We are often asked to advise residuary beneficiaries on whether Estate administration charges are reasonable. Yet challenging such costs as a third party under the Solicitors Act 1974 has become a rarity. This was predicted by LJ Lloyd in Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA [102]. This decision concerned a commercial dispute between a mortgagee and mortgagor who was paying costs pursuant to a mortgage contract, and the prediction arose because of the limitation identified in third party assessment applications made under s71 Solicitors Act 1974. A third party application led to a ‘blue pencil’ approach by a cost judge:

95. The effect of my conclusions as regards both quantification and payment is that a third party assessment under section 71 is of limited use to a third party. As regards quantification it only allows the costs judge to follow what might be called a blue pencil approach. He can eliminate (a) items which ought not to be laid at the door of the third party at all because they are outwith the scope of his liability, here as mortgagor, and (b) items which are only allowable as between client and solicitor on a special arrangement basis, within the terms of CPR rule 48.8(2)(c). He cannot either eliminate any other item or reduce the quantum of any item which is properly included in itself, but for which he considers that the charge made is excessive, unless he could have done so as between client and solicitor on an assessment under section 70.

As a third party does not stand in the shoes of a client it was determined in Tim Martin that the costs could not be reduced significantly.

Costs Judge Brown took a markedly different approach in Daniel Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15 and his decision was leap frogged to the Court of Appeal. The Appellant was a law firm that had acted for the Executor of an Estate and had estimated costs of between £10,000 and £15,000 plus VAT and disbursements. In the event the firm rendered eights invoices which totalled £54,411 plus VAT. The Application for assessment was issued over eight months from when the last bill had been rendered. The Respondent sought their assessment under s71(3) Solicitors Act. The Appellant opposed the application for assessment following the obiter of LJ Lloyd in Tim Martin, that there would be no material reduction to warrant assessment out of time.

In his judgment, Lord Justice Stuart-Smith demonstrated an excellent grasp of detail of the Solicitors Act and its antecedent statute from 1843. He distinguished Tim Martin from applications to assess Estate administration costs. Crucially he found the rights of residuary beneficiaries are determined under 71(3) and not 71(1), which was relied on in Tim Martin and did not reduce the scope of a third party to challenge costs. LJ Stuart-Smith preferred instead the much older decision of In re Brown (1867) LR 4 Eq 464. In his view this was a rare case as it concerned the position of Estate trustees and residuary beneficiaries who should be treated as a distinct sub set of third parties. Applications under s71(3) addressed Estate trustees who had “fiduciary obligations” to beneficiaries who have an “independent interest.. that goes beyond that of the client/trustee.” (para 13), which is a consideration absent from commercial contracts. As a result, he held that much of Tim Martin was obiter and its guidance not binding for s71(3) applications.

The broader considerations under s71(3) encouraged cost judge Brown to apply latitude in exercising his discretion and permit all bills to be assessed even when some were paid more than 12 months prior to the Application to assess [pa 48] a view which was provisionally endorsed by the Court of Appeal. Lord Justice Stuart-Smith made clear that an application under s71(3) permitted questions of quantum to be raised and not simply the scope of payee, and that In Re Brown was binding [pa 51].

One further question which was left unaddressed was the degree to which the fully informed consent of the Executor was determinative of the costs allowed [pa 58]. Kenig has tipped the initiative back towards beneficiaries but it will be some time before the practical implications will be clarified through assessment.

Even now the Solicitors Act has a very precise focus. When seeking to defend or attack solicitor and client costs it is a powerful tool that can be wielded but if not used appropriately the costs of doing so can be disproportionate to the benefit achieved. There are other ways of challenging costs and approaching disputes over legal fees and we are always happy to advise on the options available, with the aim of resolving matters as soon as possible and avoiding parties incurring disproportionate and potentially irrecoverable costs.