The Supreme Court recently made a landmark decision in the case of Marley v Rawlings when it decided that a professional indemnity insurer should be responsible for payment of the majority of the costs incurred by both parties in a will dispute.

Marley v Rawlings – the facts

Alfred and Maureen Rawlings had instructed solicitors to draft mirror wills for them. The couple intended to leave their whole estate to each other and then to Terry Marley, rather than to their two sons, Terry and Michael Rawlings. The wills were duly drafted but unfortunately Alfred accidentally signed Maureen’s will and vice versa and this was not noticed by their solicitors.

Maureen Rawlings died in 2003 and her estate passed to Alfred Rawlings without anyone noticing the mistake, which only came to light when Alfred Rawlings died some three years later, in 2006. Terry and Michael Rawlings contested the will and argued that it was invalid and that they should inherit their father’s estate as he had died intestate. Terry Marley issued probate proceedings. The brothers were successful in both the High Court and Court of Appeal, but the Supreme Court found in Terry Marley’s favour and held that the wills were valid despite being incorrectly signed.

Costs and why the solicitors’ professional indemnity insurers had to pay

Having made their judgment in favour of Terry Marley, the Supreme Court then had to consider the matter of costs. The usual position, and that advanced by Terry Marley, was that the brothers should pay his legal costs as he had been the successful party. The brothers, on the other hand, said that Terry Marley’s costs should be paid out of the estate or paid by the solicitor who had made the error when the wills were signed. The solicitor was covered by professional indemnity insurance and their insurers argued that the brothers should pay Terry Marley’s costs.

The Supreme Court acknowledged that even if the costs had been modest, there was unlikely to be much left in the estate after costs were paid, as the estate was only worth £70,000. The Court also noted that where the validity of a will is challenged on reasonable grounds, the costs will often be paid out of the estate. However, the Court was reluctant to order that the costs should be paid from the estate as it would reduce the amount which Terry Marley would receive, despite the fact that he had been successful.

As the dispute relating to the will had resulted from the solicitors’ error, the Court was unwilling to ignore the solicitors’ position and considered that from a common sense point of view the solicitors should bear all of the costs. Unsurprisingly, the solicitors’ insurer advanced arguments to limit the solicitors’ liability for costs, including the fact that no duty of care was owed to the brothers.

The arguments advanced by the insurers did not find favour with the Court for a number of reasons. For one, the insurers had required Terry Marley to bring the probate proceedings after he suggested that he would bring a professional negligence claim against the solicitors. The Court considered that it was not unreasonable for the brothers to fight the probate proceedings and that consequently there was a good argument to say that their costs should be paid for by the estate. However, such an order would ultimately mean that Terry Marley would bear those costs and then claim them from the solicitors in a professional negligence claim; for which the Court held the solicitors would have no defence.

Therefore, the Supreme Court held that it was appropriate to make an order that the solicitors’ insurers bear the brothers costs up to and including the Court of Appeal hearing and all of Mr Marley’s costs. The matter was complicated by the fact that the brothers’ solicitors and counsel had entered into a conditional fee agreement in respect of the Supreme Court hearing. The Court held that in respect of the brothers’ costs for the Supreme Court hearing the solicitors’ insurers should pay the solicitors’ disbursements and counsel’s base fees, provided they were willing to forgo their success fee.

Future effect: a new approach to costs in professional negligence claims?

The judgment clearly marks a departure from the usual costs rules; however, taking into account the very unusual facts of the case it is not a surprising decision. The judgment brought the matter to a swift conclusion by avoiding the need for Terry Marley to bring a professional negligence claim and for further costs to be incurred. In that sense it can be seen as following the Jackson reforms’ aims of making litigation more efficient and cost effective, since no further litigation was needed.

The decision is likely to concern insurers, particularly as they were ordered to pay some of the losing party’s costs. In the future insurers may be more cautious in requiring clients who are considering bringing professional negligence claims to bring proceedings to deal with the underlying issue. However, when large sums are at stake the insurers may decide the risk of paying both parties costs is one worth taking to avoid paying a larger sum of damages.

Whilst this decision may not lead to a change in the Court’s approach to costs, it does illustrate the wide discretion which the Court has and the range of factors it is willing to take into account when considering costs. A key consideration is to ensure that justice is done. In this particular case justice appears to have been achieved; Terry Marley has the benefit of the whole of the estate, but the brothers are not out of pocket for pursuing a claim which arose through no fault of their own and was caused by the negligence of solicitors.