Court Of Appeal Confirms That A Beneficiary Could Challenge The Fees Charged By The Law Firm That Acted For The Executors

The Court of Appeal has dismissed the appeal in Kenig v Thomson Snell & Passmore LLP and confirmed that a beneficiary of an estate could challenge the fees charged by the law firm that acted for the executors.

Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15

Facts

The executor of the estate instructed solicitors (Thomas Snell & Passmore) and agreed to their fees for the work done in the estate between 2019 and 2021, which were paid from estate funds.

The solicitors went well over the cost estimates they gave. The total cost was over £54,000 plus VAT and expenses, whereas the estimates were originally £10,000 and later rose to £20,000 plus VAT and expenses, with an open ended statement for further costs on a “time spent basis”.

Later on, a beneficiary of the estate (Mr Kenig) sought to have the solicitor’s costs assessed and reduced.

The argument

It was argued by the solicitors for the beneficiary, amongst other things, that the principle in Tim Martin Interiors v Akin Gump LLP (2011 EWCA Chiv 1574) applies such that there was no real benefit to the beneficiary in challenging the bill given the limitations on the assessment due to the approval by the executor and that the better approach ought to be to seek an account from the executor for not challenging the bill himself.

The first instance decision

Giving his judgment in the Senior Court Costs Office, Cost Judge Brown disagreed and ordered the bills would be assessed. He found that the Tim Martin principle did not apply to this case, and even if it did there would still be a good reason to have an assessment and a potentially significant benefit.

The beneficiary appealed this decision and permission was granted on the issue of the application of the principles of the Tim Martin decision.

Tim Martin Interiors v Akin Gump LLP (2011 EWCA Chiv 1574)

Background

In this case, a Company had borrowed from a Bank, and the terms of the loan provided that the Bank could add on any reasonably incurred solicitors’ costs of enforcement to the debt. Solicitors were instructed in due course and costs of £114,216 were incurred and approved by the bank, and later paid by the company.

The company then sought to have these costs assessed under section 71(1) of the Solicitors Act 1974 as a third party liable to pay the bill. Initially, the Court allowed an assessment and reduced the bill by £82,000. On appeal however Lewison J allowed the appeal and held there was no foundation for an order for repayment of any costs by the solicitor to the company and the company ought to raise the matter with the Bank, and this was later upheld by the Court of Appeal.

In giving the judgment in the Court of Appeal, during his review of the authorities Lloyd LJ appears to equate the application of the general right for third parties to challenge solicitors’ costs to that under section 71(3) which specifically refers to costs payable by a trustee, executor or administrator and the right for those to be challenged by beneficiaries or any party interested in any property out of which the costs are to be paid.

The judgment on Appeal

In this case, Stuart-Smith LJ gave the leading judgment, with which Nugee LJ and Coulson LJ agreed.

They considered that any comments made by Lloyd LJ in Tim Martin that equated the position of a beneficiary in a trust or estate with a general third party’s rights to have solicitors’ costs assessed was obiter, and wrong and agreed with the judgment of Costs Judge Brown in the first instance. There were material differences between the provisions of section 71(1) and 71(3) and the decision in Tim Martin cannot be relied on to prevent Mr Kenig from having the solicitor’s costs in this case assessed, and that an assessment will be carried out.

Further, it was added that where an executor had approved solicitors costs in a trust or estate, that was merely a major material factor (and in many cases determinative if fully informed consent), but not always so, as the ultimate interest to be protected is that of the estate and the beneficiaries.