Supreme Court ruling in Hirachand v Hirachand: A setback for claimants, victory for defendants
On December 18 2024, the Supreme Court of the United Kingdom (UKSC) overturned the rulings of both the High Court and the Court of Appeal with the long awaited judgment in the case of Hirachand v Hirachand [2024] UKSC 43.
This appeal concerns the Inheritance (Provision for Family and Defendants) Act 1975, which allows courts to grant financial support to a deceased person’s family or dependent from their estate. To do this, the court considers factors such as the applicant’s current and future financial needs. Consequently, the debated issue amongst the probate world in this case, was whether a success fee under a conditional fee agreement (CFA) could be treated as a financial need that courts can include in an award under this law.
This was a claim brought by Sheila Hirachand who challenged her father’s Will, contending she had not received reasonable financial provision. Sheila was the daughter of the late Navinchandra Hirachand who passed away leaving a Will which only provided for her in the circumstances where the late Mr Hirachand’s partner died prior to him. Therefore, Nalini Hirachand, Sheila’s mother became the sole beneficiary, and the daughter was not due to receive anything from the late Mr Hirachand’s Estate.
As a result of this, the daughter sought an award from the late Mr Hirachand’s Estate under the Inheritance (Provision for Family and Dependents) Act 1975.
To fund her legal battle, Sheila entered into a conditional fee agreement, commonly known as a “no win, no fee agreement” with her legal representatives. This agreement is a way for claimant’s to fund cases without an upfront cost and instead, the costs are generally paid upon the successful conclusion of the claim. However, the solicitors can charge an extra fee, known as a success fee, to account for the risk of not being paid if the case failed.
The success fee is typically a specific percentage of the legal costs. Due to this, Sheila sought, as part of her award, for reasonable financial provision, the success fee that arose as a result of having entered into a conditional fee agreement with her father’s legal representatives.
This claim was issued in the Family Division of the High Court who found in her favour awarding her the sum of £138,918 which included the sum of £16,750 towards the success fee.
However, this decision to allow, within the award, a sum towards the success fee was challenged in the Court of Appeal who agreed with the original ruling, stating that success fees could be included in such claims
Subsequently, the case was appealed further to the Supreme Court where it was finally ruled that success fees cannot be included in awards for financial provision from a deceased person’s estate. The decision was based on the law enacted by parliament as a matter of public policy, that prevents one party from recovering success fees from another litigation.
The overall decision of the Supreme Court was that the success fee element of a conditional fee agreement could not form part of an order for reasonable financial provision out of a deceased persons’ estate in a claim under the Inheritance (Provision for Family and Dependents) Act 1975.
The decision is a setback to claimant’s pursuing claims for reasonable financial provision under the Inheritance (Provision for Family and Dependents) Act 1975 because these success fees must now be paid themselves; therefore, ultimately reducing the amount that claimant’s will recover.
Conversely, for those defending such claims, this is reassuring as it limits the extent of their financial risk.
Wilkin Chapman are specialists in helping people both pursue and defend claims under the Inheritance (Provision for Family and Dependents) Act 1975.
Contact Sam to discuss this further.
