The death of a loved one invariably creates an emotional upheaval and administrative burden for his/her family and close friends. In this context, a claim against the Estate by a disgruntled family member or friend is always upsetting. The prospect of a delay of 12 months for a Court case, briefing solicitors and discussing the private affairs of the recently departed is not appealing to anyone.
One of the most common initial questions is who bears the cost of the claim against the Estate?
The Usual Position in Litigation
In all litigation the starting position is “costs follow the event”. This means if the matter proceeds to hearing before the Court, the loser will usually pay a contribution to the winner’s legal costs. The Court has broad powers to award costs, or not. The contribution is determined by whether any reasonable offers of settlement have been made by either party. If no offers of settlement have been made, the loser will usually pay 50-75% of the winner’s legal costs known as “party/party” costs. These costs are distinct from the total costs paid to the solicitor known as “solicitor/client” costs. Offers of settlement can alter the legal costs paid. This was introduced to encourage all parties to any litigation to attempt to resolve disputes outside the Court, and punish litigants who act unreasonably.
Legal costs are often significant and can determine whether you feel your outcome was worthwhile, irrespective of whether you “won” in Court. In our experience, whilst clients often feel greatly aggrieved and determined to proceed to hearing initially, a commercial, practical outcome will influence their level of satisfaction at the end of the litigation.
The Usual Position in Family Provision claims
Legal costs in Family Provision claims against the Estate are generally paid out of the Estate’s assets if the claim is successful. This is particularly important for smaller estates with a value of between $400,000 and $750,000, because if the Estate is unsuccessful in defending the claim, it will likely be ordered to pay the claim, a contribution to the claimant’s legal costs and its own legal costs. In some cases this may be a significant proportion of the Estate.
Risks for the Estate
The risk for the Estate can be contrasted against the risk to the claimant. Frequently, the solicitor for the claimant will act on a “no win, no fee” basis. In addition, the claimant may not have any assets to lose, if the Estate is successful in Court. Accordingly, the Estate will be required to pay its own legal costs in full because the claimant has no funds or assets to contribute. In these circumstances, the playing field is uneven and the result may be unfair. These are risk management issues for the Estate.
Our approach is to consider the end goals from the initial notification of a potential claim against the Estate. Each case is different. We can resolve many matters early by negotiating outside of Court. If one party is unreasonable, the matter will inevitably proceed to hearing and the Estate’s legal costs should be focused on preparing for the hearing.