Can a beneficiary challenge legal costs?

Our free legal helpline frequently receives calls and emails from people asking, ‘Can a beneficiary challenge legal costs incurred in the administration of an estate?’

The legal costs of administering an estate are technically incurred by the executor (or administrator). This means that the solicitor/client relationship is between the lawyer and the executor, with the executor having the associated right to challenge the legal costs that are charged. But where does this leave a beneficiary from whose legacy those costs will be paid? Can a beneficiary challenge legal costs when they are effectively footing the bill, even though they have no direct contract with the solicitor?

The Court of Appeal considered this very question and confirmed that a beneficiary of an estate is entitled to apply for an order that a solicitor’s bill for administering the estate be assessed.

It had been argued that an application for an assessment of a solicitor’s costs (under the provisions of Section 71(3) of the Solicitors Act 1974) could not be made by a third-party, where legal fees had been paid from the estate. However, the Court concluded that because an executor or trustee owed fiduciary duties to a third-party beneficiary with an interest in the estate there should be legitimate protection of the beneficiary’s separate interest.

The specific facts of the case which the Court of Appeal considered involved a firm of solicitors which had provided an estimate for its fees for administering an estate of between £10,000 and £15,000. However, the final bill was for £54,410.99 plus VAT and expenses. The estimate had been given to the executor and the costs were payable by the estate. This meant that in practice the costs would be deducted from the monies that the beneficiary would ultimately receive from the estate. So while the beneficiary was not paying the costs directly, they would be deducted from the monies he received. The beneficiary challenged the costs on the basis that they exceeded the initial estimate and asked for those costs to be assessed. The solicitors argued that it was not open to a beneficiary to challenge legal fees that had been paid from the proceeds of the estate, but the Court of Appeal disagreed and allowed the Solicitors Act assessment to proceed, even though the applicant was a third-party.

In considering the issues, the court did accept that any approval of a solicitor’s bill by an executor would be a major consideration in any dispute.

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Can a beneficiary challenge legal costs?