Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15 (18 January 2024)
Mr Kenig and his sister were beneficiaries of a Will. Thomas Snell & Passmore LLP (“TSP”) were instructed by the sole executor of the Will (Mr Saul Biber) to administer the estate. TSP’s initial estimate was £10,000 - £15,000 plus VAT and expenses, but they ended up charging £54,410.99 plus VAT and expenses.
The invoices were dated 17 October 2019 and 2 August 2021. They were sent to Mr Kenig on 3 September 2021 and paid from the estate.
Mr Kenig sought to challenge the fees charged and applied under section 71(3) of the Solicitors Act 1974. He issued those proceedings on 25 April 2022. The matter first came before Costs Judge Brown to consider whether the bills should be assessed and any terms of such an assessment.
Firstly, it was clear, and ultimately agreed, that the Claimant was, for the purposes of section 71(3) of the 1974 Act a "person interested in any property out of which the trustee, executor or administrator has paid, or is entitled to pay, the bill" and not a person chargeable with the bill. It was also accepted that the retainer permitted interim statute bills.
The Defendant argued that:
- The invoices were interim statute bills, they had been paid and there were no special circumstances; and that in any event (even if there were special circumstances) they contended in the exercise of the Court’s discretion it should refuse the relief sought.
- That there was an issue of confidentiality and privilege such that no proper considerations of the bills would be possible.
- There was no point in the Claimant being permitted an assessment of costs under the 1974 Act as the restrictions which apply under Tim Martin meant that no meaningful or useful determination of the costs payable by the estate can be undertaken
In Tim Martin (Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA Civ 1574 (21 December 2011)) the Court of Appeal found that a third-party assessment was of limited use to a third party. As regards quantification it only allowed 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 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. Effectively, save in very limited respects, only an executor can meaningfully challenge the bills payable by an estate.
As per Master Brown:
“14. It is clear that, save where the bill has been paid, on delivery of a statute bill (being a bill complying with the requirements of the Act) the "party chargeable with the bill" (normally the direct client of the solicitor) has one month to apply as of right for an assessment of the bill. Thereafter, the ordering of an assessment is discretionary albeit it is only when an application is made after 12 months that the person chargeable with the bill has to demonstrate special circumstances. In practice the discretion to allow assessment of a bill where the application is made within 12 months is generally exercised in favour of the applicant, albeit in appropriate cases an assessment may be subject to terms as to the making of payments against the bill.”.
As confirmed by Master Brown, when considering whether to order an assessment of a bill on an application by a beneficiary the court is required to "have regard" to the provisions of section 70 "so far as they are capable of being applied to an application made under that subsection". It follows that the time limits at section 70 are not determinative in an application under section 71.
Special Circumstances
The grounds for considering special circumstances were described by Mater Brown at Paragraph 38:
“As it is put in Friston on Costs [36.36], if there is something about the bill which calls for an explanation that can amount to special circumstances. For reasons which are perhaps obvious it is generally not enough for the client (or indeed a third party) simply to complain that the costs claimed are too high: if it were otherwise, the requirement to show special circumstances would be of little effect.”.
The discrepancy between the initial estimate and the costs charged was determined to be “plainly capable of amounting to a special circumstances”.
The Master voiced other concerns in relation to the costs overall, the hourly rates charged, and the reasonableness of the time claimed. For example, charges for administrative work, incoming correspondence and items for which the descriptions were vague. The Court concluded that the “sums claimed in the bill call for an explanation and amount in themselves to special circumstances”.
Privilege / Confidentiality
The Master concluded at paragraph 55:
“Applying this guidance it is difficult to see that there was any relevant privilege or confidentiality arising as between the executor and the beneficiaries in the ordinary course of the administration of the trust that would prevent disclosure of the documents to the court for the purposes of an assessment of costs, save only perhaps to the extent that there was a dispute between the trustee and the beneficiary.”.
At paragraph 56, and relevant to the disclosure of documents, the Master said:
“Mr. Biber who was, of course, the direct client of the solicitor is a trustee and owes fiduciary duties to the Claimant and Ms. Peggs. It is difficult to see why he would not co-operate in this assessment and give permission as required for the Defendant to provide the court with the documents justifying the costs claimed by the Defendant. Moreover it is difficult to see on what basis he could resist, if asked, to give his permission for the documents to be released (so long as such they did not relate to the dispute himself and the beneficiaries); the estate, and thus the beneficiaries, are after all the parties paying the bill, and the executor will simply have passed on the relevant costs to the estate. Indeed there would seem to be every reason why an executor would want to take part and give permission for relevant documents to be disclosure, as costs which are not incurred for the purposes of administering the estate may, at least in principle, may be chargeable to the executor in their personal capacity and not recoverable from the estate.”
Do the restrictions in Tim Martin apply?
“The fact that the executor has not challenged a bill and indeed agreed it cannot it seems to be a basis for barring a beneficiary from a remedy. If it were otherwise it would, inter alia, allow collusion to defeat the claim by the beneficiary.”
The Master drew a distinction between section 71(1) and section 71(3). Whilst Tim Martin may apply to the former, it can be distinguished in relation to the latter. The Master went on to say that even if Tim Martin was applied, he was not satisfied that in this case it would prevent a meaningful assessment of the costs with the potential for significant benefit to the Claimant.
Conclusion at First Instance
Master Brown was satisfied that there should be an assessment of the bills under section 71(3)
Court of Appeal
On Appeal TSP sought to argue that the restrictions in Tim Martin should apply, critically that a Costs Judge “Would not be entitled to 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.”.
The Appeal was unanimously dismissed on the basis that Tim Martin was distinguishable and should be distinguished.
Implications
This decision will be of particular interest to residual beneficiaries (including charities etc) who have not been actively involved in the administration of the estate and have not had any say in the costs that have s incurred. Where such costs appear to be excessive, unusual or beyond those originally estimated, beneficiaries may consider applying for an assessment under section 71(3).
Whilst the timings at section 70 may not strictly apply under section 71(3), it would be wise for an application made under section 71(3) to be made as soon as the beneficiary is in receipt of such information that was, or would have been, available to the party chargeable under section 70. In other words, once you have the invoices and breakdowns, it would be prudent to act promptly.
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