Hirachand v Hirachand – how this case will affect future claimants in the recovery of litigation costs

The cost of litigation can be unpredictable and, when considering whether or not to make a claim for financial provision from an estate under the Inheritance (Provisions for Family & Dependants) Act 1975 (Inheritance Act), this is often off-putting to many people and can lead to them missing out on significant sums of money which they would otherwise be entitled to.

How can I fund my litigation?

If you are successful in your claim, a judge will often order the other side to pay your costs, however there are various ways in which you can fund your litigation in the meantime. A popular way to do this is via a conditional fee agreement (CFA) or, as it is more commonly known, a ‘no win, no fee’ arrangement.

A CFA will be tailored specifically to the case at hand. If your claim has a good chance of succeeding at trial (or through other alternative methods of dispute resolution), and it is valuable enough, a CFA   can be a great way to fund your litigation.

What is a Conditional Fee Agreement?

A conditional fee agreement (CFA) is an agreement between you and your solicitor setting out the terms on which your litigation is conducted with respect to costs. Generally under a CFA, if you are unsuccessful in your claim then you will not have to pay your solicitors fees. If however you are successful, your solicitors fees will become payable. This will consist of the time spent by your solicitor in dealing with your claim at their hourly rate (the base costs) plus  a sum known as a ‘success fee’.

The success fee is usually a percentage of your base costs and can be as much as 100%. For example, if your solicitor charges an hourly rate of £300 plus VAT and has spent 200 hours representing you throughout your dispute, the base costs will be £60,000 plus VAT. If your CFA provides for the payment of a success fee of 50%, you will be required to pay an additional £30,000, plus VAT, being 50% of your base costs. This puts the total fees payable to your solicitors at £90,000 plus VAT.

As explained above, a judge will often order the other side to pay your costs if you are successful, but they would only be ordered to pay your base costs, not the success fee part of them. This is because  section 58A(6) of the Courts and Legal Services Act 1990, prohibits a costs order being made which requires a party to pay anothers’ success fee (except in limited circumstances, e.g claims for damages in respect of mesothelioma) . You would therefore still have to pay  a portion of your total costs even if you were able to recover the base costs from your opponent. How much will be depend on the terms of your CFA. As previously mentioned, this could be as much as 100% of the base costs.

Is there another way to recover my success fee?

A claim brought under the Inheritance Act is a claim for financial provision from the estate of a deceased person. These claims are often based on the claimant needing money to meet their outgoings and liabilities.

In the past few years there have been Inheritance Act cases where the judge has awarded a claimant a sum equivalent to the whole or part of their success fee on the basis that it forms part of their financial needs in much the same way as the cost of gas, water and electricity does. The reason for this is that the judge has considered it would be unjust to award a claimant a sum of money from the estate for their maintenance, only for it to be reduced in order to discharge their liability to their lawyers for the success fee. This approach however, arguably, disregards the prohibition in the Courts and Legal Services Act.

Hirachand v Hirachand: the case

On 18 January 2024 the Supreme Court will hear an appeal in the case of Hirachand v Hirachand . The court will consider whether the respondent, who successfully brought a claim under the Inheritance Act 1975 for financial provision from her fathers’ estate using a CFA, can recover her success fee as part of the maintenance payment awarded to her. The appellant is the deceased’s widow who was left all of the estate under the Will.

In this case, the claimant (respondent ) had entered into a CFA with her solicitors which provided for a 72% success fee and the court at first instance had recognised that this agreement was the only way in which the she was able to pay for her litigation. She was awarded a lump sum of £138,918 from the estate which included funds to pay for therapy, a lump sum to represent her income shortfall for the years in therapy and £16,750 representing 25% of her success fee. The judge noted that “if I do not make such an allowance one or more of [the respondent’s] primary needs will not be met”.  As the widow was the only beneficiary of the estate, it meant she was effectively paying part of the claimants success fee. The widow appealed the decision to the Court of Appeal.

In 2021 the Court of Appeal ruled that the judge in the first instance was correct noting that “in my judgement a success fee, which cannot be recovered by way of a costs order by virtue of section 58A(6) CLSA 1990, is equally capable of being a debt, the satisfaction of which is in whole or part a ‘financial need’ for which the court may in its discretion make provision in its needs based calculation”.

Comment

The Supreme Court’s decision on this matter should set a precedent for all future cases and provide clarity as to whether more claimants in Inheritance Act 1975 claims can recover more of their costs from an opponent.

Our Private Wealth Disputes team of specialist lawyers can offer expert advice and representation for individuals,  Trust Corporations and Charities when disputes arise in relation to Inheritance Act claims, disputed/challenged Wills, contested probate and estates, trust disputes.

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This content is correct at time of publication