Contentious Probate update: recoverability of success fees – what’s happened?
The Court of Appeal has confirmed in the recent case of Hirachand v Hirachand  EWCA Civ 1498 that a person bringing a claim under the Inheritance (Provision for Family and Dependants) Act 1975 can now recover at least a part of any success fee which is payable under a conditional fee agreement – also known as a “no win no fee”. However, what is a conditional fee agreement, why is this case important, and what could happen because of this decision?
What is a conditional fee agreement?
When someone wants to bring a claim under the Inheritance Act against a deceased person’s estate, it is normally because they feel they have not received what they should have under the Will or where there is no Will, the intestacy rules. It might be that they relied upon the deceased, for example by living in their house without having to pay full market rent or where they received regular payments from the deceased to help with their day-to-day costs of living.
Inheritance Act claims, where defended, can be costly particularly if they result in a contested trial. This can pose a funding problem for those who wish to bring such a claim especially, as is so often the case, where they are in financial difficulties to start with.
There are potential solutions to this funding problem such as insurance or for the intending claimant to try and finance their claim with a loan – but insurers tend to have unaffordable premiums, and personal loans may not be sufficient particularly if there is inadequate security or guarantors available.
Another solution is for the solicitor and their client to agree that the client does not pay for some or all of their legal fees if the client loses their case. However, if the claimant “wins” they will be liable to pay their solicitor’s legal fees as well as an additional success fee – which can be a 100% uplift on those legal fees.
Why is Hirachand v Hirachand important?
Once the court has decided the outcome of a claim, it will then decide who should pay the costs of the litigation. The general starting position is that the losing party pays the winning party’s costs, but the court has wide discretion to depart from this depending on the facts of the particular case. Legislation was introduced in 2013 to stop claimants from recovering their success fees generally because it was considered unfair for defendants to have to pay even more just because they lost. Therefore until Hirachand, a claimant’s award from the court would be eaten into by the liability to pay the success fee which, depending upon the sums and percentages involved, carried the danger of making the whole claim financially pointless as ultimately the claimant might receive very little of their award.
However, Hirachand now confirms that if a conditional fee agreement is the only way to litigate a claim under the Inheritance Act, the success fee should also be considered as part of the award.
The court explained that consideration will be given to the extent in which the claim succeeds, and only where is it necessary to ensure that reasonable financial provision is made.
What could happen now?
The impact of this decision is significant. A claimant is more likely going to be able to recover at least a part of the success fee from the defendant at trial. If they lose, they won’t be burdened with a success fee and may pay little (or even nothing) to their own solicitors – although they may be ordered to pay the defendant’s costs. Defendants in contentious probate cases are usually family members who are defending their own share of the estate. As the value in an estate is always finite, we regularly warn our clients that all parties must be careful when entering into legal proceedings so as not to consume the entire estate with legal fees. The recoverability of at least part of a success fee is likely to encourage claimants to proceed further with their claims, and potentially exposes more estates to the risk of disproportionate legal fees.
Consequently defendants will need to be more alive to making reasonable offers at an early stage, not only to mitigate the overall costs of the claimant, but also because conditional fee agreements can be withdrawn by solicitors where the claimants don’t accept that which their solicitors advise them to be a good offer which they are unlikely to beat at trial.
Victoria Wall is a solicitor within the contentious probate team who can assist you with bringing or defending a claim under the Inheritance Act, as well as other areas within contentious probate, such as claims for or against the validity of a Will, or disputes between personal representatives to name a few.
Our contentious probate team specialises in all aspects of contentious probate and is consistently ranked in the top tier of The Legal 500. The team is headed up by Robert Weston, who is listed in The Legal 500 as a “leading individual” and was the instructing solicitor for the successful party in the landmark judgment of Walker v Badmin. Robert, together with Suzanne Lee and Andrew Chandler are all full members of The Association of Contentious Trust and Probate Specialists (ACTAPS) and represent clients both nationwide and abroad in both bringing and defending claims.
If you have a contentious probate matter which you would like to discuss with a specialist solicitor with a view to instructing mfg Solicitors LLP, please visit https://www.mfgsolicitors.com/site/services-for-me/contentious-probate/ for further information and contact details.