Hirachand Supreme Court judgment

The Supreme Court has confirmed that success fees under conditional fee arrangements (“CFAs”) can not be recovered as part of an award made to claimants under the Inheritance (Provision for Family and Dependants) Act 1975 (the “1975 Act”).

In December 2024, the Supreme Court finally ruled in the case of Hirachand -v- Hirachand & Anor [2024] UKSC 43 Supreme Court. The claim was brought under the 1975 Act and the claimant’s original award included an amount specifically described as being in part coverage of the CFA success fee. 

The key feature of CFAs is that on top of solicitors’ basic hourly rates, an uplift or ‘success fee’ will apply if the case is successful. CFAs are attractive to claimants for obvious reasons, where claimant’s cannot fund a claim privately from the outset and if the claim is unsuccessful, the fees are not payable. CFAs are also attractive to solicitors in cases where the prospects of success are high, they can receive a premium in the form of the uplift to cover off the risk of not succeeding in the case. 

Hirachand has dealt with the pertinent point of whether factoring in contingency for this uplift as a “financial need” is permissible when assessing what would be a reasonable and proportionate award from the deceased’s estate in a 1975 Act claim. 

The original claim, brought in 2020, concerned Navinchandra Hirachand, who sought to advance a claim against her father’s estate for reasonable financial provision, a claim that was defended by her mother, largely on the basis that Navinchandra was estranged from both her parents. The trial judge ruled that the will did not make reasonable provision for her and the High Court awarded her a total award of £138,918 from her father’s estate for her maintenance, breaking the award down to reflect her specific requirements. Importantly, the court took account of the fact that Navinchandra was liable to her solicitors for an uplift under her CFA and awarded £16,750 in part coverage. This sum reflected about 25% of Navinchandra’s costs liability, which the judge at first instance considered to be reasonable in all the circumstances of the case. 

The High Court had therefore squarely placed this costs liability within the category of financial responsibility and reasoned that if it were not taken into account, it would be taken from the remainder of the award which would mean that her other financial needs, including therapy costs, loss of benefits and income shortfall and housing need would be impacted. 

In principle however, the decision to take account of the success fee due was contrary to the relevant statute, namely section 58A[6] of the Courts and Legal Services Act 1998, which states that a success fee under a CFA is not recoverable from the unsuccessful party (subject to certain exceptions). It was duly appealed on this legal point by Navinchandra’s mother Mrs Hirachand, but the Court of Appeal upheld the High Court’s decision, reasoning as the High Court had, that Navinchandra’s liability for the success fee was to be interpreted as a debt which could be taken into account when assessing Navinchandra’s financial needs as one of the factors listed under Section 3 of the 1975 Act. 

The Court of Appeal also sought to compare the circumstances with that of the section 25(2)(b) of the Matrimonial Causes Act 1973 which provides that ancillary relief must take account of financial needs and responsibilities of the relevant parties now and in the foreseeable future, this includes costs of litigation. 

Mrs Hirachand took the matter to the Supreme Court where it was conclusively and unanimously decided that success fees are not recoverable from the unsuccessful party and should not be considered in respect of 1975 Act claims as a Section 3 factor, namely they do not form part of the claimant’s financial needs and resources. The Supreme Court also sought to dispense with the comparisons awarded in divorce proceedings that had been presented in the Court of Appeal, citing that it is the Civil Procedure Rules that apply to 1975 Act claims and that the keystone of this is that costs of proceedings are not recoverable as substantive relief, i.e. damages

The Supreme Court decision brings 1975 Act claims back in line with other types of claims and demands a strict application of the Courts and Legal Services Act 1998. Success fee uplifts do not form part of an award under the 1975 Act and cannot be taken into consideration by either side when assessing what level of award would be reasonable. The decision also makes it possible to avoid the inherent complications that would beset the Part 36 regime if the recovery of success fees were permitted, the Supreme Court specifically commenting that this would make Part 36 “virtually unworkable” and thus undermine the leverage of Part 36 offers in achieving settlement at the earliest possible juncture. 

Potential applicants under the 1975 Act as well as contentious trusts and probate practitioners should take note of this important judgment. Putative 1975 Act claimants must now think carefully about their liability for a CFA success fee to avoid any ‘victory’ becoming somewhat pyrrhic once their solicitors recover their uplift from any award, particularly where the estate in question is modest. The Hirachand decision should also act to force the more ‘optimistic’ (or opportunistic) of applicants to take a sensible and realistic view on the prospects in recognition of this risk. Similarly, claimants that choose to proceed to trial must keep a close eye on costs which typically in 1975 Act cases can become disproportionate quite quickly. We may well see a shift towards ‘global’ lump sum settlements which may allow claimants to try and accommodate the uplift as far as possible, knowing that at trial, the uplift is outside of the remit of considerations for the court to take into account. There will also likely be a drop in the number of smaller claims that might have proceeded under a CFA but without the option of recoverability, will not proceed at all. 

For further information on this topic, please contact Martha Allen.

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