Court of Appeal Decision in Hirachand v Hirachand
The Court of Appeal recently clarified an issue, which had previously been approached in conflicting ways by High Court Judges, over the recoverability of costs in Inheritance (Provision for Family and Dependants) Act 1975 (“1975 Act”) claims.
It is not unusual for claimants under 1975 Act claims to lack the financial resources to personally fund a claim against a deceased’s estate. By the very nature of such claims, those claimants tend to have a serious need for financial provision and the deceased’s estate failed to make reasonable financial provision for them.
One way that 1975 Act claimants may be able to fund such a claim however, is through a Conditional Fee Agreement with their solicitor. These arrangements are more commonly referred to as ‘no win no fee’ agreements. While the terms often stipulate that there will be no fee if the claim is unsuccessful, they also state that if the claim is successful, there will be an uplift on the solicitor’s fees (referred to as the ‘success fee’). For more details on how these work in practice please see the blog entry here.
While the general rule on cost shifting is such that the losing party in civil litigation claims must pay the winning party’s legal fees, this didn’t generally include the success fee as, following a review into costs in civil litigation in 2010, Parliament passed legislation stating that ‘A costs order made in proceedings may not include provision requiring the payment by one party of all or part of a success fee payable by another party under a conditional fee agreement’ (s.58A(6) Courts and Legal Services Act 1990). In other words, while the losing party is required to pay the winning party’s costs they wouldn’t be required to pay the success fee element of those costs.
Nevertheless, the Court of Appeal in Hirchand v Hirchand has ordered that, while a success fee ‘cannot be recovered by way of a costs order by virtue of the Courts and Legal Services Act 1990, [the success fee] 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’. The court did go on to say that it will by no means always be appropriate to make such an order, adding that it is unlikely that such an order will be made unless the judge is satisfied that the ‘only way in which the claimant had been able to litigate was by entering into a conditional fee agreement’ and stating that consideration will be given to the extent to which the claimant has ‘succeeded’ in their claim.
While it is always important to explore different funding arrangements with 1975 Act claimants, it is now even more important to explore whether there are any other forms of funding potentially available to the claimant in order to consider their chances of being able to recover the success fee element of their conditional fee agreement as this will now no doubt play a large part in any settlement discussions, particularly as the litigation progresses.