Where there’s a will, there’s a damages claim:
Assessing damages for the negligent drafting of a will in the light of Corbett v Bond Pearce
Sue Carr and Graham Chapman provide an analysis of a recent Court of Appeal decision which
is not all that it might seem to be at first glance
(taken from Isssue No 15 – April 2001
In a series of recent cases the courts have demonstrated a willingness to recognise the existence of duties of care owed by professional advisers to persons other than their clients. These secondary duties owed to third-party non-clients must be consistent with the primary duties owed by the professional to his client. Often the duties will mirror each other and certainly the content and scope of any secondary duty will be informed by the nature of the primary duty owed to the client. It may in the past have been tempting to assume that any loss suffered by the third party would be no more extensive and, indeed, would only mirror that suffered by the client. Moreover, it may have been thought that such loss would only be recoverable at the action of the client or the third party and not both. These issues have recently been considered at first instance by Eady J1 and by the Court of Appeal2 in Corbett v. Bond Pearce.
- The Decision at First Instance in Corbett
The claimant in Corbett was the sole personal representative of the late Miss Tresawna (`T`). By a will dated 3rd February 1989 T bequeathed a farm to the claimant’s sister and another property to the claimant. The residue of her estate was to be divided in favour of the claimant and his sister in equal shares with gifts over in favour of the latter’s infant sons, James and Jonathan (T’s great-nephews).
In September 1989 the defendant firm of solicitors were retained by T to advise upon her affairs and, in particular, to arrange for the making of lifetime gifts of the farm and the other property to the claimant and his sister and to then draft a new will that took into account these gifts. By the proposed new will no specific bequests in respect of the two properties were to be made but the residue of T’s estate was to be left to James and Jonathan.
In performance of this retainer the defendants sent to T a draft of the new will on 8th September 1989 and on 22nd September 1989 they sent a fair copy of the will along with instructions for signing and dating. The will was signed by T on about 27th September 1989 but was not dated until 26th December 1989 when the date was inserted by a partner in the defendant firm. T did not date the will when she signed it because she did not want the new will to take effect until after the lifetime gifts had been made. These gifts were not completed until 25th December 1989.
T died on 6th February 1991. In June 1992 the claimant as a beneficiary under the earlier will commenced a probate action to have the later will declared invalid on the basis that T lacked testamentary capacity when she signed it. Mr Newey, an executor under later will resisted these proceedings with the benefit of an indemnity as to costs from the defendant firm’s professional indemnity insurers. The probate proceedings eventually found their way to the Court of Appeal where the claimant prevailed. The later will was set aside on the ground that T lacked testamentary capacity when she signed it because she did not intend to execute it until after such time as the lifetime gifts had been perfected. The Court ordered that the earlier will be admitted to probate and that the costs of the probate proceedings be paid out of T’s estate.
Prior to determination of the will action James and Jonathan commenced proceedings against the defendant firm to recover damages in respect of the failure to execute the later will in accordance with T’s wishes. As the intended beneficiaries under the later will they argued that they were owed a duty of care by the defendant in accordance with the principles set out by the House of Lords in White v. Jones3
The defendants settled the claim brought by James and Jonathan by paying a sum of damages calculated by reference to the value of T’s residue estate making no allowance for the costs order in the probate proceedings.
The claimant then brought proceedings against the Defendant firm seeking damages on behalf of T’s estate in respect of the adverse costs order made in the probate proceedings4. At first instance, the defendants unsuccessfully resisted the claim on the basis that to pay damages to the estate having already compensated the intended beneficiaries under the later will would be unjust and would amount to double recovery. In the Court of Appeal the defendants succeeded on the basis that the loss suffered by both the estate and the intended beneficiaries was the same.
- The rationale for the decision at first instance
The cumulative practical effect of the Court of Appeal decision in the probate proceedings and the first instance decision in the negligence proceedings can be summarised thus :
the beneficiaries under the earlier will, whom T did not intend to take the residue of her estate at the time of her death, would in fact be able to do just that under the terms of the earlier will.
the intended beneficiaries under the later will would be put in the position they would have been in had the later will been effective by payment to them of a sum of damages by the defendant firm.
the estate would be compensated for the costs of the probate action increasing the amount of residue available for the `unintended` beneficiaries under the earlier will (or rather simply returning the size of the residue to its value had there been no adverse costs order).
At first blush this result might appear somewhat startling. However, a closer analysis of the position reveals in our view that the decision is sound as a matter of legal principle subject to one caveat which is explained below. This is perhaps reflected in the fact that there was apparently little between counsel for both parties in Corbett as to the law applicable to the case; the difference being one of how that law ought to be applied to the particular facts5.
The starting point, as the judge recognised6 must be a consideration of the duties owed by the defendants to the various parties :
`21.It is necessary always to remember that the present claimant sues in his capacity as the sole representative of Miss Tresawna and thus on behalf of the estate. In the Disappointed Beneficiaries Action, the claim obviously had to be based upon a duty of care owed to James and Jonathan Arthur (being the persons to whom Miss Tresawna intended, at the time of her death, that the residue of her estate should be distributed). In the present proceedings, equally obviously, the claim is based upon the duty owed during her lifetime to Miss Tresawna, in accordance with the retainer. The allegations thus relate to distinct breaches of duty. I need to bear that in mind when considering one of Mr Etherton’s fundamental submissions; namely, that his clients should not be placed in the position of having to pay twice over for the same damage.`
The defendants were retained by T. Thus their primary duties both in contract and tort were owed to T and reflected the terms of her instructions. Uncontroversially, the defendants also owed a duty to the intended beneficiaries under the later will. The content of this duty would mirror that of the duties owed to T and would be consistent with them7. The interrelation of these duties is perhaps conveniently summarised by Jonathan Parker J in another case concerning the drafting of a will, Trusted v. Clifford Chance8 where he said this :
`I would make the following observations about the decision in White v Jones:
- It appears clearly from the passages I have just quoted – and is a consistent theme throughout the judgments of the Court of Appeal and of the majority in the House of Lords – (a) that the duty owed (in tort) by the solicitor to the intended beneficiary and the duty owed (in contract) by the solicitor to his client are for all practical purposes one and the same, and (b) that the nature and extent of the duty is determined by the terms of the contract between the solicitor and his client, i.e. by the terms of the solicitor’s retainer. This latter point is graphically illustrated by the fact that the duty of care towards the intended beneficiary may be restricted or excluded altogether by contract between solicitor and client. Thus, Lord Goff said (at p. 268G-H):
`Such assumption of responsibility [towards the intended beneficiary] will of course be subject to any term of the contract between the solicitor and the testator which may exclude or restrict the solicitor’s liability to the testator under the principle in Hedley Byrne. It is true that such a term would be most unlikely to exist in practice; but as a matter of principle it is right that this largely theoretical question should be addressed.` (Emphasis supplied)
- It follows not merely (a) that conduct on the part of the solicitor which amounts to a breach of his (contractual) duty towards his client must also amount to a breach of his (tortious) duty towards the intended beneficiary, but also (b) that unless the solicitor is in breach of his (contractual) duty towards his client, he cannot be in breach of his (tortious) duty towards the intended beneficiary.
- As I understand the decision in White v Jones, it is not authority for the general proposition that a solicitor owes a duty of care in tort to any third party who can prove that but for the solicitor’s breach of his (contractual) duty of care to his client the third party would or might have been better off, and that this was reasonably foreseeable by the solicitor. The decision (as I read it) is directed at supplying a remedy for the injustice which would otherwise arise in the particular case where, as Sir Donald Nicholls put it (p. 222F-G):
`the very purpose of the employment of the solicitor is to carry out the client’s wish to confer a particular testamentary benefit on the intended beneficiary`.
- It follows from 3 above that no tortious duty of care will arise in favour of the intended beneficiary unless and until the client has (a) decided to confer on the intended beneficiary a particular testamentary benefit (being the benefit for the loss of which the intended beneficiary seeks to hold the solicitor liable), and (b) retained the solicitor for that purpose.`
So the solicitor owes separate but complementary duties to both his client and the third-party intended beneficiaries. The crucial question is whether this necessarily means as a matter of principle that any loss suffered by the intended beneficiaries and the client-testator (as a result of the solicitor’s negligent drafting of the will) will be identical such that payment to one will discharge the solicitor from liability to the other? In our view it does not.
Although the intended beneficiaries and the client-testator are owed like duties these duties are separate and may give rise to different losses. As Eady J observed in Corbett9:
`the court is often required, as here, to address breaches of separate duties owed to different persons. Circumstances could have arisen where only one category of loss was brought about. If the defendants in the present case had failed to put into effect Miss Tresawna’s wishes but without leaving matters so unclear as to spawn the probate litigation, James and Jonathan Arthur would still have been entitled to recover for their loss as disappointed beneficiaries, but the estate would not have been exposed to depletion by the costs of such proceedings.`
The loss suffered by the intended beneficiaries was not receiving the bequests that they ought to have received on the testator’s death. The testator’s loss (or rather that of her estate) is represented by the costs of the probate proceedings that only became necessary as a result of the uncertainty created by the Defendant solicitor’s negligence. The losses, found the judge, were distinct and arise from breaches of distinct and separate duties owed to different persons. Neither the testator nor the intended beneficiaries are over-compensated, nor is there double recovery. However, it is right to say that the unintended beneficiaries do, in effect, receive a windfall. But the windfall factor was already present and accepted as an inevitable consequence of the result in White v. Jonesand was even canvassed expressly before their Lordships10 .
That this result, insofar as it relates to the identification of different duties, is correct as a matter of principle can be seen from an examination of other cases where primary and secondary duties have been considered.
For example, in Johnson v. Gore Wood11 the House of Lords considered the extent to which a shareholder in a company can bring an action in respect of losses suffered by him as a result of a wrong done to the company in which he holds shares12.
In this case the claimant’s company instructed the defendant firm of solicitors to act on its behalf in exercising an option to purchase certain lands. The owner of the lands disputed that the option had been properly exercised and the claimant’s company brought proceedings against the owner which ultimately succeeded. However, in the meantime, the company’s opportunity to make a profit out of the transaction diminished by reason of the fall in the property market. The company then brought an action against the solicitors and this was compromised on terms that the defendant solicitors pay £1.8 million. Unusually, perhaps, it was a term of the settlement that if the claimant decided to bring personal claims against the solicitors these would be limited to £250,000. The claimant did bring proceedings against the solicitors, relying on the same acts and omissions as the company had done but also contending that the solicitors had accepted a retainer from the claimant personally.
The principal objection to the claimant’s claim was that it was an abuse of process being based as it was on the same facts and allegations of breach of duty as the company’s claim against the solicitors. The House of Lords held that the solicitors owed duties to both the company and the claimant as a shareholder. Being retained by the company the solicitors’ primary duties were owed to the company with secondary duties in like form being owed to the claimant. Breach of these duties could, as their Lordships expressly recognised, lead to the company and the claimant suffering loss. If and to the extent that the loss suffered by the claimant simply mirrored that suffered by the company then his action would be an abuse of process. However, if he could show that he had suffered loss distinct from that suffered by the company then there was no objection to his action going forward. Thus, the possibility of the third-party shareholder, to whom what we have called a secondary duty was owed, suffering a distinct loss from the client to whom the primary duty was owed was not only accepted by the House of Lords but it formed the very reason why the shareholder’s claim did not constitute an abuse of the court’s process13.
This result is perhaps not surprising given that if the shareholder is owed such a distinct duty then it is not a question of the shareholder recovering damages in respect of a wrong done to the company (although this may, as a matter of fact, also be the case) but rather of the shareholder recovering damages in respect of a wrong done to him. Similarly, at first instance in Corbett it was held that the estate and the intended beneficiaries were owed distinct duties and suffered separate and different types of loss.
Thus the key to understanding the outcome in Corbett at first instance is to focus on the nature of the duties owed by the defendant firm of solicitors and the different losses that breach of those duties was found to have caused.
- Corbett in the Court of Appeal
The reversal of the judgment of Eady J in the Court of Appeal may be seen to undermine the analysis set out above. However, we would suggest that, properly understood, the decisions of the Court of Appeal and Eady J are not as far apart as they might seem.
It would appear that the analogy of claims brought by shareholders explained above was not argued before the Court of Appeal in Corbett14. Nevertheless, the basic analysis of primary and secondary duties being owed by a solicitor to his client and non-client at one and the same time was approved15. Where the Court of Appeal and Eady J parted company was on the question of whether breach of these duties had led to the two parties (the intended beneficiaries and the estate) suffering different and distinct loss. Whereas Eady J thought that they had, the Court of Appeal robustly asserted that they had not. In the Court of Appeal’s judgment, Eady J had fallen into error in failing to give sufficient consideration to :
`the question whether the alleged duty was a duty in respect of the kind of loss which in the event was suffered.`16
The kind of damage which the solicitors had to take care to hold the testatrix and the intended beneficiaries harmless was the same : it was the loss which those who would become interested in the testatrix’s estate, as intended by her, would suffer if effect were not given to her latest testamentary intentions17. The Court accepted that :
`the damages which the claimant now seeks to recover do not represent precisely the same sum as that which formed part of the award to the Disappointed Beneficiaries. The former sum represents an actual sum which, as a result of the defendant’s negligence is not included in the Testatrix’s net estate, falling to be dealt with under the February will. The latter was a notional sum which, but for the defendant’s negligence, would have been included in the Testatrix’s net estate, falling to be dealt with under the September will. In substance, however, the two sums represent the same monetary loss. In my judgment this is the relevant point for present purposes.`18
Sir Christopher Slade was comforted in reaching this conclusion (and hence the conclusion that the claimant’s claim had to fail) by two further points :
that he doubted whether if the instant action had been consolidated with the claim made by the intended beneficiaries whether the court would have awarded the latter damages (as it surely must have done) and then gone on to award damages to the claimant as well; and a contrary result would lead to the unintended beneficiaries receiving even more of a windfall than they were currently to receive under the earlier will.
This would tend to suggest that the negligent solicitor’s liability is effectively `capped` at the value of the testator’s intended estate.
On the particular facts of Corbett itself this conclusion would seem to be correct. However, we are of the view that practitioners ought not to take undue comfort from the Court of Appeal’s reasoning. Applying this reasoning to different facts reveals that had the intended beneficiaries not been the residuary beneficiaries under the later will then the result in Corbett may well have been different. If the later will had provided for two specific legacies to the intended beneficiaries of, say, £100,000 each then they would have been entitled to compensation from the defendant in that sum. Provided that the residue of the estate after deduction of the costs of the probate proceedings was worth in excess of £200,000, no part of that compensation would have included a sum representing the costs of the probate action. Thus, the estate and the intended beneficiaries would have suffered distinct losses. This must follow from the Court of Appeal’s acceptance of the analysis of primary and secondary duties that formed the cornerstone of Eady J’s judgment at first instance and is consistent with the outcome in Johnson v. Gore Wood.
Nevertheless, the loss suffered by the estate would be the same as any loss suffered by the intended residuary beneficiary under the later will. Thus, if the negligent solicitor compensates the intended residuary beneficiary in full, then the estate’s claim would seem to have to fail. However, on the Court of Appeal’s reasoning, the converse would not necessarily follow. If the solicitor was sued first by the estate then the `same loss` argument would not appear to be available, nor would payment to the estate seem to satisfy any claim by the intended residuary beneficiary because the estate would arguably be under no duty to pay over the compensation it received.
Does this, in fact, suggest that the estate and the intended residuary beneficiary have suffered different losses? We would suggest that the answer in this case is `yes`, but that it could be argued that the loss suffered by the estate, being a loss ultimately to be borne by the unintended beneficiaries, does not fall within the scope of the duty of care owed by the solicitor as defined by the Court of Appeal19. Unfortunately for defendants, this is not, in our view, the ratio of the Court of Appeal’s decision and so the point must remain open for argument.
Further, if instead of a new will, the dispute was confined to the validity of a specific bequest in an otherwise valid will, then the solicitor will be liable:
to compensate the intended beneficiary of the ineffective bequest; AND
to compensate the estate for any other losses suffered, for example the costs of any proceedings taken to challenge the bequest.
When analysed in this way, it can be seen that the Court of Appeal decision inCorbett does not have the effect of limiting the liability of the negligent solicitor to the size of the testator’s intended estate.
- The effect of Corbett : an ever-expanding liability?
It might be thought that the decision in Corbett (or at least this analysis of it) represents a further hammer blow to those who draft wills and threatens to expose them to vast and previously uncontemplated liability in damages. We would suggest that this need not necessarily be the case.
The very reasoning that led to the result in Corbett may be employed by defendants to their advantage to avoid liability altogether in other cases. Thus it is now clear, thanks to the recent decision of the Court of Appeal in Worby v. Rosser20, that the draftsman of a will does not owe a duty to the beneficiaries under an earlier will.
In Worby the claimants were beneficiaries under a 1983 will. In 1989 the testator executed a later will which had been prepared by the defendant solicitors. One of the effects of the new will was to reduce the share of the estate to which the claimants were entitled. The claimants successfully contested the validity of the later will but were unable to recover all their costs. They then brought an action against the defendant solicitors to recover these costs. The Court of Appeal dismissed an appeal from the judgment of Holland J who had found against the claimants. The Court of Appeal held that White v. Jones was needed to fill a lacuna which left disappointed beneficiaries without a remedy but there was no such lacuna in the present case because the estate could maintain an action against the defendants (as in Corbett). As Chadwick LJ put it21 :
`The remedy fashioned in White v. Jones was needed to fill a lacuna. The remedy is provided in circumstances in which it can be seen that there is a breach of duty by the solicitor to the testator in circumstances in which the persons who have suffered loss from that breach will have no recourse unless they can sue in their own right.`
While Chadwick LJ considered the conceptual difficulties in finding such a duty22, the primary ground for dismissing the appeal was that there was no need for the court to fashion a remedy and so, presumably, no need to embark on a detailed analysis of why the defendant solicitors did not owe the claimants a duty. In truth, we would suggest that the idea that the draftsman of the later will could owe a duty to the beneficiaries under the earlier will is a pretty radical one; and one that cannot survive scrutiny based upon the discussion of primary and secondary duties set out above.
Some support for this proposition can be derived from the short concurring judgment of Peter Gibson LJ where, commenting upon the alleged duty owed by the defendants to ensure that the testator had capacity to make the later will, he says :
`That duty is said to have been owed not only to the testator but also to the beneficiaries under the 1983 will. . .. I do not believe that any such duty arises.
Of course, if one goes backwards from the fact that the plaintiffs have suffered a loss in that they have not been able to enforce the costs order made in their favour in the probate action(despite the fact that the costs order was made on an indemnity basis), one can see that but for the solicitor drawing up the 1989 will, the subject of the probate action, that loss would not have been incurred. That is an impermissible way of finding that there is a duty of care owed by a solicitor to such beneficiaries. Still less is it possible to see that there was an assumption of responsibility by the solicitor towards such beneficiaries.`
It might be suggested that there is a similarity in approach here to that adopted in the case of shareholders, if, in effect, what the court is saying is that the only duty (putting considerations of proximity aside) that the solicitor could owe to the beneficiaries would mirror that owed to the testator. More importantly perhaps, breach of that duty could only lead to the beneficiaries under the earlier will suffering an identical loss to the testator (or his estate) : the costs of probate proceedings. In those circumstances, the testator – or rather his estate – is the appropriate claimant just as where a shareholder cannot establish a distinct duty owed to him personally causing him distinct loss from that suffered by the company, the company is the appropriate claimant.
A further, and compelling, reason for the solicitor not owing a duty in these circumstances can be derived from the judgment of Henry J in the New Zealand case of C V Knox v. M J Till23. This case is almost identical to Worby on its facts. What is noticeable from the judgment of Henry J is that it concentrates much more on the nature of the duty contended for by the beneficiaries under the first will24 :
`The particular duty of care was framed initially as a duty to take reasonable steps to ensure that the testator has testamentary capacity. The breach of such a duty would however on its own be insufficient to found the present cause of action in negligence. It must be the appellants’ [beneficiaries] case that a solicitor must not only take steps to ensure there is testamentary capacity, but having ascertained its absence, to refrain from preparing a will as instructed. Absent that duty, and its breach, there would be no be no entitlement to the damages claimed. Expressed in conventional terms, the duty here must be to take reasonable care to avoid loss to the appellants. The loss is that resulting from the execution of the later wills. The duty therefore must be to avoid the execution of the wills.
No basis for the imposition of such a duty, which could still remain compatible with the ordinary features and ramifications of the solicitor/client relationship, was proffered.`
In addition, Henry J remarked that there was insufficient proximity between the beneficiaries and the solicitor and no assumption of responsibility by the solicitor toward them. What is striking, however, is that the primary ground for rejecting the contention for a duty to be owed is that such a (secondary) duty to the third party beneficiaries would be incompatible with the solicitor’s (primary) duty to his client. It must be fateful to any contention for the existence of a secondary duty being owed to a third party if that duty is incompatible with the professional’s primary duty to his client.
Thus Corbett-type reasoning may be deployed in favour of the careless draftsman of a will.
On a more practical level, we would suggest that Corbett demonstrates that defendants and their insurers will now have to be more cautious when deciding whether or not to support (and fund) probate actions arising out of negligently drafted wills25.
It is superficially attractive for a solicitor who is alleged to have negligently drafted a will to support a probate action designed to clarify the position. The two principle advantages of this approach are :
that the solicitor’s liability for costs in the probate action may well be smaller than his liability to make good the loss of the intended beneficiaries under the negligently drafted will; and
by rectifying the negligently drafted will or preferring a defectively executed later will to an earlier one the court is giving effect to the testator’s true intentions and not artificially increasing (for practical purposes) the size of the estate by compelling the solicitor to pay damages to the intended beneficiaries. In short, the testator’s property goes to those whom he intended to receive it.
Not only is this approach attractive it appears to have been commended by the Court of Appeal in Walker v. Medlicott & Son26. Further, this case is authority for the proposition that unless the intended beneficiaries take steps to rectify the will in circumstances where they allege that by reason of the solicitor’s negligence that will does not reflect the true intentions of the testator, any action against the solicitor is liable to be dismissed on the basis that the intended beneficiaries have unreasonably failed to mitigate their loss.
However, it is now clear that save in the most clear cases (as in Medlicott itself) where rectification of the will is comparatively straight-forward, this mitigation argument may not be available to the negligent solicitor27 and nor may it be appropriate from a practical point of view for him to fund rectification or probate proceedings, if to do so risks incurring an additional costs liability.
We would suggest that in future it will be important for a defendant solicitor to consider in some detail :
the likely merits of any probate/rectification action.
the costs of any such action.
the potential liability to the intended beneficiaries.
whether it might be more cost effective simply to fight or settle any claim made by the intended beneficiaries rather than opening up a second front (and second additional liability) by supporting contested probate/rectification proceedings.
The difficulty that the defendant will face is that the intended beneficiaries or the trustees of the estate may commence probate proceedings without reference to the defendant. In these circumstances, even if the defendant immediately takes steps to establish the true position with regard to the estate puts the intended beneficiaries on notice that it will not support the probate proceedings, the defendant remains at risk of having to face a costs liability if costs are awarded against the estate. The best that the defendant can do is to negotiate with all parties to bring an end to the probate proceedings as quickly as possible, by, for example, reaching a settlement with the intended beneficiaries. If nothing else,Corbett in the Court of Appeal demonstrates the need for a defendant solicitor to get all potentially interested parties together and deal with them in the round.