Marley v Rawlings & Anor [2014] UKSC 51

Following the Supreme Court’s earlier decision validating a will mistakenly signed by the wrong spouse, this costs judgment determined that the negligent solicitor’s insurers should bear the costs of both parties throughout, subject to counsel disclaiming CFA success fees.

Facts

This judgment concerns the allocation of costs following the Supreme Court’s substantive decision in Marley v Rawlings [2014] UKSC 2. Mr and Mrs Rawlings had each accidentally signed the will intended for the other, owing to an error by their solicitor (“the Solicitor”). Mr Marley, the residuary beneficiary under the will if valid, succeeded in the Supreme Court in having the document admitted to probate, having lost at first instance before Proudman J and in the Court of Appeal. The respondents, Mr Rawlings’s two sons, would have inherited on intestacy. The estate was worth approximately £70,000, yet the litigation had passed through three levels of court. The Solicitor was insured. In the Supreme Court (but not below), the respondents’ solicitors and both counsel acted under conditional fee agreements (“CFAs”) providing for a 100% uplift.

Issues

The court had to determine: (i) as between Mr Marley, the respondents, the estate, and the Solicitor’s insurers, who should bear the costs of the proceedings at all three levels; and (ii) whether the CFAs affected the recoverability of the respondents’ costs in the Supreme Court, in particular whether any success fee/uplift should be payable.

Arguments

Mr Marley contended that, as the successful party in hostile litigation, the respondents should pay his costs. The respondents contended that all parties’ costs should be paid out of the estate or, alternatively, by the Solicitor whose error caused the litigation. The insurers argued that the respondents should pay Mr Marley’s costs, and further submitted that (1) courts should be wary of third-party costs orders, (2) the Solicitor owed no duty to the respondents, and (3) it was not the Solicitor’s fault that the respondents chose to litigate. On the CFAs, the insurers relied on the indemnity principle (Gundry v Sainsbury [1910] 1 KB 645; Bailey v IBC Vehicles Ltd [1998] 3 All ER 570) to argue that the respondents had no liability to their lawyers and so no costs were recoverable.

Judgment

Costs disregarding the CFAs

Lord Neuberger (with whom Lords Clarke, Sumption, Carnwath and Hodge agreed) rejected each of the insurers’ three points. The Solicitor’s error had caused the litigation; the insurers had themselves required Mr Marley to bring proceedings by way of mitigation, and had accepted liability for his appellate costs. It was foreseeable that the respondents would contest the claim, and their doing so was not unreasonable, as demonstrated by their success below. Ordering all costs out of the estate would effectively be reconstituted by Mr Marley through a damages claim against the Solicitor, ultimately borne by the insurers. As a pragmatic short-circuit, the insurers should pay the costs of both sides throughout. Lord Neuberger drew support from In re Bimson [2010] EWHC 3679 (Ch) and Gerling v Gerling [2010] EWHC 3661 (Ch).

The CFAs in the Supreme Court

On the solicitors’ CFA, the respondents could not rely on the “derive benefit” limb as they had lost the appeal and were plainly no better off substantively. However, the disbursements limb permitted recovery of counsel’s fees as disbursements. On counsel’s CFAs, the “outcome with value of £1” limb did not assist, but the limb triggered by a court order for costs did apply, given the order proposed against the insurers.

The uplift

Under rule 46(1) of the Supreme Court Rules 2009, the court has a discretion regarding uplifts. Whilst usually a successful CFA-funded party would recover an uplift, here the respondents had lost. It would be wrong for unsuccessful counsel to receive a success fee payable ultimately by the insurers. The court therefore conditioned recovery of counsel’s base fees on both counsel disclaiming the uplift; failing which, no order for costs would be made in the Supreme Court save as to solicitors’ disbursements. Lord Neuberger noted the “many unsatisfactory aspects of the CFA system under the Access to Justice Act 1999”, referencing Coventry v Lawrence (No 2) [2014] UKSC 46. Both counsel subsequently disclaimed their success fees.

Implications

The judgment illustrates the court’s pragmatic willingness, in probate litigation caused by professional negligence, to order the negligent solicitor’s insurers to bear all parties’ costs directly, avoiding the circular route of estate payment, reimbursement by the solicitor, and indemnity by the insurers. It confirms that third-party costs orders against solicitors (or their insurers) responsible for causing litigation are not exceptional where the solicitor’s error is causative and the insurers have effectively required the proceedings to be brought. The decision also demonstrates the court’s willingness, in unusual circumstances, to refuse a CFA uplift where the CFA-funded party has lost on the merits but nevertheless recovers costs by virtue of a bespoke costs order. The reasoning is tightly tied to the unusual facts and to the recognised deficiencies of the pre-LASPO CFA regime, and should not be read as establishing broader rules on either third-party costs orders or success fees.

Verdict: The Supreme Court ordered that the Solicitor’s insurers pay (i) Mr Marley’s costs up to and including the Supreme Court, (ii) the respondents’ costs up to and including the Court of Appeal, and (iii) the respondents’ solicitors’ disbursements and counsel’s base fees (but not the uplift) in the Supreme Court, conditional upon both counsel disclaiming their CFA success fees. Counsel duly disclaimed, and the order took effect accordingly.

Source: Marley v Rawlings & Anor [2014] UKSC 51