Failure To Mediate And Validity Of Part 36 Offers In Probate Claims

Full Background And Decision

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This case concerned a dispute over legal costs following a probate trial in which Samuel Jones succeeded in proving the validity of a will after it was disputed by Linda Cano. Mr. Jones brought a claim seeking to prove the 2013 will of the deceased, which left the estate to him, was valid. Ms. Cano, the deceased’s niece, disputed the will and sought a grant of letters of administration based on intestacy. She had lodged a caveat to prevent Mr. Jones obtaining a grant of probate.

Prior to issuing proceedings, Mr. Jones’ solicitors sent a pre-action letter setting out the basis for validating the will. Ms. Cano’s solicitors disputed the claim without seeing Mr. Jones’ evidence. Mr. Jones then made a Part 36 offer of settlement, offering to pay Ms. Cano money if she withdrew her caveat and supported his application for probate. This offer was not accepted. Mr. Jones eventually issued proceedings.

The key disputes between the parties on costs issues were:

• Whether Ms. Cano should pay Mr. Jones’ costs or receive a reduction due to his alleged failure to engage in mediation
• What basis costs should be assessed – standard or indemnity
• Whether Mr. Jones was entitled to cost consequences under Part 36 despite Ms. Cano arguing the offer was invalid

On whether Ms. Cano should pay Mr. Jones’ costs, she argued that his refusal to mediate warranted depriving him of some costs. Mr. Jones argued that as the successful party, he should receive his costs.

Regarding the basis of assessment, Mr. Jones argued for indemnity costs while Ms. Cano contended standard basis should apply.

On Part 36, Ms. Cano said Mr. Jones’ offer was invalid as there was no claim to stay pre-action and Part 36 doesn’t apply to probate claims. Mr. Jones maintained his offer was valid, Part 36 applied to probate claims, and it would be unjust not to award Part 36 consequences.

MASTER MARSH (Sitting in Retirement)

Costs

1. 1. I have in mind the provisions of CPR rule 44.2(4) and (5).

1. 1. The claimant submits that having been wholly successful at trial an order for costs should be made in his favour. Furthermore, the claimant relies upon the Part 36 offer made well before the claim was issued and submits that the outcome of the claim is at least as advantageous to him as the proposal in the Part 36 offer. Consequently it is said that the court, if it considers it is just to do so, should award (i) costs for the period after the relevant period expired on the indemnity basis, (ii) interest on costs at a rate not exceeding 10% above base rate and (iii) an additional sum up to a maximum of £75,000 applying the prescribed percentage of 10% of the costs awarded by the court.

1. 1. The claimant submitted that the court should treat the letter dated 7 June 2023 as without prejudice and pay no regard to it. If a contrary view was reached, as has proved to be the case, the claimant asked for an opportunity to make further submissions. However, in light of the conclusions I have reached it is unnecessary to invite the claimant to provide further submissions.

1. 1. The third defendant relies heavily upon what is said to be a material conduct issue namely the apparent refusal by the claimant to mediate. It is said a failure to respond to an offer to mediate should be treated as a refusal to mediate. The third defendant cites a number of well-known authorities, including Halsey v Milton Keynes NHS Trust [2004] EWCA Civ 576 Dyson LJ at [16] and PGF II SA v OMFS Co 1 Limited [2013] EWCA Civ 1288 Briggs LJ at [30], [42] and [51]. As a consequence, it is said the claimant should be deprived of a proportion of his costs.

1. 1. The third defendant also submits that the court should have no regard to the Part 36 offer and should not apply the consequences of failure to accept the offer. It is said that the Part 36 offer was of no effect for two reasons:

(1) CPR 36.14(1) provides that if a Part 36 offer is accepted the claim will be stayed. It is said that prior to the issue of the claim there was no claim to stay and an essential step was an application to the Probate Registry to deal with the application for a grant.

(2) In the period after issue of the claim the third defendant third defendant relies upon paragraph 6 of Practice Direction 57 which deals with the ways in which a probate claim may be disposed of after the parties have agreed to settle the claim. Notably neither Part 57 nor PD 57 state that the parties may not rely upon offers made under Part 36 despite explicit disapplication of other provisions of the CPR such as the provisions of Part 38 (see CPR rule 57.11).

1. 1. As I observed in the judgment delivered at the end of the trial, probate claims are not entirely on all fours with mainstream litigation in which the interests of the parties are predominant. However, I can see no basis for concluding that Part 36 does not apply to probate claims for the following reasons:

(1) CPR rule 57.11 (1) and (2) make provisions for the disposal of a probate claim leading to a grant of probate. The claim may be discontinued or dismissed. Paragraph 6 of PD57 provide further guidance about how a probate claim may be resolved after the parties have agreed to settle. It is right that a probate claim cannot simply be stayed because it would leave the estate in limbo. There must either be a discontinuance or dismissal of the claim and/or counterclaim or a grant in solemn form or under section 49 of the Administration of Justice Act 1985.

(2) It is right that the provisions of CPR rule 36.14(1) provide that if a Part 36 offer is accepted the claim will be stayed. Under rule 36.14(2) if the offer relates to the whole of the claim the stay will be upon the terms of the offer and under rule (5) the court has power to enforce the terms that have been agreed. It is also right that before proceedings are issued there is no claim to stay. However, it cannot seriously be suggested that the acceptance of a pre-issue Part 36 offer is outside the provisions of Part 36. Although Part 36 primarily functions in money claims it is capable of operating in other claims and it would be wrong to give its terms a narrow reading that limit its effect when the CPR encourages parties to use its provisions to resolve claims. In that sense probate claims are no different to other litigation before the courts. There is however a difference in the steps that must be taken upon terms having been agreed.

(3) The provisions of Part 36 and Part 57 need to be read together. One is providing a mechanism for making offers that have specified interest and costs consequences. The other is seeking to ensure that an estate can be administered. Those aims are not inconsistent.

(4) After issue of the claim, acceptance of a Part 36 offer will have the effect of staying the claim in a limited way. Neither party will be entitled to pursue the claim to a trial. But the court is not deprived of all powers to ensure that there is a proper disposal of the probate claim by a grant being made or the claim being dismissed.

(5) It has not been suggested in any authority drawn to my attention that a probate claim cannot be subject to valid Part 36 offers and there is a good reason for that. In fact, it has been assumed in at least one reported decision that Part 36 applies in a probate claim: see the decision of HHJ Behrens sitting as a High Court judge in Ritchie v Joslin [2011] 1 Costs L.O. 9.

Failure to engage in mediation

1. 1. I propose to consider first whether the third defendant is right to suggest there was conduct by the claimant that would warrant a reduction to the costs he will recover and then to consider what effect, if any, Part 36 has on the position. To some extent there is an overlap between these areas because for example if there is relevant conduct on the part of the claimant, it may be relevant to whether it is unjust to apply the consequences set out in CPR rule 36.17(4).

1. 1. The third defendant relies heavily on the letter dated 7^th June 2023 and the previous communications about ADR. It seems to me there are a number of factors in play with regards to conduct including:

(1) The claimant had made offers to settle well before the claim was issued to which there was no substantive response.

(2) It was essential there was a grant in respect of the estate either under an intestacy or under the 2013 will. The claim was not entirely on all fours with a claim for a money sum or damages. The options for settlement were rather more limited than in such a case.

(3) The third defendant’s conduct of the claim was very unsatisfactory including (1) filing her acknowledgement of service and defence and counterclaim late, (2) failed to provide a Disclosure Review Document or a certificate of compliance for disclosure, (3) failed to provide signed witness statements until the trial (4) made a very late application to adjourn the trial based upon unsatisfactory medical evidence, (5) made the application for third party disclosure very late (6) applied to serve witness summaries in a manner that was poorly framed and misguided. I have in mind however that the production of the Verisona Law file, albeit very late was of assistance to the claimant despite the application being pressed by the third defendant.

(4) It was the claimant who raised first the question of ADR on 27 April 2023. This was followed by a further offer that would have had significant benefits to the third defendant had it been accepted. Critically the third defendant chose not to engage with the offer and was unspecific about the form of ADR she proposed. The letter of 7 June 2023 adds little because the third defendant decided to refer back to ADR on the day the offer made on 24 May 2023 expired without having responded to the offer. The claimant was entitled to know what view the third defendant took of the offer before committing himself to a form of ADR.

(5) The merits of the claim were weighted heavily in favour of the claimant. The third defendant knew of the basis upon which the claim was made from the claimant’s letter before claim and the follow-up letter from Russell Cooke and had a clear idea of the evidence that was relied upon from the first defendant’s letter to the Probate Registry dated 30 December 2018. The third defendant had no positive evidence to rely upon of any weight or value. Instead of leaving it to the claimant to prove his claim, she actively opposed it and by doing so took her chances albeit she had no positive case.

1. 1. Nevertheless, the claimant’s failure to engage more positively with ADR and in particular mediation, ENE or Chancery FDR in April 2023 without providing any explanation is surprising.

1. 1. I have concluded that the claimant’s conduct was not such as to warrant a deduction from his costs. In reaching that conclusion I have in mind in particular (a) the fact that the claimant made most of the running in relation to settlement (b) the third defendant’s behaviour in her conduct of the claim and (c) the strong merits of the claim which either were known or should have been known to the third defendant and (d) the late stage at which the third defendant expressed a willingness to engage in ADR. Although the claimant did not explain his position in April and May 2023 it would not have been unreasonable to have concluded that the additional cost of mediation was not warranted. I do not consider that on the facts of this case it can be said that silence on the part of the claimant amounted to a refusal to undertake mediation (or some other form of ADR).

Part 36

1. 1. I turn to the effects of the Part 36 offer. I must first consider whether it is unjust to make the orders referred to at CPR rule 36.17(4) by considering all the circumstances of the case including the factors mentioned in CPR rule 36.17(5). The burden is on the third defendant to show that it is unjust.

1. 1. Taking the factors in turn:

(1) The terms of the Part 36 offer were realistic and accorded with the merits of the claim. The claim was strong. The third defendant would have been better off had she accepted the offer.

(2) The offer was made well before the claim was issued. As I have pointed out the third defendant had various options open to her. She chose to actively oppose the claim and counterclaim for a grant based upon an intestacy.

(3) The third defendant had sufficient information when the offer was made to decide what course of action to adopt. The third defendant had seen the letter from the first defendant (who did not benefit under thew will_ to the Probate Registry and was aware of the case he made and the claimant’s case. Interestingly the third defendant was slow to follow up enquiries and made her application for a third party disclosure order very late on. The Verisona Law file when it was produced strongly supported the claimant’s case.

(4) The claimant provided a response to EA Neary’s reply to the offer. There is no sense in which the claimant withheld information. He was not an executor under the will and in no better position than the claimant to obtain documents.

(5) The offer was a genuine attempt to settle the claim without proceedings being issued.

1. 1. I do not consider it is unjust to apply the effects of CPR rule 36.17.

1. 1. I accept the claimant’s submissions that the appropriate order is that the third defendant should pay:

(1) the claimant’s costs of and incidental to the claim on the standard basis until the expiry of the Relevant Period and on the indemnity basis to the date of the court’s order consequent upon this judgment;

(2) interest on those costs at 4% above base rate from the date they were incurred to the date of payment;

(3) an additional sum of 10% of the assessed costs.

1. I invite the claimant to file an order which reflects this decision.