Claims for provision from estates and no win no fee agreements – The case of Re: Hirachand

If a person is left out of a will or does not receive as much provision as they expected, then there may be an opportunity to make a claim for further provision under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”). This legislation enables spouses, former spouses, cohabitees, children, people treated as children and other dependants to bring a court claim seeking inheritance they were not otherwise entitled to under the will or intestacy rules (where there was no will).

Once a party can show they fit within the eligible claimant categories above, they also need to show that they were not reasonably provided for from the estate. For a spouse the claim they can make is not limited to maintenance, and the court may take into account what the widow/er would have received if the proceedings were for divorce rather than an inheritance claim. For all other categories the amount that can be claimed is limited to what provision they would need for their maintenance.

The court takes into account a number of factors in assessing claims and possible awards, including the net value and nature of the estate, the financial needs and resources of the claimant and beneficiaries of the estate, obligations the deceased had towards the claimant and beneficiaries, physical or mental disabilities of the parties, and conduct of any parties.

Because the nature of the claims mean that claimants are often in financially difficult positions, many law firms will offer conditional fee agreements (“CFA”), otherwise known as no win no fee agreements. These are a way of enabling the work of litigation to be done for a client who may not be able to pay upfront, with the payment to the solicitor firm contingent on them successfully achieving an award from the estate.

The firm takes on risk in acting on a CFA basis because they may not get paid if a settlement cannot be reached or the court does not decide to make an award to the client. Because of the risk, CFA cases will usually have a success fee payable in addition to the basic hourly rate charges. The success fee is normally based on the level of risk in the case and can range up to 100% of the basic charges.

A success fee would usually only be payable in 1975 Act claims where the claimant had shown that they were not reasonably provided for from the estate and were able to achieve an award from the estate at court, or during settlement negotiations.

While successful parties in court claims may ordinarily expect to have some or all of their costs paid by the unsuccessful party; over time the law has been changed to stop recovery of success fees. The motivation in limiting recovery was to prevent increasing costs from reducing access to justice and the threat of making litigation only available in the highest value cases or for wealthy litigants. This presented a dilemma for less financially stable claimants though as they would have to pay the success fee of their CFA from any award they received, thereby reducing their net financial result. This is contrary to purpose of claims in the 1975 Act which are to give provision to claimants who have shown they were not reasonably provided for and may have their maintenance need impacted by paying the CFA success fee, potentially undermining any amounts allocated for specific needs of the claimant.

Court cases have considered this problem and have recently reiterated that success fees can be taken into account in the making of an award. The case of?Hirachand v Hirachand [2021] EWCA Civ 1498?(“Re: Hirachand”) which was decided by the Court of Appeal on 15 October 2021 determined that it was right for CFA success fees and their impact on the claimant to be considered in determining the value of the provision to be made from the estate.

In?Re: Hirachand?the deceased’s estranged daughter was left nothing from her father’s estate. She suffered from worsening mental health problems and had not worked for around 10 years. The entire estate went to the deceased’s widow who is in her 80s and lives in a care home following the death of her husband. The claimant daughter was given an award from the modest estate of around ￡140,000 which included a contribution to her CFA success fee liability at about a 25% uplift, plus an award of ￡80,000 to her basic charge costs (the CFA hourly rates not including the success fee).

The widow appealed the decision on multiple grounds, one of those being that contribution to the CFA success fee was unlawful.?The Court of Appeal dismissed the appeal, and on the CFA grounds determined that the claimant’s liability to her solicitor for the success fee could be considered as a debt due by her. Previous court decisions had decided that debts of a claimant could be taken into account as part of the claimant’s financial circumstances, and so here the daughter’s success fee liability factored into her financial needs in making an award to her. The Court tried to limit the impact on the estate and potential injustice to both sides by only giving the 25% uplift contribution rather than the whole of the success fee payable.

The Court of Appeal also noted that awards contemplating contributions to success fees would need to be decided on a case-by-case basis. They considered that such contributions should only be made where a CFA was the only funding arrangement available to the claimant. This is to try and avoid situations where claimants will fund their litigation via CFAs, despite having sufficient funds to pay their legal costs privately in order to use the CFA and risk of success fee contribution as an additional financial risk/burden on the estate as a litigation/negotiation tactic.