The Court of Appeal has handed down its eagerly awaited judgment in Kenig v Thompson Snell & Passmore LLP [2024] EWCA Civ 15, an appeal against a decision of Costs Judge Brown in relation to the scope of assessments ordered under s.71(3) of the Solicitors’ Act 1974.
A beneficiary under a will (Mr Kenig) sought an assessment of the bills of the solicitors engaged by the executor to assist in the administration of the estate (from which the bills were to be paid). The solicitors argued that an assessment should be refused because the executor had ‘approved’ the bills and a third party under s.71 of the Solicitors Act 1974 could not challenge the reasonableness of fees which had been ‘approved’ by the party chargeable – third parties can only make reasonableness challenges which would have been open to the client themselves (per Lloyd LJ in Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA Civ 1574).
The Court of Appeal rejected that contention, confirming that not all ‘third party’ assessments under s.71 of the Solicitors Act 1974 are to be treated the same.
The assessment in Tim Martin had been conducted pursuant to s.71(1) – the general right of third parties to seek an assessment of a bill in which they have an interest. In those assessments, the third party is restricted to taking points which would have been open to the client themselves (or ‘blue pencilling’ costs which are not within the scope of the third party’s liability).
However, section s.71(3) is in materially broader language. It was not necessary for the court in Tim Martin to consider those differences, and there is nothing in the judgment to suggest that the court was addressed on them. Accordingly, any observations about s.71(3) were purely obiter.
In any event, Lloyd LJ’s assumption that there was no material distinction between s.71(1) and s.71(3) was wrong. In Kenig (at [51]), the Court of Appeal unanimously concluded that there are material differences between applications under section 71(3) and those under section 71(1) because of the different nature of the interests of the third party that the different sub-sections are intended to reflect. As such, assessments under s.71(3) are not subject to the same principles, or restrictions, as set out in the Tim Martin decision. The Costs Judge had been correct to find that Tim Martin was distinguishable and should be distinguished.
As a result, an assessment by a beneficiary under s.71(3) is capable of being a much broader enquiry than that an assessment sought by a ‘normal’ third party under s.71(1). The beneficiary is not necessarily limited to taking quantum challenges which would have been open to the executor/administrator of the estate.
As for whether any approval of costs by the executor would nevertheless be sufficient to prevent the beneficiary challenging the reasonableness of fees, the Court of Appeal was careful not to say more than was necessary for the disposal of the appeal. However, Jeremy Stuart-Smith LJ accepted that, while approval by the executor may be a material factor (an often a major consideration), there should be no hard and fast rule because what matters most was the legitimate protection of the beneficiary’s separate interest:
“57… First, although the starting point is that an assessment under section 71(3) is an assessment as between solicitor and client, I accept that the ultimate interest to be protected on an assessment under section 71(3) is that of the estate and/or the beneficiaries. Second, I consider it to be material that section 71(3)(b) makes express provision permitting an order that payments be made “to or by the applicant, to or by the solicitor, or to or by the executor, administrator or trustee”, which underscores the broader nature of the enquiry under section 71(3) when compared with an assessment under section 70 or section 71(1). Third, it seems appropriate that separate consideration should be given to the position of the beneficiary and the estate in circumstances where the executor/trustee carries no risk because of their ability to pay the solicitor out of the trust property. Fourth, the decisions in In re Brown and Hazard v Lane both contemplated and allowed the beneficiary to challenge the bill even though an executor had approved it.”
As a result of the decision in Kenig, solicitors will no longer be able to resist or curtail assessments requested by beneficiaries on the basis that the restrictions set out in Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA Civ 1574 apply. Beneficiaries may be able to succeed in challenging the reasonableness of a solicitor’s charges, even where the executor has ‘approved’ them.
The judgment is likely to be welcomed by beneficiaries who may previously have felt ‘stuck’ with a bill which had been ‘approved’ by an executor with no personal interest in the sums from which the bill was to be paid. On the other hand, it is a decision which may cause concern for firms of probate solicitors who may have previously considered the third-party assessment rights in s.71 to be relatively ‘toothless’ once the executor had ‘approved’ the bill.
The solicitor appellant was refused permission to appeal to the Supreme Court by the Court of Appeal. Nevertheless, the implementation of the decision and the effect of ‘approval’ by an executor is likely to be the subject of dispute in future.
Roger Mallalieu KC and Simon Teasdale acted for the successful respondent, Mr Daniel Kenig. Robert Marven KC acted for the appellant, Thompson Snell & Passmore LLP.
