The Supreme Court heard the appeal in Hirachand v Hirachand in January 2024, and the judgment has been long awaited. Our Contentious Probate team advised the Appellant, Mrs Hirachand, via her litigation friend, alongside counsel, Brie Stevens-Hoare KC, Cameron Stocks of Gatehouse Chambers; and Oliver Ingham of 3 Paper Buildings. The Supreme Court case summary distils the issue in dispute and the key facts of the case however, a fuller case summary dealing with each preceding decision prior to the Supreme Court, is set out below.
Judgment
Judgment was handed down on 18 December 2024 and the Supreme Court has now ruled that success fees due under a conditional fee agreement are not recoverable as part of a substantive award for reasonable financial provision made under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”).
Background
Our client, who appealed the Court of Appeal’s decision, is the widow of Navinchandra Dayalal Hirachand (“the Deceased”). Mr Hirachand left his estate to our client and no provision was made for either of his children. The Deceased’s eldest daughter, who was estranged from our client, issued a claim in 2017 pursuant to the Act, on the basis she had not been provided with reasonable financial provision from her father’s estate. The daughter relied on the fact she was not able to work and as such was reliant on state benefits and ad hoc financial support from her partner, due to her poor mental health, to advance her claim that she should be provided with financial provision from the Deceased’s estate.
At a remote trial, in April 2020, it was determined that the claimant’s situation meant that she was in real financial need, which was only made worse by the fact that this necessitated her entering into a funding agreement with her lawyers on a ‘no win, no fee’ basis, otherwise known as a Conditional Fee Agreement (“CFA”). In this instance, the success fee if the daughter achieved a successful outcome, was set at 72% by reference to the base costs incurred. The standard expectation is that a claimant funding their claim pursuant to the Act will need to use an element of any award or settlement sum, to satisfy the success fee, which is not recoverable from the estate. It therefore follows that the sum available to the claimant is reduced by that amount. The judge at first instance wished to avoid that reduction and as such, ordered both an award to meet the daughter’s needs at the time of the final hearing and a contribution towards the success fee for which she was liable. This second element of the award went against the usual rules of awarding costs in civil litigation, on the basis that it is not possible to recover success fees from the unsuccessful party.
Our client was granted permission to appeal to the Court of Appeal.
Court of Appeal decision
Permission to appeal was given on two grounds: firstly, that the trial should not have been held remotely on account of Mrs Hirachand being profoundly deaf which made it difficult for her to follow the proceedings; and secondly, on the basis that it was incorrect for the judge to have included a contribution towards the success fee associated with the CFA, in the financial award which should have been limited to meet the daughter’s maintenance needs.
Lady Justice King gave the lead judgement; the appeal was dismissed on both grounds. In respect of the first ground of appeal, it was determined that on the basis that Mrs Hirachand had been debarred from taking an active role in the proceedings, it was not wrong to hold for the hearing to have been conducted remotely. Despite the mode of hearing, Mrs Hirachand had been able to attend the hearing, with a care worker. Given Mrs Hirachand was not permitted to take part in the hearing, it mattered not whether she followed proceedings.
As to the second ground, Lady Justice King observed that the only way the daughter could fund her claim was by way of a CFA. The success fee associated with the CFA could only ever be paid from a financial award to meet the daughter’s maintenance-based needs. As such, the payment of the success fee would have the effect of the award no longer providing for the entirety of the daughter’s maintenance.
It was held by the Court of Appeal that a success fee associated with a CFA in a claim under the Act, was capable of being deemed a debt. As such it could form part of a claimant’s financial needs and could be treated as need when assessing reasonable financial provision. The payment of the success fee from the financial provision award would therefore create a position whereby the daughter would no longer be able to meet her financial needs despite having an award made in her favour.
Despite this ruling, the Court of Appeal made it clear that such a ruling would only apply if a CFA was the only way a litigant could fund legal representation and that such an order would amount to ‘reasonable provision’ only.
Supreme Court
The Supreme Court has now ruled that success fees due under a CFA are not recoverable as part of a substantive award for reasonable financial provision made under the Act.
This is because whilst claims under the Act remain subject to the Civil Procedure Rules, costs of the proceedings are treated separately from the substantive relief; and a substantive award may not include either directly or indirectly, provision for a success fee under a CFA.
As a firm, we have long offered alternative funding arrangements to our clients where their matter allows, and we shall continue to do so. We pride ourselves on being forward-thinking and progressive when it comes to funding models, including ‘no win, no fee agreements’.
Please contact our Contentious Probate team should you require further guidance and advice.
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