Shovelar & Ors v Lane & Ors

The special costs practice applicable to probate proceedings does not extend to an adversarial claim that mutual wills created a constructive trust. Such a claim is governed by the ordinary rule that costs follow the event.

Executors who actively defend the claim, without maintaining neutrality or seeking the court’s directions, may be personally liable for the successful party’s costs. Good faith alone does not entitle them to an indemnity from the estate.

Part 36 is a self-contained costs code and prevails over the general discretion under Part 44. Neither uncertainty of outcome nor concern about disproportionate costs ordinarily makes its prescribed consequences unjust. An interim payment must reflect a fair estimate of the receiving party’s costs that will almost certainly be due.

The claimants, who were descendants of one member of a married couple, successfully established that wills made by the couple in 1999 were mutual wills. The Central London County Court declared that the executors of the survivor’s estate held it on a constructive trust for the beneficiaries of the 1999 wills.

The present appeal concerned costs only. The judge ordered all defendants to pay the claimants’ costs on the standard basis, but allowed the executors to recover their own liability and costs from the estate. She declined to impose the enhanced consequences of the claimants’ successful Part 36 offer and ordered an interim payment of £27,658.

The issues were whether the probate costs practice applied by analogy, whether the executors were entitled to indemnities, whether the Part 36 consequences would be unjust, and whether the interim payment was too low.

1. Appeal allowed and cross-appeal dismissed. The probate costs practice did not apply to the claim. That practice arose from the inquisitorial function of the probate court in determining whether a will should be admitted to probate. A claim that mutual wills created a constructive trust is instead an adversarial trust claim. The ordinary rule that costs follow the event therefore applied, and the unsuccessful defendants were liable for the claimants’ costs: per Ward LJ, with whom Arden and Moore-Bick LJJ agreed.

2. The executors were not entitled to recover their own costs from the estate or to be indemnified against their liability for the claimants’ costs. They had accepted service, pleaded a full defence, put the claimants to proof, advanced an unsustainable reliance on section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, and continued the adversarial defence after beneficiaries had joined it. They neither maintained neutrality nor sought directions. Their good faith and wish to protect the estate did not distinguish them from the other defendants.

3. The claimants had obtained a result more advantageous than their Part 36 offer. Part 36 is a separate, self-contained code and cannot be displaced by taking the same offer into account under Part 44. Uncertainty before evidence is heard is commonplace and encourages the making or acceptance of appropriate offers; it does not make the Part 36 consequences unjust. The apparent disproportion between the estate and the claimed costs was a matter for detailed assessment.

4. The claimants were consequently entitled to indemnity costs from 30 March 2009 and interest on those costs from that date at 3.5% above base rate. The wording that an offer would remain open for 21 days did not prevent Part 36 compliance when properly construed as an undertaking not to seek withdrawal during that period, consistently with C v D [2011] EWCA Civ 646.

5. The interim payment had to be assessed by reference to the claimants’ costs that would almost certainly be found due, rather than the defendants’ expenditure. The payment was increased from £27,658 to £50,000. The provisions indemnifying the executors from the estate were discharged.

1. Court of Appeal (Civil Division): By [2011] EWCA Civ 802, allowed the claimants’ costs appeal and dismissed the defendants’ cross-appeal. It ordered indemnity costs and interest from 30 March 2009, discharged the executors’ indemnities and increased the interim payment to £50,000.

2. Central London County Court: HHJ Walden-Smith had ordered all defendants to pay the successful claimants’ costs on the standard basis, indemnified the executors from the estate in respect of their own costs and liability, declined to apply the enhanced Part 36 consequences, and ordered £27,658 on account.

3. Central London County Court: Mrs Recorder Walden-Smith had earlier declared that the executors held the estate on the constructive trusts arising from the mutual wills. That substantive order was not appealed.