Marley v Rawlings and another

A court may order the insurers of a negligent solicitor to pay the parties’ costs where the solicitor’s admitted error caused the litigation, the successful party would otherwise recover the estate’s diminution as damages, and the proceedings were reasonably contested.

Under the indemnity principle, costs recoverable under a conditional fee agreement depend on the client’s contractual liability. Avoiding an adverse costs order does not amount to deriving a benefit from an appeal which the client lost. Although success fees will ordinarily be recoverable for successful CFA-funded litigants, the court may refuse an uplift where the represented party was unsuccessful.

Mr and Mrs Rawlings accidentally signed wills intended for each other because of their solicitor’s error. Proudman J refused to admit Mr Rawlings’s document to probate, and the Court of Appeal dismissed Mr Marley’s appeal in [2012] EWCA Civ 61. The Supreme Court subsequently allowed his substantive appeal in Marley v Rawlings [2014] UKSC 2.

This unanimous judgment determined the costs of the litigation. The competing possibilities were that the unsuccessful respondents should pay, that the parties’ costs should come from the estate, or that the negligent solicitor’s insurers should bear them. The respondents’ conditional fee agreements raised further questions concerning the indemnity principle and the recovery of counsel’s base fees and uplifts.

1. Disposition. Lord Neuberger, with whom Lords Clarke, Sumption, Carnwath and Hodge agreed, ordered the negligent solicitor’s insurers to pay Mr Marley’s costs throughout and the respondents’ costs through the Court of Appeal. For the Supreme Court appeal, the insurers were also to pay the respondents’ solicitors’ disbursements and counsel’s base fees, following counsel’s disclaimers of any right to an uplift.
2. The ordinary loser-pays rule was relevant because the dispute had become hostile litigation over money. Equally, probate authority supported payment from the estate where a reasonable challenge arose from an error in drafting or execution. The respondents’ opposition was reasonable: they had succeeded at first instance and in the Court of Appeal. Charging the modest estate would, however, deprive the successful beneficiary of substantially all its value.
3. The solicitor’s error caused the proceedings, his insurers required Mr Marley to pursue them by way of mitigation, and he had no defence to the resulting damages claim. Had the estate paid the parties’ costs, Mr Marley could have recovered its consequent diminution from the solicitor, who would in turn have been indemnified by the insurers. Direct payment by the insurers therefore provided a justified practical short circuit. The usual caution about non-party costs orders did not prevent that result.
4. Under the indemnity principle, the respondents could recover only costs for which the CFAs made them liable. They derived no contractual “benefit” from resisting an appeal which left them substantively worse off. Avoidance of an adverse costs order merely removed or mitigated a disadvantage. The solicitors could nevertheless require payment of disbursements, including counsel’s fees, while counsel’s CFAs were triggered by an order requiring payment of the respondents’ costs.
5. Rule 46(1) of the Supreme Court Rules 2009 gave the court discretion concerning the uplift. Although an agreed uplift would ordinarily be allowed where CFA-funded lawyers represented a successful client, these respondents had lost. It would be inappropriate for their counsel to receive success fees. Recovery of counsel’s base fees was therefore conditional on counsel disclaiming every entitlement to an uplift; both counsel supplied the required disclaimers.

1. United Kingdom Supreme Court: Having allowed the substantive appeal in Marley v Rawlings [2014] UKSC 2, the court unanimously made the costs order specified in this judgment.
2. Court of Appeal: The appeal from Proudman J was dismissed in [2012] EWCA Civ 61.
3. High Court: Proudman J refused to admit the disputed document to probate as Mr Rawlings’s validly executed will.