There’s a recent case that’s gone through the courts that could be an interesting development for people thinking of bringing a claim under the Inheritance (Provision for Family and Dependants) Act 1975.
This Act enables certain people to make a claim against a deceased person's estate, if they believe they have not received reasonable financial provision.
The reported case of In Re: H (2020) EWHC 1134 (Fam) may be of great interest to those who are hoping to fund their claim by way of a Conditional Fee Agreement (‘CFA’), often referred to as ‘no win, no fee’ arrangements.
People who need to bring a claim under the 1975 Act are often in difficult financial circumstances. This can mean that funding the legal costs during the lifetime of a claim can prove difficult - which is why CFAs are often popular.
Under such a funding arrangement, however, in return for taking on and running a case that they will not get paid for until the end (and may not get paid for at all, if it is not successful) lawyers are entitled to a ‘success fee’ if a case is successful.
This success fee is calculated as a pre-agreed percentage uplift on the lawyer’s ‘base costs’. In general litigation, whilst base costs are often recoverable from the opponent, the success fee element is not, and is paid by the client from any damages or award they receive.
There is an argument to say that in 1975 Act claims, this can lead to an outcome for the claimant different to that which the judge intended when passing their judgment.
In all 1975 Act claims, the purpose of any award is to make reasonable financial provision for the claimant, based on their individual circumstances. This often, therefore, leads to a fairly arithmetical approach being taken by the judge and an award being arrived at which is calculated to meet specific future needs. Clearly, if that award is then eroded by a substantial success fee payable to the claimant’s lawyers, then it is easy to see how it may no longer meet the purpose for which it has been carefully designed.
That was precisely the argument put forward in the case of Re H, which was a claim by a largely estranged adult child against her late father’s estate, founded on her financial needs arising from unfortunate health issues from which she was suffering. The beneficiary of the estate was the claimant’s elderly mother who was living in a residential care home.
As part of her case, the claimant’s lawyers argued that the success fee that she had incurred, as a result of the CFA she entered into, should be payable from the deceased’s estate, as part of her award. In this case that success fee was 72%, which amounted to £48,175. That was the figure that the judge was asked to include as part of claimant’s award.
The judge indicated that he had only been directed to two previous cases which had considered this point. The first was Re Clarke (2019) EWHC 1193 and 1194 (Ch) in which the judge declined to increase his award to take into account a success fee (which in that case was £192,000) on the 5 following grounds:
- The calculation of damages is a matter of procedure carried out before costs are considered and has never included an element of costs;
- To allow it would contrary to legislative policy that the losing party should not be responsible for a success fee – s.58A(6) Courts and Legal Services Act 1980;
- It would amount to an increase in damages by way of costs;
- It may put a CFA funded litigant in a better position in terms of negotiation due to the risk of a substantial costs burden;
- It would put a claimant in Inheritance Act proceedings in a better position than, say, a claimant in a personal injuries claim.
The second was a very recent unreported case of Bullock v Denton. In that case there was also a success fee, although the precise amount of that fee was not clear. Contrary to the decision in Clarke, in Bullock the judge added the figure of £25,000 to the claimant’s award in respect of the success fee. The judge in Re: H surmised (based on the figures that were known) that this award was likely to be less than half of the full uplift likely to be claimed by the claimant’s lawyers.
In Re: H, the judge accepted that it was appropriate for him to consider liability for the success fee as part of the claimant’s needs. He did not expressly address all of the reasons for declining such a request in Clarke but did note that the award he was making was not a large one, such as in that case, and that it did not allow ‘much elasticity’. In particular, he was mindful that if he did not make an allowance for the success fee then one of the claimant’s primary needs would not be met.
The judge was also clearly very mindful, however, that he was not, by necessity, in receipt of all relevant information at that stage, particularly around any offers for settlement that may have been made, and what constituted ‘success’ under the terms of the CFA.
Weighing everything up (and acknowledging the potential for injustice to both the claimant and the estate) the judge ultimately added the sum of £16,750 (roughly 25% of the uplift) to his award to reflect the success fee liability.
It remains to be seen whether this approach will be followed in other cases and, as the judge in this case stressed, his reasons for making his decision were specific to this particular case.
It seems highly likely, however, that more claimants funding their case via a CFA will, in the light of these recent decisions, at least seek to recover some or all of the uplift as part of their award.
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If you need any help or advice in relation to Inheritance Act Claims, please get in touch with our specialist team.
Matthew Evans is a Partner at Hugh James and leads the firm’s Private Wealth group. The work of the group encompasses the full spectrum of private client work including will writing and estate planning, estate and trust administration and contentious probate. The team represents both individuals on a direct basis and institutional clients within the sector - such as financial institutions and charities, and their customers.