Exceptional and exceptions: Leonard v Leonard – a costs perspective

An unusual issue-based costs order has been made by Mrs Justice Joanna Smith in a case where the claimants have the benefit of a successful pre-action Part 36 offer. The order applied common law probate exceptions (which are available, in probate cases only) to depart from the general rule on costs at CPR 44.2(a) that costs should follow the event (i.e. that the unsuccessful party will be ordered to pay the costs of the successful party) and further allowed the parties to apply for an exceptional non-party costs order against the firm who drafted the testator’s second Will.

In Leonard v Leonard [2024] EWHC 321(ChD), a probate dispute, a claim was brought by Mr Jack Leonard’s (deceased) biological children against his second wife and her family (i.e. Mr Leonard’s step-children and step-grandchildren). The court found in favour of the Claimants and pronounced a 2007 Will valid and held that Mr Leonard had lacked testamentary capacity in respect of a later 2015 Will (“Probate Dispute”). The third claimant (in her capacity as co-executor of the 2007 Will) had also challenged two lifetime gifts made by Mr Leonard prior to the 2015 Will but this was later conceded (“Gifts Dispute”).

Issue 1: Gifts Dispute

The third claimant conceded her claim to repayment of the lifetime gifts, following a change in expert opinion as to Mr Leonard’s capacity at the time the gifts were made. As a result, the third claimant was ordered to bear her own costs and the Defendants’ costs of the Gifts Dispute on the standard basis.

The parties were at odds as to the significance of the Gifts Dispute (the claimants contended that only costs of circa £10,000 applied whereas the defendants sought a 60/40 split on the entire costs claim) and, as such, this was an occasion where the court felt it appropriate to make an issue-based order. Generally, the court favours percentage or specific date range orders due to the impracticalities of identifying and apportioning costs to any particular issue. Indeed, the CPR requires that when the court is considering making an order for a distinct part of the proceedings (CPR 44.2(6)(f)) that it should first consider making an order for a proportion of another party’s costs (CPR 44.2(6)(a)) or for costs from, or until, a certain date only (CPR 44.2(6)(c)). For that reason alone, the order of Mrs Smith is unusual.

Issue 2: Part 36 offer and whether it was a genuine attempt to settle

In respect of the Probate Dispute, the claimants’ case was that they were the successful party and that, in accordance with the normal rule, the defendants should pay their costs. The claimants had submitted that, from expiry of the relevant period (i.e. 21 days after the Part 36 Offer was made), the consequences set out in CPR 36.17(4) must apply, namely indemnity costs, an enhanced rate of interest on those costs, and a further amount calculated under CPR 36.17(4)(d)(ii). Prior to that date, the claimants sought an order for costs on the standard basis.

The defendants sought to rely solely on CPR 36.17(5)(e) in advancing the argument that it would be unjust to apply the consequences set out in CPR 36.17(4) as they contended the offer was not a genuine attempt at settlement.

The judge held that determination of whether a Part 36 offer was a genuine offer of settlement must be considered at the time it was made and free from the hindsight afforded by the outcome of trial. The court considered that the claimants’ offer to give up the claim to repayment of the gifts was a genuine concession, which represented a real attempt to settle the claim. It was not a request for total capitulation on the part of the defendants.

Issue 3: Should the probate exceptions apply to displace the general rule?

When applying the general rule on costs at CPR 44.2, the judge went on to note that “in probate cases only, it is also necessary to consider whether the court should be guided in the exercise of its discretion by two long-established common law exceptions which have survived the introduction of the CPR. These exceptions were summarised in Kostic v Chaplin [2007] EWHC 2909 (Ch) and Perrins v Holland [2009] EWHC 2556 (Ch).

The exceptions “allow good cause to be shown why costs should not follow the event” and require the court to ask:

(1) whether the litigation was caused by the testator or a beneficiary. If so, the court may order the unsuccessful party’s costs to be ordered out of the estate; and

(2) whether the circumstances, including the knowledge and means of knowledge of the opposing party, led reasonably to an investigation of the matter. If so, the court may make no order as to costs…”.

Mrs Justice Smith held that the second exception was engaged in the period up to and including the mediation. She was persuaded that, during this period, it was reasonable for the defendants to undertake investigations following receipt of the Letter of Claim as the first defendant’s detailed knowledge could not be relied on due to her lack of capacity. As such, the parties were ordered to bear their own costs up to and including the mediation. Whilst it is not unusual for the court to adopt an approach which will provide fairness between the parties, an order such as this (particularly where indemnity costs are in play) is exceptional (even in probate cases) and even less likely to be seen in a case where probate exceptions do not apply.

Issue 4: Third party costs order

At the end of the hearing, the claimants drew the judge’s attention to the procedure invoked in Key v Key [2010] EWHC 769 (Ch) whereby Briggs J ordered that the solicitors who had been found wanting in their preparation of the testator’s will be joined to the proceedings for the purposes of determining whether they should be liable for the costs. At the defendants’ invitation, the court made an order that any party wishing to apply to the court to join the firm who prepared the Will to these proceedings for the purposes of making a non-party costs application against that firm should do so within three weeks of the order.

If you have any queries regarding the content of this article or wish to discuss any issue regarding costs, please contact Sarah Burwood or Melanie Bonté to see how Birketts can help.