England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION
(MR DAVID MACKIE QC
(Sitting as a Deputy Judge of the Chancery Division)

		Royal Courts of Justice Strand, London, WC2A 2LL
		1st July 2003

Lord Justice Carnwath:

Introduction

1. Emma Woolnough, and her brother Len, died (both in their 90s) in March 1992 and November 1993, respectively. Their principal asset was a house at 1 Stanley Road, Brighton, where they had lived together for many years. Neither had married or had children. Their niece, Dorothy Sherman (also known as Carole), who lived in Canada, died more than ten years before them. She had three children, Claudia, David and Robert ("Buddy") Sherman. (Claudia is also referred to in the papers as Ms Borden.) Claudia lives in Canada; her brothers in the USA.
2. In 1981 Emma and Len made wills in similar form, under which the house would pass to the survivor for life and thereafter to Dorothy, or her three children. That was Emma's last will. Apart from a possible share in the house, which was one of the matters in dispute in these proceedings, Emma's estate was insolvent.
3. Len went on to make other Wills. In January 1989 he made a Will in favour of Claudia and Robert. More significantly, on 19th March 1993, after Emma's death, he made another will which cut out the family altogether. He appointed Mrs Perkins, his next-door neighbour, as executrix; and gave £500 each to Mrs Perkins and her son, the residue to be shared between what is now Cat Welfare Sussex, and the Guide Dogs for the Blind Association ("the charities"). After Len's death, Mrs Perkins obtained probate in common form on 13th January 1994. In that capacity, she sold the house in 1995 for £30,000. That sum with interest represents the major part of Len's estate (now totalling some £42,000 after expenses), which ten years after his death has yet to be distributed.
4. The appellants, Fitzhugh Gates ("FHG"), are a firm of solicitors in Brighton. They (or their predecessors) have acted for the family for many years. They acted for Emma and Len in making their various wills. Two of the partners were and are executors of Emma's estate under her 1981 will. The firm has also acted throughout as solicitors for Mrs Perkins, as executrix of Len's estate under the 1993 will.
5. The present appeal (for which permission has yet to be granted) concerns a wasted costs order against that firm, made by David Mackie QC, sitting as a deputy High Court judge, in respect of proceedings brought by Mrs Perkins, as Len's executrix, to which Claudia was the principal defendant. The case before the judge took the form of an appeal against that part of an Order of Master Moncaster, dated 14th July 1999, by which he ordered that the costs of the proceedings be paid out of the proceeds of sale of the house. The judge substituted an order making FHG liable for all the costs (over £1,750) on the indemnity basis. His grounds for making the order were, in summary, that the form of the proceedings was misconceived, that FHG had failed to inform Claudia of the Master's indication to that effect, and more generally that they had they had failed to take proper steps to avoid a conflict of interest in their dealings for the two estates. The grounds of FHG's proposed appeal, in summary, are that the order was made without jurisdiction and without regard to the principles governing such orders, and was in any event unjustified on the merits.
6. Claudia, the eldest sibling, has taken the lead in the present dispute ever since Len's death in 1993. Her brothers do not appear to have taken any direct part until recently. They were named as co-appellants in the appeal to the judge, but he treated it as an appeal by her alone, because the brothers had not been named as respondents in the proceedings. The brothers have also been named as co-claimants in negligence proceedings against FHG commenced in May 2002. Their personal views of the matter are not apparent from the papers before the court, but Miss Lonsdale, appearing for Claudia, explained that they have been used to follow their sister's lead. Salusbury's letter of 18th May 2000, when they were first instructed for Claudia, said that the brothers had given their sister authority to deal with the matter.
7. It is easy to understand the emotions aroused in Claudia by the discovery of Len's change of his will. In her evidence, Claudia describes her close relationship in the past with her English relations, including Emma and Len, her regular visits to them, and her shock at discovering his apparent change of attitude after Emma's death. Not surprisingly, perhaps, she suspected that this was due to his age and mental condition, and the influence of those around him at the time. Her suspicions were reinforced by the apparently hostile reception she and her brother Buddy received when they visited Mrs Perkins in January 1994. On the other hand, Mrs Perkins' side of the story is apparent from a long letter she wrote to Buddy in January 1994, which told of her close friendship with Len, and sought to explain the reasons for the bequests in his last will.
8. These strong feelings, at least on Claudia's side, set the tone for the correspondence over the next four years until the commencement of the proceedings, and subsequently. Unfortunately, they were not matched by any continuity or consistency in her legal representation or the conduct of her case. In order to understand the form of the proceedings and FHG's conduct in relation to them, it is necessary to review the history, and the course of the proceedings in some detail.

Pre-action history

9. From an early stage, following Len's death, two issues of substance were raised by Claudia and her advisers. The first was whether the interests of Emma and Len, having originally been held on joint tenancy, had (by virtue of the 1981 wills or otherwise) been severed so as to become tenancies in common ("the severance issue"). If so, Emma would at her death have had a separate beneficial interest in half of the property, which would have passed to her estate, of which Claudia was a beneficiary. The other issue was whether Len's 1993 will had been vitiated by lack of testamentary capacity or undue influence ("the capacity issue"). If this had been established, Claudia would have benefited under whichever of his earlier wills was upheld.
10. In February 1994, she instructed English solicitors, Griffith Smith & Conway (GSC). In March FHG wrote to them, enclosing a letter from Len's doctor (Dr Parikh) confirming his view that Len had testamentary capacity at the time of the 1993 will. GSC were still awaiting instructions. At the same time, Claudia was taking advice from a Canadian lawyer, James Taylor, who wrote to FHG on 28^th March 1994, dealing principally with the severance issue. FHG replied suggesting that Counsel's opinion should be obtained. Nothing further was heard from Mr Taylor. GSC wrote on 25^th April 1994 recording (without further details) Claudia's view that Len "lacked testamentary capacity and/or was subject to undue influence from Mrs Perkins", and asking for information on certain points. Having learnt from FHG of Mr Taylor's involvement, they said they would seek further instructions from their client. On 23^rd June, FHG sent them a copy of an opinion of Counsel (Mr Monnington) that there had been no severance. On 27^th June GSC wrote that they were no longer instructed. In the meantime, Claudia seems to have been making direct approaches to one of the charities.
11. By 11^th August 1994, GSC had been re-instructed. They wrote again questioning Len's capacity, and challenging counsel's view on the severance issue. They stated that, unless a "reasonable settlement" were proposed Claudia would "pursue the matter through the Courts". In their reply, FHG noted that any such settlement would be a matter for the residuary legatees, subject to approval of the Charity Commissioners. Further correspondence followed, and further information was provided by FHG, including a statement as to testamentary capacity from their employee (Dorothy Drewitt) who helped Len prepare the 1993 will.
12. GSC also obtained Counsel's opinion (from Miss Lonsdale) on the merits of her claims, and the procedure for pursuing them. (This was later disclosed by Claudia before the Master.) Miss Lonsdale explained the relevant legal principles; expressed the view that to pursue a claim based on undue influence was a "hopeless task"; and outlined the evidentiary difficulties Claudia faced on the capacity issue given that "the presumptions… are against her and she has no real evidence to give". She had insufficient information to advise on the severance issue. She suggested that it was worth pursuing the capacity claim "for a little longer in the correspondence"; but made clear that, if Claudia wanted to take it beyond that, it would be for her to commence a probate action to set aside the previous grant:

"… if the will has already been proved in common form, the person challenging the will must commence a probate action for the revocation of the previous grant: Re Jolley [1964] P 262. As the will has already been proved in common form, Miss Borden would have to commence a probate action to challenge it. This should only be done if there was a real chance of success."

13. On February 1995, in response to a chasing letter from FHG, GSC wrote to say that their client "does wish to proceed in this matter", but that they were awaiting funds. There was then silence until October 1995, when, in response to a further chasing letter from FHG, GSC asked them to correspond with Claudia direct. She herself wrote on 2nd November 1995 saying that she was "most certainly pursuing a claim" against FHG and Mrs Perkins, that she was proceeding with the claim "at this very moment", and that they would hear from her solicitor "promptly". This was followed by a letter of 20^th November, from a Mr Audi Gozlan, writing under the name of a Montreal firm of lawyers, Amar Kugler Elhadad, saying that they had been instructed; that they were "assessing the file"; and that they would "contact you as soon as possible to advise you of her position".
14. Having heard nothing further from them, FHG wrote on 5^th February 1996, saying that they would advise Mrs Perkins that "your client's behaviour is vexatious", and that she should apply to the court for an order that the estate should be distributed in accordance with Len's will. They added:

"Obviously, this is going to cause delay and expense and it would be much simpler if your client either confirmed that she has no claim on the Estate or alternatively pleaded any claim she may have in a clear and precise form".

15. Mr Gozlan responded on 19^th March, this time under his own name, saying that his client was taking "proper measures" in preparing her case; that she had reason to believe that "(FHG) have misrepresented her and have been negligent in pursuing this case ethically"; and that he would contact them "shortly". He wrote again on 27^th May, enclosing copies of various documents, including an earlier letter from Dr Parikh, and extracts from scientific journals on mental disorder, which, he said, showed that Len lacked testamentary capacity. He invited an reasonable offer of settlement, but stated that otherwise "we have been instructed to immediately resort to litigation…" FHG replied on 10^th June, rejecting his contentions. On 31^st July, he wrote enclosing, without further comment, a long letter from Claudia (dated 7^th July) setting out her own perception of the history, but giving no indication what legal steps she intended to take. FHG responded to Claudia in September saying that the executrix and beneficiaries would have to be consulted.
16. On 17^th January 1997, FHG wrote to Mr Gozlan saying that the matter had been considered by all parties, who had agreed that no payment should be made to Claudia. They continued:

"In the circumstances our instructions are to require your client to either confirm that she renounces all or any claims against the Estates of Emma Woolnough or Len Woolnough of whatever nature, or to commence appropriate proceedings in the English Court within 28 days from receipt of this letter.

If your client fails to do either of the above within the specified period, then we have instructions to apply to the English Court for Directions.

We would put you on notice that your client will be at risk as to the costs of such an Application to the Court as this action will only be required because your Client had indicated that she wished to bring a claim but failed to pursue it having had considerable length of time to do so."

No response was received until 9^th May 1997, when Mr Gozlan wrote to say that he was in contact with solicitors in England to represent her case. Nothing further was heard from him, or any English solicitors on her behalf.

17. On 20^th January 1998, FHG commenced the present proceedings by Originating Summons on behalf of Mrs Perkins as Executrix, having obtained permission to serve on Claudia out of the jurisdiction. On 13^th July 1998, Claudia wrote indicating that she had changed her address, and asking to be bought up to date with developments since the previous October. There was no mention of any lawyer acting for her. FHG sent her "by way of service" the Originating Summons and supporting documents. On 21^st August, GSC reappeared on the scene, saying that they had been asked to go on the record for Claudia, and were seeking legal aid; and asking for an extension of time. Legal aid seems to have been refused in about November, and on 3^rd December GSC informed FHG that they should deal with Claudia direct. Thereafter, Claudia represented herself in the proceedings, and continued to do so until May 2000, when her present solicitors, Salusburys, became involved.

The proceedings before the Master

18. The Originating Summons, which had been settled by Counsel, was issued on behalf of Mrs Perkins as executrix of Len's estate under the 1993 will. It named Claudia Borden as first respondent; the only other named respondents were the beneficiaries under the 1993 will. The substantive relief sought was:

"1. An inquiry as to whether… Claudia Borden Sherman is entitled to any and if so what interest in either the Testator's Estate or in any and if so what assets therein comprised.

2. All further or other necessary declarations, directions, inquiries or relief…."

It was supported by an Affidavit from Mr Watson of FHG as solicitor for Mrs Perkins, setting out the background, and exhibiting the correspondence with Claudia and her various advisers. He summarised the position as follows:

"On the basis of the said correspondence it is my belief that Ms Borden seeks to claim the Testator's estate by reference to an earlier will of his dated the 9^th January 1989, under which she was the sole beneficiary, or alternatively to claim some part of the assets representing the net proceeds of sale of the property, 1 Stanley Road, Brighton, as one of the residuary beneficiaries under the will dated the 27^th February 1981 of the Testator's sister Emma Maria Woolnough. Ms Borden has been sent copies of a letter dated the 8^th March 1994 from the Testator's General Practitioner Dr J K Parikh vouching for the Testator's testamentary capacity at the time of making the will, and also of an Opinion of Counsel confirming that on the evidence the estate of Emma Maria Woolnough is not entitled to any share of the proceeds of sale of 1 Stanley Road, Brighton. Nonetheless Ms Borden through her Canadian lawyers continues to assert that she has claims to the estate or to assets therein comprised."

He indicated that the other respondents had agreed that the estate could not property be distributed without the allegations "being disposed of in accordance with an order of the court."

19. In November 1998, in response to an order to file evidence, Claudia, who by this time was acting for herself, faxed to the court a long statement. This related entirely to the capacity issue. By reference to the history, to contemporary documents, and to articles from medical journals, she sought to establish that Len "suffered from a medical condition that would make him vulnerable to the influence of the (respondents)…" during the last months of his life.
20. A hearing before the Master was fixed for 27^th January 1999, and notice was sent to Claudia on 12^th January. She sent a fax on 21^st January to say she would be unable to attend because of the short notice, but asking the Master to take account of her statement, and also enclosing a copy of Miss Lonsdale's 1994 Opinion. At the hearing before Master Moncaster, the matter was adjourned generally with liberty to restore. FHG's manuscript notes of the hearing show that the Master commented on the two principal issues, severance and capacity. He considered that he could decide the former, but not the latter, which would require a probate action. On the former, he expressed a preliminary view, contrary to the 1994 Counsel's Opinion, that the interests of Emma and Len had been severed when they made their 1981 wills. He gave no directions as to whether or how these views were to be communicated to Claudia.
21. In a letter to FHG, dated 10^th February, she noted that she had been informed by the court that the matter had been adjourned, and asked them "to explain your position at this time". FHG responded confirming that the hearing had been adjourned, and that they expected to restore it shortly and would advise her of the date. In response to a telephone call from Claudia, they explained simply that "the Master wished to hear further argument in support of the application and was not prepared to make a final order at that stage". In May they made a without prejudice offer, on behalf of Mrs Perkins and the residuary beneficiaries, to settle her claim for £5,000. This was rejected by Claudia, who wrote on 4^th June:

"I have not remained adherence to my principals for six-years so that I could make some sort of bargain out of my inheritance…. I cannot put a price on the truth or principal and there-for I cannot accept your clients offer." (sic)

22. A new hearing was fixed for 14^th July 1999. Claudia came from Canada to attend in person, expecting to argue the capacity issue. Mrs Perkins was represented by Counsel (Mr Studer), who had submitted a lengthy skeleton argument dealing principally with the issue of severance. He commented briefly on Claudia's evidence on the capacity issue, submitting that none of it went any way to subvert the 1993 will, and that there was no evidence that Len was coerced into making the will.
23. The Master gave a reasoned judgement, of which there is an approved note. He repeated his view that he could not decide the capacity issue. He noted that neither Claudia nor the executrix had brought proceedings suitable to decide that issue, which could only be done by a probate action:

"I think that it is not possible for me under the guise of an inquiry to decide the question whether or not the 1993 will is invalid… At the moment that will is a valid will as seemingly it has been admitted to probate."

He referred to the special procedures involved in a probate action, and commented:

"If the executor is not confident or not willing to act on a grant in common form, then it is necessary to apply for a grant in solemn form, though after this long delay it is much to be hoped that that will not be seen as necessary."

He then considered the severance issue, and confirmed his earlier view that the interests had been severed in 1981. He made a declaration, accordingly, that the proceeds of the sale should be held by the claimant as to one half for Emma's estate.

24. The issue of costs is not covered by the approved judgment. Counsel's note shows that Claudia made a submission that FHG and Mrs Perkins should be responsible for the costs. The Master ordered that the costs of all parties should be paid out of the proceeds of the sale before division, subject to detailed assessment in default of agreement. There is a transcript of the Master's reasoning on costs:

"It is quite clear that there was a serious question to be decided as to whether or not the joint tenancy had been severed, and it is therefore quite clear that there was no impropriety on the part of the executor or the solicitors in taking proceedings for that purpose. Therefore, in my view, it is right that the costs of the proceedings should be borne by the proceeds of the sale of the house.

It is true that much of the evidence has been directed to the other question as to capacity, but that was put in issue by Ms Borden and therefore she cannot, as I see it, complain that costs have been incurred in dealing with that matter."

25. There was no appeal at the time against any part of that order, nor any application for a stay. There followed a long period of confused and inconclusive correspondence, first with Claudia in person (although she claimed in a letter of December 1999 to have received unspecified "legal advice" on FHG's conduct); and then (from May 2000) with Salusburys. It is impossible, in a short summary, to give more than a flavour. FHG sought agreement on their costs, which were eventually assessed on 14^th December 2000 at £13,480, and a certificate to that effect was issued. Claudia continued to assert that Len had lacked testamentary capacity, but took no steps to set aside the probate. Solicitors for the charities wrote in March 2000, referring to the continuing "deadlock", and calling on her to start proceedings to challenge the will or withdraw her claim. Following their instruction in May 2000, Salusburys took up the complaint of misconduct by FHG, and challenged their right to any costs.
26. In November, they supplied FHG with draft Particulars of Claim (signed by Miss Lonsdale), running to over 100 paragraphs, alleging negligence by FHG in its dealings for the family dating back to 1981, and also seeking revocation of the 1994 probate of Len's "pretend will" of 1993. On 6^th December 2000 they said that proceedings would be issued the next day. FHG described the allegations as "statute barred, prolix and bad in law", and said that, if served in that form, they would be met with an application to strike out.
27. However, on 7^th December 2000, instead of commencing new proceedings, Salusburys lodged an application for permission to appeal out of time against the Master's costs order. The main reason given for the failure to appeal sooner was that it had been the responsibility of the FHG partners, who were executors of Emma's estate, to appeal. Permission to appeal was initially refused by Evans Lombe J on paper, but granted by him at a without notice hearing on 1^st February 2001. (There does not appear to be any record of his reasons for giving permission.) That is the appeal which led to the hearing before the deputy-judge on 20^th December 2001, and the judgment which is before us for consideration.
28. In May 2002, Salusburys issued new proceedings, substantially in the form of the draft Particulars of Claim supplied in 2000. They were met, as promised, by an application to strike out, dated 6^th September 2002. As I understand it, that is awaiting a decision on the present appeal.

Comment on the history

29. The judge took a surprisingly charitable view of Claudia's conduct in the pre-action period. He said:

"She instructed lawyers in Canada and England but with limited resources seemed not in a position to take her opposition to the Will as far as litigation. She has taken legal advice intermittently, when funds permit, but is for most purposes a litigant in person."

With respect to him, I regard this as a wholly inadequate reflection of Claudia's role in the dispute.

30. I would not wish to underestimate the difficulties faced by Claudia in pursuing her sincerely-felt grievance in a foreign country. However, it would be wrong to assume, without more evidence, that lack of funds was the main problem. Her affidavit before the judge gave very limited evidence of her own resources, and none about those of her brothers. Before us, Miss Lonsdale did not suggest that her brothers lacked means.
31. More importantly, the judge's comment seems to ignore the difficult position into which Claudia's conduct placed Mrs Perkins, as executrix, and FHG as her advisers. There is nothing to show why Claudia, whatever her means, failed to keep FHG informed of her intentions, or of her changes in representation (or even in 1998 of her change of address); nor why having threatened proceedings so often from as early as August 1994, she did nothing. This was not for lack of informed advice. Miss Lonsdale's opinion, in October 1994 (when GSC were still acting for her), had made quite clear that the initiative lay with her to start a probate action if she wanted to challenge the will, and also had underlined the evidentiary difficulties she faced if she did so. If, in spite of that, Claudia thought she had a case, there was no reason for her to delay in starting proceedings.
32. In my view, her conduct in that period, in the absence of any explanation, was rightly described by FHG as "vexatious". It is even more extraordinary that the pattern continued, not only after the Master had made clear that he could not determine the capacity issue, but even after she was being advised by Miss Lonsdale (once again) and Salusburys from May 2000. It was not until May 2002, almost three years after the Master's decision, and almost nine years after Len's death, that proceedings were begun in terms challenging the validity of the will, and then only as an apparently incidental part of a wide-ranging attack on FHG's conduct as solicitors over more than 20 years.

Permission to appeal

33. The judge refused FHG permission to appeal to this court. When the application for permission to appeal came before me on paper, there was a letter from Salusburys claiming that the application for permission to appeal (made at the end of October 2002) was out of time, and raising other objections to the grant of permission. I accordingly adjourned the application to be heard on notice, with the appeal following if permission were granted.
34. The argument that the appeal was out of time was based on the contention that the substantive part of the judge's decision was handed down in December 2001, and that time should be taken as running from then. However, for various reasons, the remaining parts of the decision could not be not completed for some months. Presumably in order to resolve any doubts on the point, the judge's final order specifically directed that time for any application to the Court of Appeal should run from 17^th October 2002. There is no appeal from that part of the order. Accordingly, the objection is in my view misconceived.
35. Apart from that point, I would have granted permission to appeal. That view is confirmed by the reasons which follow. Like the judge, I do not think it is fair to regard this as a second appeal, since the issue of wasted costs, even if touched on before the Master (see below), took on a completely new emphasis and direction before the judge.

Jurisdiction

36. Before the judge, and before us, there was some discussion as to the judge's power to make a wasted costs order, in circumstances where no such order had been sought in the court below. The judge held that he had such power, by virtue of CPR Part 52.10, which, in relation to an appeal, gives the appeal court all the powers of the court below. He also rejected a submission that it was inappropriate for the matter to be dealt with by him:

"A distinct but related point is the submission that wasted costs orders should only be made by the judge dealing with the matter and immediately afterwards, not by a separate tribunal at a much later date. It is obviously desirable for the judge who determined the case to decide whether or not a wasted costs order should be made. But in this case the Master has no further jurisdiction and it would be time consuming and expensive to repeat this hearing before him even if he still had power to deal with the matter. It is also a case where criticism is directed at the bringing of the proceedings in the form they took rather than to the quality and quantity of advocacy. While I agree that the authorities suggest that this jurisdiction should be normally exercised promptly and by the trial judge this is guidance not a rule. If justice requires it this court may make a wasted costs order."

37. This aspect of the appeal appears to have proceeded on the mistaken basis that no such application had been made before the Master. As has been seen, Claudia did apply for an order that the costs should be paid by FHG. Although not couched as an application for wasted costs, it was sufficient in my view to put the point in issue, and it removes any technical doubts as to the judge's jurisdiction on the appeal. On the other hand, it is also relevant that the issue was considered by the Master, and decided by him in favour of FHG, on the basis that the proceedings were reasonably brought. As the judge recognised, the appeal court should not interfere with his conclusion unless beyond the ambit of reasonable disagreement. (I should also note Miss Peacocke's submission that the judge's comment as to the Master's lack of jurisdiction was in conflict with the recent decision of Patten J in Melchior v Vettivel 25^th May 2001, unreported.)
38. Apart from questions of jurisdiction, the procedure by which the matter came before the judge was highly unusual. It is surprising to find permission for an appeal against costs being granted a year and a half after the decision appealed against, and on a without notice application. It is equally surprising to find such an appeal being used, by solicitors instructed after the original hearing, as a vehicle for mounting a wide-ranging attack on the handling of the case by the solicitors of the other party. As has been emphasised many times, wasted costs applications need to be handled with great care if they are not develop into costly satellite litigation. This will usually be best achieved if the application is dealt with as soon as possible after the judgment in question, by the judge who heard the case; and, where this is not possible, the judge has a discretion to refuse to allow it to proceed (see e.g. Re Freudiana Times 4.12.95). In this case, permission to appeal having been granted, the judge considered the application on its merits, and I will do the same. However, I should not be taken as endorsing in any way the procedure which was adopted.

The judge's reasoning

39. The power to make a wasted costs order is found in Supreme Court Act 1981 s 51, as substituted and amended by later legislation. Sub-sections (6) and (7) provide:

"(6) In any proceedings mentioned in subsection (1), the court may disallow, or (as the case may be) order the legal or other representatives concerned to meet, the whole of any wasted costs or such part of them as may be determined in accordance with rules of court.

(7) In subsection (6), 'wasted costs' means any costs incurred by a party—(a) as a result of any improper, unreasonable or negligent act or omission on the part of any legal or other representative or any employee of such a representative; or (b) which, in light of any such act or omission occurring after they were incurred, the court considers it is unreasonable to expect that party to pay …

(13) In this section 'legal or other representative', in relation to a party to proceedings, means any person exercising a right of audience or a right to conduct litigation on his behalf." 

40. The judge directed himself, by reference to Ridehalgh v. Horsefield [1994] Ch 205, as to the appropriate tests for a wasted costs order, which he summarised:-

(a) Has the legal representative of whom complaint was made acted improperly, unreasonably or negligently?

(b) If so did that conduct cause the applicant to incur unnecessary costs?

(c) If so, is it, in all the circumstances, just to order the legal representative to compensate the applicant for the whole or part of the relevant costs?

He also noted that the court has no power to make a wasted costs order in respect of conduct by the lawyers outside the context of issuing proceedings and conducting the litigation. On this basis, he treated as irrelevant allegations as to negligence by FHG in their previous dealings with Len and Emma and their relations. There is no dispute as to the correctness of his summary of the principles.

41. As I have said, he gave three principal reasons for making the wasted costs order against FHG: (a) the form of the proceedings; (b) failure to give notice to Claudia of the Master's views; and (c) conflict of interest.
42. Before considering those three points, it is important, in the context of the statutory definition, to identify the categories of costs which the judge regarded as "wasted", and the "party" by whom they had been incurred. His order, as eventually settled in October 2002, provided that FHG should

"meet the wasted costs of the proceedings in the following manner:

(i) all of the costs (FHG) has claimed in the proceedings less the sum of £1,750 shall be disallowed

(ii) the firm of (FHG) shall pay to (Claudia) the sum of £850 as an interim payment on account of her costs together with such further sum as is agreed without assessment of costs or as is ordered by the costs judge on assessment of costs on an indemnity basis…"

The figure of £1,750 represented what the judge described as:

"a small sum to be paid by Len's Estate… to mark the fact that the proceedings have had the result of resolving a question that, at least by July 1999, needed to be decided."

As to this sum, the order recorded that the court made no determination as to which party should bear it, "save that the estate of Emma Woolnough should not bear the sum."

43. Thus, the "wasted costs" in question were not simply those of Claudia, who had applied for the order, but those incurred by FHG on behalf of Mrs Perkins as executrix for Len's estate, who had made no such application. Claudia's only interest in those costs was as one of three beneficiaries under Emma's estate, which on the basis of the Master's order was entitled to half the interest in the house, and would indirectly bear half the costs. I shall need to return to that point when considering the overall jusitice of the order.

Conflict of interest

44. It is convenient to deal first with the point (c), since this is directly relevant only to the severance issue, the costs of which the judge sought to exclude from the wasted costs order. Indeed, the judge seems to have recognised the lack of any direct causal link between the alleged conflict and the wasted costs. When refusing permission to appeal, in response to a submission to that effect, he referred to the conflict point as "simply a complicating factor that led to the negligence which caused the wasted costs."
45. The conflict in question was that between the position of FHG as solicitors to Len's estate, and that of two of its partners as executors of Emma's estate. It was clearly against the interests of Emma's estate for FHG to maintain the position that there had been no severance. The judge commented:

"It was negligent and improper for FHG, having acted in the Estate of Emma to take a position contrary to the interests of that Estate when acting in Len's Estate. It is not clear that FHG could properly have represented Len's Estate at all given the conflict. FHG appear to have recognised the conflict in 1994 but continued to act. The conflict of interest became worse once FHG not only represented Len's Estate but brought proceedings to establish that there had been no severance."

He had earlier quoted from the Guide to the Professional Conduct of Solicitors, including the statement (Cap. 15.03) that:

"A solicitor or firm of solicitors must not continue to act for two or more clients where a conflict of interests arises."

46. As the judge said, FHG had in fact recognised at an early stage that there was a potential conflict in relation to this issue. In a letter to GSC dated 27^th April 1994, they suggested that the severance issue might be resolved by seeking Counsel's Opinion, on joint instructions. They added:

"Alternatively, if you cannot agree such an approach and you consider that a conflict of interest has arisen, we shall have to consider whether this firm can continue to act in the matter. One possible solution might be for Mr Druce and Mr Deacon as the partners in this firm who extracted the Grant in the Estate of Emma Woolnough to retire and appoint your client and her two brothers to be trustees of Miss Woolnough's will."

This suggestion was not followed up by GSC at the time, nor when they were re-instructed later in the year. There appears to have been no further reference to the conflict issue on either side before the commencement of proceedings.

47. The judge was unimpressed by the making of this offer and the lack of response to it. He said:

"It would of course have been for FHG not Claudia to take action on the conflict of interest."

Later he commented:

"It is regrettable that FHG allowed this conflict to continue in the face of protest and sought to justify it by reference to an offer made, well before litigation was contemplated some years ago…. If the conflict had been recognised and acted upon these proceedings might never have become necessary and, if they had, would probably not have taken their mistaken form. Furthermore the role played by the only lawyers present must have inadvertently given the Master a false impression of the position as between the two Estates. So this factor is relevant to wasted costs."

48. I find this comment difficult to follow. The importance of the rules regarding conflicts of interest is not in doubt, particularly where questions of judgment and discretion are involved. However, this was a narrow point of law. The judge accepted that FHG were motivated by a desire to ensure that the two small estates were wound up without undue expense. In my view, it was reasonable for FHG in 1994 to seek to resolve this point, in co-operation with Claudia's solicitors, without the expense and inconvenience of involving another firm to act for Emma's estate, which was otherwise insolvent. Given the lack of funds in Emma's estate, their suggestion that the professional executors should be replaced by members of the family, was sensible and realistic. FHG also properly sought independent advice of Counsel on the severance issue. No practical – and certainly no cheaper - alternative has been suggested by Claudia or her advisers.
49. Nor is it clear what the judge meant by the reference to FHG continuing to act "in the face of protest". From 1995, at least until the first hearing before the Master, Claudia's main attention was directed to the capacity issue. In the circumstances, although it was FHG's duty to avoid a position of conflict, it is perhaps understandable that the point seems to have been largely forgotten on both sides, at least until the Master at the first hearing identified severance as the main live issue before him.
50. From that point, the conflict should have been more apparent, since it meant that there was no-one, other than Claudia, to represent the position of Emma's estate on what was now the central issue before the Master. To that extent Emma's beneficiaries might have had cause to complain against her executors, if the decision had gone the other way. However, it is hard to see what that has to do with the wasted costs order, which is concerned with the conduct of FHG as legal advisers to Len's executrix. The judge does not indicate how, in that capacity, FHG could or should have acted so as to save expense. If FHG had recognised the conflict, and declined to act for Mrs Perkins on the severance issue, the issue would not have gone away. She would presumably have needed to instruct other solicitors, at similar expense, to conduct the same proceedings, or other proceedings for the same purpose.
51. In my view, the conflict of interest point was neither a reason in itself, nor a contributory factor, justifying the making of the wasted costs order.

Form of proceedings

52. This point was at the heart of the judge's reasoning. He said:

"These proceedings were brought negligently because they could not achieve either of the objectives which they sought. First they could not determine the question of capacity, a probate action would be required. Despite the argument at the hearing that it was not necessarily the case that a probate action was required this is not a point requiring elaboration as the Master's conclusion was not appealed. Secondly they could not properly determine the right of Len's Estate as to severance without Emma's Estate being a party. By good luck, or rather the vigilance of the Master and the tenacity of Claudia, that issue has been resolved because the outcome is in favour of Emma's Estate. Although not bound by the result Emma's Estate thus has no reason to challenge it."

Later, he described the proceedings as a "fiasco", from which only "the Master's initiative and vigilance" enabled something of value to be retrieved.

53. I need not spend time on whether the proceedings were appropriate to determine the severance issue. Miss Lonsdale submits that what was needed was a construction summons, to which Emma's estate was a party. However, the point is wholly academic. Unsurprisingly, she does not challenge the outcome, and there is no reason to suggest that costs would have been saved by any other procedure.
54. With regard to the capacity issue, the judge's conclusion seems wholly to ignore the background and the circumstances in which the proceedings were commenced. Claudia had been advised correctly by Miss Lonsdale in 1994 that it was for her to start proceedings, if she had the evidence to do so. Before us, Miss Lonsdale did not resile from that advice. Furthermore, it is clear from the correspondence that Claudia understood the advice, as did her Canadian lawyers, because she and they continually repeated her intention to start proceedings. Her failure to do so until May 2002 has never been properly explained.
55. The review of the history shows the dilemma which faced Mrs Perkins and her advisers in 1998, four years after obtaining probate. This was clearly explained in their letter to Claudia's Canadian lawyer in January 1997, and she was warned that, if she failed to come off the fence, they would make an application to the court for directions, at her risk as to costs. A year later, having heard nothing, they started proceedings. As the supporting affidavit made clear, Mrs Perkins' primary objective was, not herself to advance any positive case on either issue, but to seek the help of the court to achieve finality after four years of vacillation by Claudia.
56. In principle, that seems to me to have been an entirely reasonable course for her to take. The judge does not in terms indicate how otherwise Mrs Perkins could have resolved the dilemma. In theory, she could have simply proceeded on the basis of the probate, which was conclusive until set aside (see Williams, Mortimer and Sunnucks, 14^th Ed 41-04). However, one can see why, in the face of Claudia's threats, this might have seemed a risky course. Miss Lonsdale, as I understood her, suggested that Mrs Perkins should herself have started a probate action for proof in solemn form. She relies on the fact that, in Re Jolley [1964] P 262, it seems to have been assumed that it was open to executors to take that course "for their own convenience", notwithstanding a previous grant in common form (see p 275, per Danckwerts LJ). However, the case makes clear that there is no obligation on the executor to do so. Where, as here, the executrix, on the information and advice available to her, had no reason to doubt the validity of the will, it is hard to see why she should have been expected to incur the costs of a fully-fledged probate action. The beneficiaries under the 1993 will might have had reason to complain, if she had done so.
57. The textbooks do not appear to offer an easy solution in such circumstances. There is no statutory time-limit for proceedings to challenge the validity of a will. It seems that an action may be struck out if there has been unreasonable delay, but the cases offer little guidance as to what this means in practice (see Williams op cit para 35-03; Re Flynn [1982] 1 WLR 310), or as to what directions the court can give. This subject was not explored in detail in the submissions before us. The powers of the court to control abuse and delay have been strengthened by the new Civil Procedure Rules. However, even before those changes, the court's powers of direction under the old RSC Order 85 (administration actions) were very wide. I see no reason why they could not have been used to impose a time-limit on a potential challenge to the probate - in effect a direction to "put up or shut up" - following which the executor would be free to distribute under the will.
58. That, however, was not how the proposed relief was expressed in the originating summons. It was expressed as a request, not simply for directions, but for an inquiry as to the extent of Claudia's interest, if any, in the estate. That formulation was settled by Counsel then instructed. There is no indication in the papers as to how he expected such an inquiry to proceed. He may have intended to follow Ord 85 r 2(1)(c), which allows a determination of "any question as to the rights or interests of a person claiming to be… entitled under a will…". However, as the Master recognised at the first hearing, that power did not enable there to be launched an inquiry into whether the will itself was valid.
59. It seems to me a fair criticism of Mrs Perkins' legal advisers, that, having been given that warning by the Master, they did not then consider how to deal with the problem, or whether any alternative directions might be sought along the lines discussed above. Claudia had by then made clear that she was going to treat the proceedings as an opportunity to launch her attack on the capacity issue. It is surprising therefore that the skeleton argument lodged on Mrs Perkins' behalf for the July 1999 hearing contained no reference to the procedural problem, nor any proposal to overcome it. On that issue, the proceedings failed in their objective. They left Claudia free to continue her campaign, as indeed she has done.
60. However, in my view that is not a matter of which Claudia can properly complain. She had already been advised in 1994 as to the form of action required. It was her, not Mrs Perkins, who was seeking to advance a positive case on the capacity issue. It was up to her to take advice as to the suitability of the Order 85 proceedings for that purpose. As the Master said, since she chose to make that an issue in the proceedings, she could hardly complain that costs were incurred in dealing with it. Subject to the notice point, FHG cannot be held responsible for the fact that Claudia wrongly saw the proceedings as a substitute for the probate action, which she had threatened so often, but failed to bring.
61. Before leaving this aspect, it is relevant in my view to note that the form of the proceedings was settled by counsel. In Ridehalgh v Horsefield (above at p 237G) it was said that, while a solicitor does not abdicate responsibility when he seeks advice of counsel:

"the more specialist the nature of the advice, the more reasonable is it likely to be for a solicitor to accept it and act on it."

As I have said, the problem facing Mrs Perkins in 1998 was far from straightforward. In my view, FHG were entitled to look to counsel for specialist advice as to the appropriate procedure, and to have that factor taken into account in assessing the reasonableness of their conduct.

Failure to give notice

62. It was unfortunate that FHG failed to pass on to Claudia the view expressed by the Master at the January hearing. It might have saved her a journey and some further work, or at least given her a chance better to prepare herself for the hearing. However, the question is whether that failure was conduct justifying a penal sanction against the solicitors (see Medcalf v Mardell [2002] 3 All ER 731, [2002] UKHL 27 para 32), and what costs if any were wasted as a result.
63. The judge explained his view as follows:

"FHG failed to tell Claudia in January 1999 that capacity would not be at issue in any future hearings. One can debate what if any duties in their twin capacities FHG owed Claudia in her various capacities but even without these the position is clear. Claudia was a litigant in person and should have been told about the outcome. Solicitors generally make it a point of honour to assist litigants in person to get through the process partly of course because it is generally in the broader interests of their own clients in the litigation. That honourable tradition, in my judgment, obliges any litigation solicitor to report fairly the outcome of a hearing which a litigant in person is for good reason unable to attend. On the face of the proceedings the capacity point remained an issue so Claudia naturally sought to deal with it. The direct cause of that further work was not the fact that she had persistently raised the issue in correspondence. It was FHG's conduct in bringing proceedings in the wrong form and not telling Claudia when that issue fell away."

64. I agree with the judge in commending the well-established practice of professional lawyers (solicitors and barristers) in assisting litigants in person on the other side, so far as consistent with their duties to their own clients. However, that is far from establishing that failure to do so is "improper, unreasonable or negligent" in the sense used by the statute. The judge gave no authority in support of that view, and none has been cited by Miss Lonsdale. In the absence of some duty imposed by law, or direction of the court, a legal representative's duty is to his client, not his client's opponent (see per Brooke LJ said in Connolly-Martin v Davis [1999] Lloyds Rep PN 790, 795).
65. In my view, the primary responsibility for the difficult task of protecting the interest of litigants in person must rest with the court. In this case, it was the court which in February 1999 informed Claudia of the adjournment of the hearing. The Master was fully aware of Claudia's position and that she was a litigant in person. He could have made directions to ensure that she was informed of his preliminary views, or he could have given a short judgment and taken steps to have it sent to her. In the absence of any such action, I find it impossible to hold that FHG were under a formal legal or professional duty, a breach of which could trigger the wasted costs jurisdiction. Nor on this issue can it make any difference that FHG partners had a separate interest as executors of Emma's estate. That had nothing to do with the capacity issue, which was of concern only to the potential beneficiaries under Len's various wills.
66. Finally, on this point, it is not clear to me that any costs were in fact wasted as a result of this failure. By February 1999, most of the evidence had been exchanged on both issues. FHG's letter to Claudia of 19^th March could usefully have explained more fully the Master's views. However, if they had done so, the adjourned hearing would have still had to go ahead on the severance issue, and presumably Claudia would have wished to attend. She would also have had to decide how to deal with the capacity issue: whether to try to persuade the Master to reconsider his view, or to start her own proceedings. Furthermore, since the proceedings have not led to her abandoning her capacity case, it is hard for her to say that any time spent preparing her evidence on that issue has been wasted.

Discretion

67. Lastly, I consider, as did the judge, the exercise of discretion. He thought that the "negligence and/or misconduct" identified by him, if drawn to the attention of the Master, would have led to him making a "quite different costs order" and that "justice" required FHG to pay the costs of the proceedings, other than the amount fixed by him in respect of the severance issue.
68. I am unable to agree with this conclusion. The question, as he had correctly formulated it earlier, was whether it was just to order the legal representative "to compensate the applicant" for the whole or part of the relevant costs. The applicant was Claudia, not Mrs Perkins or any other of the potential parties to the proceedings. It was necessary therefore to consider, first, to what extent the alleged misconduct had caused any loss to her; and secondly, whether it was just, as between FHG and her, for those costs to be borne by them.
69. As to the first, Claudia's own costs, at this stage, were those of a litigant in person. Her indirect interest in the legal costs incurred on behalf of Mrs Perkins was not more than one sixth, or, if she is regarded as representing also the interests of her brothers, not more than half. There was no possible basis, in my view, for a wasted costs order relating to the whole of the costs incurred by FHG.
70. On the second point, for the reasons I have already given, I consider that much more weight should have been given by the judge to the circumstances which led to the proceedings. Claudia's unexplained failure, over more than four years, to take any effective action to advance her case was the primary cause of the proceedings. Whatever criticisms may be made of FHG's handling of the case, I can see no reason in justice for her to be compensated for costs which need never have been incurred at all if she had acted reasonably.
71. In conclusion, in my view, the judge was wrong to make a wasted costs order. The Master had been entitled to conclude that the proceedings were reasonably brought. In reaching that view, he clearly had in mind the procedural problems, which he himself had identified. FHG, faced with a difficult dilemma created by Claudia's unreasonableness, acted in good faith on the advice of counsel. Their conduct cannot be characterised as "improper, unreasonable or negligent" in the required sense. In any event, in view of the applicant's own conduct, I would not regard it as just to require them to compensate her for any costs incurred, directly or indirectly, by her.
72. For the same reasons, I think he was wrong to order costs on an indemnity basis. Apart from the criticisms which I have mentioned, he also took account of a Part 36 offer made by Claudia in December 2000, of which he said:

"The Appellant made offers to settle which appear to have been ignored and rejected. These include a Part 36 offer of 12th December 2000 which was the subject of a request for clarification but otherwise not pursued. The clarification sought was not as I see it necessary to enable FHG to take a decision. The Part 36 offer seems to me to have been an entirely appropriate attempt to overcome the complexities of this case in the interests of avoiding further unnecessary costs. The terms of that Part 36 offer if accepted would have been more advantageous to FHG than the outcome in this judgment. FHG have failed to beat it."

73. It is not clear what offers, other than that of December 2000, the judge had in mind. That offer was nearly a year and a half after the proceedings complained of. He seems to have ignored the fact that, in May 1999, in the course of the proceedings, Claudia herself had rejected any possibility of a compromise in stark terms, because she was not willing to make "some sort of bargain out of my inheritance". In any event, the December 2000 offer required FHG to accept responsibility for the commencement of the proceedings in the wrong form and to bear most of the costs. On the view I have taken of the facts, contrary to the judge's view, they, and the other parties, were fully entitled to reject that proposal.

Costs against Emma's Estate

74. Apart from the wasted costs issue, the only other issues concern the propriety of the Master's order, in so far as it had the effect indirectly of imposing a burden on Emma's estate. As I understand it, Miss Lonsdale makes three main points:

i) Emma's estate was not a party to the proceedings, and no order should have been made to its detriment;

ii) In any event, Emma's estate had no interest in the capacity issue, and therefore should not have to bear any of the costs of dealing with that issue;

iii) More generally, in the absence of a Beddoe order, it was wrong for Mrs Perkins' costs to be awarded out of the estate.

75. The judge agreed on the first two points. He said:

"There is no reason for Emma's Estate unrepresented and not a party to pay any of the costs of these proceedings. Further Emma's Estate has no interest whatever in the capacity question which though still unresolved has occupied some of the costs."

This led him to order that no part of the £1,750 (which was excluded from the order against FHG because it related to the severance issue) should come out of her estate. He did not address the Beddoe point, regarding it as "an unnecessary complication", given his overall view of the case.

76. Miss Peacocke submits that the Master's order was a perfectly normal and correct exercise of his discretion. She refers to Williams op cit para 66-28 (and the cases there cited):

"In general the costs of administration fall on the general estate, but the costs of distribution fall on the gift in question. Thus, the costs of inquiries to ascertain the person entitled to any legacy, money, or share or otherwise in relation thereto are normally paid out of such legacy, money or share."

The legal interest in the house had devolved to Mrs Perkins, under the 1993 will, which was to be treated as conclusive in the absence of any proceedings to set it aside. In regard to the house, there was an issue whether Emma's estate was entitled to a share in the beneficial interest. It was reasonable, as both the Master and the judge accepted, for there to be proceedings to determine that issue. It was therefore appropriate for the costs of the executrix to be paid out of the proceeds of sale of that asset.

77. As far as the house is concerned, I have no doubt that Miss Peacocke is correct. This point has to be looked at from Mrs Perkins' point of view as executrix. She was the legal owner of the proceeds of sale, and it was her responsibility to decide how they should be distributed. In order to do that she needed to know who was entitled to share in the beneficial interest. The proceedings settled that issue. The fact that part of the burden falls on Emma's estate is simply the consequence of the fact that the dispute concerned an asset in which her estate was found to have a share.
78. There may be a separate question whether Emma's estate should formally have been made a party, or given notice. Complaint could perhaps be made of FHG that they did not draw this point to the Master's attention in January 1999, and it is not clear whether the Master considered it. If he had, he would have been entitled to regard it as a pure technicality, since Claudia was effectively representing the interests of the only beneficiaries to that estate. There would have been no purpose in incurring further costs by requiring the estate to be formally joined. I do not see this as raising a ground of objection to his order.
79. It is true that Emma's estate had no interest in the capacity issue, and therefore arguably the abortive costs attributable to this point, even if reasonably incurred from Mrs Perkins' point of view, should have come only out of the fund to which Len was beneficially entitled. The only reason given by the Master for not making such an order was that Claudia had put capacity in issue, and could not therefore complain that costs were incurred in dealing with it. Arguably, the fact that Claudia had put this point in issue was not a reason for putting the burden on Emma's estate. On the capacity issue, Claudia's interest was as a potential beneficiary under one or the other of Len's earlier wills, in which the shares, as between the siblings, were not necessarily identical to those in Emma's will. However, on the facts of this case, I am not surprised that the Master took a broad view of the matter. I would not have regarded this as an error sufficient to justify the unusual course of overturning his exercise of discretion on the issue of costs.
80. Finally, there is Miss Lonsdale's point on Re Beddoe [1893] 1 Ch 547. I am afraid I found it difficult to follow. The Beddoe procedure provides a means by which a trustee, who is contemplating taking proceedings in that capacity, can obtain advance protection from personal liability for costs. However, there is no obligation to do so before starting proceedings. The only difference is that, if he does not follow that procedure, he is at risk if he is later held to have acted unreasonably (see per Bowen LJ, at p 562). Whatever criticisms are made of FHG, I see no grounds for challenging the Master's view that Mrs Perkins, as executrix, acted reasonably in bringing the proceedings. She is entitled therefor to have the costs of doing so paid out of the fund.

Conclusion

81. The judge ended by urging the solicitors, or their insurers, "to take a grip on this very unhappy dispute". I agree that the time and cost involved in the dispute have long since ceased to bear any reasonable proportion to the amounts at stake. I regret, however, that I am unable to accept the judge's attribution of the blame for that state of affairs. A fair reading of the correspondence between 1994 and 1998, in my view, puts the main responsibility firmly at Claudia's door. Her concerns may have been sincerely held, but the way she pursued them was inexcusable. It is unfortunate that her new advisers in May 2000 seem to have been blind to anything but the perceived procedural failings of FHG, and had no regard to her own part in the story.
82. It would be inappropriate for me to comment on the merits of the new proceedings which have now been launched against FHG and the other parties. I would make one observation. I note that the proceedings are brought in the names of Claudia and of her two brothers. I know nothing of their circumstances or involvement. However, if, as Miss Lonsdale says, they have hitherto been in the habit of following their sister's lead, I would strongly advise them, in their own interests, to show a much greater concern for what is being done in their names.
83. As to the appeal, in my view, the Master dealt with the matter sensibly and correctly. It is unfortunate that permission was given to appeal against his decision long out of time, and unfortunate that the appeal was allowed to develop into a disproportionate attack on the competence of the estate's advisers. I would allow the appeal and restore the Master's order.

Sir Christopher Staughton

84. I agree.
Order: Appeal allowed; Claudia Sherman do pay costs of appeal before Mr Mackie QC and the Court of Appeal; any application by David Sherman and Robert Sherman should be heard under part 48.2 of CPR to the High Court; no order in relation to costs before Judge Rich on 13/07/01; interim orders for payment of costs on account paid by FHG should be repaid in the sums of £850 and £15,000; Application for leave to appeal to the House of Lords refused. (Order does not form part of the approved judgment)