In a recent Supreme Court decision, Lord v Craig, the Court sent a clear message about proportionality of legal costs in family provision claims—particularly where the estate is small.
The case involved a dispute between two adult children over their late father’s estate, valued at approximately $135,000. By the time the matter reached an early procedural stage, the parties had already incurred over $62,000 in legal costs, representing almost half of the estate.
Recognising the risk that ongoing litigation would consume most (if not all) of the estate, the Court made an early interlocutory costs capping order, limiting the amount any party could recover in legal costs to $22,500 (including GST).
What is a costs capping order?
A costs capping order limits how much one party can recover in legal costs from another party or from the estate itself. In family provision matters, this is designed to ensure that legal fees do not defeat the very purpose of the claim—namely, providing proper and adequate provision from the estate.
While costs capping is more commonly considered at the end of proceedings, this case is notable because the Court stepped in early, before a hearing date had even been set.
Why did the Court intervene so early?
Justice Meek highlighted the principle of proportionality—the idea that legal costs should be reasonable having regard to the size of the estate and the complexity of the issues in dispute.
Key factors included:
- The modest size of the estate
- The high legal costs already incurred
- Estimates showing future costs could exhaust the estate entirely
- The relatively contained nature of the dispute
- The risk that continued litigation would leave little or nothing to distribute
The Court made clear that family provision litigation should not become a process where the estate is “devoured” by costs before any meaningful outcome is achieved.
No fixed rules—just a principled assessment
Importantly, the Court rejected any notion that costs should be capped by reference to rigid percentages or “rules of thumb.” Instead, costs capping requires a case-by-case evaluative judgment, based on the available evidence and the overall justice of the matter.
The Court also noted that early costs capping does not prevent a case from continuing. If circumstances change, the cap can be varied later where there are special reasons and it is in the interests of justice to do so.
A warning for small estate claims
This decision serves as a strong reminder to parties and practitioners alike:
family provision claims involving small estates must be run with care, focus and restraint.
The Court emphasised that:
- Parties should realistically assess whether litigation is worth pursuing
- Legal work should be scaled to the size of the estate
- Early settlement discussions are critical
- Excessive costs may be curtailed by the Court—even without consent
In this case, the Court also directed the parties back to an informal settlement conference, reinforcing the expectation that disputes should be resolved as efficiently as possible.
Why this decision matters
For anyone considering a family provision claim—or defending one—this case highlights the growing willingness of the Supreme Court to actively manage costs and protect estates from disproportionate legal expense.
Early costs capping may become more common, particularly in small or modest estates, where unchecked litigation risks undermining the purpose of the Succession Act altogether.
DISCLAIMER
This article reflects the current law at the time of publication. It is intended for informational purposes only and does not constitute legal advice. The actual decisions in each case are summarised for general understanding. For specific legal guidance in relation to your situation, please consult with a qualified legal professional.