Estate litigation can be complex, emotional and expensive. Estate litigation includes challenges to wills (including over their validity or a family provision claim); disputes over the administration of estates; and applications for Court directions. These proceedings often involve executors, beneficiaries, and other interested parties.
Unlike ordinary civil litigation, estate disputes frequently involve questions about the deceased’s intentions and the proper administration of their estate; this means that there are some circumstances where the Court’s assistance is required, even when no wrongdoing by any party is alleged.
It is therefore important to understand how the Court will approach the matter of legal costs before commencing estate litigation.
Unlike civil litigation, where costs usually “follow the event” – i.e. the losing party pays the costs of both parties, estate litigation applies a more nuanced approach to the issue of costs and considers the nature of the dispute and the conduct of the parties.
One of the primary cases that the Court will consider when dealing with costs in estate litigation is Buckton v Buckton [1907] 2 Ch 406. The case of Buckton v Buckton sets out three broad categories to guide Courts in determining whether the costs of estate litigation should be paid from the estate or be borne by the parties themselves. The categories are as follows:
1. Necessary Guidance on Will Construction
Where a trustee or executor applies to the Court to obtain direction on how to administer a will or trust, the costs are generally paid out of the estate. This is because the application is seen as being in the interests of all beneficiaries, and it is necessary for the proper administration of the deceased’s wishes.
For example, If a written will is ambiguous and the executor seeks the Court’s guidance on how to interpret it, all parties will benefit from the Court’s decision. Therefore, the estate typically bears the legal costs of all parties.
2. Reasonable Disputes Among Beneficiaries
In cases where there is a genuine dispute amongst beneficiaries about the interpretation of a will or the rights of parties, and the parties bring the matter before the Court in good faith, the Court may order that costs be paid from the estate. However, this is subject to judicial discretion and the reasonableness of the parties’ conduct.
For example, If beneficiaries disagree about whether a clause in the will gives a life interest or an absolute gift, and they go to Court for clarity, the costs may still be shared by the estate if the dispute was not without merit.
3. Contested Litigation
If a party initiates contested litigation, especially to challenge the validity of the will or for personal gain (i.e. a family provision claim) and the challenge is unsuccessful, the Court is less likely to order that their costs be paid from the estate. In these cases, the unsuccessful party may have to bear their costs and potentially those, or a portion of those, of the other parties.
For example, A disgruntled family member challenges the will, seeking additional provisions to be made for them without a strong basis and loses. The Court may see this as an unnecessary expense for the estate and decline to reimburse their legal fees. It is possible that the Court also requires the losing party to pay the estate’s costs (as the estate will have been required to participate to some extent in the proceedings).
While the case of Buckton v Buckton is over 100 years old, it remains a foundational case in the consideration of estate litigation costs. Courts routinely rely on the above categories to exercise their discretion fairly and equitably.
In exercising their discretion, the Court is also likely to consider matters such as:
The conduct of the parties;
Whether litigation could have been avoided through mediation, and
The impact of any costs order on the estate’s assets and the beneficiaries.
If you are involved in estate litigation, whether as an executor, beneficiary, or other interested party, it is essential to understand the rules governing costs. Legal fees can quickly accumulate and/or erode the value of the estate, particularly in contentious disputes.
The above summary is a guide only and should not be taken as legal advice. Each matter is unique, and it is essential to seek specialist legal advice early to understand how costs in the matter will likely be addressed.
Contact Robinson + McGuinness to arrange an appointment on (02) 6225 7040, by email on info@rmfamilylaw.com.au or get started now online with one of our experienced estate lawyers.