This Supreme Court judgement might be one of the most anticipated for those interested in contentious probate. The question the Supreme Court had to answer was whether a success fee under a conditional fee agreement (CFA) could be recovered as part of an award given to a successful claimant under the Inheritance (Provision for Family and Dependants) Act 1975.
Background:
On the 6th of August 2016, Navinchandra Dayalal Hirachand died, leaving his wife, Nalini, their daughter, Sheila, and their son. According to his last will, dated the 25th of June 1998, the deceased appointed his son as executor and left his entire estate to his wife, Nalini, should she survive him. Otherwise, the estate was to be divided in equal shares between his children. The sole beneficiary of the estate was Nalini.
Sheila was estranged from her parents, but brought a claim against her father's estate under the 1975 Inheritance Act, asserting she had not received reasonable financial provision. Indeed, like her mother, she suffers from severe health problems and does not have sufficient income or assets to support herself.
The High Court ruled in Sheila's favour, awarding a lump sum of £138,918 on the 7th of May 2020 which included a contribution of 25% of the success fee (£16,750) towards her solicitors pursuant to a CFA under which they were acting. The High Court treated her obligation to pay her solicitors as a debt. Nalini appealed on the basis that the Court had no power to make provision for the success fee in a substantive award under the 1975 Act. The Court of Appeal (CoA) dismissed the appeal and she appealed to the Supreme Court.
Decision:
The UK Supreme Court unanimously allowed the appeal and overturned the rulings of both the High Court and the CoA. The Supreme Court ruled that a claimant's award under the Inheritance Act 1975 should not include any success fee they are liable for under a CFA. The Court reminds us that judges "cannot include directly or indirectly any allowance for a success fee".
Lord Richards carefully analysed the various aspects, noting that the sum to meet liability for litigation costs could fall under the scope of 'maintenance', as found in Section 1(2)(b) of the 1975 Act. However, success fees under CFAs cannot be considered a debt constituting a 'financial need' under Section 3(1)(a) of the 1975 Act. The Judge emphasised that the concept of 'financial need' should not be extended to cover litigation costs.
Implications:
This landmark judgement will have a significant impact on those considering making a claim under the 1975 Act, especially regarding how to fund those claims. Indeed, success fees are not recoverable as part of awards in 1975 Act claims. The narrow construction used by the Supreme Court brings the financial provisions awards in line with the principles laid out in the Courts and Legal Services Act 1990 in restricting the recovery of success fees.
The likely impact of this judgement is a potential fall in the use of CFAs, as solicitors might not be willing to take any risks. It might also limit the number of persons being able to claim under the 1975 Act due to the financial constraints involved.
Source:UKSC | 01-01-2025
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