An indemnity costs order of £132,400 against beneficiaries who achieved a bill reduction of under £18,000 demonstrates the acute costs risks of unreasonable conduct in third-party assessments.
The identity of the party liable for the costs of a detailed assessment under section 71(3) of the Solicitors Act 1974 is determined by the capacity in which the applicant pursued the assessment, not by their description in the underlying proceedings. Where beneficiaries apply for and conduct the assessment, they do so in their personal capacity as beneficiaries, not as executors or trustees, and the court may order them to bear the costs personally. [40-43, 46]
On a detailed assessment pursuant to section 71(3) of the Solicitors Act 1974, the court has a broad discretion under section 71(3)(b) and section 51 of the Senior Courts Act 1981 to order that the costs of the assessment be paid by the applicant beneficiaries personally, particularly where their conduct in the assessment has been found to be unreasonable. [38, 47-50]
Where a solicitor, in a personal or fiduciary capacity, instructs their own firm to act for them, the resulting supply of legal services is a taxable supply for VAT purposes. The separate legal identity of the solicitor and the firm means it is not a ‘self-supply’, and VAT is properly chargeable and recoverable on the costs. [60, 62-65]
A party wishing to challenge the VAT element of a bill of costs must raise that specific challenge in their Points of Dispute. A new point on VAT may not be raised for the first time after the conclusion of the assessment hearing without permission, in accordance with CPR 47.14(6). [58-59]
The court, when exercising its discretion on costs, may consider it unfair for an estate or non-participating beneficiaries to bear costs incurred by the unreasonable conduct of applicant beneficiaries in a detailed assessment, particularly where reasonable settlement offers were rejected. [48-50]
