The decision brought some clarity for claimants who have entered a conditional fee agreement (CFA) with their solicitors for the purposes of bringing a claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975.
The judgment determined that an award under the 1975 Act may include a sum of money to take into account the success fee payable by the claimant to its solicitors under the terms of a CFA.
Until recently, it was considered that the recoverability of a success fee under a CFA in the context of 1975 Act claims would not be possible by virtue of section 58A(6) Courts and Legal Services Act 1990, which prevents success fees from being recovered from the other party as part of any order for legal costs.
Issues considered by the Court of Appeal
The circumstances of this case followed the death of Mr Hirachand, who died in August 2016.
Pursuant to Mr Hirachand's will, his entire estate was to pass to his spouse, Mrs Hirachand. Mr Hirachand's daughter ('C') brought a claim for reasonable financial provision under the 1975 Act and was ultimately awarded a portion of the deceased estate, totalling £138,918.
Included in the award was a contribution towards the success fee that C would be required to pay to her solicitors due to the 'success' of her claim. The contribution of £16,750 represented approximately 25% of the total success fee payable.
Grounds of appeal
Mrs Hirachand appealed the High Court's decision and the following two grounds fell to be determined by the Court of Appeal:
Whether the trial judge had erred by conducting the hearing by video in circumstances where Mrs Hirachand was profoundly deaf (this aspect of the appeal is not considered in this article); and
Whether the trial judge had erred in law when determining the award payable to C, in particular, by including a contribution towards C's liability to pay the CFA success fee to her solicitors.
The court found that a success fee (which cannot be included in a costs order, as explained above) is capable of being a debt, the satisfaction of which is a ‘financial need’ of C within the meaning of section 3(1)(a) of the 1975 Act and something the court may make provision for when carrying out its needs-based calculation.
In making its decision, the court made the following points:
It will not always be appropriate to make an award that includes a contribution (whether whole or in part) towards the success fee. It will be unlikely to be awarded unless a judge is satisfied that the claimant was only able to litigate the matter by entering a CFA arrangement (i.e., could not fund the claim via alternative means);
Consideration will be given to the extent to which a claimant has 'succeeded' in its claim; and
The first instance judge's cautious approach in only allowing a 25% contribution towards the payable success fee could not be faulted.
This decision will provide claimants and their solicitors with some clarity at the outset when considering whether to bring a 1975 Act claim and how such a claim is to be funded.
Each case will inevitably turn on its own facts, so it should not be taken for granted that every claimant that enters into a CFA will be entitled to recover an element of any success fee payable as part of any award. Nor can it be said that a claimant is likely to be granted an award to cover all (or a significant proportion) of any success fee payable.
It remains to be seen how the court will determine which cases are appropriate and what proportion of the success fee is to be included in the award.
Undoubtedly, however, in considering the facts of each claim, the court will consider a number of factors, including:
The size of the estate;
The size of the award (excluding any sum for a success fee);
The needs of the claimant and the competing needs of the other beneficiaries to the estate; and
Perhaps most importantly, the ability of a claimant to fund a 1975 Act via other means.
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