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On December 18, 2024, the UK Supreme Court delivered its long waited judgment in the case of Hirachand v Hirachand [2024] UKSC 43, a pivotal decision concerning the recoverability of success fees under Conditional Fee Agreements commonly used in claims under the Inheritance (Provision for Family and Dependants) Act 1975 (the "1975 Act").
Background
The appellant, the widow of the Deceased, Navinchandra Hirachand, contested a claim brought by the respondent, the Deceased's adult daughter, under the 1975 Act. The respondent, who had been estranged from the Deceased, sought reasonable financial provision from the estate. Due to limited financial means, the respondent entered into a Conditional Fee Agreement (CFA) with an element of a success fee to fund her legal proceedings.
Court of Appeal Decision
In 2021, the Court of Appeal upheld the initial judgment and awarded the respondent a lump sum that accounted for her financial needs, with an additional provision to cover a portion of the CFA success fee liability the respondent had to pay to her legal team. The Court determined that the success fee forms a debt for the respondent, which addressed a "financial need" under section 3(1)(a) of the 1975 Act.
Supreme Court Judgment
The Supreme Court unanimously allowed the appeal, ruling that success fees are not recoverable as part of a substantive award under the 1975 Act. The Court emphasised that this statutory prohibition, which resulted as a consequence of Section 58A(6) of the Courts and Legal Services Act 1990, could not be circumvented by treating a success fee as a debt or a financial need for the applicant.
The Court highlighted that claims under the 1975 Act remain subject to the Civil Procedure Rules (CPR) and therefore, success fees and legal costs must be addressed separately from the substantive award.
Allowing success fees to be included in substantive awards would result in conflict with the policy objectives underpinning s58A(6) and the CPR. The judgment preserves the balance intended by the costs regime, where costs are determined after the resolution of the claims.
Implications of the Judgment
The ruling in Hirachand v Hirachand has significant implications for claimants, practitioners, and those involved in estate administration:
By virtue of the ruling, Claimants relying on CFAs will need to be advised that success fees cannot form part of an award under the 1975 Act resulting in a greater emphasis for alternative funding in such claims.
The decision provides reassurance to executors and beneficiaries that substantive awards will not include provision for success fees or other litigation costs.
Practitioners must ensure that costs, including success fees, are dealt with under the CPR's costs regime following the determination of substantive claims.
Conclusion
The Supreme Court's decision in Hirachand v Hirachand establishes a definitive boundary between substantive relief under the 1975 Act and the recoverability of litigation costs. By upholding the prohibition on including success fees in substantive awards, the Court has reinforced the legislative intent of s58A(6) and preserved the integrity of the CPR's costs framework.
It is arguable that the exclusion of provision for success fee's will result in inflated claims and limit the Claimants' ability to make compromises when negotiating a settlement.
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