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Solicitor’s insurer liable for costs of negligently drafted mirror wills


In the recent Supreme Court case of Marley v Rawlings and another, a solicitor’s insurer has been ordered to pay the costs of both parties in litigation after mirror wills were incorrectly executed as a result of a solicitor’s negligence.  The insurer was ordered to pay both parties costs of the action to rectify the wills on the basis that the insurer had funded the litigation by urging one of the parties to commence litigation in order to mitigate the insured solicitor’s position.

The insurer had admitted the negligent solicitor’s liability from the outset.  Therefore it was inevitable that if the will had been upheld and if the Supreme Court had ordered the costs to be paid out of the estate, the beneficiary would have had the right to seek damages from the solicitor’s insurer to reconstitute the estate that had been depleted by the costs of the litigation.  The Court therefore held that it was logical to order the insurer to pay the costs of the litigation directly to the parties.  This is a common sense approach that is now being utilised by the Courts when invalid wills are drafted by solicitors.

The general rule for costs in most proceedings is that the losing party pays the winner’s costs.  However, the Courts have a wide discretion when it comes to determining costs.  The power to award costs is derived from section 51 of the Senior Courts Act 1981.  This states that the courts have the power to order a party to pay another party’s costs “of and incidental to the proceedings”.  It also gives the Court power to make costs orders against non-parties.

The costs position can be more complicated in regards to will rectification applications particularly when these are necessitated by the negligence of a solicitor who drafted a will and/or supervised the execution of a will.  In those circumstances, the Court often orders costs to be paid from the testator’s estate so that the successful party can then claim damages in negligence against the solicitor to make up the shortfall caused to the estate.  However, to avoid the additional costs and time of a separate negligence action, the parties can sometimes agree beforehand with the solicitors that they will cover the costs.  This shortcut solution has now been taken one step further by holding that the negligent solicitor’s insurer should be directly responsible for all the parties’ costs.

In this case, Mr Marley won his appeal in the Supreme Court.  Therefore Mr Marley asked the Supreme Court to order that his costs be paid by the Rawlings as they had opposed his appeal.  The Rawlings argued that their costs and Mr Marley’s costs should either be paid from the estate or by the solicitor who had negligently supervised the execution of the wills.  The Rawlings had funded their own costs in the High Court and the Court of Appeal on a private fee paying basis.  However, they had then entered into a Conditional Fee Agreement (CFA) with their solicitor for the Supreme Court proceedings.  The Rawlings’ solicitor had then entered into a CFA with the Rawlings’ barrister for the Supreme Court Hearing.

Lord Neuberger, who gave the leading judgment, held that where the validity of a will was being challenged and the challenge was reasonable (as in the Rawlings’ case) and the validity of the will was based on an error in the drafting or execution of the will, the Court would often order that costs be paid out of the estate.  However, in cases where the estate is modest (as was the case here because the estate was only worth approximately £70,000), Lord Neuberger said that Courts should think long and hard before making such an order as it would deprive the successful party of any benefit from either the litigation or from the estate.  In Lord Neuberger’s view, common sense dictated that the solicitor whose fault it was should be made to pay the parties’ costs.  This is on the basis that the solicitor’s negligence caused the litigation in the first place.  In those circumstances, therefore, ignoring the CFA element of the Rawlings’ fees, the insurers should pay all of the costs of Mr Marley and the Rawlings.

The Rawlings’ CFA was drafted on the basis that their solicitor would only be paid if the Rawlings derived benefit from pursuing the claim.  If the Rawlings lost, they would only have to pay disbursements (court fees and the like).  Lord Neuberger held that no benefit had been derived from the appeal.  However, the Rawlings could be liable for disbursements which arguably included the barrister’s fees.  The CFA between the barrister and the solicitor provided for counsel’s fees to be paid if either Mr Marley or the estate was ordered to pay the Rawlings’ costs.  On this analysis, the insurer was liable to pay for the Rawlings’ costs save for the success fee payable on the barrister’s fees which the barrister agreed to waive.

This case shows the pragmatic approach the Court’s take in dealing with costs orders when rectification of a will is involved.  This case may also encourage insurers to agree to pay costs automatically when a solicitor’s negligence has caused the litigation in the first place.

Myerson Solicitors LLP provides specialist advice relating to wills, probate, probate disputes, inheritance tax planning and powers of attorney to clients in Manchester, Cheshire and further afield.  Please contact us today on 0161 941 4000.

 

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