After a very considerable delay, the hearing was held in January 2024, the Supreme Court today (18th December 2024) delivered their decision in Hirachand v Hirachand [2024] UKSC 43. After such prolonged consideration, the judgment was refreshingly brief. The outcome is easy to state – success fees cannot be included as part of a claimant’s award under the Inheritance (Provision for Family and Dependants) Act 1975 (the ‘1975 Act’). But is there anything else that can be drawn from this decision?
The first thing to make clear is that this decision does not in any way prohibit conditional fee agreements (‘CFA’) for claimants under the 1975 Act. However, a successful claimant under a CFA will have to pay their success fee out of their award; there is now no way for them to recover it from the defendant estate.
For those who are not familiar with the term, a CFA is also commonly known as a ‘no win no fee’ agreement. The lawyers agree that they will not receive their fees upfront as usual. If the claim fails, the lawyers do not recover their fees at all. As a result, lawyers only agree to undertake CFA in cases they assess as having good prospects of success. If the claim succeeds, the lawyers are entitled to a success fee in addition to their regular fees. This is usually calculated as a percentage of their regular fees; in Hirachand the success fee was set at 72%. The success fee compensates the lawyers for the risk they may get nothing, and for waiting to receive their fees until the end of the litigation.
CFA first came to prominence in the field of personal injury litigation. At one point, personal injury claimants regularly expected to recover their success fee in addition to their regular costs as part of a costs order. Unfortunately, this situation caused the costs of litigation in this area to increase markedly, with knock on effects for everyone’s insurance. Section 58A(6) Courts and Legal Services Act 1990 was amended to prevent parties from recovering a success fee as part of a costs orders. For personal injury claimants this was accompanied by a new regime for claimant’s costs, following a review by Sir Rupert Jackson, in order to make the system workable for impecunious claimants. However, this did not include any direct consideration of claimants under the 1975 Act and how their claims should be funded.
Claims by persons other than the deceased’s spouse under the 1975 Act are limited to making reasonable provision for the claimant’s maintenance. This means, as set out by the Supreme Court in Ilott v Mitson [2017] UKSC 17, [2018] AC 545, that by definition a successful claimant is going to be impecunious, because otherwise they would not be in need of maintenance. This means that they are unlikely to be able to fund litigation against an estate without entering into a CFA.
It is also important to appreciate that the successful claimant will receive an award calculated to meet their needs; no more, no less. They do not receive a percentage of the estate, a common misconception. If the court assesses the claimant as needing £100,000, but the claimant has to pay £50,000 in success fees, then the claimant will be left with £50,000 less than the court assessed them as ‘needing’, and the statutory aim under 1975 Act (to make reasonable provision for their maintenance) will not be fulfilled.
It was this conundrum that led the Court of Appeal and first instance judge, Cohen J, to conclude that a successful claimant should be able to recover their success fee as part of their lump sum award, thus circumventing the prohibition on recovering them as part of a costs order. They drew analogies with the ability of spouses under the Matrimonial Causes Act 1973 to recover their legal costs as part of their award.
The Supreme Court held that this was not permissible. The Courts and Legal Services Act 1990 was meant to prohibit the recovery of success fees and it was not permissible to circumvent it in this way. The analogy with Matrimonial Causes Act 1973 litigation was not appropriate, because success fees were entirely prohibited in that jurisdiction, and also that litigation was covered by the Family Procedure Rules rather than the Civil Procedure Rules and very different principles applied.
The important fact that should not be lost in this decision is that this was a successful 1975 Act claim by an adult child, and although the Supreme Court held that she could not recover her success fee, the remainder of her award was not disturbed. So, it is worth considering what the facts were and what the claimant received.
The claimant was the 50 year old child of the deceased. The claimant had lived with her father until she was 30 years old in 2000. Then she had gone to university and supported herself. In 2007 her father had provided support by way of standing order of £400 per month for a three year postgraduate course. In 2010 she fell out with her father and stopped speaking to her parents; the claimant said because in therapy she remembered mistreatment in her youth. The claimant suffered from severe obsessive compulsive disorder and other mental health problems and was incapable of work. She lived with her two children and subsisted on benefits.
The deceased left his entire estate of £554,000 to his widow, the claimant’s mother. The claimant’s mother lived in a care home, and was incurring fees of £52,000 a year.
Cohen J awarded the claimant £138,918 made up as follows:
- £17,000 for therapy – on the basis that after three years therapy she would regain her earning capacity;
- £32,000 on the basis that receipt of this award would remove her universal credit for three years, and this amount would replace the lost universal credit;
- £48,168 being the difference between her income and her needs for the next three years;
- £15,000 for a new car and white goods;
- £10,000 for a rental deposit on a new more suitable rental property;
- £16,750 towards her success fee (of a total success fee of £48,175).
Viewed against this backdrop, the loss of the success fee award appears less significant. The total award goes down from £138,918 to £122,186. Net of her success fee the claimant receives £74,011, a significant reduction, but still a worthwhile amount.
So, in conclusion, this decision does not render the 1975 Act jurisdiction unworkable for claimants, but it will create access to justice issues for many of them. It is to be hoped that it will prompt some consideration of procedural reform for 1975 Act claims, which fit very ill in the current regime.
This article was prepared by Jody Atkinson. His chancery practice focuses exclusively on wills and trusts and is a full member of STEP. Jody is particularly sought after for Inheritance Act disputes, due to his rare crossover knowledge of both probate and divorce law.