The question of legal costs under the Inheritance (Provision for Family and Dependants) Act 1975 (the 1975 Act) is contentious at the best of times.
However, the High Court (EWHC) in Jassal v Shah, 2024 EWHC 2214 Ch, has finally ruled on whether litigation costs should be included in the substantive award or not.
The case concerned the estate of the late Fiaz Ali Shah (Mr Shah, the deceased). In 2000, he began a relationship with Ms Srendarjit Kaur Jassal (Ms Jassal). He later cohabited with her. Over the following years, there are a series of events that impact Mr Shah’s Will provision. He subsequently makes a further three Wills.
In 2006, the deceased made a Will under which he left everything to Ms Jassal, whom he described as 'my wife'.
Later in the same year, the deceased made a new Will under which he left Ms Jassal only half the proceeds of a property that he owned. This Will referred to Ms Jassal as 'close friend'. The residuary estate was to pass to two of his children, Sajad and Shabana Shah.
The couple's relationship and cohabitation ended in 2012.
In 2018, the deceased made another Will, making Sajad his sole beneficiary.
Mr Shah died in 2020, leaving an estate of £1.4 million.
When Mr Shah died, he left nothing to Ms Jassal. Consequently, she launched a spousal claim for reasonable provision under the 1975 Act, alleging that she and Mr Shah had resumed their relationship before his death. Her claim was resisted by Sajad and Shabana Shah (the executors). They argued that Ms Jassal and Mr Shah were not living together prior to his death, instead Ms Jassal had been living as Mr Shah’s tenant in another of his properties, Salt Hill Mansions.
The case was heard by Deputy Master Marsh at first instance in November 2021. He preferred Ms Jassal's evidence and granted her a half share of the Salt Hill Mansions property, together with a lump sum of £385,000 for her maintenance needs.
Importantly the award expressly stated that costs had already been dealt with as part of the £385,000 lump sum.
The executors appealed on the grounds that Deputy Master Marsh had made an error of law by awarding Jassal her £140,000 (+VAT) litigation costs as part of the substantive award. In other words that legal costs were awarded as part of the calculation for Ms Jassal’s maintenance needs.
They argued the costs should have been kept separate from the award in accordance with the usual practice under the Civil Procedure Rule (the CPR) which state that the court will invariably first determine the substantive claim and then go on to decide whether to make an order in relation the litigation costs.
The opposing argument is that when considering how to determine the substantive claim under the 1975 Act, courts must have regard to the claimant's financial needs, which include an obligation to pay litigation costs. Thus, it could be suggested that a court may wish to consider the claimant's litigation costs as part of the substantive determination of the claim.
The appeal went to the EWHC under Deputy High Court Judge James Pickering KC. His decision was determined by the fact that “proceedings under the 1975 Act are squarely governed by the CPR”.
It was not permissible for Ms Jassal's litigation costs to be considered as part of the substantive award. Instead, Deputy Master Marsh should have considered the appropriate substantive relief ignoring those litigation costs, “however unrealistic that may have been” and should then have gone on to consider the matter of costs, subsequently and separately.
The executors' appeal was duly allowed. Judge Marsh's original order is to be varied such that the lump sum will be reduced to exclude the litigation costs and the VAT for those costs.
Mr Justice Pickering KC also ordered the executors to pay Ms Jassal her costs for the original proceedings (excluding the appeal), as the victorious party in that part of the dispute.
Mr Justic Pickering KC’s judgment highlights the need for firms to be mindful of their client’s costs position. While client costs should always be a central consideration for practitioners, the EWHC’s clarification of the matter further emphasises the importance of being flexible but firm in the agreement of legal costs with clients.
In matters such as these, we are always prepared to consider alternative funding options such as deferred payment agreements or no win no fee arrangements if these would be in the interests of our client.
Contact Katherine to discuss this further.