HHJ Matthews costs ruling following the trial of the proprietary estoppel and probate claim in James v James & Ors  EWHC 242 (Ch) (see my post on the substantive issues here) has been published and provides a helpful reminder of the contentious probate costs rules and the consequences of failing to follow the prescribed formula for a valid Part 36 offer. The claimant son in James v James had been unsuccessful both in his claim to establish a proprietary estoppel entitling him to the family farm and in his challenge to his father’s Will; however, HHJ Matthews concluded that different cost consequences should apply to each of these issues.
Contentious probate costs
“In deciding questions of costs one has to go back to the principles which govern cases of this kind. One of those principles is that if a person who makes a will or persons who are interested in the residue have been really the cause of the litigation a case is made out for costs to come out of the estate. Another principle is that, if the circumstances lead reasonably to an investigation of the matter, then the costs may be left to be borne by those who have incurred them.”
The second of the contentious probate costs exceptions outlined in Spiers v English was relied upon by the claimant son in James v James. It was argued on behalf of the claimant that an investigation into the circumstances surrounding the execution of the Will was required given that:
- the testator was suffering from Alzheimer’s disease at the time he made his will, and there was real doubt raised about his capacity;
- both of the experts called in relation to the issue of capacity said that the case was one which was very close to the line;
- there was little interaction between the testator and the solicitor Ms Thomas, who in any event did not follow the “golden rule” of seeking a medical opinion as to capacity at the time of making the will.
The defendants resisted this application and submitted that because the claimant held a strong belief in his right to inherit, he had engaged in “distinctly adversarial” conduct. They argued that the claimant’s doubts as to the testator’s capacity were not reasonable but were firm beliefs founded on a false premise; hence, the contentious probate costs rules in Spiers did not apply.
HHJ Matthews considered that the claimant’s conduct did not go that far and this was a case for applying the second rule in Spiers, stating as follows:
“In my judgment, this case does not go so far. I accept that the claimant had a strong belief in his entitlement to inherit from his father. But I do not accept that he pursued the challenge to the will at all costs. He pursued the challenge to the will because there was a reasonable basis for doing so. There was medical evidence and factual evidence tending to suggest that the testator’s capacity was doubtful. The expert medical evidence (on both sides) reinforced that view. The fact that the so-called “golden rule” was not followed was also significant. There being no contemporary medical evidence, all that was left was for the court to decide. In my judgment, it was reasonable for the claimant to pursue the will challenge, even though, at the end of the day I have held that the testator had capacity to make his will when in fact he made it.”
Accordingly, he held that each party should bear their own costs of the Will challenge.
Part 36 offers
The defendants in James v James had made an offer to settle on terms which departed from the wording of CPR 36.13(1) in providing that the claimant was to be liable to pay the defendants’ costs of the Claims and the Counterclaim:
“up to the end of the Relevant Period or, if later, the date of service of notice of acceptance of this Offer.”
CPR rule 36.13 (1) provides that:
“… where a Part 36 offer is accepted within the relevant period the claimant will be entitled to the costs of the proceedings … up to the date on which notice of acceptance was served on the offeror.”
So, if the offer, as expressed, was accepted, the claimant would pay the defendants’ costs up to the end of the Relevant Period, whereas by rule 36.13 the claimant would pay the defendants’ costs only up to the date of acceptance within the Relevant Period.
The defendants sought to rely on the fact that whilst, strictly, there was an inconsistency with the wording in CPR 36.13, the letter should nonetheless be construed as substantively compliant with Part 36 in view of an earlier paragraph in the latter which stated that the claimant’s liability for costs will be “in accordance with CPR 36.13” and relied upon C v D  1 All ER 302, for the proposition that
“where an offer clearly expresses an intention that it is intended to comply with Part 36, the court should hold it to do so if at all possible”.
The claimant pointed to other passages in in C v D, where Rimer LJ said:
“75. … It [ie the offer] was expressly stated to be an ‘Offer to Settle under CPR Part 36’ that was ‘intended to have the consequences set out in Part 36’. Of course, that does not mean that it did in fact comply with Part 36 and therefore must, come what may, somehow be shoehorned into the confines of its four corners: a stated bid to attain a particular goal does not also mean that the goal has been attained. “
And went on to say this:
“The answer to the critical question still turns on how the reasonable man would read the offer. The relevance, however, of the claimant’s expressed intention to make its offer a Part 36 offer is that, if there are any ambiguities in it raising a question as to whether the offer does or does not comply with the requirements of Part 36, the reasonable man will interpret it in a way that is so compliant.”
In HHJ Matthew’s judgment, the difficulty for the defendants was that there was no evidence of any error on the part of the letter writer or of any ambiguity, justifying interpretation in line with the requirements of Part 36. The terms put forward in the offer letter made grammatical sense but were simply inconsistent with the rules.
Consequently, whilst this was a letter to which the court could have regard in the exercise of its discretion on costs, it was not one to which the more advantageous consequences of Part 36 applied.
Learning points for practitioners
- The exceptions to the ‘loser pays’ principle that may apply in contentious probate proceedings are alive and well.
- However, the courts will scrutinise carefully the circumstances said to merit a departure from the general rules of adversarial litigation and good reason must be demonstrated. The merits of the testamentary capacity challenge were finely balanced in this case and the fact that two reputable experts reached divergent conclusions on whether or not the testator had capacity, and agreed that his capacity was borderline, was a significant factor in favour of concluding that an investigation into the circumstances surrounding the making of the Will was required and that the claimant’s stance was justified and did not merit an adverse costs order.
- Even in cases where there are reasonable grounds for questioning the validity of a Will, which might at the outset appear to justify applying one of the exceptions in Spiers to the question of costs, in many cases there will come a point in the litigation where the doubts of the challenging party ought reasonably to have been assuaged and the challenge to the Will withdrawn, from which point they will be at risk on costs.
- Form matters when it comes to Part 36 offers. Even seemingly minor modifications can result in an offer failing to have Part 36 consequences. Accordingly, if parties want an offer to carry the full consequences of Part 36, they must ensure that they are carefully formulated in line with the wording in the rules.