The Supreme Court has issued its landmark verdict on the Hirachand v Hirachand case, ruling that success fees can no longer be awarded as financial provision in claims brought under the Inheritance (Provision for Family and Dependents) Act 1975.
A civil claim will very rarely make it to trial, so it follows that the chances of a subsequent appeal and referral to the Supreme Court - the highest court in the land - are diminishingly small. This will only happen when the case involves questions and clarifications of the law - as has been the case for the landmark Hirachand v Hirachand case.
There has been much attention given to this case, as the previous ruling from the Court of Appeal established a new precedent regarding how victorious claimants should recover costs from defendants. However, the Supreme Court’s decision has overturned and clarified this.
The Inheritance Act generally allows a family member or dependant to claim for reasonable financial provision from the estate of the Deceased whether they left a Will or not (‘intestacy’), and even if they were provided for in the final will or an intestacy decision.
Typically, applications for reasonable financial provision from the estate of a deceased person are usually suited for early settlement or mediation, as they tend to involve a balancing of various factors rather than a binary judgment. If they do go to court, it will merely be to ascertain whether a provision was reasonable under the circumstances. In the case of a surviving spouse or civil partner, there is no ‘maintenance’ requirement, so these cases are easier to prove and awards made are likely to be higher.
The Inheritance Act sets out the factors that the court should take into account when considering an award, including the financial recourses and needs of the claimant, as well as the size and nature of the estate, and any physical disabilities of a party. The reason why the Hirachand v Hirachand case has been seen as so significant is that it had the potential to set a new precedent for how these costs are calculated.
Mr Hirachand died in August 2016, and was survived by his widow and two children. He had left a will that gave his entire estate to his wife, meaning his children had not been provided for.
His daughter, who had severe health problems and was in very poor financial circumstances, issued a claim for provision from the estate under the Inheritance Act, and was funded by a no win, no fee agreement, which was perhaps her only means to pursue a claim given her financial situation. This agreement - also known as a conditional fee agreement, or CFA - provided for a large uplift on her solicitor’s fees, which was intended to reflect the risk of her case failing (in which case the solicitor’s fees would be written off). Such a fee will usually be expressed as a percentage uplift upon the base legal costs, with the exact percentage being capped at no more than 100%, reflecting the risk of losing. In this particular case, it was 72%.
The daughter argued that this success fee should be recoverable as part of her award from the estate, as she was bound to pay it in the event of her receiving an award, and it should therefore be considered as part of her financial needs. This represented a huge departure from the prevailing legal precedent, established since 2014, that a success fee cannot be recovered from the losing side, and further that costs and awards should to be treated separately.
In its ruling, the court balanced the daughter's needs with those of the widow, and ultimately awarded the daughter a lump sum payment, which included a partial (25%) reimbursement of the success fees on top of her legal costs. The widow appealed this decision, which was dismissed initially, resulting in the escalation of the case to the Supreme Court.
On December 18th, 2024, the Supreme Court made its highly anticipated decision, allowing the widow’s appeal, excluding the daughter from receiving any sum for her success fee, and overturning the decision made by the Court of Appeal.
The recoverability of the success fee was deemed to be in opposition to a number of established legal principles, namely:
On the latter consideration, if success fees were recoverable as part of the judgment sum / substantive relief, then the defendant may not know their liability to pay the success fee until the judgment had been made, which would be hugely problematic for parties in deciding whether to make or accept offers.
On this basis, we believe that common sense has prevailed in this case, even though the claimant’s main argument - that a success fee was a financial liability that she was faced with paying as a matter of fact, and should therefore form part of her award - had a certain logic to it. There was also a potentially compelling argument around access to justice, which underpins the availability of CFAs in the first place.
The Supreme Court’s ruling is very much a defendant-friendly decision, as it reduces the potential award for a claimant under the Inheritance Act if they are funded by a CFA that provides for a success fee. It also may act to deter claimants from making a claim in the first place, as they may not be able to afford it; if a solicitor has no way of recovering an uplift, which is supposed to act as a reward for the risk they take, they may decline to act on a no win, no fee basis.
Having said that, there is nothing to stop a claimant merely agreeing to pay a success fee from their award, even if it was not ostensibly recovered from the other party. The problem is that an award in this area of law is intended to be for a claimant’s maintenance, and it is therefore inherently strictly applied for their reasonable upkeep. To prevent the award from being unintentionally generous, the subsequent deduction of a success fee may be regarded as financially punitive for the victorious claimant.
Nevertheless, the Supreme Court’s ruling will provide clarification of the rules around Inheritance Act claims, and will give future claimants greater certainty about the costs involved in taking action.
If you are seeking more advice or legal guidance on the process of making an Inheritance Act claim, Walker Foster Solicitors can help you. Find out more about our litigation and dispute resolution team, or get in touch with us to see how we can support you.
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