The Supreme Court ruled against the recovery of success fees in a landmark inheritance case that saw a mother and her estranged daughter go head to head over the family estate.
Hirachand v Hirachand,(Nalini Hirachand-Appellant, Sheila Hirachand -Katan Hirachand-Respondents)in a case highly anticipated by the wills and probate sector, was concluded to allow the inclusion of a success fee, circumventing both common law rules relating to costs and the statutory prohibition against recovering a success fee from an unsuccessful party.
The UK Supreme Court overturned the rulings of both the High Court and the Court of Appeal in a decision handed down today. This tightens financial provision awards and attunes them with principles set out in the 1990 Act restricting the recovery of success fees under Conditional Fee Agreement (CFA).
Legal professionals have spoken on the contentious issue, with some saying success fees are ‘between the lawyer and claimant’ and others saying claimants without wealth have ‘little option but no win no fee’ pursuits, forcing them to ‘pay legal representatives with the award they receive’.
The appeal concerned the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”), which gives courts the power to order a lump or recurring sum to be paid out of the estate of a deceased person for his or her family and dependants. Section 3(1)(a) of the 1975 Act provides that, in determining whether and in what manner the court should exercise such a power, it shall have regard to “the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future”.
The Respondent used the 1975 Act to dispute her father’s will as she felt he ‘had not left her financial provision’. She was awarded a lump sum and fee contribution in 2020, with the appellant going on to appeal the judge’s ruling.
The issue was re-visited today, raising questions from the sector about the ‘changing landscape’ of inheritance cases and the variance on morality surrounding payment of success fees from awards.
Ms Stevens-Hoare KC submitted on behalf of the Widow, saying: “An order that provides for one party to pay another party’s costs is a costs order. This is consistent with the language of section 58A(6), its evident purpose and the policy considerations on which it rests.”
In Hirachand v Hirachand (2020) the court saw daughter Sheila Hirachand(Respondent) awarded a sum of £138,918 after contesting her father’s will. In determining the lump sum award payable to the Respondent, the judge included the sum of £16,750 as a contribution towards the Respondent’s liability to pay a CFA success fee. The UKSC questioned ‘the issue is whether it is wrong in law for a judge to include such a contribution in an maintenance-based award calculated by reference to the financial needs of a claimant’.
In 2016, Navinchandra Hirachand died in a house fire, leaving his widow Nalini Hirachand the entirety of his estate. Ms Hirachand, in her 80s and ‘profoundly deaf’ was noted to be ‘frail’ alongside suffering from cancer. She required round the clock care and was no longer able to live independently.
Sheila Hirachand sought a mortgage free home, therapy for mental health support, capitalised maintenance and costs – however the judge deemed that due to the modest size of the estate, the ‘ambitious’ demands of the Respondent would exceed the maximum value of the estate.
In the initial case, The judge concluded that the will of Navinchandra Hirachand (The Deceased) did not make reasonable financial provision for his daughter Sheila Hirachand (Respondent), and that the award should be calculated by reference to what she ‘requires to meet her current financial needs’. It was not, the judge said, a case where the Respondent should ‘in effect be set up with a home or income fund for life‘. Sheila was assessed to have mental health needs, and had two children to support.
Sheila Hirachand lived at home with her parents until around the age of 30, when she moved out of the family home in order to undertake a post-graduate diploma at university. After 2007, when she commenced an MA in Sheffield, her father began giving her an allowance of £400 a month, which only ceased around the time of parental estrangement in 2011.
She was noted to have suffered with ‘severe mental health issues for much of her adult life’, and had not been employed since the birth of her eldest child.
The trial in 2021 saw that under section 58A(6) of the Courts and Legal Services Act 1990, the respondent would not have been entitled to recoup the success fee by way of a costs order made in her favour. The appellant went on to appeal this aspect of the judge’s decision to the Court of Appeal.
The Court of Appeal upheld the judge’s award and concluded that the respondent’s liability for the CFA success fee was a debt the satisfaction of which was a “financial need” within the meaning of section 3(1)(a) of the 1975 Act, for which the court might in its discretion make provision in an award under the 1975 Act. The appellant then appealed to the Supreme Court.
Those working within the wills and probate sector have commented on the case, saying the question for the Supreme Court is ‘to decide if a conditional fee agreement (CFA) is a debt satisfaction of financial need’.
John Tunnard, a Probate Solicitor, said on LinkedIn: “We have now heard that the eagerly awaited judgment in Hirachand v Hirachand is due to be handed down by the Supreme Court on 18th December 2024.
The question for the Supreme Court to decide is whether the Court of Appeal erred in law by finding that a success fee under a conditional fee agreement (CFA) is a debt in satisfaction of “financial need” for which the court may make provision in an award under the Inheritance (Provision for Family and Dependants) Act 1975.
Warning ⚠️: Linkedin may crash that day due to the likely barrage of posts from Contentious Private Client practitioners.”
Legal Director Alistair Spencer also took to the social media platform to air his views, commenting on the changing landscape of inheritance claims he posted: “The Supreme Court ruled against the recovery of success fees in Inheritance Act claims in the case of Hirachand v Hirachand today.
Today’s ruling represents a significant shift in the landscape of inheritance claims. Successful claimants who, due to their financial circumstances, have been left with little option but to pursue their claim on a no win no fee basis, will have to pay their legal representatives entirely from the award they receive. That award will no longer include any contribution to the success fee.”
A barrister and mediator commented that the order ‘in favour of the daughter should exclude any sum for the success fee payable’.
Natasha Dzameh said: “Judgment handed down in Hirachand v Hirachand [2024] UKSC 43. Long awaited decision for those in the contentious probate world concerning 1975 act claims and success fees albeit wider comments on costs also.
Appeal permitted. Order in favour of the daughter under the 1975 act should exclude any sum for the success fee payable by her in respect of the proceedings.”
Elis Gomer, a barrister at 5 Stone Buildings noted that success fees are now a ‘matter between lawyers and the claimant’ as consistent with success fees in other claims.
He said: “The result in Hirachand v Hirachand is finally here, ending what feels like several years of shadowboxing about whether a CFA success fee will be recovered in a 1975 Act claim. Success fees in 1975 Act claims are now consistent with success fees in any other type of claim – irrecoverable inter partes and a matter between the claimant and their lawyers.”
