The success fee element of a conditional fee agreement (CFA) can be recovered as part of an award under the Inheritance (Provision for Family and Dependants) Act 1975, the Court of Appeal has ruled.
Moore Barlow, the solicitors for the claimant in Hirachand v Hirachand and Anor [2021] EWCA Civ 1498, hailed the judgment for opening up CFA funding to claimants, given that it was previously commonplace for success fees to be owed separately by the claimant and not taken into consideration when deciding the amount of any award from an estate.
In the case, the deceased’s estranged daughter was awarded a share of her father’s £1.2m estate, despite not being a beneficiary of his will, to cover ongoing healthcare costs related to a pre-existing mental health condition.
Mr Justice Cohen also ruled that the success fee should be factored into the amount awarded to the claimant, or else one or more of the claimant’s primary needs would not be met.
Giving the ruling of the Court of Appeal, Lady Justice King noted that a succession of cases have emphasised “not only that maintenance should not be defined too prescriptively for the purposes of the Inheritance Act, but also that the payment of debts may form a legitimate part of a maintenance award”.
A success fee, she said, could be a debt for these purposes, but it would “by no means” always be appropriate to make such an order.
She explained: “It is unlikely that an award will include a sum representing part of the success fee unless the judge is satisfied that the only way in which the claimant had been able to litigate was by entering into a CFA arrangement and consideration will no doubt be given of the extent to which the claimant has ‘succeeded’ in his or her claim.
“Further, an order will only be made to the extent necessary in order to ensure reasonable provision is made. It does not mean that there can be no impact whatsoever upon the standard of living that the applicant would otherwise be afforded by the maintenance award.”
King LJ said the trial judge was right and there was no error in principle or law, but added: “I am conscious, as was the judge, of the difficulty identified by Briggs J in Lilleyman, namely of the potential for undisclosed negotiations to undermine a judge’s efforts to make appropriate provision under the Inheritance Act.
“The civil litigation costs regime, unlike the approach in financial remedy cases, means that there is the potential for a situation where a claimant is awarded a contribution to her CFA uplift but is subsequently ordered to pay the defendant’s costs of the claim where, for example, the claimant won overall but failed to beat a part 36 offer.
“I note, however, that this is likely to be less of a risk than might be thought at first blush to be the case given that, under many CFAs, the claimant is obliged to accept any reasonable settlement offer or an offer above a specified threshold or risk the solicitors withdrawing from the CFA.
“Conversely, a success fee is frequently not payable in the event that the claimant, on advice, rejects a part 36 offer or other relevant settlement offer but subsequently fails to beat that offer at trial.”
King LJ noted that the judge was “alive” to this tension and commented that he could not avoid some potential injustice to one side or the other. He mitigated it by ordering only a 25% contribution towards payment of the success fee.
“In my view, the judge’s cautious approach to this difficult aspect of maintenance cases where the claim is made on the back of a CFA contract cannot be faulted and only serves to highlight the imperative of the full engagement in the part 36 process and the importance of the parties making realistic offers in order to settle these difficult and distressing cases.”
Scott Taylor, partner and head of contentious trusts and estates at Moore Barlow, who acted for the claimant, described it as “an incredibly important and positive ruling” that supported claimants who were only able to litigate by entering into a CFA but struggled to find solicitors because of the uncertainty around success fee recovery.
“The court’s decision incentivises private client lawyers to take on cases under the Inheritance Act 1975 for those able to demonstrate genuine financial need under CFAs which in turn could make it easier for people to access specialist legal support, regardless of their financial circumstances.”
Brie Stevens-Hoare QC and Oliver Ingham (instructed by Mills & Reeve) for the appellant (appearing pro bono). Constance McDonnell QC and Sophia Rogers (instructed by Moore Barlow) for the respondent.