Christmas Clauses and Family Feuds – Unwrapping Hirachand v Hirachand

This is a landmark case in relation to litigation funding for claims under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”).

Under the 1975 Act, certain categories of person can make an application against a deceased’s estate for reasonable financial provision.

Under s.3(1)(a) of the 1975 Act, in determining whether and in what manner the court should grant a claimant financial provision, it shall have regard to ‘the financial resources and financial needs which the applicant has or is likely to have in the foreseeable future’.

In this case, the claimant, Sheila Hirachand (Sheila), was the estranged daughter of her late father and made a claim for reasonable financial provision against his estate.

The defendant was the deceased’s surviving spouse, Nalini Hirachand (Nalini), who was the sole beneficiary under the deceased’s Will. Sheila’s claim was successful, and she was awarded a lump sum of £138,918 from her late father’s estate.

This lump sum included a contribution towards Sheila’s success fee, under her Conditional Fee Arrangement (CFA) with her solicitors. Nalini appealed and the Court of Appeal upheld the High Court decision.

Nalini then appealed to the Supreme Court. The question for the Supreme Court was essentially whether the Court of Appeal was wrong in law to decide that a CFA success fee is a debt which can be recoverable as part of an award under the 1975 Act.

The Supreme Court’s decision is important as it will affect the funding options available for 1975 Act claims.

The Supreme Court’s decision will be final and will set a precedent for all future 1975 Act claims to follow.

Claims under the 1975 Act are ordinarily brought because the Claimant has a need for maintenance from the Deceased’s estate – this means that they are unlikely to be able to fund legal fees privately  so CFAs are an extremely common way of funding in 1975 Act claims.

For claimants without the means to meet legal fees, the Hirachand decision may make it more difficult for them to bring their claims and CFA agreements may be a less attractive funding method.

However, it is important to note that success fees have never been fully recoverable, and it has always been the case that a proportion of these will be met by the claimant.

Now that the Supreme Court has confirmed that success fees are not recoverable, this will add certainty to negotiations and may assist in bringing matters to settlement at an earlier stage, saving time and costs for all parties.

For defendants, the decision in Hirachand will come as welcome confirmation that they do not need to worry about paying an uplift on top of the costs of a successful claimant.

However, the costs of any claim brought to trial are likely to be substantial even without the threat of an uplift.