Costs in estate administration disputes: who really pays?

This article explores two recent decisions, Lumb v Lumb [2023] and Jassal v Shah [2024], which shed light on the nuances of costs in estate disputes.

Costs are a hot topic at the moment. We are seeing more and more applications under the Solicitors Act for assessment of estate administration costs, as well as interesting decisions coming out of the courts following disputes arising out of estates.

Costs in litigation are governed by the Civil Procedure Rules. The court has a wide discretion as to how the costs are paid, and by whom. The usual practice is for the court to determine the substantive claim and then to go on to decide whether or not to make an order in relation to the parties' costs of the litigation, with the usual order being that 'costs follow the event' or 'loser pays'.

Unsurprisingly, there are exceptions to the general rule including situations in which the testator was the cause of the litigation or if the court finds that there were reasonable grounds for investigation into the validity of a Will.  

Below, we cover two recent decisions which illustrate how a court can apply its discretion.

Lumb v Lumb [2023]

Mrs Lumb had two sons, Stuart and Michael. In her last Will made in 2019 she left her residuary estate, to Michael. Shortly after her death in 2020, Stuart entered a caveat. There then followed correspondence between the parties about the validity of 2019 Will, with Stuart arguing that Mrs Lumb lacked capacity to make the 2019 Will. However, Stuart did not issue proceedings.

On 22 June 2022, Michael issued proceedings asking the court to prove the 2019 in solemn form. Stuart put forward a qualified defence, whereby he states that he does not raise any positive case, but insists on the will being proved in solemn form and, for that purpose, will cross-examine the witnesses who attested the will.

Michael applied for summary judgment and his statement in support of the application underlined that Stuart was not making a positive case or putting forward evidence, but merely was "making [him] jump through hoops".  His application was successful as the court found that Stuart had no real prospect of success. However, the judge found that the usual order of the costs following the event would not apply because "the court will not make an order for costs ... unless it considers there were no reasonable grounds for opposing the will’. The judge noted that this was a “rather unsatisfactory outcome” but one that was he was required to make by the rules.

Michael was granted permission to appeal the judge's costs order. The appellant judge ordered that Stuart should pay costs to Michael on the standard basis. He founds that the costs protection afforded by CPR57.7(5)b did not apply. The courts are increasingly concerned to avoid encouraging litigation and discouraging settlement but moving away from the 'loser pays' rule. The judge found that these issues should be at the heart of any decision on costs.

It should also be noted that the appellant judge agreed that there was incongruity in finding that there was no real prospects of the grounds raised by Stuart preventing the 2019 Will being proved, but then in applying the costs protection afforded by CPR57.7(5)b which states that "the court will not make an order for costs against him unless it considers that there was no reasonable ground for opposing the Will"

Jassal v Shah [2024]

In proceedings brought under the Inheritance (Provision for Family and Dependants) Act 1975 by the cohabitee of the deceased, the judge in this case held that litigation costs should be dealt with separately from and after the making of an award out of the estate.

The claim was brought by Ms Jassal who had been in a lengthy relationship with the deceased. She maintained that in spite of a period of separation from the deceased before he died, she had been living with him for the purposes of being an eligible claimant under the Inheritance Act.

Even though the deceased's family argued against this claim, the court did find that Ms Jassal had been living with the deceased as a married couple, and that therefore she qualified for relief. The judge at first instance treated Ms Jassal's litigation costs as a financial need, such as housing or living costs.

The executors obtained permission to appeal this arguing that the costs should have been considered separately in accordance with the usual practice under the Civil Procedure Rules.  The Judge found that it was not permissible for Ms Jassal's litigation costs to be considered as part of the substantive award. His view was that the judge at first instance should have considered the appropriate award to make and then gone on to consider costs separately.

The effect of the ruling was to exclude the litigation costs from the lump sum awarded to Ms Jassal. However, the judge found she was the 'clear winner' in the proceedings and so that cost of the first instance proceedings were met by the executors.

Points to note from these cases

The first case serves as a reminder that whilst there is some degree of unpredictability when advising on the question of costs, the court will rarely depart from the usual costs rule. The costs regime under the CPR is focussed on encouraging settlement before cases go to court.

In claims under the Inheritance Act, the financial needs of a claimant and the costs of the litigation are not mutually exclusive. But this recent approach by the court will give some pause for thought when advising on parameters of settlement and it would not be surprising to see some expressions of unease from judges having to follow this ruling.

If you have any questions about costs either in relation to a challenge to the fees incurred in the administration of an estate, or following a probate dispute, please do get in touch.