NEW ZEALAND SOLICITOR/EXECUTOR CAUSES MISTAKE WHICH LEADS TO COURT PROCEEDINGS – IS HE LIABLE FOR THE COSTS?

In Crawford v Phillips [2018] NZCA 351, the New Zealand Court of Appeal decided that, notwithstanding one of the executors of an estate may have made a mistake which led to the litigation, all costs should be paid from the estate, not that executor personally.  This case is of interest to practitioners outside New Zealand because it applies old English law principles which will likely apply in most common law jurisdictions.

Background

Messrs Crawford and Wells were the executors of the estate of Mr Phillips.  There was a dispute between them and Mrs Phillips (the widow) as to the meaning of portions of Mr Phillip’s will.  The result of this dispute was an application to the Court to decide whether certain provisions of the Will were invalid.  The Court decided that those provisions were invalid.  This meant there was a partial intestacy in relation to the Will.  Messrs Crawford and Wells unsuccessfully appealed this decision.  Mr Wells was Mr Phillips’ solicitor and had drafted the Will. Therefore, Mrs Phillips alleged that he was at least partly responsible for the proceedings (because had he drafted the Will correctly, the proceedings would have been unnecessary).

Following the appeal, the parties were unable to reach an agreement as to costs, so the Court had to decide.

Messrs Crawford and Wells asked the Court to award them their “fair and reasonable” indemnity (i.e. full solicitor-own client) costs and disbursements from the estate, despite the fact the appeal had failed and that Mr Wells might have made a mistake which led to the proceedings. They also submitted that Mrs Phillips’ costs should also be paid from the estate.

Mrs Phillips, who was worried about costs depleting the estate, said that Messrs Crawford and Wells should personally pay their own costs, plus her costs on the “usual” scale basis.  This would mean the estate would not pay any of the costs.

Judgment

In New Zealand, the usual rule is that the “loser” pays the “winner’s” costs on a scale basis.  This scale means the winner usually still has to pay a portion of his/her own costs.  However, the Court has an overriding discretion as to who should pay whose costs and on what basis.

In addition, in both England and New Zealand, there are special costs principles when there is a contest concerning a will. The costs may be paid out of the estate if:

  1. The testator caused the litigation, e.g. because of a mistake or ambiguity in the will; or
  2. Someone is justified in challenging the will because of the circumstances in which it was executed, e.g. there are questions about the testator’s capacity, whether he was subject to undue influence or fraud, etc.

In this case, the proceedings arose because some of the provisions of the Will were uncertain (and in fact ultimately found to be void).  Therefore, it could be said that Mr Phillips had caused the litigation.  However, Mrs Phillips said that because Mr Wells was Mr Phillip’s solicitor and had drafted the will, it was his negligence which had resulted in the proceedings.  Thus, she said, the “usual” rule should apply

Unfortunately for Mrs Phillips, the Court distinguished between Mr Wells as an executor of the Will and Mr Wells as the solicitor who drafted the Will. The Court found that any claims made in relation to the drafting of the Will would involve Mr Wells in his capacity as Mr Phillips’ solicitor. In this litigation, the Court said that if it took into account the alleged negligence of Mr Wells and refused to order costs for the executors, Mr Crawford would be unfairly prejudiced and personally liable for costs even though he had no role in drafting the Will.

The Court found the executors were acting in a manner consistent with their position as executors and were seeking to uphold what they perceived were Mr Phillips’ wishes.

On that basis, the Court held that the fair and reasonable actual costs of both sides should be paid from the estate assets.

Comment

This case demonstrates that the court will use its discretion to order costs from the estate, not the parties personally when:

  1. One of a number of executors may have been negligent or made mistakes in other capacities; and/or
  2. The executors have acted consistently with their positions as executors, even if they lose the litigation in question.
Richard Norridge
Richard Norridge
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Joanna Caen
Joanna Caen
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