As with any litigation, the issue of how estate litigation will be funded, or what costs can be recouped, will be at the forefront for the parties:
a. Will the estate be able to recoup a proportion of their legal fees in the form of a costs award against an unsuccessful claimant? Or will the estate be further eroded by simply having to defend against the claim on a standard fee basis?
b. Although a successful claimant is likely to secure a costs award against the executors, would an unsuccessful claim fit into that category of cases where their reasonable costs are also met by the estate?
c. The commentary here assumes a typical estate claim whereby the executor/administrator stands to benefit under the will or intestacy of the deceased estate which they represent.
d. Historically, the reasonable costs of estate litigation for both the claimant and executor/administrator were typically borne by the estate. However, more recent case law has confirmed the position that in estate disputes, the general rule should be no different than in any other civil claim – that costs follow the event, and an unsuccessful party will have to shoulder a proportion of the successful party’s legal costs.
e. Although the Court has a general discretion as to costs, the Court of Appeal referred to a number of fundamental principles for costs determinations in the circumstances of a contested will: -
i. If the litigation originates in the fault of the testator – e.g., by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life – or of those interested in the residue, the costs may properly be paid out of the estate.
ii. If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.
iii. Unless the circumstances of the cases are such as to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail.
For the executors, those considerations inevitably lead to the following questions:
f. If we defend this claim and we succeed, then: -
i. will the Court order costs against the claimant? or
ii. will the Court order that the claimant’s costs be paid out of the estate because of some fault of the deceased?
g. If we defend and lose, then will we as executors be held personally liable for a portion of the claimants’ costs (i.e., will the defendants’ costs award be deducted from our share of the estate, or from the overall estate or residue)?
h. For the claimant(s), similar questions arise
i. If our claim succeeds, who should meet the costs award?:
i. The estate and thereby potentially reducing the overall share of the estate to which I am entitled? or
ii. The executor(s) personally in the sense that their share of the estate would be reduced for having to account for a costs award in my favour made against the executors personally?
j. If our claim fails, then: -
i. should the estate absorb only the executors’ costs? Or
ii. should the estate absorb not only the executors’ costs but also our own?
k. The Court of Appeal has confirmed that: -
i. The conduct of a claimant or defendant in a given proceeding will often have a bearing on the Court’s costs determination. For example, if a claimant refuses to accept the defendant’s reasonable settlement offer, or if a defendant fails to accept a claimant’s reasonable settlement offer or needlessly prolongs a proceeding by failing to disclose relevant information which would have clarified the strength or otherwise of the claim.
l. ii. Costs arguments always turn on the particular facts of the case. However, a key factor in determining whether or not the estate should meet any costs award is whether or not the dispute has come about as a result of the deceased’s actions, or inaction. A line of cases dealing with this question was considered by Fitzgerald J in Dodssuweit v Olivier. In that case, the following examples were given: -
i. A testator taking steps to have a will prepared but dying unexpectedly prior to that process being completed (and thus her “affairs were not fully in order”), was not considered at fault.
m. The fact that proceedings arose due to a lack of certainty in some provisions of the will was held to justify costs being paid out of the estate.
n. A testator failing to make provision for certain parties as promised amounted to “fault”, leading to costs being paid out of the estate.
o. A testator’s desire to avoid conflict, and thus failure to attend to formalities which would have made a draft will valid, was sufficient for costs to be paid from the estate.
p. The fact that the testator failed to leave a will was one factor, among others, for making costs awards out of the estate.3
q. This is not an exhaustive list of possible scenarios but serve as a guide when considering whether the particular case is one where the cause of the dispute is due to the actions of the deceased.
r. An executor’s duty is to administer the estate in accordance with the will, and to protect the interests of the beneficiaries. Should litigation commence, an executor should take advice about the claim’s prospects of success and how best to conduct any defence. As an executor and beneficiary, there is a tension between acting out of self-interest, and as responsible trustee for the estate. Executors must be cognisant of their duties in those cases.
s. Potential claimants also need a clear understanding of the prospects of success and a defined strategy to achieve the best result.
t. In either case, parties to estate litigation need to have clarity regarding potential costs liability.
u. As specialist litigators, the lawyers at Braun Bond & Lomas are uniquely positioned to provide that robust advice and strategic clarity. If you need to know the strength of your position and potential liability in an estate claim, then get in touch with our team today.