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Landmark decision handed down in Hirachand v Hirachand [2021] EWCA Civ 1498

On 15 October 2021, the Court of Appeal upheld the first instance decision confirming that the success fee (or uplift) for a conditional fee agreement may be recoverable as part of the lump sum awarded under the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”) to the claimant.

It is well established that pursuant to Section 58(A)(6) of the Courts and Legal Services Act 1990 (as amended by Section 44 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012), a success fee cannot be recovered by way of a costs order. However, in this case, the Court of Appeal held that a success fee is capable of being a ‘debt’, the satisfaction of which is in whole or part a ‘financial need’ within the meaning of Section 3(1)(a) of the 1975 Act. For this, the court may use its discretion to make provision on a needs-based calculation. Turning to the underlying facts in this case:

  • The claimant to the 1975 Act claim was the estranged adult daughter of the deceased, who had been left no provision from her father’s estate;
  • The claimant suffered from mental health problems, leaving her unable to work;
  • The defendant to the claim was the deceased’s widow who had been left the entirety of her husband’s estate; and
  • The defendant was in her 80’s, with poor deteriorating health. She was moved into a care home after the proceedings were issued.

At first instance, the claimant was awarded funds from the estate to meet her current financial needs. The court held that this was not a case where the claimant should be set up with a home and/or income fund for life. In total an award of £138,918 was granted, including £16,750 towards the uplift of the conditional fee agreement, amounting to around 25% of the success fee. The court felt an award was justified given that if it was not accounted for the claimant would have had to meet the costs herself, and one of her primary needs would therefore not have been met.

The Court of Appeal was keen to impress that it will not always be appropriate to make such an award. The initial indication is that it is unlikely an award will include a sum representing part or all of the success fee unless the court is satisfied that the conditional fee agreement was the only way in which the claimant had been able to litigate. In addition, the Court of Appeal was clear that an order will only be made to the extent necessary to ensure reasonable provision was made.

Although this decision helps to resolve a previously unsettled issue on recovery of success fees, there are still a number of questions that haven’t been resolved, including what is the effect of a claimant failing to inform the defendant of a conditional fee agreement promptly? Does the agreement or level of success fee need to be disclosed? Overall, as the decision has only recently been made, the impact of it is yet to become clear. However, we consider it likely that this may lead to defendants making applications under Section 5 of the 1975 Act for interim relief, which can include provision for funding legal costs to mitigate the risk of any eventual award being increased by success fees.

Blog written by Meg Edwards - Trainee Solicitor & Sarah Bolt - Senior Associate in the Contested Wills, Trusts and Estates team.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.

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