Lilleyman v Lilleyman was an interesting case, explored in depth in the last post, in which a widow argued that her reasonable needs had not been met in her late husband’s will. Almost the entirety of his estate had been left to his sons from a previous marriage. His wife of two years had been left his Dinky Toy collection along with other chattels, gifts, conditional rights of occupation of the former matrimonial home and a holiday home, and an annuity of £378 per month. She made a claim under The Inheritance (Provision for Family and Dependants) Act 1975, which gives the court power to override a will or override the effect of the intestacy laws, if it deems it necessary.
Mrs Lilleyman was awarded £600,000 – but after the judgment had been delivered, there was a further hearing on 4 April 2012 to deal with the issue of costs in the case.
The husband’s two sons argued that the wife should pay their costs from 17 August 2011. They had made her an offer to settle, known as The July Part 36 Offer, which had expired on this date. This offer had been higher than the final sum awarded to the wife by the court.
The sons’ costs were approximately £68,000 and the wife’s costs stood at around £114,500, giving a total of £182,500. It was agreed that £30,000 should be deducted for detailed assessment; giving the wife a costs burden of £152,000.
Notwithstanding the fact that the parties had made various without prejudice offers throughout proceedings, the fact that the Part 36 offer was not beaten at trial meant that the losing party (in this case, the wife) would be liable for the costs of the other party. As Mr Justice Briggs stated:
Since the claimant has failed to obtain a judgment more advantageous than the defendants’ July Part 36 Offer, I must, unless I consider it unjust to do so, order that the defendants are entitled to their costs from 17 August 2011, and interest on those costs.
Mr Justice Briggs carefully examined how much the wife would be left with if she had to pay the costs burden. He stated that it would leave her with a net sum of £197,500, which was to be added to her £77,500 share in her mother’s house, realisable upon her mother’s death. The £125,000 value of Lea Court – the property in which her son lived, which had been transferred to her by order of the court – would be realisable in 2014 when the agreement with her son came to an end. So this property’s value was also considered.
It was calculated that after costs, Mrs Lilleyman would be left with approximately £380,000. The judge worked out that she would need £235,000 to meet the shortfall in her own income, in comparison to her income needs. This would leave her with a “cushion” of £145,000.
He described this as:
A modest amount in the context of providing financial security for the rest of Mrs Lilleyman’s life, but not obviously inadequate … The unfortunate reality is that Mrs Lilleyman was, from August 2011, engaged in a high risk venture in which she played for high stakes and, in substance, lost … Nonetheless, there is to my mind an injustice in allowing for a full recovery for either party of costs incurred in pursuing this litigation in the no holds barred way that it has been pursued rather than making sensible early concessions … While it may be that a ‘no holds barred’ approach to certain types of litigation is entirely appropriate, it is not in my judgment at all appropriate in the context of claims under the Inheritance Act.
Mr Justice Briggs therefore ordered that the wife’s costs incurred up to 17 August 2011 be paid out of the estate, and that she pay 80% of the son’s costs incurred after that date, 20% representing an appropriate deduction. He concluded his judgment by expressing his concern about the different ways in which costs are dealt with in financial relief proceedings arising from divorce, and the way in which they are dealt with in Inheritance Act claims:
I must in concluding express a real sense of unease at the remarkable disparity between the costs regimes enforced, on the one hand for Inheritance Act cases (whether in the Chancery or Family Divisions) and, on the other hand, in financial relief proceedings arising from divorce. In the latter, my understanding is that the emphasis is all on the making of open offers, and that there is limited scope for costs shifting, so that the court is enabled to make financial provision which properly takes into account the parties’ costs liabilities. In sharp contrast, the modern emphasis in Inheritance Act claims, like other ordinary civil litigation, is to encourage without prejudice negotiation and to provide for very substantial costs shifting in favour of the successful party. Yet at their root, both types of proceedings (at least where the claimant is a surviving spouse under the Inheritance Act) are directed towards the same fundamental goal, albeit that the relevant considerations are different, and that there is the important difference that one of the spouses has died, so that his estate stands in his (or her) shoes.
I express no view on which of those fundamentally divergent approaches to costs is better calculated to serve the ends of justice, and in particular to promote compromise. I merely observe that the potential for undisclosed negotiations to undermine a judge’s attempt under the Inheritance Act to make appropriate provision for a surviving spouse is a possible disadvantage of the civil litigation costs regime currently applied to such claims, by comparison with the regime applicable to financial provision on divorce. I consider that those fundamental differences in approach to proceedings having the same underlying objective deserve careful and anxious thought.
While inheritance and divorce claims inherently share the same objective, they have different approaches to costs. As noted in the previous post, financial proceedings arising from divorce generally have a presumption that there will be no order as to costs, unless one party is guilty of litigation misconduct – but even then, it is not a guarantee. The idea of having to pay the other party’s costs for failing to beat an offer is unheard of in financial proceedings arising from divorce.
Mr Justice Briggs’ comment above that the approach to costs in Inheritance Act claims as a possible disadvantage is understandable. Of course, it can make it difficult for a judge to provide appropriately for a surviving spouse without knowing how much they may be liable for in terms of costs.
But here’s a final thought. The ‘no order’ principle in divorce costs has been widely criticised as encouraging litigation by the wealthier party with little to lose except their own costs of the litigation. Here we have the application of the ‘costs follow the event’ rule that used to apply and was considered to assist the poorer party.
Which is the more advantageous in divorce proceedings? The parties involved might wish to make sensible offers from an early stage, rather than incur a significant costs risk. However, my own view is for more discretion. The ‘no order’ principle should be departed from in wider circumstances than is currently the case. Where a party is hell bent on going to court, thereby forcing the poorer spouse to settle on either less favourable terms or incur the additional costs of litigation, should such a strategy be more routinely condemned in costs if it ultimately proves unsuccessful?
Laura Guillon was the principal trainee solicitor at Stowe Family Law, assisting the Senior Partner. Laura is half French and speaks French fluently. Her interest is in ancillary relief, particularly cases that have an international element.