The Supreme Court has given its judgment on the costs of Marley v Rawlings following the judgment given on 22 January 2014 ([2014] UKSC 2).

Background

As we reported in January, this claim related to wills made by a husband and a wife.  They each intended to leave their estate to each other or, if the other had predeceased them, to their informally adopted son Mr Marley.  The solicitor who drafted the will (the Solicitor) failed to notice that the husband had signed the will meant for the wife and vice versa.

The wife predeceased the husband and it was not noticed that she had signed a will which was in his name.  When the husband died there was a dispute between his biological sons (the Rawlings) as to whether or not the husband had a valid will and therefore who would inherit his estate (which was worth in the region of £70,000).

In January 2014 the Supreme Court ordered that the will was valid and as a result Mr Marley inherited the estate.  The Supreme Court has now given its judgment on costs.

The costs arguments

Mr Marley argued that the Rawlings should pay the costs of the litigation in accordance with the usual rule that the losing party pays the winner's costs.  This would be, of course, in addition to the Rawlings paying their own costs.

The Rawlings contended that both their and Mr Marley's costs should be paid out of the estate.  Alternatively they argued that the Solicitor should be ordered to pay them as his error was the cause of the litigation.

The Solicitor was not a party to the litigation.  However, solicitors for his insurers were permitted to make submissions on costs.  They argued that the Rawlings should bear the costs, on the basis that: (1) a court should always be wary before making a costs order against a third party; (2) it would be odd for the Solicitor to be ordered to pay the Rawlings' costs when it did not owe a duty of care to them; and (3) it was not the Solicitor's fault that the Rawlings had chosen to fight the case.

The decision

The Court noted that whilst there were many authorities which supported Mr Marley's position there were also authorities which supported the position that, where there is an unsuccessful challenge to a will, and that challenge was reasonable, the costs should be borne by the estate.  However, if the costs were ordered against the estate, the estate would be expected to seek reimbursement from the Solicitor who in turn would seek an indemnity from the Insurers.

The Court could not ignore the conduct of the Solicitor as the dispute was caused by their mistake.  Further, the Insurers had accepted liability to Mr Marley for his costs and, when Mr Marley had intimated a claim against the Solicitor, the Insurers had required him to bring the proceedings to seek to mitigate his loss.

The Court did not consider it was unusual for a costs order to be made against a party who was funding the litigation or who was responsible for the litigation.  Further, the Court considered the Solicitor had no defence to a claim by Mr Marley.  The Court did not consider that the decision by the Rawlings to fight the litigation was unreasonable and therefore it would be harsh if they had to pay any substantial costs.  Therefore, the Court was of the view that there was considerable force in the argument that costs should be ordered against the estate.

The Court considered that an order that the Insurers pay the costs was justified on the basis that, whether or not the estate was substantial, the estate would look to recover any loss from the Solicitor.  As the Insurers would ultimately fund this it was acceptable for the Court to order that they should pay the costs.

The Rawlings had instructed their advisers for the Supreme Court hearing on CFAs.  The first issue for the Court to determine was whether, as the Rawlings had lost, they had a costs liability.  If the answer to that question was yes, was the uplift on those costs recoverable?  To answer these questions the Court reviewed the terms of the CFAs with both the solicitor and counsel.

The Court held that there was no liability to pay solicitors' fees under the CFA as the Rawlings had not "won" the litigation.  However, the Court was mindful that the terms of the CFA still obliged the Rawlings to pay disbursements (which would include counsel's fees which were themselves subject to a CFA including an uplift).

The CFA with Counsel provided that fees would be payable and the uplift triggered if the court ordered another party to pay the Rawlings' costs.  As such, the Rawlings had a liability for disbursements.

In respect of the uplift on the disbursements, the Court considered that this was a case which was a very long way from being normal.  The Court thought that it would be inappropriate if any costs order resulted in the unsuccessful party's counsel receiving a success fee.  However, if the Court ordered the uplift was not recoverable counsel would be entitled to seek this from the Rawlings.

Given this, Counsel for the Rawlings agreed to disclaim any entitlement to the uplift or success fee and as such the Court ordered that the Insurers pay Mr Marley's costs, the Rawlings' costs up to the Court of Appeal and the Rawlings' solicitors' disbursements of the Supreme Court hearing (on the basis that no uplift was sought by counsel).

Conclusion

This is not an unusual decision as there have been previous cases where costs orders have been made against third parties.  Given the Insurers had provided an indemnity to Mr Marley they were funding his fees and were therefore akin to a third party funder.  Furthermore, they had required him to bring the proceedings.  As such, it is not surprising that the Court was minded to order the Insurers to pay the costs.  Further, ordering the Insurers to pay enabled the Court to prevent the need for the estate to embark on further litigation to seek reimbursement from them.

The Supreme Court's decision on the case itself was welcomed by solicitors as it demonstrated that the Court would take a wide approach to rectify a will.  However, this costs judgment reminds solicitors and their insurers that whilst rectification proceedings may be successful, there will be a high costs liability if the matter is not resolved quickly. The case is also an example of the Court being willing to delve into the detail of a party's CFA and, effectively, require its representatives to vary its terms in the interest of achieving a just outcome.