This week, the Supreme Court heard the appeal in the case of Hirachand v Hirachand. In the initial ruling, the Court of Appeal held that success fees can be recovered from an estate as part of a claim under the 1975 Inheritance Act.
The original ruling meant that successful claimants under the Act would be able to preserve a greater share of the monies recovered under a successful claim, but would cost defendants even more. The Appellant is represented by Wright Hassall (Danielle Pawson and Katie Alsop) and Counsel Brie Stevens-Hoare KC, Cameron Stocks of Gatehouse Chambers; and Oliver Ingham of 3 Paper Buildings.
The Supreme Court is hearing Wright Hassall’s client’s appeal against a ruling by the Court of Appeal – which upheld an earlier High Court decision – that in an Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”) claim, the success fee payable under a CFA the claimant entered into with her solicitors, should form part of her financial needs when assessing what award should be made under the 1975 Act.
The point at issue is whether a success fee, not ordinarily recoverable in civil litigation cases under the Courts and Legal Services Act 1990, is properly treated as a debt and if so, whether a sum to repay it would fall within the definition of “reasonable financial provision” which the court has the discretion to provide for. If the Supreme Court upholds the Court of Appeal decision, 1975 Act claimants have the potential to recover the CFA success fee payable to their lawyers, which ordinarily have to be personally funded, even if the claimant is successful. This would represent a dramatic change in the funding landscape for these types of claims. Commenting on the potential outcomes of the ruling, Andrew Wilkinson, head of inheritance disputes at Lime Solicitors, said:
“The Supreme Court is faced with a highly consequential decision, and one which will have far reaching implications for claimants and lawyers. The Court of Appeal decision is something of an anomaly – given that in other types of litigation, generally a success fee cannot be recovered.
Should the Supreme Court overrule the Court of Appeal’s decision, then a successful claimant would not be able to reclaim any part of their lawyer’s success fee from their opponent, thereby leaving them with less from the estate after a winning claim.
While this might at first seem beneficial for those defending claims, as the total value of a claim would go down, a decision to overrule may make limited practical difference, because a Claimant who is liable to pay a success fee may well hold out for a higher settlement of their claim, because they have a success fee to pay from whatever they recover.
Inversely, upholding the ruling should not be seen as a blank cheque for claimants and lawyers. The precise operation of the original decision remains unclear, particularly when offers are made in claim. Solicitors must show that a Conditional Funding Agreement is the only way of funding the case, which is not always the case. It’s also worth bearing in mind that the claimant in Hirachand only recovered a 25% contribution towards the success fee, so even a successful claim may not see the recovery of all costs. Each case will turn on its own facts.”
Katie Alsop, Partner and Contentious Probate lead at law firm Wright Hassall, said:
“Currently success fees payable in accordance with the terms of a ‘no win, no fee’ agreement cannot be factored into a judge’s assessment of a claimant’s financial need in claims under the Inheritance (Provision for Family and Dependants) Act 1975, meaning claimants are personally responsible for any success fees owed to their solicitors out of the award made to them.
It is, therefore, the case of our client that the High Court erred in law upon making an order for financial provision in favour of the Claimant which contributed towards her liability to pay her solicitors a success fee.
Wright Hassall and our client are hopeful the Supreme Court will reach a positive conclusion which will draw a line under the uncertainty created by the High Court decision – the implications of which could drastically change the landscape for all future claims of this type under the 1975 Act.”