England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BRISTOL DISTRICT REGISTRY

		Bristol Civil Justice Centre 2 Redcliff Street, Bristol, BS1 6GR
		2 October 2018

HHJ Paul Matthews :

Introduction

1. On 8 March 2018 I handed down my reserved judgment in this claim, in essence in favour of the Defendant. The parties were unable to agree the order to carry my judgment into effect, and I heard them further on 16 April 2018, at some length, after which I made the necessary order ("the Order"). This provided (at [6]) that the

"Claimants should pay the Defendant's costs of the claim, including the costs of this hearing, on the standard basis, to be assessed if not agreed".

2. The Order did not however make any provision for an interim payment on account of costs, notwithstanding CPR r 44.2(8), which states that

"Where the court orders a party to pay costs subject to detailed assessment, it will order that party to pay a reasonable sum on account of costs, unless there is good reason not to do so".

Regrettably I overlooked that provision at the time, and neither side reminded me of it.

3. After the Order had been sealed and sent out by the court, however, the Defendant's solicitors raised the matter of a payment on account of costs with the Claimants' solicitors in correspondence. The Claimants' solicitors pointed out that the Order made no provision for such a payment. The Defendant's solicitors referred to r 44.2(8). The correspondence continued between them, but they were unable to agree, and on 12 June 2018 the present application, in Form N244, was made by the Defendant and issued by the court. This was supported by a witness statement of Mr James Johnston, a partner in the Defendant's solicitors, which exhibits relevant correspondence and other documents. In addition, each side has by its solicitors made written submissions, which I have read. The application has been dealt with on paper, without putting the parties to the expense of oral argument.

The parties' positions

4. In essence, the defendant says that he should not be precluded from obtaining an interim costs payment whilst he waits for the final costs amount to be determined, whether by detailed assessment or otherwise. He refers to commentary in the White Book at paragraph 44.2.12, and to Mars UK Ltd v Teknowledge Ltd [2000] FSR 138, where Jacob J held that

"where a party is successful the court should on a rough and ready basis also normally order an amount to be paid on account, the amount being a lesser sum than the likely full amount."

The Defendant says that a realistic starting point for assessing what a reasonable sum should be would be the Defendant's costs budget, which was approved by the court.

5. The Claimants say that there was a good reason within rule 44.2 (8) for not ordering them to pay a reasonable sum on amount of costs, and that is that the Defendant did not request any such payment at the time that the order was made. They also say that it is not required that the court make an order of its own volition. Moreover, they say that, if a request had been made at that time, they would have opposed it, on the basis that they act in a fiduciary capacity as personal representatives of the estate of the deceased, and that the estate has no funds until the property in dispute is sold. They say that this also would be a good reason for not making an order for an interim payment of costs on account. Had the court been minded to order such a payment, the Claimants would have sought a different order for sale, so that the property be sold earlier, so as to put the estate in funds.
6. Thirdly, the Claimants say that, since the defendant made no application for a payment on account before the order was sealed, the next opportunity for doing so arises only after a request for a detailed assessment hearing has been filed, pursuant to rule 47.16 (1). In this respect they rely on a decision of mine, sitting as a chancery master, in Ashman v Thomas [2016] EWHC 1810 (Ch). That was a case where costs were awarded to a party but no order for a payment on account was made at the time that the order was pronounced. However, before the order was sealed, the receiving party wrote to the court and asked that such an order for payment on account be made. The paying party said it was too late.
7. I held that, since the order had not yet been sealed, the court had power under the so-called Barrell jurisdiction (Re Barrell Enterprises [1973] 1 WLR 19, CA) to make a different order from that pronounced, if appropriate. I know I said (at [5]) that the substantial question was "whether a request for a payment on account can only be made at the hearing itself", but it was not in fact a case where I had to decide whether there was a limit beyond which no application (in the formal sense) for such a payment on account could be made. In the present case the facts are different, as the order has been drawn up and entered.
8. The Defendant in reply relies on the decision of the Court of Appeal in Blackmore v Cummings [2009] EWCA Civ 1276, where Elias LJ said that:

"There is a wide discretion afforded by both CPR rule 44.3 (8) and CPR rule 47.15 to be exercised in the circumstances of the particular case, and all material factors have to be weighed in the balance. These will include those identified by Jacob J in the Mars case."

The Defendant also cites the White Book at paragraph 44.2.12 to the effect that the delay by the receiving party in making an application for detailed assessment was a relevant factor in deciding whether to order a further payment on account.

9. The Defendant argues that the fiduciary capacity of the Claimants does not help them, since he says that they failed to remain neutral in relation to the Defendant's counterclaim and failed to obtain the directions of the court in relation to defending that counterclaim at the expense of the estate. They have instead engaged in adversarial litigation from which as beneficiaries on the intestacy of the deceased they might have benefited personally.
10. In this respect the Defendant relies on a passage from the judgment of Ward LJ in Shovelar v Lane [2011] EWCA Civ 802, [48], a case on the doctrine of mutual wills:

"I conclude that the executors did not conduct themselves reasonably. They accepted service on behalf of all defendants yet they assumed the responsibility at first of putting in the only defence, making no admissions and putting the claimants to proof of the agreement to treat the mutual wills as irrevocable. They also took the bad point that section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 applied. Although they had at an early stage written of their need 'to steer a median course' and 'to be guided by the court' they did not adopt that position of neutrality in their defence. They did not indicate that they would be bound by the decision of the court and hold the estate to abide that decision. They did not seek directions from the court. Instead they assumed the role of defendants and when the defence was amended to join the family members, they, the executors, continued their stout resistance. They did not stand aside. There was nothing to distinguish their conduct from the conduct of the family members. The questions put in cross-examination to test the claimants' case were put as much for the benefit of the executors as for the beneficiaries under the 2003 will."

11. The Defendant also argues that although there may be a general rule in probate cases that costs come out of the estate that does not apply to trust claims brought in the Chancery Division of the High Court, such as this is. He relies on a further passage from the judgment of Ward LJ in Shovelar v Lane [2011] EWCA Civ 802, [44]:

"I conclude that the so-called rule in probate cases does not apply in the case before us. The probate rule is rooted in the inquisitorial exercise that was conducted by the Ecclesiastical Courts and the Probate Division where the court had to be satisfied of the validity of the will before it could pronounce for the will and admit it to probate. The effect of mutual wills upon the distribution of the estate under a later will which is admitted to probate is a matter for the Chancery Division applying the law of trusts; it is not a matter of probate law and practice. The nature of that litigation is not inquisitorial: it is adversarial and, not infrequently, very adversarial as the two families disunited by death battle for their perceived true inheritance. That is exactly what has happened here."

12. As to the decision in Ashman v Thomas, the Defendant says it is irrelevant. He says he is not seeking to change the terms of an order that has been pronounced, but is instead asking the court to make a further order for a payment on account of costs.
13. Finally, the Defendant refers to a number of factors which he says are relevant to this case in considering the application for an interim payment. Amongst other things, he says there is no good reason not order a payment on account of the costs he is entitled to, that the approved costs budget is a good starting point, and that it would be unjust to keep him out of his money, particularly in having to finance detailed assessment proceedings.

Jurisdiction

14. I begin with the question of jurisdiction. In my judgment, it is not the law that, once an order for costs has been made, drawn up and sealed, no further application can be made to the court for an order for a payment of a sum on account of those costs. There is nothing in the rules which so requires, and there may be good reason why payment of the sum on account is not considered at the time the order was made. My decision in Ashman v Thomas [2016] EWHC 1810 (Ch) does not decide to the contrary. It was a case where the court was asked to revisit its order before it had been drawn up and entered. So it turned on the so-called Barrell jurisdiction. There was no need to decide what would have happened if the order had already been entered. Although r 44.2(8) contemplates that the court will decide this question at the time of making the order for costs, to my mind this does not exclude the possibility that the court should decide it later. I see no justification in the rules or authorities for the Claimants' view that, if an application is not made at the time, the next opportunity arises only after detailed assessment proceedings have been commenced.

Discretion

15. Once it is accepted that the court has jurisdiction in principle to make an order for the payment sum on account of costs in an appropriate case, it is then simply a question of whether the court is minded to exercise that jurisdiction on the facts of the case, at the time when the court is asked to do so. Given the terms of r 44.2(8), I should say that I do not accept that the mere fact that the defendant did not ask for a payment on account by itself amounts to a "good reason" for not making an order for one. No doubt one factor to take into account (not on its own necessarily determinative) will be whether the receiving party made a deliberate decision not to seek such an order at the time and then simply changed his or her mind later. At all events, I turn to consider the circumstances of this case.

The Claimants' capacity

16. Here the Claimants brought their original claim against the Defendant (for possession of the property) in the capacity of personal representatives of the estate of their deceased brother, but also as persons beneficially entitled on his intestacy. The Defendant defended the claim, and counterclaimed, successfully, on the basis of a proprietary estoppel equity. The Claimants say that, if an application had been made for a payment on account at the time, they would have opposed it on the basis that they were acting in a fiduciary capacity, and that until the house was sold they would not be in funds to make such a payment. The Defendant challenges that approach, asserting that the Claimants were not neutral in the litigation, but instead were acting in their own interests.
17. My assessment of the situation is this. Whatever the position in the claim itself, which was a straightforward possession claim in which the Claimants put forward their title as personal representatives and asserted that the Defendant had no right to remain in the house, in relation to the counterclaim the Claimants made strenuous attempts to resist the proprietary estoppel equity, both on the law and on the facts. They did not make any application for a Beddoe order beforehand, no doubt because it would not have been appropriate in the circumstances.
18. Personal representatives, like trustees, generally have the right to indemnify themselves out of the estate for litigation costs which they properly incur, in accordance with CPR rule 46.3 (2). But they will lose that right if the costs are not properly incurred. As paragraph 1.1 of Practice Direction 46 says (in part),

"whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representative ('the trustee') –

a) obtained directions from the court before bringing or defending the proceedings;

(b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustees' own; … "

19. In my judgment the Claimants acted in their own interest rather than in that of the estate. This was in substance a dispute between the Claimants and the Defendant as to who should benefit from a significant asset of the estate, namely, the house. Personal representatives as such would simply be neutral and leave it to the court to decide as between the rival claimants. But that is not what the Claimants did. The remarks of Ward LJ in Shovelar v Lane [2011] EWCA Civ 802, [48], cited above, are apposite to the facts of this case as well. Accordingly, in considering whether to make an order for a payment on account of costs, there is no good reason for me to treat the Claimants as different from any other ordinary litigants who have lost and been ordered to pay the costs.

The "probate rule"

20. So far as concerns the so-called "probate rule" relating to costs, referred to by Ward LJ in Shovelar v Lane [2011] EWCA Civ 802, [44], this is in fact a rule which is much narrower than might be supposed. It is not a "general" rule in probate cases at all. It was expressed by Sir Gorell Barnes P in Spiers v English [1907] P 122 in these terms:

"In deciding questions of costs one has to go back to the principles which govern cases of this kind. One of these 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 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."

Plainly, neither of these principles applies here. This is ordinary adversarial litigation, concerning a proprietary estoppel equity, and not a will. The "probate rule" has nothing to do with it.

Order at the time?

21. Nor am I impressed by the argument that, if an application had been made at the time for an order for a payment on account, the Claimants would have sought the sale of the property at an earlier stage. I am not concerned with what order might have been made at an earlier stage. I am considering the application before me, and whether to make such an order at this stage. In accordance with the terms of the order which I made, the property ought now to be on the market. But even if it is not, I do not see the fact that the Claimants in their capacity as personal representatives do not have liquid funds as something which should inhibit the court in making an order that the Claimants as litigants having lost the litigation and having been ordered to pay the Defendant's costs should make a payment on account of those costs, in accordance with what Jacob J said in Mars UK Ltd v Teknowledge Ltd [2000] FSR 138, and now CPR r 44.2(8).

Conclusion

22. There is no suggestion here that the Defendant deliberately decided not to ask for a payment on account. I might have raised the point myself at the hearing, and yet overlooked it. In my judgment, there is no good reason why the court should not make an order even at this stage for a payment on account of costs. It would still be of value to the Defendant, who has an order for costs in his favour and is being kept out of his money only because of the need for the detailed assessment to ascertain the exact sum. Accordingly, taking account of r 44.2(8), I consider that the court should make such an order.
23. I turn to the question of the amount. The obvious starting point for the assessment of the amount of the payment is the approved costs budget of the Defendant. This is in the sum of £45,580. The Defendant however asks for a payment in the sum of only £30,000. He refers to the decision of Birss J in Thomas Pink Ltd v Victoria's Secret UK Ltd [2014] EWHC 3258 (Ch), as showing that (in accordance with CPR r 3.18(b)) the court on a detailed assessment of costs will not depart from an agreed or approved budget unless satisfied that there is good reason to do so. In that case, payment on account was ordered in a sum amounting to 90% of the claimant's approved budget. The Claimants in their written submissions however do not put forward any arguments as to the amount. In these circumstances, the sum of £30,000 seems wholly reasonable to me, and I will so order. Given that this has arisen at a later stage than usual, when the Claimants may not have been expecting to have to provide for it, I will however order that it be paid within 28 days rather than the usual 14.

Costs

24. Finally, in their draft order, the Defendant's solicitors ask that the Claimants pay their costs of the application. Costs are in the discretion of the court, but if the court decides to make an order the general rule is that they follow the event, although the court may make a different order. Here the Defendant has won, and if costs follow the event he should have his costs from the Claimants. The Claimants may say that if the Defendant has asked for a payment on account at the time there would have been no need for this application. I think that may well be right. But when the Defendant's solicitors raised the question in correspondence the Claimants did not immediately concede, or (so far as I know) even suggest a compromise. If they had, their objection would have been more soundly based. Instead, they resisted the application, their solicitors in written submissions calling it "doomed to fail".
25. Accordingly my provisional view is that I should make a costs order on this application and that the Claimants should pay the Defendant's costs of the application, to be subject to detailed assessment if not agreed. There is no request that I should order the payment of a sum on account (and nothing to that effect in the draft order), and I have no figures to enable me to reach a view on what would be a reasonable sum for this purpose. If the Claimants wish to challenge my provisional view, they must do so in writing within 48 hours of their solicitors receiving this judgment, with the Defendant having 48 hours thereafter to respond to any such written submissions.