Kenig v Thomson Snell & Passmore LLP: Challenging executors' costs

A recent Court of Appeal decision, Kenig v Thomson Snell & Passmore LLP [2024] EWCA CIV 15 has reconfirmed that a beneficiary has a right to challenge solicitors' costs for dealing with an estate or trust.

We look at the practical implications of this case for charities when considering whether to challenge the level of executors' legal costs.

What was the Court of Appeal's decision?

Thomson Snell & Passmore LLP ('the Solicitors'), acted on behalf of the executor in relation to the administration of an estate. The original cost estimate was £10,000 - £15,000 plus VAT to deal with an estate with a value of £2.9million. However, they billed four times their original cost estimate- £54,410 plus VAT.

A residuary beneficiary of the estate sought permission for an assessment of the firm's invoices under section 71(3) Solicitors Act 1974 as a person interested in the estate rather than as a person who was subject to the charges. The Solicitors robustly defended the claim and argued that there were no special circumstances justifying assessment of the bills.

The judge (at first instance) did not agree with the Solicitors' arguments and said 'it seems to me clear that where there is a substantial discrepancy between an estimate provided to a client by a solicitor and the costs billed, that discrepancy generally calls for an explanation, and if no adequate explanation is provided the costs over and above the estimate may be disallowed in whole or in part.' An assessment of costs was ordered.

The Solicitors tried to appeal the decision reached, but the Court of Appeal upheld the decision from the court at first instance.

What relevance does this decision have to charitable residuary beneficiaries?

The Court of Appeal decision supports the charities' right as a residuary beneficiary to query legal fees charged by a firm of solicitors.

The fees in this case equated to 1.9% of the value of the estate which on paper seems reasonable, but the court looked at the simplicity of the estate, the cost estimate and updates given, the rates of the individuals working on the matter and the delegation of work and found that an explanation was required. It is important to note that the court did not decide that the costs were excessive. It only decided that the costs should be subject to detailed assessment. It is, in theory at least, possible that the costs will ultimately be held to have been reasonable, although the judge at first instance did say that '…there is potential for a very significant reduction in the bill',

Key takeaway points for charity residuary beneficiaries

• It may be appropriate to query hourly rate-based charges even if the overall costs as a percentage of the estate seem reasonable on paper, especially if the estate is straightforward.
• s.70 of the Solicitors Act 1974 states that a bill can't be challenged after 12 months, but where a residuary beneficiary has not been privy to this information before this deadline, this deadline does not apply.
• The Court is critical of solicitors who give a cost estimate at the outset of a matter but then don't update it throughout the matter as necessary.
• Communication is key, as the cost of probate and trust work can vary widely depending on a wide range of factors. There are many estates and trusts where costs of c£54,000 plus VAT would be perfectly reasonable, but whether or not the estate in Kenig is one of them remains to be seen.
• You would be justified in requesting regular cost updates from executors. Sometimes, arrangements can be made for the solicitors to update the executors and then for the executors to update you. This can help to control the costs, especially in cases with a lot of beneficiaries.  

How can you challenge legal costs?

If you a residuary beneficiary and are concerned about the level of legal fees incurred by the executors in relation to the administration of an estate or trust, you should firstly raise those concerns with the solicitors. You would have good standing to query those costs if no costs information was provided to you at the outset of the matter, or if costs were not regularly communicated to you throughout the matter. It is always worth seeking to agree a reduction of the costs with the solicitors in the first instance if you do not consider the costs can be justified.

If seeking an agreement does not work and you consider the costs are unreasonable or have not been justified, then residuary beneficiaries have two routes to explore. Firstly you can make a complaint to the Legal Ombudsman. Although it is important to note that only charities with an annual income net of tax less than £1million can explore this avenue. It can prove a useful route for relevant applicants if they are having client care issues (for example your correspondence is being ignored). Your complaint will be assigned to an investigator who will investigate the position and report back to you with a recommendation.

Secondly a residuary beneficiary can make an application to the court to have the costs assessed if you are concerned that the level of costs do not reflect the amount and complexity of the work undertaken. This means a judge would consider the costs incurred in detail and decide whether the sum billed was a reasonable amount for the solicitor to have charged. Caution is advised when considering this route. Whilst ordinarily in litigation the Civil Procedure Rules provides that the unsuccessful party pays the costs of the successful party, the position is different with costs assessment. S.70 (9) of the Solicitors Act 1974 provides that the solicitor will only have to pay costs if the judge reduces their bill by 20% or more. If the bill is not reduced by 20% or more, you would be responsible for the costs of assessment. You therefore must have reasonable confidence that you would get the bill reduced by 20% or more before embarking on this route.

If you have any questions at all about this decision or querying executors' legal costs in a trust or estate, please do not hesitate to contact Elizabeth Ware.