors’ contention that an adversarial presentation was necessary to enable the court to decide the issue was rejected. A neutral claim could still have been determined after argument by the trustee, and, if necessary, the court could have invited the neutral executor to present both sides fairly. The solicitors also did not need to argue the substantive issue to answer criticisms directed only to the necessity and cost of the proceedings.

5. The circumstances did not justify departing from the general rule. The solicitors had taken the side of the unsuccessful claimant and therefore had to pay the trustee’s costs, without recourse to the estate of Bertha Hemming.

6. Although the bankrupt had adopted the legal argument and had not accepted the trustee’s proposed pragmatic solution, he had not chosen the form of proceedings, issued them, filed evidence or taken steps causing the trustee to incur costs. His executor later took no substantive part in opposing the trustee. Having regard to the conduct factors in CPR Part 44.3(4) and (5), it would not be just to charge any part of the trustee’s costs to the bankrupt’s estate.

7. The trustee’s costs were ordered to be paid by Raymond Saul & Co., assessed on the standard basis if not agreed, with no recourse to funds forming part of either estate.

First-instance costs judgment following the court’s substantive determination in [2008] EWHC 2731 (Ch).