Judge: Cobb J
Citation:  EWHC 483 (COP)
Summary: This decision in relation to costs is, as Cobb J noted at the outset, a cautionary tale which illustrates vividly the danger of informal family arrangements being made for an elderly relative lacking mental capacity, made without proper regard for (i) the financial and emotional vulnerability of the person who lacks capacity; and (ii) the requirements for formal, and legal, authorisation for the family’s actions, specifically in relation to property and financial affairs.
The case concerned a 90 year old woman called DB, suffering from progressive dementia. She had been cared for by JS (her daughter) and MS (her son-in-law) for over three years, in line with a family arrangement first discussed with KB (DB’s son) over their Christmas day meal in 2009.
The actual care arrangements was described by Cobb J as being many ways excellent. However, the full story of the (mis)management of DB’s finances makes very sorry reading indeed. For purposes of this newsletter sufficient of it can be found in the summary set out by Cobb J at the outset of his judgment. As he noted, the informal and formal means by which DB’s finances were utilised by JS to fund the current care arrangement led to the sale of the home in which she had lived for over fifty years effectively ‘over her head’, and the proceeds of sale being placed out of her immediate reach, rendering her financially highly exposed; state benefits and retirement pension payable to DB have subsequently been diverted into an account in JS’s name. All of this was done without legal authority. Only with the intervention of the court appointed deputy was the situation regularised. Regrettably, the actions of JS, of which DB would have been largely unaware, and which were in some important respects kept secret from KB, caused a deep schism within the family, generated lengthy and avoidable litigation, and caused the parties to expend considerable sums which they can little afford in legal costs. As Cobb J found, KB was not entirely blameless in the tale. He knew or reasonably believed that his mother lacked capacity to manage her financial affairs when arrangements were being made to establish the current care regime, made no enquiries of his own, and (at least for a period of time) acquiesced in the arrangements.
The matter came to the attention of the court by way of an application by JS to be appointed DB’s property and affairs deputy, by which she sought to have the authority to continue to make decisions on behalf of DB (which she had been making for some time) given that DB was unable to make such decisions for herself, in relation to her property and financial affairs. That application was initially dismissed summarily on the papers by a District Judge who note that JB had a significant conflict of interest, and appointed a local solicitor, MP, as panel deputy for DB. JB persisted in seeking to be appointed a deputy until, finally, the matter was resolved save for the question of costs, by HHJ Hodge QC on 6 September 2013. By order made on that date (which was consensual), it was recorded inter alia that JS agreed not to pursue her application to be appointed as DB’s property and affairs deputy.
The costs issue was left unresolved. The total bill of costs of the three parties was in the region of £70,000. Cobb J was asked to decide whether the costs of this litigation incurred by KB and MP (on behalf of DB) should be paid by JS, or paid by DB or charged to her estate.
Cobb J directed himself as to the rules relating to costs in s.55 MCA 2005 and Part 19 of the COPR 2007. He also referred to the reported cases (identifying them all, as far as we are aware), but noted that they were all “essentially, no more or less than illustrations of the rules” (paragraph 12). That said, he noted in particular that in D v R (the Deputy of S) and S  EWHC (COP) (a property and affairs case), an award of costs (departing from the general rule) was made where the Judge concluded that the litigant’s conduct had led to the hearing being substantially longer and more complicated than it should have been. He also directed himself by reference to R (Boxall) v Waltham Forest LBC (2001) 4 CCL Rep 258 QBD (Admin), Scott Baker J confirmed that the court has power to make a costs order when the substantive proceedings have been resolved without a trial, but when the parties have not agreed about costs; specifically in relation to compromised cases (§22) he observed that: “at each end of the spectrum there will be cases where it is obvious which side would have won had the substantive issues been fought to a conclusion. In between, the position will, in differing degrees, be less clear. How far the court will be prepared to look into the previously unresolved substantive issues will depend on the circumstances of the particular case, not least the amount of costs at stake and the conduct of the parties.”
In order to resolve where the incidence of costs should lie, Cobb J heard limited oral evidence as to and determined a number of important factual matters relating to early history of the saga so that he could form conclusions as to the provenance of the dispute before the court. As he noted, he was also entitled to take into account for purposes of r156 the conduct of the parties before and during the proceedings.
Both Counsel, unusually, invited Cobb J to depart from the normal costs rule that the costs of proceedings relating to P’s property and affairs should be charged to their estate. He agreed that it would be unconscionable for DB to bear the costs of these lengthy proceedings. The ultimate order that he made was that JS should pay 4/5 of the litigation costs of the deputy MP, to date, and 2/3 of the costs of KB. He took into account, in particular that (1) none of the parties were well-placed financially to shoulder their own responsibility for their own costs, let alone those of others; (2) JS provided good quality daily care for her mother and had made life-style sacrifices to do so; (3) JS’s deputyship application was doomed to failure given her obvious conflict of interest, and she should not have sought to pursue it for over a year; (4) it was not prudent of her to pursue an associated claim to a share of the beneficial interest in the property that was purchased with the proceeds of the sale of DB’s home (‘Beech Avenue’) when it must have been clear to her, particularly when she had legal advice, that the manner in which she had placed her mother’s funds in her name was (at best) highly questionable, or (at worst, and in the words of MP) “financially abusive”; but (6) KB was not blameless. Cobb J noted, however that it was likely that had JS not pursued her own claim for deputyship, KB would have made application to the Court of Protection; had that occurred, a professional deputy may have been swiftly appointed. There would have been modest costs to DB in this process.
Rather creatively, given the possibility that JS would be unable to fund the costs within a reasonable time, either from the sale of property owned by JS in Spain or otherwise, Cobb J gave permission to MP to explore the mechanics of an equity release scheme to permit JS to discharge her liability for costs by way of a loan against the equity in Beech Avenue, and gave permission to MP to apply for such a scheme. The relief was granted to MP on the basis that any equity released shall clearly be a loan against the equity in the Beech Avenue property, to be repaid by JS. If, at the date of DB’s death, the loan has not been repaid by JS, the loan will be an asset of DB’s estate, with the amount to redeem the loan being set off against the half-share which JS will be entitled to from DB’s residuary estate. Cobb J further gave leave to MP to investigate, and if the need arises to bring proceedings on behalf of DB in respect of any loss she had suffered by virtue of the actions of a firm of solicitors which had acted (contrary to the clear guidance in the SRA Code of Conduct) for DB on the sale of her property and JS on the concurrent purchase at a time when (as indicated at §19 above) it is now agreed that DB lacked capacity to manage her financial affairs.
Comment: As Cobb J noted, this case is an illustration of the application of the costs rules to a particularly sorry set of facts. The judgment merits reading in full as it details how informal decision-making spiralled out of control. Whilst the analysis of who should bear the costs was scrupulous, we would note one small point of detail. The Boxall case upon which reliance was placed has now been superseded by M v Croydon LBC  EWCA Civ 595, and the Court of Appeal has made it clear that Boxall should no longer be cited – see Peace Emezie v SSHD  EWCA Civ 733. The guidance in M is to similar effect as in the passage from Boxall (see, in particular, paragraphs 50-1).