Using the Back Door – The Award of Success Fees in Inheritance Act Claims

The recent Court of Appeal decision in the case of Hirachand -v- Hirachand & another has been eagerly awaited by contentious probate lawyers dealing with claims under the Inheritance (Provision for Family and Dependants) Act 1975.

The claim originally known as ‘Re H’ (not apparently a Line of Duty reference) was made by the estranged adult daughter of the deceased against her mother who was the sole beneficiary of the deceased’s estate.  The claimant had long-standing mental health problems which meant that she had not been able to work since the birth of her first child in 2011.

Out of an estate which the judge valued at £554,000, he made an award of £138,918, significantly less than the claim which the daughter was making.  Controversially that award included £16,750 in respect of the success fee on the daughter’s solicitors ‘no win, no fee’ agreement.

Although historically success fees were recoverable from a losing party as part of a costs award against them, by virtue of the Courts and Legal Services Act 1990 a costs order “may not include provision requiring the payment by one party of all or part of a success fee payable by another party” under a “no win, no fee” agreement.  Although the actual success fee set at 72% amounted to £48,175 the judge made a more modest award of about 25% or £16,750.

So how in the light of this, did the judge get round the clear words of the legislation.  The same issue had in fact been considered in two previous cases, but different judges had come to completely opposite conclusions.

Whilst a claim for “reasonable financial provision” in these circumstances is limited to what is needed for the claimant’s “maintenance” it has long been accepted that that can include the payment of existing debts. Since one of the things which the judge needs to take into account is the claimant’s needs and resources assessed as at the date of trial, the judge concluded that he could take into account the debt representing the success fee.  In so doing, he said that he was looking at the reality of the situation.  Essentially by approaching the case on what he felt the claimant needed, he concluded that she would be under compensated if he completely ignored this legitimate debt which would otherwise fall to be deducted from his award.

In deciding that he said that it would “by no means always be appropriate to make such an order” “unless the judge is satisfied that the only way in which the claimant had been able to litigate” was by entering into the no win, no fee arrangement. “Further an order would only be made to the extent necessary in order to ensure that the reasonable financial provision” which the judge wished to give the claimant was actually going to be received.

How should society deal with providing funding for cases for impecunious claimants with meritorious claims.  It seems to me that there are three options:

1. The state (that of course is/was legal aid).
2. The unsuccessful defendant – that was the position pre-2013 when success fees could be recovered as part of the costs award.
3. The claimant – by means of the success fee being deducted from their award even though that may cause injustice. Until this case, that was the law post 2013 in relation to Inheritance Act claims.

Since of course the amount of the success fee in pounds and pence terms goes up as the basic costs go up this is an additional incentive for respondents to these claims to engage in settlement negotiations at an early stage with a view as the judge said to “making realistic offers in order to settle these difficult and distressing cases”.

Bearing in mind that this seems to achieve by the back door what was not available by the front, there is presumably at least some prospect of an appeal.   Watch this space!

In fact, you don’t have to as hot off the presses is the judgment in the case of Higgins -v- Morgan & Others where a success fee of £14,200 or about 15% was recovered as part of the claimant’s award.

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The information given here is intended for general information purposes only and should not be taken as legal advice.

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