The deputy judge erred in making a wasted costs order against solicitors whose conduct of proceedings was not "improper, unreasonable or negligent" under s.51(7) Supreme Court Act 1981 and where it was not just to require them to compensate the applicant for any costs incurred directly or indirectly by her.Appeal by solicitors ('FHG') from the order of David Mackie QC making FHG liable for all the costs of an action on the indemnity basis. A sister ('EW') and brother ('LW') died in March 1992 and November 1993 respectively. Their principal asset was a house in Brighton. They made wills in 1981 in similar form under which the house would pass to the survivor for life and thereafter to their niece or her children. After EW's death LW made a will appointing his next-door neighbour ('P') as executrix, cutting out the niece's family and leaving the residue to charity. P proved the will and sold the house. FHG acted for EW and LW in making their wills and were the executors of EW's estate under her 1981 will. FHG also acted as solicitors for P. After LW's death the niece's daughter ('C') raised two issues of substance: (i) whether the interests of EW and LW in the house had been severed so as to become tenancies in common so that EW at her death had a separate beneficial interest in half the property, and; (ii) whether LW's 1993 will was invalidated by lack of testamentary capacity or undue influence. Between 1994 and 1998 C threatened to issue proceedings but did not do so. On the basis that the estate could not properly be distributed without her claims being disposed of in accordance with an order of the court, in 1998 FHG commenced proceedings on behalf of P seeking an inquiry as to whether C was entitled to any and if so what interest in LW's estate. At a hearing before the master in January 1999 at which C was not present he indicated that he could decide the severance issue but not the capacity issue, which required a probate action, and adjourned the proceedings generally with liberty to restore. At a further hearing in July 1999 which C attended the master held that the interests had been severed when EW and LW made their 1981 wills so that half of the proceeds of sale of the house should be held for EW's estate. The master ordered that the costs of all parties should be paid out of the proceeds of sale on the basis that it was reasonable for P and FHG to take proceedings to decide the severance point and that although much evidence was directed to the question of capacity, that had been put in issue by C and she could not complain that costs had been incurred in dealing with the matter. On appeal the deputy judge substituted an order making FHG liable for all the costs on the indemnity basis reasoning that FHG had a conflict of interest in acting for the two estates, had commenced proceedings in the wrong form and had failed to communicate to C the master's indication that he could not decide the capacity issue given the form of the proceedings. FHG appealed from the wasted costs order.HELD: (1) C's conduct between 1994 and 1998 when she often threatened proceedings but did nothing was rightly described as vexatious. (2) The conflict of interest point was neither a reason in itself nor a contributory factor justifying the making of a wasted costs order. FHG recognised at an early stage that there was a potential conflict and suggested how it might be resolved without the expense and inconvenience of appointing another firm to act for EW's estate which was otherwise insolvent. FHG also properly sought advice of counsel on the severance issue. No practical and no cheaper alternative had been suggested by C. (3) In any event there was no causal connection between the representation of EW's estate and the wasted costs order which was concerned with the conduct of FHG as legal advisers to P. The judge did not indicate how in that capacity FHG could or should have acted so as to save expense. (4) Costs would not have been saved by any other form of proceedings to decide the severance issue. (5) It was not unreasonable for P to take proceedings given that C continued to threaten proceedings but did not issue any. The proceedings were not apt to decide the capacity issue, but that was not a matter of which C could complain since she had herself been advised in 1994 as to the form of action required. Since C chose to make capacity an issue in the proceedings she could not complain that cost were incurred in dealing with it. (6) It was not improper, unreasonable or negligent of FHG for the purposes of the wasted costs jurisdiction under s.51 Supreme Court Act 1981 to fail to pass on to C the view expressed by the master at the January hearing. A legal representative's duty was to his client not his client's opponent. The primary responsibility for protecting the interests of C as a litigant in person was that of the court. In any event it was not clear that any costs were wasted as a result of the failure. (7) The judge was wrong to make a wasted costs order as a matter of discretion. The question was whether it was just to order FHG "to compensate the applicant", namely C, for the relevant costs. It was therefore necessary to consider to what extent the alleged misconduct had caused any loss to C and whether it was just as between FHG and C for those costs to be borne by FHG. Since C's own costs were those of a litigant in person and she had an indirect interest in not more than half of P's costs, there was no possible basis for a wasted costs order relating to the whole of the costs incurred by FHG. Further whatever criticisms could be made of FHG's handling of the case there was no justice in compensating C for costs that need never have been incurred if she had acted reasonably. The judge was wrong to order costs on an indemnity basis. (8) In the circumstances it was not wrong for the master's costs order to impose a burden indirectly on EW's estate and his order should be restored.Appeal allowed.

[2003] EWCA Civ 886

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