What the Supreme Court’s decision on success fees means for inheritance claims

The Supreme Court has made its eagerly awaited decision in Hirachand v Hirachand, ruling that success fees cannot be recovered in claims under the Inheritance (Provision for Family and Dependants) Act 1975 (the ‘1975 Act’).

The 1975 Act allows claims against an estate by certain individuals if they do not receive reasonable financial provision. The Court considers various factors, including the claimant’s financial needs and obligations.

What is a success fee?

1975 Act claims are typically bought by those who are in financial need. Therefore, often, claimants do not have the money available to instruct a solicitor.

A “no win, no fee” Conditional Fee Agreement (‘CFA’) is often a desirable option as no legal fees are payable if the claim fails. If the claim is successful, the legal costs become payable, plus an uplift which is a percentage of the costs. The uplift is known as the success fee.

Usually in civil litigation, a winner can recover their legal costs from the losing party. However, this does not include success fees, which claimants must still pay.

What happened in Hirachand?

Shelia Hirachand made a 1975 Act claim against her late father’s estate, which passed entirely to her mother.

Shelia entered into a CFA, meaning if her claim was successful, she would have to pay the legal costs, plus a 72% uplift (the success fee).

In May 2020, Shelia’s claim went before the High Court and she was successful. The Court circumvented the usual ban on recovering success fees by treating it as part of Shelia’s financial need as it was a financial obligation she had to pay.

The matter was appealed, and the Court of Appeal upheld the decision.

Supreme Court

There was another appeal to the Supreme Court which unanimously overturned the decision, ruling that success fees cannot be recovered from an estate under a 1975 Act claim as part of a “financial need”.

When considering a claim under the 1975 Act, the Court can consider the Claimant’s “financial needs”, including any debts and liabilities they have. It was argued that a claimant’s liability to pay a success fee should be considered when calculating their financial need as it was a liability they would have to pay.

The Supreme Court rejected this argument stating that allowing this would undermine the long-established cost regime that success fees were not recoverable.

The Supreme Court noted that if Parliament intended for different cost rules to apply to 1975 Act claim, it would have made that decision when making the 1975 Act, or when it banned the recovery of success fees.

In light of Hirachand, success fees are not to be included in the financial needs assessment in a 1975 Act claim.

The Birketts view

Amanda Smallcombe, partner in Birketts’ Private Wealth Dispute Team, has made the following comment:

“Whilst the Supreme Court’s decision may be seen as hindering access to justice for some claimants, it is good news for beneficiaries of estates defending such claims.  

Many 1975 Act claims by their nature are brought by people who lack financial resources to pay legal costs and the decisions of the lower courts allowed successful claimants to keep the entirety of the amount awarded to them from the estate for their needs rather than it being eroded by legal costs but this necessarily meant that the other beneficiaries received even less from the estate.

Solicitors will still take such cases on a no win, no fee basis, but the fact that the success fee will now be payable by the client means that it will be incumbent on all sides of these disputes to work collaboratively to resolve them quickly and cost effectively to preserve as much of the estate for the people involved.”

Birketts’ Private Wealth Dispute team is experienced in dealing with 1975 Act claims, acting for both individuals making a claim as well as those defending claims.

Birketts do offer “no win, no fee” agreements so please contact a member of the Private Wealth Disputes team if you would like to discuss this further.

This article was written by Rachel Leech, Associate. For any enquiries, please contact a member of our team on 01473 406386 or at disputeawill@birketts.co.uk.