03 March, 2008
A recent case, involving the family of a man who died and left his entire fortune to the Conservative Party, illustrates one of the main exceptions, in cases involving wills, which can apply to the normal rule that 'the loser pays the costs'.
Normally, the winner's legal costs are paid by the loser. This is called 'costs following the event' in legal terminology, but it means that the party in whose favour the issue is decided normally has his or her costs met by the unsuccessful party. The principle behind this is that the winner in a contested claim should not be worse off because of having to use legal proceedings to demonstrate the rightness of their argument.
There are, however, exceptions to this principle. In the case of contested wills, there are two. The first is when the cause of the argument was the behaviour of the person who drew up the will. An example of this might be where the will was inconsistent with itself or unclear as to its meaning. In this case, the costs of the legal proceedings will normally be borne out of the estate. The second exception is when the circumstances are such that it is reasonable for an investigation to be made of the circumstances surrounding the will. In this case, the costs of the proceedings will be shared between all the parties to the action.
In the case in point, a millionaire left his entire fortune of £8m to the Conservative Party and the will was contested by his family on the basis that he was not 'of sound mind' when he made the will - in legal speak, he lacked 'testamentary capacity'. Evidence was presented to the Court that the man was delusional to the extent that a challenge to his last will was more or less inevitable in any circumstances. The Court ruled the will invalid. The question of how the legal costs should be borne was then raised.
The Court took the position that it was proper in the circumstances for the Conservative Party to investigate the issue of the man's testamentary capacity once the will had been challenged. Their costs to that point should therefore be met out of the estate. In this case, both sides had appointed experts to examine the issue of testamentary capacity. Their reports were exchanged, as is normal practice. The Court ruled that it was appropriate for the costs to be shared up to the point at which the reports of the experts were exchanged.
"This case is important for families because it shows that the courts will be sympathetic as regards costs when the circumstances meet the exceptions to the 'loser pays costs' rule," says Manisha Modasia, Contentious Probate solicitor of Forbes Solicitors. "Many families are wary of challenging wills which have been created when the person making the will lacked mental capacity because they fear the costs of losing. However, when the circumstances justify it, the costs of the challenge may be borne, in whole or in part, by the estate."
"The effect of this case does not, however, undermine that the Court will be more likely to look at such costs exceptions where the value of the estate is extensive. Where the value is disproportionate to the legal costs incurred in the dispute or investigation the Court's decision could be different"