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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Lilleyman v Lilleyman & Anor [2012] EWHC 1056 (Ch) (26 April 2012) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2012/1056.html Cite as: [2012] EWHC 1056 (Ch), [2013] 1 FLR 69, [2012] 1 WLR 2801, [2013] 1 All ER 325, [2013] 1 FCR 219, [2013] 1 Costs LR 25, [2012] Fam Law 949, [2012] WTLR 1033

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice Strand, London, WC2A 2LL
		26/04/2012

Mr Justice Briggs :

1. This is my judgment in relation to the costs of and occasioned by Mrs Lilleyman's claim for reasonable financial provision from the net estate of her late husband. I handed down my judgment on the main claim on 4 April 2012, and then heard extended submissions as to costs for most of the remainder of that morning. I make no criticism of the length, indeed thoroughness, of counsel's submissions, bearing in mind the very substantial consequences of any order for costs against Mrs Lilleyman upon her financial needs and resources. In paragraph 71 of my main judgment I recorded counsel's agreement that I could not at that stage make any assumptions as to the incidence or amount of any contingent costs liabilities arising from these proceedings, either for the estate or for Mrs Lilleyman, and would therefore have to leave them entirely out of account "however unrealistic in the real world that might prove to be." As will appear, my apprehensions about the unreality of doing so have proved to be fully justified.
2. In order to explain the order which I have decided to make, it is necessary for me to describe what has now (after judgment) been revealed to be the history of the without prejudice negotiations between the parties, of which I was, of course, wholly unaware when giving judgment. The claim was issued, together with the claimant's evidence, on 24 February 2011. She supplemented her evidence in March, shortly before an unsuccessful mediation on 21 March. On 1 April the claimant made a Part 36 offer to take a transfer of Water Meadows, and Lea Court, a lump sum of £600,000, to release her interest in Dunhome and to release the deceased's chattels to the defendants. The term of the offer was payment to her of her then costs of £37,000. I should add that the claimant has litigated throughout with the benefit of a Contingency Fee Agreement, providing for a 40 per cent uplift.
3. There followed the first round of the defendants' evidence, taking detailed issue with large parts of the factual basis of the claimant's claim and making what turned out to be irrelevant assertions about the claimant's conduct which were not, in the event, pursued at trial. In May the claimant responded with her third witness statement which also included unfortunate and irrelevant allegations about the deceased's first marriage. This exchange no doubt reflected and unnecessarily exacerbated what were I assume already hostile relations between the parties, to no useful purpose.
4. On 27 July the defendants by their solicitors made two simultaneous written offers. The first ("the July Part 36 Offer") proposed a transfer of Water Meadows and Lea Court, together with a lump sum of £450,000, and a separate offer of £18,000 should the claimant wish to receive it in exchange for the deceased's chattels. Pursuant to Part 36.2 (2)(c) the offer was stated to have the consequence that, if accepted within 21 days, the defendants would be liable for the claimant's costs until then.
5. The second offer ("the July Without Prejudice Offer") contained two parts. First, it offered to buy the claimant's occupation rights in relation to Dunhome Manor for £30,000 in addition to the amount offered in the July Part 36 Offer. Secondly, it offered a simple global sum, inclusive of costs, (then assumed between the solicitors to be £66,000 including uplift) of £550,000 or £568,000 depending upon whether the claimant wished to retain or sell the chattels. It included the £30,000 for the claimant's rights in Dunhome.
6. The claimant did not accept either of those offers, and the 21 day period specified in the July Part 36 Offer expired on 17 August 2011.
7. On 18 November 2011 the claimant made a further without prejudice offer to take Water Meadows, Lea Court and £535,000, together with all her costs, while releasing her interest in Dunhome and in the deceased's chattels, provided that the estate write off a loan of £15,000 to Jean King. On 16 December the claimant made a further without prejudice offer to take Water Meadows, Lea Court and £498,000, upon the basis of the same additional terms as proposed in November.
8. On 6 January 2012 the defendants by their solicitors made a further without prejudice offer which, because of the dispute as to its effect, I must set out in full:

"We refer to our without prejudice letter of the 22^nd July 2011 and our clients' offer to settle your client's claim in the sum of either £550,000 or £568,000 (depending upon whether or not your client wished to retain the chattels referred to in our Part 36 Offer of the same date) to include your client's costs at a figure of £66,000.

We are now instructed to advise you that our clients withdraw that offer, but replace it with an amended offer of paying your client the sum of £520,000 or £538,000 dependent upon which basis as to chattels the offer is accepted, to include your client's costs now quantified at £40,000 and on the basis also that your client will meet our clients' costs incurred since the expiry of the Part 36 offer to be subject to assessment on the standard basis if not agreed. In all other respects, the offer is on the same terms."

9. By this time the parties were engaged in preparing to give each other standard disclosure, but not a great deal of other work had been done by either side on the case, following 17 August.
10. The claimant made a final Part 36 offer on 14 February to take a transfer of Water Meadows and Lea Court, and a lump sum of £498,000, while releasing her interest in Dunhome, provided her then costs were paid in full. There, so far as I have been informed, negotations rested.
11. I must first decide whether, within the meaning of Part 36.14 (6)(a), the defendants' July Part 36 Offer had been withdrawn prior to judgment, by the terms of the defendants' January 2012 offer. Mr Sartin for the claimant submitted that, read as a whole, it withdrew and replaced both the simultaneous offers made by the defendants in July. Miss Evans-Gordon for the defendants submitted that, by its plain language, it merely withdrew and replaced the July Without Prejudice Offer, leaving the July Part 36 Offer in place. I bear in mind in construing that letter, passing between experienced solicitors, the useful summary of the purpose and effect of Part 36 in Gibbon v Manchester City Council [2011] 2 All ER 258, per Moore-Bick LJ, in particular at paragraphs 4 to 6, 16 to18 and 32.
12. In my judgment the January 2012 offer did not withdraw the July Part 36 Offer. The subject matter of the letter was clearly expressed to be the July Without Prejudice Offer and the expression "that offer" in the second paragraph of the letter was plainly a reference to it, and not to the July Part 36 Offer. Part 36 is, as Moore-Bick LJ said, a highly technical code, and I consider that the January 2012 offer was designed to, and did, take full advantage of the ability of a party to keep on foot a Part 36 offer, while at the same time negotiating without prejudice on different terms, however different a conclusion might have been reached by a purely common law analysis. It is fair comment that the latter part of the second paragraph of the January letter describes the Part 36 offer as having "expired" some time previously, but Part 36 offers do not expire merely because the date specified for the purposes of Part 36.2 (2)(c) has passed. They are either withdrawn by notice pursuant to Part 36.9 (2) or they remain open for acceptance at any time, and continue to have the consequences specified in Part 36.14(2), subject to the exceptions in paragraph (6).
13. Mr Sartin submitted in the alternative that Part 36.14 (6)(b) applied, upon the basis that the defendants' January without prejudice offer had amounted to a less advantageous change in the terms of the July Part 36 Offer, which his client had beaten. The short answer to that submission is that my award did not, on any view, "beat" the defendants' January without prejudice offer. Using perhaps hasty arithmetic during the costs hearing I suggested that my award had fallen short of that offer by at least £50,000, and Mr Sartin did not pursue his submission to the contrary any further.
14. The result of that analysis is that 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: see Part 36.14(2). Paragraph (4) requires me in that context to take into account all the circumstances of the case including, but not limited to those specified in sub-paragraphs (a) to (d). Taking those considerations in turn:

(a) There was nothing about the terms of the July Part 36 Offer which would make it unjust to apply paragraph (2).

(b) The offer was made long before trial, and within a reasonable time after an unsuccessful mediation.

(c)(d) It has not been suggested that the claimant was adversely affected by any lack of any relevant information when considering the offer, nor by any conduct of the defendants in relation to the giving of relevant information.

15. It was common ground that the claimant should have her costs out of the estate incurred from the issue of the proceedings until 17 August 2011. Mr Sartin made a number of submissions why she should not be ordered to pay the defendants' costs incurred thereafter, together with interest pursuant to Part 36(14)(2). He made those submissions primarily upon the basis that, the July Part 36 Offer having been withdrawn, they were material to a costs decision under Part 44. Nonetheless, he invited me to consider the same submissions in relation to the question of injustice under Part 36.14(2) and (4).
16. It is plain that the court's discretion to depart from Part 36.14(2), constrained as it is by a precondition that its full enforcement would be unjust, is much more circumscribed than the court's broad discretion under Part 44. Furthermore, the four specific considerations identified in paragraph (4)(a) to (d) disclose a common thread which focuses the injustice analysis upon the circumstances of the making of the offer and the provision or otherwise of relevant information in relation to it, rather than upon the general conduct of the proceedings by the parties. Nonetheless, I consider that the requirement to take into account all the circumstances of the case does enable the court to take a broader view in an appropriate case, so that it is not entirely disabled from having regard to questions of justice or injustice arising from the manner in which the offering party has made use of its costs expenditure prima facie now recoverable from the unsuccessful offeree, in the pursuit of its defence to the claim. If that were not so, then the protection of a generous Part 36 offer would enable the offering party to conduct its part in the litigation at the offeree's potential expense without regard to the obligations and constraints which the achievement of the overriding objective now place upon civil litigants. I recognise that, to a limited extent, the process of detailed assessment may be of assistance, but it seems to me to be wrong in principle to exclude the trial judge from modifying the otherwise rigorous consequences of Part 36.14(2) where satisfied that aspects of the offering party's conduct of the litigation subsequent to the making of the offer have not served the interests of justice. In such circumstances I consider that it would be unjust to implement the full consequences of that conduct upon the unsuccessful offeree. I now address Mr Sartin's submissions upon that basis.
17. His first point was that the defendants had, until Miss Evans-Gordon's closing speech, stoutly maintained throughout the proceedings that the deceased's will had made reasonable provision for Mrs Lilleyman. It will be apparent from my judgment that this was in my view, from start to finish, an entirely unrealistic stance. It ought in my view to have been obvious to the defendants, if (as I assume) properly advised, that the will went nowhere near to making reasonable provision for Mrs Lilleyman. Miss Evans-Gordon fairly comments that, since the statutory tests relevant to that question are the same as those which the court applies when deciding what provision to make, this resolutely unreasonable stance had no practical consequences in terms of lengthening the trial or otherwise adding to the costs. I accept the gist of that submission, but it did in my view contribute to the 'no holds barred' basis upon which this claim was litigated throughout, just as did the exchange of irrelevant accusations about the parties' conduct, a process initiated by the defendants, albeit then participated in by the claimant as well.
18. I pass by a number of Mr Sartin's points, which were predicated on his submission that the July Part 36 Offer was withdrawn in January 2012. He next submitted that Miss Evans-Gordon's approach to reasonable provision was unrealistically low in her closing submissions. Against that, I have to say that Mr Sartin's were unrealistically high. His more forceful point was that this was a case in which both parties had attempted to mediate, and made genuine offers, in a field of undoubted legal difficulty, when seeking to apply the developing divorce jurisdiction as a cross-check in a short marriage big money Inheritance Act claim. While recognising, and having indeed been required to surmount, those difficulties I do not consider that this gives rise to any injustice in applying Part 36.14(2). There are many areas of litigation in which quantum is the subject of complexity and legal uncertainty so as to give rise to a wide range of possible outcomes. Nonetheless, the policy behind Part 36 is intended to encourage settlement of those cases, just as much as more simple cases, by establishing a regime where the parties can have reasonable confidence that the specified consequences of the successful use of the Part 36 procedure will normally follow.
19. Finally Mr Sartin submitted that a full application of Part 36.14(2) would lead to the result that, after paying both her own and the defendants' costs for the period after 17 August 2011, she would be left with less than she reasonably required for her maintenance. Were it to be true, this would be a weighty consideration indeed, since the purpose of the court's powers to interfere with testamentary freedom under the Act would thereby be substantially interfered with, by reason of private dealings between the parties of which the court, when exercising those powers, was necessarily wholly unaware.
20. With counsel's usual helpful assistance, I have endeavoured to calculate on a broad brush basis what the claimant would be likely to have left for her maintenance if she were obliged to pay both her own and the defendants' costs from August 2011 to date. I was told that the defendants' costs for that period amount to approximately £68,000, and that the claimant's costs were approximately £114,500, giving a gross figure before detailed assessment of £182,500. Counsel agreed that I should assume an approximate disallowance of £30,000 on detailed assessment, giving the claimant a net costs burden of £152,500. When that is deducted from the £330,000 (or equivalent in value by transfer of Dunhome) awarded as a result of my judgment, it leaves a net sum of £177,500. In addition, the claimant will continue to hold the deceased's chattels, worth a little under £20,000. In considering her long term needs, to that sum of £197,500 must be added the value of her half share of her mother's house, currently worth £77,500, and the value of Lea Court (currently £125,00, and realisable in about 2014. For this purpose I shall assume that Mrs Lilleyman's other resources are broadly equivalent to her short term one-off expenditure requirements. Her long term capital resources, apart from her home, therefore amount to approximately £380,000, after paying costs. Against that, she needs a Duxbury capital amount of £235,000 to meet her income shortfall, leaving £145,000 as a cushion against contingencies. That is a modest amount in the context of providing financial security for the rest of Mrs Lilleyman's life, but not obviously inadequate.
21. The question however, as Miss Evans-Gordon submitted, is whether that outcome would cause Mrs Lilleyman an injustice, arising as it does from her decision to fight on for a better award than what has turned out to have been a generous offer made to her by the defendants last July. While I have considerable sympathy for Mrs Lilleyman's present predicament, I am not persuaded that this would, viewed separately, amount to an injustice, within the meaning of Part 36.14(2) and (4), although it is substantially less than reasonable provision from the estate. 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. There was real force in Miss Evans-Gordon's submission that it would be unjust to the defendants to require the costs of the litigation after that time to come out of the estate, in the light of the generous offer which they had made.
22. Drawing those threads together, there is little by way of injustice as between the parties in my allowing the provisions of Part 36.14(2) to take their course. 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 so as to reduce the scope of the trial and therefore the cost of its preparation. I have in mind in particular the defendants' refusal to concede until the last moment that the will had not made reasonable provision, and their persistence in challenging, without any real ammunition for the purpose, the claimant's evidence that she had substantially repaid the deceased for his financial assistance in the acquisition of Lea Court. Looking at the without prejudice negotiations, it is plain that these items were, in all offers by either side, being conceded for negotiating purposes, and no useful purpose was achieved by persisting in them to trial.
23. 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, where, even in a big money case, the costs are likely to form an ever-increasing part of the subject matter of the dispute until, as appears largely to have occurred in the present case, it is the costs burden alone which prevents settlement.
24. I therefore consider that it would be unjust if the strict application of Part 36.14(2) were to prevent the court from signifying its disapprobation of a no holds barred approach to this claim by an appropriate proportionate disallowance of the costs to be recovered. I have carefully considered whether that disallowance should apply both to the claimant's costs before 17 August 2011 and to the defendants' costs thereafter. On balance, and upon a review of the litigation as a whole, I have decided that it should apply only to the defendants' costs. My reasons are that, although it is true that the claimant responded in kind to the introduction of irrelevant matters of personal criticism during the period before 17 August, originally introduced by the defendants, otherwise most of the responsibility for that no holds barred approach lies with the defendants. I have referred already to the refusal to concede that the will made no reasonable provision, and to the pursuit of a claim for a beneficial interest in Lea Court. More broadly, I have in mind that upon most of the factual issues in dispute the claimant's account prevailed at trial. I have noted in my main judgment how realistic was the claimant's own evidence about her reasonable needs, albeit that the quantum of her case was pitched much too high in closing submissions.
25. I shall therefore order that the claimant's costs, incurred up to 17 August 2011 be paid out of the estate, and that 80 per cent of the defendants' costs incurred thereafter be paid by the claimant, a 20 per cent disallowance of their total costs being an appropriate reflection of the matters to which I have referred. Interest is to be paid on the defendants' costs pursuant to part 36.14(2)(b), at the judgment rate. Costs on both sides are to be the subject of detailed assessment on the standard basis and, since there is nothing to show that the one will be obviously larger than the other, there need be no order for an interim payment on account.
26. 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.
27. 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.