Tim Martin restrictions on third-party assessments brought by beneficiaries do not apply, says Court of Appeal

Judges distinguish 2011 decision as applying to different type of assessment

The restrictions on third-party assessments in Tim Martin do not apply to cases brought by beneficiaries under section 71(3) of the Solicitors Act 1974, the Court of Appeal has ruled.

Lord Justice Stuart-Smith also suggested that the executor’s ‘approval’ of solicitors’ charges was not necessarily the end of the story.

In Kenig v Thompson Snell & Passmore LLP [2024] EWCA Civ 15, the defendant law firm (TSP) acted for the executor of a will. Its original costs estimate was between £10,000 and £15,000 plus VAT and expenses. In the event, invoices between October 2019 and August 2021 totalled £54,411 plus VAT and expenses.

In April 2022, Mr Kenig, a beneficiary under a will, sought an assessment under section 71(3) as a “person interested in any property out of which the trustee, executor or administrator has paid, or is entitled to pay the bill”.

TSP opposed the application, arguing first that the principles that should be applied on any such assessment were those identified by the Court of Appeal in Tim Martin Interiors Ltd v Akin Gump LLP [2011] EWCA Civ 1574 and that application of those principles meant any assessment on the application of the beneficiaries would be fruitless and therefore should not be allowed.

It submitted that Tim Martin meant a costs judge conducting a section 71(3) assessment would only be entitled to eliminate items which ought not to be laid at the door of the third party at all, because they were outwith the scope of his liability, and those which were only allowable as between client and solicitor on a special arrangement basis, within the terms of CPR 46.9(3)(c).

But a judge would not be entitled to eliminate any other item or reduce the quantum of any item which was properly included in itself, but for which he considered that the charge made was excessive, unless he could have done so as between client and solicitor on an assessment under section 70.

Last February, Costs Judge Brown ordered that there should be a section 71(3) assessment and rejected the submission that it would be governed by the principles set out in Tim Martin.

On appeal, Stuart-Smith LJ noted that the application in Tim Smith was made pursuant to section 71(1) – the general right of third parties to challenge bills – meaning any observations about section 71(3) or its precursor sessions were obiter unless necessary to the reasoning on section 71(1).

Second, Lord Justice Lloyd had assumed there was no material distinction to be drawn between sections 38 and 39 of the 1843 Act – the origins of sections 70 and 71 of the 1974 Act – and “drew no material distinction between sections 71(1) and section 71(3)”.

This assumption was “wrong”, said Stuart-Smith LJ. “I would hold 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.

“The consequence of Lloyd LJ’s mistaken assumption is that his judgment cannot be relied upon as saying anything authoritative about the position that obtains where an application and assessment are brought under section 71(3): his judgment simply does not deal with that question.

“Furthermore, in my judgment there is no rational basis for transposing the principles that apply to a section 71(1) assessment, as identified in [95] of Tim Martin, to the different circumstances of an assessment pursuant to section 71(3).”

The judge therefore rejected the appeal about the binding nature of Tim Martin. “In my judgment the costs judge was correct to find that Tim Martin was distinguishable and should be distinguished – essentially for the reasons he gave – and that the relevant principles to be applied are to be derived from In re Brown (1867) LR 4 Eq 464 which is binding on us.”

This was enough to dispose of the appeal but Stuart-Smith LJ mentioned two other issues raised.

First, TSP submitted that the fact that the executor had paid some of the bills more than 12 months before Mr Kenig made his application provided a complete answer to any assessment thanks to section 70(4).

His “provisional” conclusion – given that there was limited argument on the point – was that this would be the case on the application of the executor, but not a beneficiary, “since the court is only required ‘to have regard’ to the provisions of section 70 as to applications by the party chargeable”.

He continued: “It seems to me to be well arguable that different considerations may apply to an application by the person chargeable (who will know whether and when the bills were paid) as contrasted with an application by the beneficiary (who may have no such knowledge, or may learn of the payment later).”

The second issue was the effect of the executor’s approval of the fees. Stuart-Smith LJ accepted Mr Kenig’s submission that there should be no hard and fast rule because what mattered most was the legitimate protection of the beneficiary’s separate interest.

“That said, I would accept that the fact of fully informed consent by the executor (if proved) is likely to be a major consideration, which in many cases may prove to be determinative.”

He concluded: “I would uphold the order that there should be an assessment of the bills under section 71(3) while making clear that we are not in a position to determine whether there is material that would justify rebutting the presumptions and that we do not purport to do so.”

Lords Justice Nugee and Coulson agreed.

An article on the 4 New Square website – its barristers Roger Mallalieu KC, Robert Marven KC and Simon Teasdale all appeared in the case – said: “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 section 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.”

Robert Marven KC and Alicia Tew (instructed by Thomson Snell & Passmore) for the appellant. Roger Mallalieu KC and Simon Teasdale (instructed by SCS Law) for the respondent.

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24 Jan 2024

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