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However, that has now all changed following the decision of the Court of Appeal in Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15. In Kenig, the solicitors had been instructed by the executor
to conduct the administration of
the estate. The solicitors estimated that their costs for conducting the administration would be between £10,000.00 and £15,000.00 plus VAT and expenses. At conclusion, the costs sought totalled £54,410.99 plus VAT and expenses. The solicitors transferred funds from
the estate accounts in order to pay their invoices. Mr Kenig, one of the beneficiaries, sought to challenge the costs incurred by the solicitors by a third-party assessment brought pursuant section 71(3) Solicitors
Act 1974. The solicitors opposed
the listing of an assessment arguing that any such assessment would
be fruitless as it was not open to a beneficiary to challenge legal fees paid from the proceeds of the estate in such circumstances.
It is a bold person that makes a prediction as to the next big costs issue that may emerge. However, for the purpose of this article I will dare to be BOLD!
www.pic.legal Autumn & Winter 2024
At first instance, Costs Judge Brown disagreed with the solicitors and determined that the matter could proceed to an assessment. He found that such an assessment would not be governed by the principles set out in Tim Martin. The solicitors appealed. In a detailed judgment, the Court of Appeal dismissed the appeal and determined that the principles set out in Tim Martin did not apply to a third party assessment brought by a beneficiary. Accordingly, on such an assessment, the beneficiary could, in principle, challenge the reasonableness of the costs incurred, even though s(he) was not the solicitor’s client. The beneficiary could therefore challenge not just the scope of the costs incurred, but also the quantum of those costs. The Court of Appeal held that on such
an assessment, the ultimate interest to be protected was that of the beneficiaries and the estate. With that decision, the Court of Appeal removed the obstacle that had stood in the way of beneficiaries challenging executor’s costs for over a decade.
Where does that leave the profession and will it result in a proliferation of such challenges? It certainly now seems a distinct possibility. Beneficiaries will feel empowered to challenge solicitors’ costs and professional executors will no longer be able to rely on the limitations of such assessments to rebuff a challenge. The relationship between the legal costs and the residuary estate means there will always be an incentive for beneficiaries to challenge the costs.
However, that is not to say that the decision in Kenig did not give any comfort to solicitors. In fact, the final paragraphs of that decision may prove to be of particular importance and is likely to be the subject of extensive argument. The solicitors in Kenig had argued that, even if the restrictions in Tim Martin did not apply, as the executors had approved the Bills, the beneficiaries were precluded from now challenging those Bills. Whilst the Court of Appeal rejected that, it added at paragraph 57 of the judgment “...That said, I would accept that the fact of fully informed consent by the executor (if proved) is likely to be a major consideration, which in many cases may prove to be determinative.”
In what circumstances will it prove to be determinative and how does this fit with the Court of Appeal’s observations that the ultimate interest to be protected on assessment is that of the estate and the beneficiaries? We shall see. However it raises a possibility that a solicitor may be able to rebuff such a challenge from a beneficiary if it can prove that the executor who approved the Bills, gave fully informed consent.
There remain other as yet unanswered but important questions, including, how are such costs to be assessed? It is likely that in the majority of such assessments, the costs will be non-contentious i.e. proceedings will not have been issued in the underlying administration. If so, costs will be assessed pursuant to the factors set out in The Solicitors’ (Non-Contentious Business) Remuneration Order 2009. The ultimate
question for the purpose of such an assessment is whether the costs are fair and reasonable having regard to all the circumstances of the case.
What does fair and reasonable mean in such cases and how is it to be determined?
My prediction is we will fifind out sooner rather than later.
John Meehan, Costs Practitioner – Kings Chambers.
Kings Chamber - A Set Apart From The Rest.
Kings Chambers is a modern and forward-thinking chambers with a national reputation.
www.kingschambers.com
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