Stephen Jourdan QC:
- Mr John Folkes and his wife Mrs Patricia Folkes ("Mrs Folkes") had three children; the Fourth Defendant, Constantine Folkes, who I will refer to as "Con", the Claimant, Patricia Jane Folkes, known as Jane Griffiths, who I will refer to as "Jane" and a third child who is not a party, James Folkes. Jane had two children, Tosca and Conrad. James Folkes also had two children, Laura and Max. Con had three children, Samson, Cleopatra and Amy Folkes, who are the Fifth, Sixth and Seventh Defendants. I will refer to them as "Con's Children" although they, as well as Tosca, Conrad, Laura and Max, are all adults.
- The family's assets included shares in steel and real estate companies, a very large house in substantial grounds called Stourton Hall, and a holiday home at Pen-y-Graig in Anglesey. John Folkes died in 1991 and Mrs Folkes on 20 December 2014.
- By her last will, Mrs Folkes appointed the First, Second and Third Defendants as her executors and trustees. I will refer to them as "the Executors". The First Defendant, Mr Higgs and the Second Defendant, Mr Leek are both solicitors, both of Higgs & Sons, and Mr Homer, the Third Defendant, is an accountant, and they had acted for Mrs Folkes for many years. Mr Higgs drew up her wills, codicils and letters of wishes.
- By her last will with its codicils, Mrs Folkes left her personal chattels to the Executors, and the remainder of estate on discretionary trusts, with her children and grandchildren as beneficiaries. Mrs Folkes left a letter of wishes saying that she wanted £50,000 be paid to each of James and Jane, and that after those payments the trust fund be divided in three equal parts with Con, Jane and James each receiving the income from one part, their respective children receiving the capital, in equal shares, after their parent's death.
- She also left a letter dated 29 July 2011 prepared by Mr Higgs and signed by Mrs Folkes in which she said that her personal chattels at Pen-y-Graig and Stourton Hall, which included gold coins kept at Stourton Hall, had already been given to Con, in 2000 and 2005 respectively.
- On 18 July 2016 Jane issued a part 8 claim form against the Executors, seeking an order that Mark Keenan, a solicitor at Mishcon de Reya, be appointed as administrator of Mrs Folkes' estate in place of the Executors. This was because Jane considered there were a number of transactions entered into and documents executed by Mrs Folkes during her life that Jane considered required investigation. She did not consider that the Executors had sufficient independence to investigate them fairly, as they had been involved in some of them personally, and she thought that the Executors favoured Con and Con's Children. Jane did not join any of the other beneficiaries under the will as defendants.
- Con and Con's Children then applied to be joined as defendants and following a hearing on 24 February 2017, at which Jane opposed their joinder, on 28 March 2017, Deputy Master Linwood ordered that they should be joined.
- There was then a 3 day trial of the claim before the Deputy Master, at which submissions were made by counsel for Jane, for the Executors, for Con, and for Con's Children, followed by a reserved judgment given on 15 November 2017 ("the Main Judgment"). In the Main Judgment, the Deputy Master decided that the Executors should be replaced by an independent administrator, although not Mr Keenan, but rather by a solicitor based in the Midlands, whose fees would be lower. There is no appeal from any aspect of the Main Judgment.
- On 15 November 2017, the Deputy Master heard submissions on the costs of the claim, and on 30 November 2017 he delivered a reserved judgment on costs ("the Costs Judgment") and made a costs order giving effect to that judgment ("the Costs Order").
- The Costs Order divided liability into two periods, the period up to the date of the hearing on 24 February 2017 ("the First Period") and the costs incurred after that date ("the Second Period"). The significance of 24 February 2017 to the Costs Order was that shortly before the hearing on that date, the Executors, who had until then actively opposed their removal, dropped their opposition to Jane's application for them to be removed and thenceforward took a neutral stance. The Deputy Master ordered as follows:
(1) All seven Defendants were jointly and severally liable to pay Jane's costs during the First Period, up to 24 February 2017.
(2) Con and Con's Children were jointly and severally liable to pay both Jane's and the Executors' costs incurred during the Second Period, from 24 February 2017.
(3) The Executors were not entitled to any indemnity from the estate in respect of their own costs either before or after 24 February 2017.
(4) A payment of £150,000 on account of costs from all the Defendants was to be made to Jane.
- There are a number of grounds of appeal against the Costs Order relied on by Con and Con's Children on the one hand and the Executors on the other, for which permission to appeal has been given, in some cases by Nugee J, in some cases by Rose J, and in some cases by me. I heard submissions from counsel over 2 days and also received some subsequent written submissions. I am grateful to all counsel for their clear and helpful submissions. I will address the grounds of appeal in turn below, taking Con and Con's Children's grounds of appeal first, and then those of the Executors. Before doing that, I will (1) summarise how the dispute developed; (2) summarise the main findings of the Deputy Master in the Main Judgment (against which there has been no appeal); (3) summarise the Costs Judgment; and (4) summarise the principles applicable to an appeal against a costs order.
How the dispute developed
- After Mrs Folkes' death, in June 2015, Jane by her solicitors, Bircham Dyson Bell ("BDB") wrote to Higgs & Sons with a request for information and documents relevant to the question of whether the will and codicils were valid - whether Mrs Folkes had the mental capacity needed, whether there was any undue influence, and whether she knew and approved the contents of the documents. In Larke v Nugus  WTLR 1033, it was held that a solicitor should reply to a request of that kind. Requests of that kind are, therefore, now known as Larke v Nugus requests. There followed correspondence about that issue, in which Jane contended that the Executors should resign because they were biased in favour of Con. The Executors disagreed, as did Con and Con's Children.
- It was not until March 2016 that BDB raised for the first time queries about certain transactions during Mrs Folkes' life. In their letter dated 16 March 2016 to Mr Homer, they said that there were numerous substantial concerns as to the assets that should fall within the estate and significant transactions during Mrs Folkes' lifetime. They said that the issues raised involved Mr Higgs and Mr Leek both as executors and as professional advisers to Mrs Folkes, Con and the family companies, that there were material conflicts of interests and that the Executors should step aside to allow independent executors to be appointed to undertake a thorough investigation. The issues raised included an allegation that the chattels in Stourton Hall, other than the dining room furniture and the contents of the cellar, had not been given to Con, contrary to what was said in the letter of 29 July 2011. The letter made criticisms of the part that Mr Higgs had played in the production and signing of that letter, which it was said had been procured by Con. The letter pointed out that the 29 July 2011 letter contradicted earlier letter of wishes which made it clear that the chattels had not been given to Con. There were many other allegations.
- On 20 May 2016, BDB sent to Higgs & Sons a draft witness statement made by Jane. They asked the Executors to voluntarily agree to step aside and said: "it is inevitable that in the event the application is opposed, it will be successful and your clients will be condemned in costs".
- They did not send a copy of the statement to Con and Con's Children, but Higgs & Sons did. On 10 June 2016, Withers acting for Con wrote to Higgs & Sons saying that Con did not consider that there was any justifiable legal basis for the Executors to step down or be removed. On 13 June 2016, Mills & Reeve, acting for Con's Children, wrote to Higgs & Sons saying that Con's Children were strongly of the view that their grandmother's wishes should be adhered to: "They are adamant that the executors named in the Will should remain in place and we are instructed to oppose any application to have them removed. For the avoidance of doubt, we would also point out that our clients take issue with a number of points raised in Jane Griffin's draft witness statement".
- The Executors did not agree to stand down, and on 18 July 2016 Jane then issued this claim, using a part 8 claim form supported by a witness statement made by Jane, which was 72 pages long and had 7 files of exhibits. Near the beginning in paragraph 3, under the heading "Summary", Jane said:
"I believe that there are reasons to suspect that my vulnerable, elderly mother was pressurised, to an extent that may be considered tantamount to financial abuse, over the course of 23 years to transfer circa £26.5m at current values against her true wishes to my older brother Constantine and his son Samson. Many of the transactions comprising that gradual transfer were facilitated by the Defendants, in their capacities as professional advisors, without due regard to my mother's vulnerability or their own significant conflicts of interests. The Defendants, as executors of my mother's estate, have now refused my reasonable requests to step down in favour of an independent executor who can investigate serious matters of concern appertaining to the estate and the transfer of my mother's assets against her wishes".
- Later, at paragraph 10, she said:
"I believe the estate ought to investigate and if appropriate pursue a number of potential claims against my brother Con, his son Samson and/or Folkes Holdings Ltd in respect of various transactions my mother was persuaded to make during her life, and other matters of which my mother may have had no knowledge. I believe that some or all of these transactions ought to be investigated and if appropriate set aside. They are detailed below. Indeed, I believe that these transactions, taken together, raise suspicions of a sustained campaign of pressure tantamount to financial abuse by Con against my elderly and vulnerable mother, to ensure that the vast bulk of her wealth was his or in his family on or before the time she died. However, I have tried to be selective in the particular transactions focused on below."
- In relation to the Executors, Jane said they had:
"… long-standing and continuing professional relationships with Con, Samson, and the companies Con controls. They are unlikely to wish to act against Con's wishes for fear of losing business in the future. I therefore do not believe that they will properly consider the merits of these claims when deciding whether to pursue them or not. Moreover, some or all of the Defendants were closely involved in facilitating the transactions in question, either acting for and advising both parties of the transaction at once, or acting on Con's behalf. (Indeed, I believe that Mr Higgs was a willing participant in Con's financial abuse of my mother, although it is not necessary for me to go that far on this application). The Defendants are therefore particularly unlikely to entertain any suggestion there is anything wrong with these transactions; indeed, they have a personal interest in leaving the transactions alone."
- The many matters raised in the statement included the assertions which had already been made in correspondence concerning the letter of 29 July 2011. The allegation was that the statement in the letter that Mrs Folkes had already given the contents of Stourton Hall to Con in 2005 and the contents of Pen-y-Graig in 2000 was untrue. Jane said she thought it likely that Mr Higgs and Mr Homer had persuaded Mrs Folkes to state falsely that she had gifted the chattels years ago in view of the inheritance tax benefits.
- She concluded by saying that, if her mother's assets had simply been left alone, she would have died worth around £28.7 million, instead of dying with an estate of £2.1m. She said that it should be investigated whether this had been a result of Con's influence of their mother over the years. She said that the transactions for which she had obtained documents were clearly ones meriting close scrutiny and very possibly legal action. The Executors had been closely involved. She thought it likely that there were several other such transactions. It was essential, she said, that those appointed to get in and safeguard her estate were neutral and independent, and in particular that they had no interest in preventing investigation into Mrs Folkes' lifetime transactions.
- On 5 August 2016, Mills & Reeve wrote to Higgs & Sons, saying that Con's Children were adamant that the Executors should remain in place and they were instructed to oppose any application to have them removed, and that their clients took issue with a number of points raised in Jane's draft statement. They said Con's Children should have been added as parties, that if Jane did not add them they would write to the Court accordingly, and asked that this be brought to the Court's attention at the first case management conference as a matter of priority.
- On 17 August 2016, Withers wrote to Higgs & Sons, saying that Con "does not consider there to be any grounds for the Executors to be removed and intends to contest the application … The issue of our client being joined to the proceedings will need to be dealt with at the first Directions Hearing, absent Jane Griffin voluntarily agreeing to our client being joined as a party".
- Thereafter, as I have said, Con and Con's Children made applications to be joined as defendants and following a hearing on 24 February 2017, at which Jane opposed their joinder, on 28 March 2017, the Deputy Master made an order that they should be joined.
The relevant findings of the Deputy Master in the Main Judgment
- The Deputy Master said that this was an "extremely bitter, long running and costly family dispute" with a complicated history. He considered 34 witness statements made by 21 deponents. The accompanying exhibits and other documents took up some 17 lever arch files. The Main Judgment with its appendices is 64 pages long. He reviewed the history of the family from the 1950s on.
- He discussed the law applicable to an application to replace personal representatives and trustees. At paragraph 41, he concluded that he should take each allegation made by Jane, and consider:
"… whether there appears to be on the evidence before the court, or with such evidence that appears likely to be obtained at proportionate cost, the basis for a claim which has reasonable prospects of success, subject to consideration of potential defences. Such a claim must enhance the value of the estate relative to the costs of pursuing it. Evidence for a claim or a defence before the court is unlikely to be determinative but must not be speculative or dependent upon matters which may or may not happen. Further, the whole may be more than the sum of the parts in that individual claims may be borderline but together they may persuade the court that investigation is necessary. Then the question of the replacement of the Executors must be considered in the context of their position as far as knowledge and possible conflicts of interest are concerned."
- There were 15 allegations raised by Jane's witness statement which she said she thought required investigation. There were in addition two further allegations raised shortly before the hearing, which it was common ground before me had not caused any additional costs to be incurred. These transactions concerned the sale in 2014 of shares in one of the Folkes' companies by the trustees of a life interest trust established by Mr. Folkes's will of which Mrs. Folkes was the life tenant, and the grant of an option to Con to purchase shares in the family company in 2001. Both Mr. Higgs and Mr. Leek were trustees at the relevant times.
- In respect of 12 of the 15 allegations raised by Jane's witness statement, the Deputy Master held that there was not sufficient evidence to satisfy the test he had identified. In some cases, he was dismissive of the allegations. For example, in relation to an allegation relating to lifetime transfers, the Deputy Master said "There is therefore no evidence of such transfers". In relation to an allegation relating to gold bullion, the Deputy Master said: "In circumstances where no-one has seen the alleged bullion, there is no documentary evidence, only one family member considers it to exist, several others are silent and the remaining majority do not believe it exists, I cannot see that there is anything that could possibly be investigated."
- With a number of others he reached his conclusion with some hesitation. For example, in relation to an allegation relating to the sale of shares by Mrs Folkes to Samson, he said that he recognised "certain questionable elements of the transactions" and in relation to an allegation relating to a loan to a family company, he said that "the circumstances do appear to give rise for concern".
- The Deputy Master held that only 3 of the 15 allegations raised by Jane's witness statement met the test he had stated. They all concerned chattels belonging to Mrs Folkes. The Deputy Master considered that there were grounds for considering that the chattels which Mrs Folkes had said in the letter of 29 July 2011 had already been given to Con had, in reality, never been given to Con and belonged to Mrs Folkes at the date of her death. He was also concerned about the fact that, in late 2013, Con had sent his mother a cheque for £198,500 in respect of two thirds of the gold coins at Stourton Hall, even though the letter of 29 July 2011 said that these had been given to Con years earlier. That payment was followed 5 days later by a payment out by Mrs Folkes of £200,000, for which the Executors seemed unable to provide an explanation.
- He also held that the two new allegations raised shortly before the hearing justified investigation by an independent administrator.
- The Deputy Master concluded:
"I have no doubt that in the circumstances I have set out above that it is in the best interests of the beneficiaries for all the Executors to be replaced. I of course make no findings as to wrongdoing or fault on the part of the Executors but consider that the administration of the estate cannot be properly concluded in the sense that an investigation needs to take place and these Executors are conflicted or else professionally embarrassed from conducting it as I refer to below. I do consider there is a real risk that the estate could be endangered due to the questionable dealings and conflicting documents I have identified above. I have taken into account that removal is a drastic step and that friction or hostility is not by itself sufficient reason".
- He said that he had borne in mind that Mrs Folkes had chosen the Executors, but he said that certain of the events and especially the creation of some documents such as the letter of 29 July 2011 arose at a time when Mrs Folkes' dementia was well advanced, which he considered vitiated her choice or at the very least opened her choice to challenge. He addressed a number of other matters which bore on his decision.
- The Deputy Master said that what he called "a simple but substantial conflict" existed with regard to Mrs Folkes' letter of 29 July 2011 which was prepared by Mr Higgs and to which it appeared he obtained her signature, and which said she had given her chattels at Stourton Hall and Pen-y-Graig to Con many years previously. This was because Mr Higgs had earlier prepared on Mrs Folkes' direct instructions letters of wishes which all referred to Con having these chattels on her death. He held that this meant that both Mr Higgs and Mr Homer were professionally embarrassed as to accounting to HMRC. Mr Leek, as a partner in the firm in which Mr Higgs was a partner and is now a consultant was similarly in a position of conflict through being a member of the same firm.
- He also considered that the payment to Mrs Folkes of £198,500 in respect of the gold coins and the payment out of £200,000 shortly afterwards presented the Executors with a conflict as they formed part of the Stourton Hall chattels and "they failed to take any action as to the unconvincing explanation and possible loss to the estate". He said that all the post 2008 matters took place "against a background of Mrs Folkes' declining capacity and no independent advice".
- Having decided to replace the Executors, he went on to discuss whether Mr Keenan should be chosen. Con had proposed that if the Executors were to be replaced, it should be with one of three solicitors based in the Midlands, each of whom would charge lower fees. Jane had resisted that, because she did not think any of the three would be suitable. The Deputy Master agreed with Con on this issue and held that one of the three should be chosen, although he did not decide at that stage which of the three.
- He then discussed the question of whether the administrator should confine his investigation to the five issues he had held justified the appointment of an independent administrator. He held that this would not be appropriate, saying:
"227. I am concerned — as indicated by my view as to the costs - that the investigation should be proportionate. This will take place in circumstances where Con and Jane have battled over their mother's assets for years both before and after she died. Constant pressure from any beneficiary or those acting on their behalves would be unhelpful, costly and unnecessary. I have considered whether a limit should be placed upon the areas that the independent administrator should review, in the context of well documented pressure from Con. This combined with certain claims Jane has made which in my view are quite hopeless — as there is no evidence — such as the gold bullion must be avoided to ensure costs are proportionate.
228. On balance I do not think it appropriate to fetter the independent administrator in that way as s/he must be properly independent and able to follow such lines of inquiry as is felt is in the interests generally of the beneficiaries, without having to seek costly approval via court applications which I envisage will be contested — as Ms Talbot Rice QC indicated may occur if Beddoes applications were to be made. I expect the substantial investigation and my comments on each allegation will be taken into account."
The Costs Judgment
- The Deputy Master began by discussing the principles applicable to costs orders where executors were parties to litigation. He said that "the general rules as to costs apply to executors, the starting point being that costs follow the event, subject to the discretion of the court, which includes consideration of whether or not executors' costs have been properly incurred". He adopted the summary of the law by Master Matthews, now HHJ Matthews, in Jones v. Longley  EWHC 3362 (Ch) at [11-19].
- He quoted from Lewin on Trusts, (19th edition and supplement) at [27-191]:
"If a trustee is removed on the ground of conflict of interest and duty, the court might normally be expected to make an order for costs against the trustee, though might allow the trustee his costs in special circumstances. Although it has been suggested that a trustee might be less at risk of losing his indemnity where he is removed on grounds other than conflict of interest, the test should be the same regardless of the grounds relied upon for the trustee's removal, namely whether the trustee has acted reasonably in resisting the application for his removal. If the trustee did not act reasonably, he will be ordered to pay the applicant's costs and deprived of his indemnity."
- He said that he accepted submissions made by Mr Burden for the Executors derived from Kain v Hutton  8 ITELR 411 (a New Zealand decision),  NZSC 61 that:
(1) A trustee is entitled to an indemnity in relation to all expenses incurred in the execution of the trusts provided they were reasonably, or properly, incurred.
(2) The question as to whether the trustee has acted so that he should be deprived of his contractual right to costs is not a matter of formal proceedings but a matter of substance, namely the trustee's conduct.
(3) The court should not discourage persons from becoming trustees by inflicting costs if they have done their duty or even if they have committed an innocent breach of trust.
(4) If a trustee's conduct had been honest, even though he has been mistaken, he will be allowed his costs out of the trust when acting on behalf of the trust and not on his own behalf.
(5) Where the trustee has to be a necessary party to proceedings and may do no more than submit to the court's judgment, so he will receive his costs. The position is different where misconduct is concerned.
- He then discussed BA v. Verite Trust Company Ltd  JRC 150, a decision of the Royal Court of Jersey, where the Court held that a trustee had acted unreasonably in opposing its replacement and should pay the costs of the application to remove it and should not be entitled to recover its costs from the trust fund. The Deputy Master quoted passages from the judgment in which the Royal Court. In those passages, the Court said that their judgment was not to be understood as meaning that a trustee must retire immediately upon being requested to do so, and that it should be deprived of its costs if instead it seeks the directions of the court before agreeing to retire; that was most definitely not the case. The Court said its decision in that case was "… based upon the fact that the conflict of interest referred to by the beneficiaries was as plain as could be and it was thoroughly unreasonable of the trustee not to recognise that it was in an impossible position and had no option but to retire." In many cases the position would be far less clear; "it will often be entirely reasonable for a trustee to seek a decision from the court before agreeing to retire or to oppose any application for removal. In many cases, even where the court's decision is that the trustee should retire or be removed, the court will not conclude that the trustee has acted in such a way that it should be derived of its costs or remuneration. Everything will depend upon the facts of the specific case but the general approach remains that a trustee which is acting in good faith in what it perceives to be the best interests of the trust and the beneficiaries as a whole will not be deprived of its costs unless it had behaved unreasonably. That includes differences over whether the trustee should continue in office or not".
- The Deputy Master then discussed the principles applicable to when an issue based costs order might be appropriate, referring to the relevant parts of CPR r.44.2, notes in the White Book, and the judgment of Jackson LJ in Fox v. Foundation Piling Ltd.  EWCA Civ 790.
- He then referred to Hospira UK Ltd. v. Novartis AG  EWHC 886 (Pat), where Arnold J said:
"The principles to be applied in these circumstances are familiar subject to one small qualification. The court generally approaches the matter by asking itself three questions: first, who has won; secondly, has the winning party lost on an issue which is suitably circumscribed so as to deprive that party of the costs of that issue; and thirdly, are the circumstances (as it is sometimes put) suitably exceptional to justify the making of a costs order on that issue against the party that has won overall. ... The origin of the phrase 'suitably exceptional' is the judgment of Longmore LJ in Summit Property v Pitmans… Longmore LJ was not intending when using the words 'suitably exceptional' in the particular circumstances in which he did to impose a specific requirement of exceptionality. The question rather is one of whether it is appropriate in all the circumstances of the individual case not merely to deprive the winning party of its costs on an issue in relation to which it has lost, but also to require it to pay the other side's costs."
- He also referred to two personal injury cases where the court had refused to make issue based costs orders even though the successful party had lost on an issue in the case.
- He then referred to two commentaries that had not been cited to him. The first was Cook on Costs (2018) paragraph 38.2 which said: "A trustee or personal representative who has acted outside his duty or has acted in his own interests or otherwise unreasonably not only will be unable to recover his costs out of the fund or estate, but he may be ordered to pay the costs of another party personally".
- The second was the Law Society's Practice Note on Disputed Wills at para.5.1. which said:
"As an executor you are a fiduciary with duties to the beneficiaries of the estate, whoever they turn out to be. If you are partisan in the litigation, you risk a costs order being made against you personally. Provided you act neutrally in any litigation, the costs of the executor should come out of the estate. So far as the warring parties are concerned, it is no longer the case that costs in probate litigation will necessarily be ordered from the estate. Costs are at the discretion of the court, and it is increasingly the case that the unsuccessful party will have to bear them. To avoid being at risk of costs you should therefore remain neutral and allow the beneficiaries of the will or next of kin to pursue the litigation. Your only obligation in the proceedings is to provide information and to preserve the estate".
- The Deputy Master commented: "I appreciate that that is a practice note but it is a long-standing one, and all solicitors practicing in that field will or should be aware of it. Mr Homer, whilst not a solicitor, is bound in with Messrs. Higgs and Leek as joint executors. The practice note refers to disputed Wills. All three executors in their first witness statements refer to the claimant's claim being to the validity of the Will and which 'has morphed over time into an application to remove the executors'. The practice note must therefore apply to executors in these circumstances."
- On the applicable principles, he concluded that: "Clearly all the authorities turn on their own peculiar facts. I must have regard to all the circumstances and the conduct of each party before me, and the starting point is the three questions posed by Arnold J in Hospira".
- He then addressed the first of those questions: "Who has won" and held that Jane had won. He recorded the submissions made on behalf of Con and Con's Children (who were separately represented before him) that they had won because: (1) What Jane applied for was very narrow, namely that Mr Keenan should be appointed as the independent administrator. She failed on that and indeed maintained it should be Mr Keenan until the start of the hearing on 15 November 2017. Rather, one of the three Midlands based solicitors proposed by Con's solicitors, Mr Keeley, was, at that hearing, appointed. (2) Con had shown that the majority of Jane's allegations, by number and value, were not worth investigating.
- The Deputy Master rejected those arguments and held that Jane had won because:
(1) The Executors had been removed.
(2) That removal was preceded by nine requests by Jane and her lawyers for the Executors to step down over a period of a year prior to issue of the claim.
(3) Jane's application was vehemently opposed by Con and Con's Children.
(4) The majority of the beneficiaries in number, six out of ten, and value, supported Jane.
(5) The Executors were provided with Jane's draft first witness statement in May 2016, some two months before issue. They, and Con and Con's Children, were therefore well aware of the basis for the claim some time before issue.
(6) The Executors initially opposed the application.
- He did not accept that Jane was unsuccessful in the sense that the executor she requested was not appointed. Rather, he considered that the correct characterisation of the outcome was that, notwithstanding the strong opposition of Con and Con's Children, the Executors had been removed and a replacement appointed.
- He considered that the circumstances were similar to three personal injury claims he had discussed, in that Jane had succeeded on some but not all issues, but had to come to court to obtain an order for removal.
- He then addressed the question identified in Hospira: "Has the winning party lost on an issue which is suitably circumscribed so as to deprive that party of the costs of that issue?" He said he had taken into account the history of this claim, the authorities he had already referred to, and the entirety of the note in Civil Procedure 2017 at [44.2.7] which included seven propositions derived from Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd  EWHC 2280 (TCC), 122 Con LR 88. He recorded the arguments put by Con and Con's Children that (1) Jane had only won on three of the issues raised by her; (2) Jane had made a large number of most serious allegations against Con and the Executors; (3) Jane had substantially exaggerated her claims in that the original depletion in the estate's assets was, she claimed, some £26 million, but by the time of trial this had reduced to hundreds of thousands, if not millions, of pounds; (4) Jane had made claims incapable of substantiation; made grossly disproportionate claims by number, volume and cost; and had raised doubts over the testamentary capacity, but backed away from a formal challenge.
- There was also an argument that Jane's failure to accept one of the three alternative administrators proposed by Con, which amounted to the rejection of an offer to settle. The Deputy Master held that the proposal of alternative administrators was not equivalent to an offer to settle.
- The Deputy Master held that Jane had not lost on a circumscribed issues or issues so as to deprive her of the cost of any issue or issues, for the following reasons:
(1) The vast majority of the evidence and submissions were so inter-connected as to make a fair determination of any issue-based costs order extremely difficult.
(2) All parties agreed that he should not, in the absence of oral evidence, make conclusive findings of fact especially in the absence of all the relevant information and documentary evidence.
(3) The key matters, such as the Pen-y-Graig chattels letter and the gold coins, were matters put before the Executors, and thereby Con and his children, sometime before proceedings were issued. They were never satisfactorily answered. Conflicts of interest clearly existed.
(4) Con and the Children never made a settlement offer of any kind that could be accepted.
(5) Con and Con's Children could have consented to the removal of the Executors without prejudice to their responses to Jane's allegations.
(6) The evidence evolved, disclosures were made and points were answered in evidence, leading to certain shifts of position. This process lasted right up to and during the trial.
(7) The position was analogous to the personal injury cases he had referred to previously.
- He then said in paragraph 44:
"Whilst Jane's conduct of her claim can be criticised, such as the wide-ranging nature of the allegations, many of which did not pass the test I set, and at times the aggressive way in which they were put, I find the family dispute part of this claim, as opposed to the removal of executors, to be one in which it would not be just to make an issues or conduct-based costs order. I say this particularly because Jane has succeeded on the narrow but main issue of the replacement, and my review of the allegations was not, and never intended to be, conclusive… I may have decided differently had I made concluded findings of fact".
- The Deputy Master then turned to the position of the Executors. They did not make any claim to costs in respect of the period up to 20 May 2016, when Jane's draft witness statement was sent to them. They said that they should be indemnified in respect of the period from then on. They argued that they were caught between Jane and Con, and should not be penalised for supporting Con and Con's Children being joined to the claim, and that from 24 February 2017 to trial the Executors took an administrative role, assisting by providing information as the focus of the claim shifted.
- The Deputy Master said it was necessary to consider the correspondence between the Executors and Con and the Children as well as the witness statements to properly consider their stance. He then summarised some of the correspondence and procedural history of the claim and then his assessment of the history, which was as follows:
"51… the key point is the Executors contested their removal with the strong and insistent encouragement of Con and his children at all times up to 17th February 2017.
52 I can see no good reason for them to have done so. I do not accept it was the most reasonable course of action in circumstances where the Executors knew or should have known of the conflicts of interest identified at paras. 217 to 220 above.
53 I consider those conflicts of interest were plain and obvious - see Verite, para.41. The Executors knew of them from when they arose, commencing in July 2011 and continuing against the background of Mrs Folkes' declining capacity (para.220). In my judgment, the Executors should not have opposed their removal but, in the interests of the estate, adopted a neutral stance from the outset."
- He gave 3 reasons for refusing to allow the Executors an indemnity from the estate:
(1) They should have either stepped aside or simply adopted a neutral position from the commencement of the request to do so from June 2015, and at the very latest from the service of the proceedings as they knew or should have known of the conflicts of interest from 2011.
(2) It was unreasonable of them to resist removal, applying what was said in Verite, paras. 41 and 42.
(3) They were well aware of Mrs Folkes' impaired or declining capacity and therefore the position they were in.
- He said there "… are no special reasons in these circumstances to reverse the normal expectation that where a trustee is removed on the grounds of conflict of interest and duty, an order for costs will be made against the trustee" referring back to the passage from Lewin he had quoted.
- He therefore held that, in the First Period, the Executors should pay Jane's costs and were not entitled to an indemnity.
- As to the Second Period, he said that the Executors were not entitled to an indemnity in that period either. This was because:
(1) The adoption of the neutral position still left them in place and present at trial, although they did, by letter 8 days before the trial, invite the other parties to agree their attendance could be avoided.
(2) The Executors did not have to attend the trial to protect their professional reputations as those reputations were not in jeopardy and no party wanted or required findings against them.
(3) The Executors' continued involvement in the period from 24 February 2017 to date arose due to their defence of this claim.
(4) The conflicts of interest were plain and obvious.
(5) It would not be just in general for executors to contest removal and then realise their own true position, adopt a neutral stance and expect the estate to pay the costs of same. That must have adverse financial consequences for beneficiaries. That, could not be right, as the Executors' change of position in the litigation did not change the cause of or reason for removal.
- However, he did consider that the Executors were entitled to be paid their costs of the Second Period by Con and Con's Children, because:
(1) It would be unjust in the circumstances for the Executors to bear their own costs in view of their change of position.
(2) The Executors could have adopted a neutral position very much earlier had Con and his children agreed, and ultimately these proceedings may not have been necessary.
(3) On the basis that costs follow the event, the Executors' costs should mirror the costs between the contesting parties for this period.
The principles applicable to an appeal against a costs order
- CPR r.55.21(3) provides that an appeal court will allow an appeal where the decision of the lower court was "wrong", or alternatively unjust because of a serious procedural or other irregularity in the proceedings in the lower court, but that is not suggested here.
- CPR part 44.2(1) provides that the court has discretion as to whether costs are payable by one party to another, the amount of those costs; and when they are to be paid. The exercise of a discretion by a judge will normally only be treated as "wrong" on appeal if one of the following grounds is made out:
(1) The judge misdirected themselves or erred in principle.
(2) The judge failed to take into account material factors that ought to have been taken into account.
(3) The judge took into account material factors that were irrelevant.
(4) The judge, despite correctly directing themselves as to the principles governing the decision, and having taken into account all material factors, and no immaterial factors, nonetheless arrived at a decision which no reasonable judge could have reached; or in other words "exceeded the generous ambit within which reasonable disagreement is possible" (per Lord Fraser in G. v G. (Minors: Custody Appeal)  1 WLR 647, HL, at 652.); or to put it another way reached a decision which the appeal court concludes "… was wholly wrong because the court is forced to the conclusion that he has not balanced the various factors fairly in the scale" (per Lord Woolf MR in AEI Rediffusion Music Ltd v Phonographic Performance Ltd  1 WLR 1507, at 1523).
- The judge who has conducted the trial is best placed to apply the guidance set out in CPR r.44. An appeal court can rarely have the same feel for the case that the trial judge will have, and must therefore be cautious before holding that the trial judge's decision on costs was wrong: Ashany v Eco-Bat Technologies Ltd  EWCA Civ 1066 at . This particularly applies to the last of the four grounds referred to above. "An appeal court will only rarely find that the exercise of discretion below is "wholly wrong", because not only is that discretion particularly wide but the judge below is usually uniquely well-placed to make the required assessment, having heard the relevant evidence", per Hickinbottom LJ in Atlasjet v Ozlem  EWCA Civ 1264 at 5(iv). That is why Nugee J, who gave permission for some of the grounds of appeal advanced by Con and Con's Children, and Rose J, who gave permission for the grounds of appeal advanced by the Executors, both said that the appellants faced an uphill struggle in persuading the appeal court to interfere with the Costs Order.
- The appeal court must also bear in mind what Lord Hoffmann said in a well known passage in Piglowska v Piglowski  1 WLR 1360 at 1372:
"The exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed. This is particularly true of an unreserved judgment such as the judge gave in this case but also of a reserved judgment based upon notes, such as was given by the district judge. These reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account. … An appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself."
- If a judge has not made any of the errors described above, an appeal against their decision will be dismissed; it is said in those circumstances that the decision was one that they were "entitled" to reach. That does not mean that the appeal court would have made the same decision; it means the decision is not "wrong" because it was arrived at by a decision making process which involved identifying the applicable principles, taking into account relevant matters, disregarding irrelevant matters, and which arrived at a conclusion which was one which a reasonable judge could have reached. If, however, the judge has made an error of the kind described above, the appeal court will set aside the decision and exercise its own discretion, nonetheless giving weight to any parts of the lower court's assessment which are not vitiated by the error.
Was the Deputy Master wrong to hold that Jane had won and that Con and Con's Children had lost?
- CPR r.44.2(2)(a) says: "the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party". The Deputy Master held that Jane was the successful party and Con and Con's Children were unsuccessful parties. Con and Con's Children contend that this was wrong in principle.
- In deciding whether either party was "successful" and if so which party, the Court must make a fact-specific evaluation by reference to the litigation as a whole. Success is not a technical term but a result in real life, and the question as to who has succeeded is a matter for the exercise of common sense: Atlasjet v Ozlem  EWCA Civ 1264 at [8-9].
- The first reason relied on to challenge the Deputy Master's decision on this point is that the Deputy Master did not appoint Mr Keenan but Mr Keeley, one of the Midlands based solicitors put forward by Con. I consider, however, that the Deputy Master was entitled to take the view that the identity of the individual chosen to replace the Executors was a relatively trivial matter. Jane's first witness statement in support of the claim did not even mention Mr Keenan. It is true that, at the costs hearing, a brief attempt was made by Mr Learmonth to persuade the Deputy Master to revisit this issue, on the basis that it might be possible to see if Mr Keenan could be persuaded to reduce his fees. However, that came after the costs in question had been incurred, and the discussion on this point takes up no more than 2 pages of the 79 page transcript of the costs hearing.
- The second reason relied on is that the vast majority, in terms of both number and value, of Jane's allegations were held by the Deputy Master not to pass his test. Con and Con's Children say that, taking a common sense, real life result analysis of success in this case, Jane was unsuccessful. She set out to establish that lifetime transactions and documents should be investigated by an independent administrator, with the expectation that it would lead to many millions of pounds being restored to the estate. She made a series of very serious allegations in support of that claim. In the end, all but three of those allegations were rejected. The three that were held to pass the Deputy Master's test related to chattels worth a few hundred thousand pounds at most. Further, since Mrs Folkes had always made it clear she wanted them to go to Con, if it was established that the chattels remained the property of Mrs Folkes up to her death, the only result would be that more inheritance tax would be payable out of the estate, the chattels going to Con in any event.
- This argument would have considerable force if the Deputy Master had directed that the administrator should not investigate the 12 issues which he held did not pass his test. However, he decided not to make any such direction. In the Costs Judgment, he said that his review of the allegations was not, and was never intended to be, conclusive, and that "I may have decided differently had I made concluded findings of fact".
- There was no order for disclosure, and the Deputy Master is likely to have had in mind that the administrator would have unfettered access to all Mrs Folkes' documents, which had not been the case for Jane. The Deputy Master clearly had some unease about some of the allegations which he held did not pass his test. In my view, in those circumstances, he was correct in principle to hold that Jane was the successful party.
- Jane sought the appointment of a new administrator to investigate issues relating to a number of transactions and documents. The Deputy Master ordered that such an administrator should be appointed, and declined to restrict the administrator from investigating all of the issues. In those circumstances, I consider it is not right to say that he rejected Jane's case on the 12 issues. Rather, he held that, on the evidence he had before him, those 12 issues by themselves did not justify the appointment of a new administrator, but there were 5 other issues that did, and the administrator should be at liberty to investigate all the issues if he saw fit.
- In those circumstances, I consider the Deputy Master was correct to hold that Jane was the successful party.
- The third argument raised by Con and Con's Children in relation to success is that they were not unsuccessful because they did not oppose the removal of the Executors. In my view, it is clear that they did oppose the removal of the Executors. Con's skeleton argument dated 31 August 2017 said at paragraph 28 that there was "… no need for expensive replacement personal representatives". Con's Children's skeleton argument dated 8 December 2016 said at paragraph 12 that they were "… strongly opposed to the Claim". Their skeleton argument dated 30 August 2017 said at paragraph 6: "Jane bears a heavy burden in establishing that the requirements for the removal of the Executors have been established … Jane's evidence does not come close to discharging that burden".
- Accordingly, I reject the arguments that the Deputy Master was wrong to treat Jane as the successful party and to treat Con and Con's Children as unsuccessful parties.
Was the Deputy Master wrong in failing to reflect in the Costs Order the fact that Jane lost on a number of issues, and her conduct of the claim?
- CPR r.44.2(4) says:
"In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including—
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful…"
- CPR r.44.2(5) says that the conduct of the parties includes:
"(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction—Pre-Action Conduct or any relevant pre-action protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim".
- Ms Talbot-Rice submitted that the Deputy Master failed to take account of the fact that issue based orders have become increasingly common since the implementation of the CPR, the new rules containing a significant change of emphasis requiring courts more readily to make separate orders reflecting the outcome of different issues so as to encourage litigants to adopt sensible and proportionate approaches to litigation and thus to be selective as to the points taken, to narrow (not widen) the issues in dispute at an early stage and not to lengthen hearings and increase costs by taking every point imaginable despite its weakness.
- She also argued that the summary of the law by Arnold J in Hospira UK Ltd. v. Novartis AG  EWHC 886 (Pat), which the Deputy Master cited and followed, was misleading and incomplete, because it made no reference to the need to consider conduct.
- As to that point, Arnold J was not seeking, in Hospira, to state comprehensively all the principles relevant to making a decision as to costs, and it would be wrong to treat his judgment as an exhaustive statement of the matters to be taken into account.
- I do not think the Deputy Master was misled into thinking that, if there is no suitably circumscribed issue, conduct is irrelevant. In paragraph 44 of the Costs Judgment, the Deputy Master specifically considered the question of Jane's conduct, so he plainly had in mind the need to do so.
- The principles that apply where a party has succeeded overall, but has failed on one or more issues in the case, are well established, and I do not think there was any error in the approach that the Deputy Master took to applying those principles here. He first considered whether Jane was the successful party overall, and held that she had been. He then considered whether there was one or more suitably circumscribed issue on which Jane had lost and held that there was not. He then considered, in paragraph 44 whether Jane's conduct of the claim justified an adjustment to the costs order, and held that it did not. In my judgment, there was no error of principle in that approach.
- As to the second question, in any litigation, there are likely to be issues which involve reviewing the same, or overlapping, sets of facts, and where it is therefore difficult to disentangle the costs of one issue from another. The mere fact that the successful party has lost on one or more issues does not by itself normally make it appropriate to deprive them of their costs. As Simon Brown LJ said in Budgen v Andrew Gardner Partnership  EWCA Civ 1125 at : "… in almost every case even the winner is likely to fail on some issues". Likewise in Travellers' Casualty v Sun Life  EWHC 2885 (Comm) at [12-13], Clarke J said: "If the successful claimant has lost out on a number of issues it may be inappropriate to make separate orders for costs in respect of issues upon which he has failed, unless the points were unreasonably taken. It is a fortunate litigant who wins on every point. On the other hand, if a party raises a discrete issue which involves very substantial costs, and upon which he fails, justice may require that he should bear his costs and pay those of his opponent on the issue." In Fox v Foundation Piling Ltd  EWCA Civ 790;  CP Rep 41, at , Jackson LJ said: "In a personal injury action the fact that the claimant has won on some issues and lost on other issues along the way is not normally a reason for depriving the claimant of part of his costs". At , e said: "There has been a growing and unwelcome tendency by first instance courts and, dare I say it, this court as well to depart from the starting point set out in CPR r.44.3(2)(a) too far and too often. Such an approach may strive for perfect justice in the individual case, but at huge additional cost to the parties and at huge costs to other litigants because of the uncertainty which such an approach generates."
- For example, in Mossa's Estate v. Wise  EWHC 2608 (QB),  5 Costs LR 927, one of the cases referred to Ms Talbot Rice and by the Deputy Master, Master Cook determined as a preliminary issue that the claimant's medical negligence claim against a surgeon was not barred by the Limitation Act 1980. The Master held in favour of the surgeon on the issue of when the claimant first had sufficient knowledge to bring the claim under s.11, but in the claimant's favour on the issue of whether the Court should exercise its discretion under s.33 to extend time. He ordered the defendant to pay all the costs of the preliminary issue. Yip J upheld that decision, saying, at paragraph 33 that it was apparent that the Master had "regarded the issues as being interconnected and not appropriate for the making of an issue based order".
- The Deputy Master clearly had those principles well in mind. At paragraph 43 he said: "The vast majority of the evidence and submissions were so inter-connected as to make a fair determination of any issue-based costs order extremely difficult".
- Ms Talbot Rice then argued that, even if the principle was correctly stated, it was not correctly applied. In my judgment, the Deputy Master was entitled to make that assessment, given the nature and relevance of the issues and the evidence in this case.
- Ms Talbot-Rice's next submission was that the Deputy Master was wrong, in paragraph 44 of the Costs Judgment, to make no adjustment to reflect Jane's conduct. She emphasised the importance of reflecting in an order for costs the fact that a party has unreasonably raised issues on which they fail.
- It is clear from paragraph 44 of the Costs Judgment that the Deputy Master did give consideration to Jane's conduct, so it cannot be said he did not take conduct into account. He said he had taken into account the whole of the commentary in Civil Procedure 2017 [44.2.7], and the propositions stated there derived from Multiplex. One of those was that "the reasonableness of taking failed points can be taken into account and the extra costs associated with them should be considered".
- Having correctly directed himself that conduct was relevant, and having taken Jane's conduct into account, I could only hold that his decision not to reduce the costs because of that conduct was wrong if it was a decision that no reasonable judge could have made. Ms Talbot Rice made it clear in opening her appeal, that, if she was unable to persuade me that the Deputy Master erred in principle, or took into account irrelevant matters, or failed to take into account relevant matters, she was not contending that his decision was one that no reasonable judge could have made.
- In my judgment, the assessment of the effect of Jane's conduct on the correct order for costs was one which the Deputy Master was entitled to make, and was not wrong in principle. The Deputy Master's decision was one which did not exceed the generous ambit within which reasonable disagreement is possible. It was justified by the unease he clearly felt about a number of the allegations which he held, on the evidence he had before him, did not satisfy his test, but which he allowed the new administrator to investigate if he saw fit.
- Mr Learmonth made the point that Jane disagrees with the Deputy Master's assessment of the 12 matters which he held in the Main Judgment did not satisfy his test but cannot appeal from that decision, although she can make the points she wishes to make on them to Mr Keeley. It would be unjust to her to reduce the costs she can recover because of the Deputy Master's assessment of those matters when she cannot appeal that assessment. I agree. The Deputy Master did not intend his assessment of the merits of Jane's contentions to be definitive, and it would be wrong therefore to use it as a basis to deprive Jane of part of her costs.
- Ms Talbot Rice argued that the serious nature of the allegations made against Con, and the intemperate tone in which they were made in Jane's witness statement, made it inevitable that Con would defend the claim. I do not agree. Given the Deputy Master's findings in the Main Judgment, which have not been appealed, Con could and should have said that he considered the allegations were entirely without merit, but that he accepted that it was appropriate for an independent administrator to be appointed to investigate any of them which the administrator considered justified investigation. He could then have made all the points he wished to make about Jane's allegations to the administrator.
- Ms Talbot Rice drew attention to the fact that, when giving judgment on the application to join Con and Con's Children as parties, the Deputy Master refused to direct Jane to withdraw her witness statement or strike out parts of it, but said that Jane was "at risk as to costs at the conclusion of this claim if the trial judge considers her evidence warrants it". She says that, having given that warning, he should have followed it through. I do not agree. The warning was only that Jane was at risk at to costs if the trial judge considered that her evidence justified making an adverse costs order. As it transpired, the trial judge did not take that view.
- In the course of the hearing, I asked what the position as to costs would have been if Con, Con's Children and the Executors had responded to the claim by saying they disagreed with the allegations made, but did not oppose the appointment of a new administrator to investigate them. That led to submissions by Ms Talbot Rice and Mr Learmonth as to what would probably have happened in that eventuality. On reflection, I do not think that trying to work out what would have happened in that situation is of any assistance in deciding whether the Deputy Master's decision was wrong.
Was the Deputy Master wrong to order costs against Con's Children in respect of the period before 28 March 2017?
- The next ground of appeal concerns the Deputy Master's decision to order Con and Con's Children to pay Jane's costs prior to 28 March 2017 as prior to that date none of them were parties to the proceedings, Jane having specifically chosen not to join them and then having opposed their application to be joined.
- The first submission made on this point is that the Deputy Master should not have ordered them to pay costs in respect of a time when they were not parties, without applying the principles applicable to costs orders against non-parties.
- I disagree. Once Con and Con's Children had been joined, they were parties to the litigation, and any order for costs against them could include costs in respect of the period prior to their being joined. Such an order would not be a non-party costs order. An order for costs against a party can include costs incurred before the claim form is issued. CPR r.44.2(6)(d) states that the orders which the court may make under this rule include an order that a party must pay costs incurred before proceedings have begun; and see Civil Procedure 2018 paragraph 44.2.3 and the cases discussed there.
- The second submission on this point is that the Deputy Master was wrong to hold that Con and Con's Children had demanded that the Executors oppose Jane's claim. This submission emerged in Ms Talbot Rice's oral submissions. I held that it was not covered by the existing grounds of appeal, but gave permission for them to be amended so it could be put forward.
- Having reviewed the correspondence, which I have briefly summarised above, I consider that the position taken by Con and Con's Children in the period prior to their being joined, as well as after joinder, justified the Deputy Master's assessment that it was just that they should be responsible for Jane's costs in respect of the period prior to joinder. Con and Con's Children's solicitors made it clear that they were opposed to the removal of the Executors before the claim was issued, and after it was issued made it clear that they intended to defend it. It is true that Jane sought to avoid them being involved in the claim, addressing the pre-action correspondence solely to the Executors, and not making the beneficiaries parties. However, the Deputy Master was entitled to make the assessment he did in paragraph 58 of the Costs Judgment that if Con and his children had not opposed the Executors stepping down, it is likely they would have taken a neutral stance far earlier. In those circumstances, the Deputy Master was entitled to decide that Con and Con's Children had sufficient responsibility for the claim being defended in the First Period to make it just that they be ordered to pay the costs of that period, even though they were not parties during this period.
- Ms Talbot Rice argued that the main costs of the First Period would be Jane's costs of preparing her lengthy witness statement, and that those are costs that were not caused in any way by Con and Con's Children's subsequent opposition to the removal of the Executors. However, as Mr Learmonth submitted, a party who resists a claim normally has to pay the costs of preparing the claim even though, if they had conceded the issues before the claim form was issued, the costs would have been irrecoverable. I consider the Deputy Master was entitled to make an order which required Con and Con's Children to pay the costs of preparing the claim even though, had they not contested the claim, those costs would not have been recoverable from them.
Was the Deputy Master wrong to order Con and Con's Children to pay the Executors' costs during the Second Period?
- The last ground of appeal advanced by Con and Con's Children is that the Deputy Master erred in ordering them to pay the Executors' costs during the Second Period, from 24 February 2017.
- They argue first that the Deputy Master erred in finding that the Executors could or should have taken a neutral stance prior to 24 February 2017 when Jane had chosen to join only the Executors to her claim, had not joined any of the other beneficiaries and was opposing the applications by Con and by Con's Children to be joined. That is also the position taken by the Executors, and I will explain below, in addressing the Executors' grounds of appeal, why I do not agree.
- Second, they say that the reasons given by the Deputy Master paragraph 63 of the Costs Judgment do not justify the order made in respect of this period. Those reasons were:
(1) It would be unjust in the circumstances for the Executors to bear their own costs in view of their change of position.
(2) The Executors could have adopted a neutral position very much earlier had Con and Con's Children agreed, and ultimately these proceedings may not have been necessary.
(3) On the basis that costs follow the event, the Executors' costs should mirror the costs between the contesting parties for this period.
- They argue that the stance the Executors took was a matter for them, not a matter for Con or Con's Children. The Executors are all professionals and furthermore had specialist advice from solicitors and counsel. Con and Con's Children bear no responsibility for the Executors' decisions, taken with the benefit of specialist advice, in this regard and, even if they did bear any such responsibility, such does not justify an order requiring them to pay the Executors' costs after their decision to take a neutral stance in the proceedings. They argue that the estate should bear the costs of Executors playing a neutral role in proceedings. They point out that the Executors were not the winning parties; they were the losing parties.
- I do not agree. In this period, the Executors' position was that they were neutral as to whether they should be replaced, and the only reason costs continued to be incurred in the claim was that Con and Con's Children were opposing their removal. The Deputy Master was therefore entitled to hold that Con and Con's Children should pay the Executors' costs during this period. An order that all those costs should be paid out of the estate would have been manifestly unjust.
- It may be that some of the Executors' costs during this period were not reasonably incurred, bearing in mind their neutral stance. If so, they will be disallowed on assessment. Nothing in the Deputy Master's order precludes Con and Con's Children from contending, on assessment, that the costs incurred by the Executors in this period were unreasonably incurred. His order means only that, if the Executors, bearing in mind their neutral stance, reasonably incurred costs which were reasonable in amount and proportionate to the matters in issue, Con and Con's Children must pay those costs, assessed on the standard basis.
- Accordingly, I reject all of the grounds of appeal advanced by Con and Con's Children. I turn now to the Executors' grounds of appeal.
Was the Deputy Master wrong to deny the Executors an indemnity from the estate, and wrong to order the Executors to pay Jane's costs, in respect of the period up to 24 February 2017?
- Mr Burden's first argument was that the Deputy Master misdirected himself in relation to the correct approach to costs in a number of respects.
- His position on the correct approach was that when an application is made to remove executors which they resist, but which succeeds:
(1) they are entitled to an indemnity from the estate in respect of their costs unless they acted unreasonably in resisting it, and
(2) should only be ordered to pay the costs of the successful claimant if a higher threshold of unreasonable behaviour is crossed; if their conduct is wholly indefensible. He submitted that to order executors to pay the claimant's costs personally is a draconian order requiring a high level of misconduct.
- I agree with the first of those submissions. It reflects what is said in CPR r.46.3 and PD46 paragraph 1. CPR r.46.3 says that where a person is or has been a party to any proceedings in the capacity of trustee or personal representative, the general rule is that they are entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by any other person, out of the relevant trust fund or estate, assessed on the indemnity basis.
- PD46 paragraph 1 says:
"1.1 A trustee or personal representative is entitled to an indemnity out of the relevant trust fund or estate for costs properly incurred. Whether costs were properly incurred depends on all the circumstances of the case including whether the trustee or personal representative ("the trustee")—
(a) obtained directions from the court before bringing or defending the proceedings;
(b) acted in the interests of the fund or estate or in substance for a benefit other than that of the estate, including the trustee's own; and
(c) acted in some way unreasonably in bringing or defending, or in the conduct of, the proceedings.
1.2 The trustee is not to be taken to have acted for a benefit other than that of the fund by reason only that the trustee has defended a claim in which relief is sought against the trustee personally."
- Where an application is made to remove executors, they cannot obtain directions from the court before defending the proceedings, so paragraph 1.1(a) is not relevant. Paras 1.1(b) and (c) read with paragraph 1.2 state the applicable principles.
- The Deputy Master referred to PD46 in paragraph 54 of the Costs Judgment, so he clearly had it in mind. The Costs Judgment, read as a whole, makes it clear that the Deputy Master had well in mind that the question for him in deciding whether to deprive the Executors of their indemnity was whether they had acted unreasonably in defending the claim, rather than remaining neutral.
- I do not agree with the second of those submissions - that executors should only be ordered to pay the costs of a successful application to remove them, which they have resisted, if their conduct is wholly indefensible. If the claimant succeeds in hostile litigation, then the general rule set out in CPR r.44(2)(a) will ordinarily apply, and the unsuccessful party will be ordered to pay the costs of the successful party.
- Jones v. Longley  EWHC 3362 (Ch) is a decision of Master Matthews, now HHJ Matthews. At  he said that the previous caselaw on an executor's right to an indemnity is now distilled in PD46 paragraph 1 and that, "… subject to the application of the special rules for trustees and personal representatives, a representative is subject to the normal rules on costs". At  he said:
"The result is that, whether or not the personal representative is entitled to an indemnity for costs out of the estate, he or she can be made liable to the other party in costs in appropriate cases. It is thus possible (and sometimes happens) that a trustee/personal representative is ordered to pay the costs of another party, but then recoups these costs – as well as his or her own- from the estate."
I respectfully agree with that. I do not think any of the cases I was taken to support any different conclusion.
- In Passingham v Sherborn (1846) 50 ER 407, the beneficiaries under will trusts claimed an order removing the trustees on the basis of allegations of fraud, which failed. However, the Court decided to remove the trustees because one of them was the tenant of trust property, a situation which had arisen because of a request by the testator. Lord Langdale MR said at p.409: "The rule of the Court is, to visit with costs parties who recklessly bring forward in their bills unfounded charges of fraud and malversation." As to the trustees, he said at p.411: "I cannot find it consistent with my duty to charge them with costs for doing that which the testator expressly desired them to do … I think that the difficulty did not arise from any misconduct of theirs but that they were led into it by the testator himself. I think that the trustees are entitled to the costs of the suit".
- That case was decided long before the modern rules on costs were introduced. I cannot see that, even if Lord Langdale was applying the same principles as now apply under the Civil Procedure Rules, his decision is anything other than an illustration of a case where trustees who unsuccessfully resisted an application to remove them were nonetheless held to have acted reasonably on the facts.
- In Attorney-General v Murdoch (1856) 69 ER 910, trustees of a church were removed and ordered to pay the costs of the suit. Page Wood VC said that they had taken "… an improper and perverse view as to the duties imposed upon them". That was an evaluation of the facts in that particular case, not a statement of the test to be applied in all cases.
- In Re Skinner  1 Ch 289, Farwell J ordered trustees to pay the costs of a claim that they deliver accounts. He said he was "always unwilling to make trustees pay costs", but did so because "the conduct of these two defendants amounts to a gross neglect to account". He quoted a passage from an earlier decision where Sir George Jessel had said: "In certain cases of mere neglect or refusal to furnish accounts, when the neglect is very gross or the refusal wholly indefensible, I reserve to myself the right of making the executor or trustee pay the costs of litigation caused by his neglect or refusal."
- To the extent that the language used in that case was intended to identify a different and more stringent test than one of reasonableness, I do not think it represents the law applicable under the CPR. However, it is questionable whether that is the case. If a trustee had no valid reason for failing to provide accounts, when obliged to do so and after being requested to do so, and persisted in his failure after receiving a pre-action letter, his failure to do so would be unreasonable, and could also fairly be characterised as "gross neglect" or "wholly indefensible". If the trustee had a valid reason for failing to produce accounts, however, his failure would not be unreasonable.
- In re Buckton  2 Ch 406 concerned the question of when beneficiaries could recover their costs of a dispute as to the construction of the will, and so is not directly relevant. Kekewich J's judgment contains, at pp.414-5 a discussion of the different types of dispute that could come before the court on an originating summons, and the costs principles applicable to them. One type of dispute identified by him was where a beneficiary makes a claim adverse to other beneficiaries. He said that sort of dispute between adverse litigants should be treated like any other, and the unsuccessful party should pay the costs. He was not concerned with a claim by one beneficiary that the trustees should be removed, but it seems to me that the same approach should apply.
- Hunter v Hunter  NZLR 520 is a decision of the Court of Appeal of New Zealand. At p.538, Myers CJ said that trustees who unsuccessfully resist an application to remove them may not only be deprived of their costs, but also be ordered to pay the plaintiff's costs: "It all depends upon the circumstances of the case". He held that the judge in that case had made no error of principle. I do not think that sheds any light on the question.
- I have already referred to BA v. Verite Trust Company Ltd  JRC 150, which the Deputy Master discussed and quoted from. Mr Burden drew attention to various other passages in the judgment of Deputy Bailiff Birt. I do not think any of those passages support Mr Burden's submission. As I read the judgment of Deputy Bailiff Birt, his view was that a trustee who unreasonably resists an application to remove him will be deprived of his right to an indemnity from the trust fund, and will also be ordered to pay the claimant's costs. He did say, at  that establishing that a trustee has acted unreasonably in incurring costs in litigation "is a high hurdle". That does no more than recognise that a finding of unreasonableness can only be made if no reasonable person in the trustee's position could have acted in the way that they did, and that a trustee, especially a professional trustee as in that case, would normally be expected to act reasonably.
- In re The Piedmont Trust  (1) JLR 14,  JRC 016 is a decision of Commissioner Birt, sitting in the Royal Court of Jersey, in litigation concerning a family trust, in which he held that the unsuccessful parties were entitled to an indemnity, as they had not acted unreasonably. The judgment includes, at [18(ii)] a reference to a passage in a judgment of Beloff JA in an earlier Jersey decision, where Beloff JA said that "mere negligence or honest mistake" would not deprive a personal representative of entitlement to an indemnity. When I asked what this meant, I was told that, in Jersey law, there is a distinction in relation to trustees between mere negligence and gross negligence. Mr Burden did not submit that this was the position in English law. I consider he was right not to do so. When considering whether a trustee should be deprived of his indemnity, I consider that the question is simply whether he has acted sufficiently unreasonably to make it just to deprive him of the indemnity. I do not think that the decision in Piedmont supports the proposition that a trustee who unreasonably resists his removal, and is therefore deprived of his indemnity, should not then be ordered to pay the successful claimant's costs unless his conduct is so egregious as to satisfy some standard higher than being unreasonable. At , Commissioner Birt said that he did not agree with a suggestion that a trustee is less at risk of being deprived his indemnity and ordered to pay the applicant's costs if the trustee is removed because of a conflict of interest rather than on some other ground. He said: "In my judgment, whether the application for removal is based upon a conflict of interest or some other ground, the test remains the same, namely whether in resisting such an application, the trustee has acted reasonably." I respectfully agree with that.
- Mr Burden's first submission on misdirection was that the passage in paragraph 27-191 of Lewin on Trusts which the Deputy Master had quoted (see paragraph 38 above) was wrong when it said: "If a trustee is removed on the ground of conflict of interest and duty, the court might normally be expected to make an order for costs against the trustee". Mr Burden said that was not what was normally to be expected in every case; it all depended on the nature of the conflict of interest. He referred to Passingham as an example of a case where a trustee was removed on the ground of conflict of interest without having to pay the costs. He submitted that there are different types of conflict of interest, and a situation where a trustee has preferred his own interest to that of the beneficiaries, or preferred the interests of one beneficiary to another, was very different to that where a trustee was unable to carry out an objective investigation of events in which they had personally been involved.
- He drew attention to paragraph 55 of the Costs Judgment where the Deputy Master said: "I consider there are no special reasons in these circumstances to reverse the normal expectation that where a trustee is removed on the grounds of conflict of interest and duty, an order for costs will be made against the trustee: see Lewin on Trusts". He said that the Deputy Master had wrongly started with a presumption that, once he had decided to remove the Executors on the grounds of conflict of interest, that he should order them to pay the costs.
- In my view, Lewin is right to say that, if there is a conflict of interest and duty which justifies the trustee's removal, and the trustee unsuccessfully resists removal, the court might normally be expected to deprive the trustee of his indemnity and order him to pay the costs. The phrase "might normally" coupled with what follows makes it clear that it will, in every case, be a question of whether the trustee has acted unreasonably in resisting his removal. I do not think that the sentence means more than that, once it has been established that the trustee should be removed on grounds of conflict of interest or duty, it would be normal for the court to find that the trustee acted unreasonably in resisting his removal, although that will not invariably be the case. I do not think it helpful to sub-divide conflicts of interest into different categories for these purposes. Whatever the nature of the conflict of interest which leads to the removal of a trustee, a trustee will be deprived of his indemnity if the court considers he has acted unreasonably in defending the claim. The nature of the conflict may, of course, well have a bearing on that question.
- Mr Burden's second allegation of misdirection concerned the Law Society's Practice Note suggesting that executors should remain neutral in will disputes. He said that the reason the Practice Note makes that suggestion is because, in a dispute about how the estate should be distributed, if executors defend such a claim, they are necessarily preferring one beneficiary's entitlement to the estate over another potential beneficiary's entitlement i.e. they are not acting in the interests of the estate as a whole. The same principle, he said, does not follow in respect of a claim to remove an executor where a refusal to step down does not itself entail preference to one set of beneficiaries over another, or imply that, in defending, the executors are not seeking to act in the interests of the estate.
- In circumstances where all the beneficiaries of an estate are adults, and are able to make their own views known, and one beneficiary applies to remove the executors, I consider that the advice in the Practice Note is applicable. The executors are well advised to remain neutral, and let those beneficiaries who wish to oppose the application do so. If instead the executors defend the claim themselves, unsuccessfully, they do risk an order for costs being made against them with no indemnity from the estate if they are held to have acted unreasonably. Accordingly, I think the Deputy Master was right to regard the Practice Note as supporting his assessment.
- Mr Burden next submitted that the Deputy Master had failed to refer to PD46 paragraph 1.2, which makes clear that the court should not find that a trustee has acted for a benefit other than that of the fund by reason only that the trustee has defended the claim. I do not think the absence of any reference to that paragraph indicates any misdirection. The Deputy Master did refer to PD46, and his judgment as a whole makes it clear he had the right principles firmly in mind.
- Mr Burden criticised the Deputy Master's assessment that the Executors had acted unreasonably in defending the claim in the period up to 24 February 2017 in a number of respects. The question of whether a party has acted unreasonably is a multi-factorial value assessment. Therefore I could interfere only on the same grounds as on an appeal against the exercise of a discretion - if the Deputy Master erred in principle, took into account immaterial factors, omitted to take account of material factors, or came to a conclusion which fell outside the generous ambit within which reasonable disagreement is possible: Assicurazioni Generali SpA v Arab Insurance Group  1 WLR 577 at  and , Aldi Stores v WSP Group  1 WLR 748 at -.
- Mr Burden did contend that the Deputy Master had erred in principle, and I have discussed and rejected his arguments above. He then submitted that the Deputy Master had wrongly failed to give any or any sufficient weight to a number of matters which demonstrated that in all the circumstances it was reasonable for the Executors to defend Jane's application up to 24 February 2017. I will summarise each in turn and explain briefly why I consider that none of them justify interfering with the Deputy Master's judgment.
- First, that Jane only joined the Executors as Defendants to the proceedings, not the other beneficiaries, despite the Executors having rightly invited the Claimant by letter dated 18 May 2016, to join those beneficiaries as necessary parties, that Con and Con's Children had for some time insisted that the Executors should not step down and were asserting they wished to be joined to present their arguments to the court, and that Jane wrongly opposed the joinder of Con and Con's Children. As to that, Con and Con's Children made it clear at the start of the proceedings that they intended to apply to be joined as parties, so the Deputy Master was entitled to regard this as quite insufficient to justify the Executors defending the proceedings themselves. The Deputy Master was entitled to consider that the Executors should have remained neutral and allowed Con and Con's Children to advance whatever arguments they wanted to advance.
- Second, that Jane made numerous allegations of misconduct against the Executors personally and also as to improper charging of professional fees, and allegations of maladministration of the estate, in particular in respect of the recovery of gold bullion and jewellery which the Deputy Master dismissed. As to that, the Deputy Master was entitled to take the view that the Executors should not be spending the beneficiaries' money in defending claims against themselves, however serious those claims were. They could have remained neutral, while making it clear that they regarded Jane's allegations against them personally as being wholly without foundation.
- Third, that the Deputy Master made an express finding in paragraph 216(v) of the Main Judgment that there was no other significant misconduct or fault on the part of the Executors, and made no finding of bad faith or dishonesty or that the Executors intended to act otherwise than in the best interests of the estate, either in the conduct of the administration or the defence of the proceedings. That does not make it reasonable for the Executors to have defended the claim, given the conflicts of interest which the Deputy Master held did justify removing them.
- Fourth, the fact that Jane made numerous allegations of misconduct in the proceedings against Con, the merits of which the Executors could not properly judge, but which the Deputy Master dismissed as not having sufficient substance to justify investigation by a replacement personal representative. Again, that does not make it reasonable for the Executors to have defended the claim, given the conflicts of interest which the Deputy Master held did justify removing them.
- Fifth, that the findings of conflict/professional embarrassment relied on by the Deputy Master were only a part of far broader exaggerated allegations which it was reasonable to resist in the light of the Main Judgment. I disagree. In the Main Judgment, the Deputy Master held that there were some allegations made by Jane which the Executors could not investigate as they were personally involved in the relevant events, and that this gave rise to "a simple but substantial conflict" which meant the Executors had to be removed. The fact that other allegations were made which did not, by themselves, on the evidence called, justify the removal of the Executors did not make it reasonable for the Executors to defend the claim.
- Sixth, the fact that prior to the end of 2016 none of the other beneficiaries had indicated their wishes in respect of the removal of the Executors despite having been invited to do so. As to that, the Deputy Master was entitled to take the view that, if the other beneficiaries had no interest in expressing a view, that was a matter for them, and that it did not justify the Executors defending.
- Seventh, that having intermeddled in the estate the Executors could not simply step down without an order of the court, which would have in any event have led to Con and Con's Children being joined to present their arguments as to removal. It is true that a court order was needed, but it does not follow that the Executors acted reasonably in resisting such an order, in circumstances where one beneficiary sought their removal while others resisted it.
- Eighth, that had the Executors not defended it would have been tantamount to preferring the interests of Jane over the other beneficiaries. I do not understand that submission. Remaining neutral could not, in my view, be seen as preferring Jane's interests.
- Ninth, the fact that the true nature of the dispute and the true cause of the costs of the proceedings was not the Executors' response to the claim but rather the underlying dispute between the beneficiaries as to certain of the deceased's lifetime transactions and her testamentary dispositions. As to that, the Executors were personally involved in some of the matters which the Deputy Master held ought to be investigated by an independent personal representative, and defended the claim to remove them. In those circumstances, the Deputy Master was entitled to take the view that they were unsuccessful parties who ought to pay Jane's costs.
Should the Deputy Master have ordered the Executors' costs to be paid out of the estate in the Second Period?
- The Executors argue that they should receive an indemnity from the estate for their costs of the Second Period, when their position was that they were neutral as to the outcome of the claim. Given that the Deputy Master ordered Con and Con's Children to pay the Executors' costs for this period, the indemnity would only be relevant in respect of any costs that the Executors would be entitled to if their costs were assessed on the indemnity basis, but not if they were assessed on the standard basis.
- In considering the Executors' costs of the Second Period, there are two different issues. First, what costs was it reasonable for them to incur in this period, bearing in mind that they were neutral as to the outcome? That is a question to be determined on the assessment of the costs. Second, in respect of costs reasonably incurred by them during this period, and reasonable in amount, is there any justification for depriving them of their indemnity, bearing in mind the principles discussed above?
- The Deputy Master gave a number of reasons for holding that the Executors were not entitled to an indemnity in the Second Period, set out in paragraph 61 above.
- First, the Deputy Master said that the adoption of the neutral position still left the Executors in place and present at trial, although they did, by letter 8 days before the trial invite the other parties to agree their attendance could be avoided. He considered that the Executors did not have to attend the trial to protect their professional reputations as those reputations were not in jeopardy and no party wanted or required findings against them.
- It is not clear whether, by this, the Deputy Master meant that it was not reasonable for the Executors to incur the costs of attending the trial, or whether he meant that it was reasonable, but not because they needed to protect their professional reputations. If it is the former, as I think likely, that is a matter which should be reflected in the assessment of the costs. If it is the latter, then that is not a reason for depriving the Executors of their indemnity.
- The Deputy Master next said that the Executors' continued involvement in the Second Period arose due to their defence of this claim. I do not see how that assessment can be justified. From 17 February 2017, the Executors' position was that they were neutral as to the outcome. The Executors' continued involvement thereafter was due to the defence of the claim by Con and Con's Children.
- Next, the Deputy Master said that the conflicts of interest were plain and obvious. He was entitled to make that assessment, but I do not see how it justifies holding that the Executors acted unreasonably in the Second Period, when they were no longer seeking to resist an order that they be replaced.
- Lastly, the Deputy Master said that it would not be just, in general, for executors to contest removal and then realise their own true position, adopt a neutral stance and expect the estate to pay the costs of same. That must have adverse financial consequences for beneficiaries. That, could not be right, as the Executors' change of position in the litigation did not change the cause of or reason for removal.
- I respectfully disagree with the principle stated by the Deputy Master. If executors unreasonably resist an application to remove them, but then change their stance and become neutral as to the outcome of the application, any reasonable costs which are reasonably incurred by them thereafter will generally not be due to their previous unreasonable resistance, but to events occurring after that resistance has been abandoned. If, they do incur costs after that which are attributable to their previous unreasonable defence of the claim e.g. amending an existing pleading then they ought to pay those costs. In the present case, it has not been suggested that there are any such costs. But if they incur costs because the claim continues due to a defence mounted by others, rather than because of their own previous defence, I do not see that they should be deprived of their indemnity in respect of those costs simply because, in the past, they unreasonably resisted the claim.
- As to the point that the Executors' change of position did not change the reason for their removal, the Deputy Master did not make any finding that the Executors had committed any breach of duty either before or after Mrs Folkes' death. He held that they were closely involved in the some of the events that he considered ought to be investigated, and would have a personal interest in the outcome of such an investigation which would preclude them from making an objective enquiry. This is not a case where the costs of the claim can be attributed to a prior breach of duty by the Executors. Therefore I do not think the Deputy Master was entitled to deprive them of their indemnity in respect of costs reasonably incurred by them, reasonable in amount, incurred during a period when they acted reasonably.
- I consider the right order in respect of the Second Period is that the Executors are entitled to be paid the costs of those proceedings, insofar as they are not recovered from or paid by Con or Con's Children, out of the estate, assessed on the indemnity basis.
- Accordingly, I will allow the Executors' appeal in respect of the costs of the Second Period, but otherwise dismiss the appeals.
- I will hear submissions on 29 October 2018 at 2 pm on the form of the Order to be made to give effect to this judgment and the appropriate order as to the costs of the appeal.