The High Court of England and Wales denies full recovery of trust litigation costs where co-claimants had separate representation

In Ong & Ors v Ping [2015] EWHC 3258 (Ch), the High Court of England and Wales (Chancery Division) limited the legal costs recoverable by a mother and her children (the "Claimants") on the grounds that from a certain point in the family trust dispute, their separate legal representation was "not reasonably justifiable". This case serves as a cautionary tale that while separate representation in trust litigation may initially appear necessary to avoid conflicts of interest between parties (and may be strategically advantageous), if the position changes and the parties' interests align, the additional costs incurred from failure to instruct a single firm of solicitors will be disallowed.

Background

This long-running dispute concerned a substantial house in London, and the proceeds of sale of that property. The initial claim was brought in 1988 by Jane Ong, against Mr. Ong Ping's (the "Defendant") mother, claiming the house in question was held on trust for her children (the "Trust"). It was not until later that Ms Ong's three children joined the proceedings as co-claimants, with their own independent legal representation.

On 17 June 2015, Mr. Justice Morgan agreed with the Claimants that the children were in fact the beneficiaries of the Trust, which entitled them to the £3.2 million proceeds from the sale of the property. The Defendant, who was held to be the sole surviving trustee of the Trust and therefore liable to account for the proceeds of sale, was ordered to pay the Claimants’ legal costs.

The Defendant appealed against the award of legal costs to the Claimants, arguing that the separate representation of Mrs Ong and her children had been unnecessary. The Defendant further submitted it would not be appropriate for the Claimants to recover the costs of two separate legal teams.

Reasoning and decision of the Court

Upon review of the facts, Morgan J held that while separate representation by solicitors did not affect the conduct of the proceedings, instruction of a single firm would have been sufficient for the main claim. Further, had the Claimants applied for an order permitting otherwise, he indicated that he would have refused it.

The rationale behind his decision was the separate representation exceeded what was reasonably necessary to present the Claimants' case. Accordingly, the amount in excess of what would have been incurred had they instructed a single firm of solicitors would be disallowed.

The Court first had to determine whether separate representation was appropriate. The Court held that it was not reasonably necessary, after a certain point in the litigation, for the Claimants to have separate representation. This was so because the Claimants' interests aligned. In respect of proceedings before 20 November 2012, separate legal advice was justifiable. Thereafter, a conflict of interest no longer existed between the Claimants.

Accordingly, the next question the Court had to consider was how to give effect to the assessment of costs that should reflect the inappropriateness of separate representation.

The Court held that in light of the above considerations, the order relating to the assessment of the sum awarded will distinguish between the period in which separate legal costs incurred were reasonably necessary and when they were superfluous. In relation to the earlier period, the costs judge should assess the Claimants' costs separately, but after 20 November 2012, only the costs which would have been incurred had the Claimants used only one firm of solicitor will be recoverable.

Implications

This case indicates that, when advising co-parties in trust litigation of their options in relation to legal representation, consider whether separate representation is necessary (i.e. whether there is a conflict of interest). An indicator that the parties' interests are aligned is if both are able to instruct the same counsel. If in doubt, parties should make an application to the Court for clarification.

In the event parties decide that separate representation is necessary, their position must remain under constant review; a change in their interests may affect legal costs recoverable.

While this case concerned beneficiaries, the same issue may arise where different trustees seek separate representation, as well as in pension litigation.

For more information, please contact Richard Norridge, Partner, or your usual Herbert Smith Freehills contact.