The much-anticipated appeal in the case of Hirachand v Hirachand was heard by the Supreme Court on 18 January 2024, laying the groundwork for a judgment that will likely have a significant impact on both claimants, defendants and lawyers involved in Inheritance (Provision for Family and Dependants) Act 1975 (the Inheritance Act) cases.
Here we take a look at the background case itself, and the possible implications of the Supreme Court’s ruling;
The Case
The initial case was bought by Sheila Hirachand, against her estranged mother, Nalini Hirachand, who was the sole beneficiary of her husband’s estate after he died in a house fire in 2016. The claim was that the deceased’s Will failed to make reasonable financial provision for the maintenance of Shiela, the couple’s only daughter, under the Inheritance Act.
Sheila lived at home with her parents until around the age of 30, when she moved out of the family home in order to undertake a post-graduate diploma at university. After 2007, when she commenced an MA in Sheffield, her father began giving her an allowance of £400 a month, which only ceased around the time of their estrangement in 2011.
She was noted to have suffered with severe mental health issues for much of her adult life, and certainly had not been employed since the birth of her eldest child.
As a result of the initial litigation, the High Court awarded lump sum of £138,918 to be paid out to Sheila from the deceased’s estate, despite her not being a beneficiary of the Will, to cover ongoing healthcare costs related to her pre-existing conditions.
Interestingly here, the Court also included £16,750 as a contribution to Sheila’s need to pay a Conditional Fee Agreement (CFA) success fee when calculating the lump sum award that she would receive. The Appeal was heard by the Court of Appeal in 2021 over whether it was lawful for the court to include such a payment in a maintenance award based on the claimant’s financial needs.
Mrs Hirachand, who was in her 80s and had her own health struggles, including hearing loss, cancer, and mobility problems, failed to engage with the legal proceedings at any stage.
As in the initial High Court ruling, the Court of Appeal found that the ‘success fee’ attached to a CFA can indeed be recovered from an estate as part of a claim under the 1975 Inheritance Act but it will depend on the facts of any particular case; as is always the way with Inheritance Act claims
Conditional Fee Arrangements
CFAs, often more commonly referred to as ‘no win, no fee’ agreements, are used when clients lack the financial means to fund their claim, particularly in 1975 Act claims where financial hardship is usually a feature.
A CFA typically includes a success fee or ‘uplift’ that the claimant must pay their solicitor if their claim succeeds (potentially up to 100% of their legal fees). Whilst prior to 2013, the unsuccessful party could be responsible for reimbursing some or all of the CFA fee, this changed with the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO).
Contradictory case law exists regarding a CFAs success fee recovery. The judge in Bullock v Denton [2020] accounted for the success fee, while in Re Clarke [2019] EWHC 1193, the judge declined to include one due to LASPO changes.
In the case of Hirachand v Hirachand, the Court of Appeal determined that a successful applicant under the 1975 Act may be entitled to a success fee in their award.
The question remains, can these fees be considered as a debt? If so, should the Court have the discretion to include as “reasonable financial provision” funds to repay some or all of the debt?
The possible outcomes
Generally, claimants are personally liable for paying the CFA success fee to their solicitors out of the award given to them; but, if the Supreme Court upholds the Court of Appeal decision, claimants may be able to recover this amount under the 1975 Act. In terms of paying for these kinds of claims, this would be a significant shift. However, a ruling of this nature should not be seen as a blank cheque for either claimants or their lawyers, as it may only result in a percentage of the success fee being awarded as happened here.
If the Court of Appeal’s decision is overturned, future claimants will most likely not be able to recover any part of their lawyer’s success fee. This means they would likely receive less from the estate after winning a claim after paying legal costs
While this may initially benefit those defending claims by reducing the total claim value, an overruling decision might not have a significant practical impact, as those claimants responsible for paying a success fee may simply attempt to demand a higher settlement to cover the fee.
