We are pleased to report that our Litigation arm SCS Law has obtained a successful outcome for our client, Mr Kenig, at the Court of Appeal (Civil Division).

The case of Kenig v Thomson Snell & Passmore LLP [2024] EWCA Civ 15 is a significant costs judgment on the rights available to beneficiaries to challenge solicitors' fees.

Lord Justice Stuart-Smith, Lord Justice Nugee and Lord Justice Coulson unanimously dismissed the Appellant solicitors' firm's appeal against the High Court decision of Costs Judge Brown dated 1 February 2023, in which Mr Kenig, the beneficiary of his late relative's will, was represented by Mr Gold, Costs Draftsman. The applicant was allowed to challenge the solicitors’ costs bill, which was payable from the proceeds of the estate. The costs had escalated to £54,410.99 after an original estimate of £10,000.00 to £15,000.00 was provided for the work administering the estate and had quickly been exceeded.

The Respondent, represented by SCS Law, sought to challenge the fees charged by the Appellant firm and subsequently applied to the Court for an assessment under section 71(3) of the Solicitors Act 1974 (“the 1974 Act”).

The High Court's decision to allow the assessment - distinguishing the application at hand from the one considered in the case of Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA Civ 1574 ("Tim Martin") - was upheld by the Court of Appeal as reported in its judgment dated 18 January 2024.

Ground 1 of the appeal posed the question, “Are the restrictions outlined in [95] of Tim Martin applicable and binding in an application under section 71(3)?” and was considered at [49] – [58] of Stuart-Smith LJ's judgment. The conclusion of the learned Judge was that they were not applicable to s71(3) applications but only to applications under s71(1). For that reason, he dismissed the appeal on Ground 1 and deemed it unnecessary to consider Ground 2 as a result.

Stuart-Smith LJ’s reasoning for the dismissal of Ground 1 may be summarised as follows.  The Tim Martin case concerned an application pursuant to s71(1) and not s71(3) of the 1974 Act, and thus, any observations – in that judgment - about s71(3) or its statutory precursor were “obiter”. To the extent that Lloyd LJ in Tim Martin considered that there was no material difference - or drew no distinction - between the two subsections (at times referring simply to, a "section 71 application"), this was wrong. There are material differences between applications brought under s71(3) and those brought under s71(1), because of the different nature of the interests of the third party that the different subsections are intended to reflect. The Judge therefore held that there was “no rational basis” for transposing the principles that apply to a s71(1) assessment as identified at [95] of Tim Martin to the different circumstances pursuant to a s71(3) assessment.

The learned Judge held that Costs Judge Brown was correct to find that Tim Martin was distinguishable from the case at hand and instead, the relevant principles to be applied in this instance were derived from the binding case of In re Brown [1867] LR 4 Eq 464. The learned Judge averred that these principles permit a wider enquiry for the purposes of an assessment under s71(3), which could go to quantum as well as scope.

Notably, the Judge also accepted Mr Kenig’s submission that while approval by the executor of the bills may well be a material factor in the Court’s s71(3) assessment, there should be no hard and fast rule, “because what mattered most was the legitimate protection of the beneficiary’s separate interest”.

The decision confirms that the 1974 Act provides a broader set of control mechanisms on solicitors' costs bills for beneficiaries via s71(3), as compared with the narrower scope of enquiry available to applicants under s71(1).