UK Supreme Court Blog

EDITORS: Dan Tench, Emma Cross, Zainab Hodgson, Francesca Knight, James Warshaw and Natalie Haefner (CMS)
Hugh Tomlinson KC, Matthew Ryder KC, Nandini Bulchandani and Daniel Rudd (Matrix)

In this post, Pippa Borton, Associate at CMS, previews the decision awaited from the Supreme Court in Hirachand v Hirachand and Anor.

Factual Background and First Instance Decision

This case concerns an appeal to the Supreme Court against an award granted pursuant to the Inheritance (Provision for Family Dependents) Act 1975 (“the 1975 Act”). Mr Navinchandra Hirachand (“the Deceased”) died in 2016, leaving his entire estate to his wife, Mrs Nalini Hirachand (“the Appellant”). Mrs Hirachand’s estranged daughter (“the Respondent”), who suffers from severe mental illness and does not work, made a claim against Mr Hirachand’s estate for reasonable financial provision for her maintenance.

Despite obtaining legal advice, the Appellant did not cooperate with the proceedings and failed to file an acknowledge of service or defence to her daughter’s claim, including following the granting of relief from sanctions in her favour. Accordingly, the Appellant was permitted to attend the hearings but was not allowed to take part in them or rely on written evidence.

The Judge concluded that the Deceased’s will did not make reasonable financial provision for the Respondent. Accordingly, a total of £138,918 was awarded to the Respondent. The award included £16,750 in respect of the fees payable under a conditional fee agreement (“CFA”) that the Respondent had entered into in order to fund the claim (“the CFA Success Fee”). The award did not cover the full CFA success fee, which was 72% and would have amounted to £48,175. The inclusion of this sum in the award formed part of the appeal.

Decision of the Court of Appeal

The Court of Appeal dismissed the Appellant’s application to set aside the CFA Success Fee.

The Court of Appeal acknowledged that, in accordance with s 58A(6) of the Courts and Legal Services Act 1990 (“the 1990 Act”), 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 conditional fee agreement”. Therefore, it was not possible for the Respondent to recover the success fee as part of an order for costs.

The question before the Court of Appeal was therefore whether the CFA Success Fee could be held to come within the Respondent’s financial needs under s 3(1)(a) of the 1975 Act by virtue of the fact it was a debt incurred since the passing of the Deceased.

The case law on the 1975 Act has been cautious not to define “maintenance” too narrowly or prescriptively. In the case of Ilott v Blue Cross and Others (No 2) [2018] AC 545, the Supreme Court held that debt may form part of maintenance if it is a financial need of the claimant. However, a financial need does not extend to everything the claimant wants, so for example, in re Jennings Deceased [1994] Ch 286 the claimant adult son of the deceased was denied provision to pay his mortgage because he lived a comfortable life with a good income.

Another important consideration in deciding to award the CFA Success Fee was that the Respondent would not have been able to afford litigation without the CFA. Moreover, the Court of Appeal agreed with the judge at first instance that not allowing the Respondent to recover the CFA Success Fee from the Deceased’s estate would mean that a substantial part of the sum awarded would go to paying the Respondent’s solicitors fees and her financial needs would, therefore, not be met by the award.

Appeal to the Supreme Court

The Appellant appealed the Court of Appeal’s decision to the Supreme Court. The appeal was heard on 18 January 2024 and the judgment is awaited.

Comment

This is an important decision for claimants and defendants alike who are facing claims under the 1975 Act. If the Supreme Court upholds the Court of Appeal’s judgment, this would put claimants under the 1975 Act in an advantaged position when compared to other litigants since they would have recourse to recover success fees under a CFA, which is specifically prohibited under the 1990 Act. Conversely, defendants in such cases, in the knowledge that an award in the claimant’s favour could include the uplift under a conditional fee arrangement, would be put at a significant strategic disadvantage because any damages awarded could be bolstered by a success fee.

Allowing claimants to recover a success fee as part of a reasonable provision for maintenance could also cause procedural difficulties. The amount of the success fee would have to be disclosed to the court in advance of any judgment, which could be problematic because (1) the full extent of the legal fees would not be known until the conclusion of the proceedings and (2) there would have been no assessment as to the reasonableness of the level of costs having been incurred. Questions also arise over treatment of the Part 36 regime (regarding offers to settle): if the claimant had failed to obtain a judgment more advantageous than a defendant’s Part 36 offer, this would not be known until after judgment was handed down. The Court of Appeal judge in the Hirachand case felt that this was likely to be less of a risk than might first appear, since most CFAs oblige claimants to accept reasonable settlement offers.

As a final consideration, if the judgment in this case is upheld, there is a question of whether future claimants should be subjected to costs management measures, something that is not currently a requirement for claims under the 1975 Act.