Daniel Kenig v Thomson Snell & Passmore LLP

A beneficiary applying under section 71(3) of the Solicitors Act 1974 is not confined to the restrictions governing an application by a third party liable for a solicitor’s bill under section 71(1). The court may examine both the scope and quantum of the charges. Its ultimate concern is to protect the interests of the estate and its beneficiaries.

Approval of the bill by an executor does not invariably prevent a beneficiary’s challenge. Fully informed approval is nevertheless likely to be a major consideration and may be determinative. The principles stated for section 71(1) assessments in Tim Martin Interiors Ltd v Akin Gump LLP do not govern section 71(3) assessments.

The solicitors were retained by the executor of an estate whose beneficiaries included the respondent. Their original fee estimate was £10,000 to £15,000 plus VAT and expenses, but eight invoices totalled £54,410.99 plus VAT and expenses. The invoices were paid from estate assets.

The respondent applied as a beneficiary for assessment under section 71(3) of the Solicitors Act 1974. The Costs Judge ordered assessment in [2023] EWHC 181 (SCCO), finding special circumstances and rejecting the solicitors’ contention that the restrictive approach in Tim Martin Interiors Ltd v Akin Gump LLP governed the assessment.

The central issue was whether a beneficiary’s section 71(3) assessment was confined to the restrictions applicable to a third-party application under section 71(1).

1. Appeal dismissed. Section 71(3) of the Solicitors Act 1974 creates a materially different regime from section 71(1). A section 71(1) applicant must apply as if that person were the party chargeable, and the court may make only the order available on an application by that party. Section 71(3) contains no equivalent restrictions. It permits assessment on such terms as the court thinks fit and requires only that the court have regard to section 70, so far as it is capable of application, and to the nature and extent of the beneficiary’s interest.

2. The distinction reflects the parties’ different interests and allocations of risk. A trustee or executor can ordinarily pay the bill from trust or estate property and owes fiduciary duties to the beneficiaries. The beneficiary therefore has an independent interest requiring protection. The ultimate interest protected by a section 71(3) assessment is that of the estate and its beneficiaries.

3. Tim Martin Interiors Ltd v Akin Gump LLP concerned section 71(1). Its treatment of section 71(3) rested on the mistaken assumption that no material distinction existed between the two subsections. Its restrictive “blue pencil” approach was consequently not authoritative for section 71(3) and had no rational basis for transposition to that distinct regime. The case was distinguished.

4. The governing approach was derived from In re Brown. A section 71(3) assessment may conduct a wider enquiry into both the scope and, where appropriate, the quantum of the solicitor’s charges. Payment of the bills from the estate does not itself prevent that enquiry.

5. Approval by the executor, even if fully informed, does not establish an absolute bar to a beneficiary’s challenge. The express power to direct payments between the applicant, solicitor and personal representative confirms the breadth of the jurisdiction. Fully informed approval is, however, likely to be a major consideration and may often be determinative.

6. The court provisionally considered it well arguable that section 70(4), which prevents an application by the party chargeable more than 12 months after payment, is not determinative of a beneficiary’s application. The point was outside the grounds of appeal and was not decided. The order for assessment of the eight bills under section 71(3) was upheld.

1. Court of Appeal (Civil Division): By [2024] EWCA Civ 15, unanimously dismissed the solicitors’ appeal and upheld the order for assessment under section 71(3) of the Solicitors Act 1974.

2. Senior Courts Costs Office: By [2023] EWHC 181 (SCCO), Costs Judge Brown ordered assessment of the solicitors’ eight bills. He held that Tim Martin Interiors Ltd v Akin Gump LLP did not govern a section 71(3) assessment and exercised his discretion in favour of the beneficiary.