In January 2014, the Supreme Court handed down its’ judgment in the case of Marley v Rawlings and another, which related to a will that had been incorrectly signed. For an overview of the case, please see our previous blog: ‘Supreme Court upholds the Wills in a landmark case where a married couple accidentally signed each other’s wills’.
However, on 18 September 2014, the Supreme Court handed down its’ second judgment relating to the costs of the substantive appeal, and how they should be apportioned.
The key issue raised by Mr Marley (“the Appellant”), was that this was a hostile litigation and that Mr Rawlings’ estate (“the Respondent”) should pay all of his costs, in addition to their own costs. The Respondent contended that either all of the costs should come out of the Estate or should be paid by the solicitor whose error caused the wrong wills to be signed in the first place.
Further, the Respondent had instructed their legal advisers in the Supreme Court on a conditional fee agreement (CFA) basis and this gave rise to two further issues: whether the CFAs rendered the Respondent liable for any costs in the Supreme Court and, if so, whether the costs paid should include any uplift.
The Supreme Court unanimously decided that the solicitors' insurers should pay the costs of both parties in the High Court and Court of Appeal. In relation to the costs in the Supreme Court, the insurers should pay the Appellant’s costs, the Respondents’ disbursements, including the counsels’ fees, which was conditional on the Respondents’ counsel disclaiming any entitlement to their success fee under their CFA.
How did the court reach their decision?
The court dealt with the apportionment of costs in two ways. The court reasoned that where there was a reasonable but ultimately unsuccessful challenge to a will, the court would usually order that all parties’ costs come out of the estate.
Lord Neuberger said that although such an approach may have been appropriate given that the Respondent had succeeded in proceedings before the High Court and the Court of Appeal, it was impossible to ignore the original solicitor’s negligence.
He went on to reason that the Appellant had a clear case against the solicitor who made the error. A court order requiring the costs to be paid out of the estate would provide the Appellant with a claim in tort against the insurers to reconstitute the estate. To short-cut this, the appropriate solution was for the insurer to pay directly the costs of both parties.
Secondly, in relation to the uplift of counsel acting on behalf of the Respondent under a CFA, the Court’s order was based on its reading of the terms of the CFAs.
The Respondents had entered into a CFA with their solicitors using a Law Society document which stated that if they were to lose the case then they ‘may’ have been required to pay their solicitor’s costs, including their barristers’ fees.
The terms of the CFAs between the Respondent’s solicitors and counsel contained a term that the solicitors would be liable for costs if either the opposing party (to include the estate) agreed to pay or the court ordered that they pay the Respondent’s costs.
The Supreme Court ruled that there was no obligation under the CFA to pay the solicitors, as the Respondents had not won their case. However, on its reading of the CFA, their barristers might still have been entitled to recover their costs from the Respondents. The court instead ordered that the barristers were not entitled to their uplift fee, something which both barristers accepted.
The judgment has provided limited clarification in relation to the role of insurers in litigation.
In this particular case, it was the solicitor’s insurers that drove it all the way to the Supreme Court. The Court’s ruling illustrates that in such circumstances the insurer will be treated as a third party against which a costs order can be made. The decision here follows a previous line of cases where costs orders have been made against third parties.
The court was prepared to retrospectively amend the terms of the CFAs in order to achieve what it regarded as a just outcome.
Lawyers therefore need to be aware that the enforceability of CFA terms may prove difficult where clients are litigating over relatively small-sized estates. In this case, the parties were in dispute over an estate worth £70,000.
The case reminds lawyer of the need to be commercial and make a reasonable attempt to settle disputes early, especially where legal costs are likely to end up higher than the amount in dispute.