Defending an Inheritance Act 1975 claim could now become troublesome for Defendants
Following Hirachand v Hirachand (2020), bringing an estate dispute claim under the Inheritance (Provision for Family and Dependants) Act 1975 may be easier for Claimants, but will no doubt carry more risk and prove more costly for Defendants.
The case of Hirachand v Hirachand
When Sheila Hirachand’s father died, she was surprised to see that, although she had been estranged for many years, no provision had been made for her in his Will. She subsequently brought a claim against his estate, seeking ‘reasonable financial provision’ under the Inheritance Act 1975.
Sheila’s late father’s surviving spouse, Nalini, defended the claim, as she was the sole beneficiary of his estate.
Nalini resided in a care home and was profoundly deaf, and was therefore unable to properly engage in defending the inheritance dispute claim. A care home worker assisted her instead.
The claim was heard remotely in April 2020, and Sheila was successful. She was awarded £138,918 from her late father’s estate, which, Sheila argued, was less than what she originally sought. The court had included a provision for a success fee of £16,750 that Sheila would incur if she was successful, as she was funding the claim using a Conditional Fee Agreement (CFA).
Sheila disputed this success fee, as well as the fact that the trial was done via video link, in the Court of Appeal. The court maintained that it was necessary to proceed with the trial remotely due to the Covid-19 pandemic and because Nalini Hirachand was unable to attend in person. The court also stated that the CFA success fee is treated as the Claimant’s debt and would therefore be considered as a ‘financial need’ when calculating an award sum.
What does this mean for those claiming using a CFA?
When a Claimant instructs a solicitor and enters into a Conditional Fee Agreement (CFA), the solicitor will usually claim a success fee. The solicitor’s success fee is often payable by the Claimant, usually from any award they receive as ordered by the court.
The decision of the Court of Appeal in the Hirachand case means that this success fee (or at least a percentage of it) may be assessed by the court as part of the Claimant’s financial needs. As a result, the CFA (and the associated success fee) would be considered a debt of the Claimant, impacting the court’s decision as to whether the Claimant has any maintenance needs at all and, if so, potentially increasing the value of these assessed needs to include the success fee.
It must be noted that this will not be the case in all 1975 Act claims where there is a CFA and any such decision is at the discretion of the court. Furthermore, Claimants are unlikely to receive 100% of their success fee as part of their maintenance needs assessment. Whether the success fee is to be included in the Claimant’s needs-based calculations will not, by any means, be appropriate in all matters.
Do CFAs in Inheritance Acts Claims negatively affect Defendants?
The decision made in this case may force Defendants in 1975 Act claims to settle in matters that they would have previously fought. This is because the stakes will be raised for cases that are prolonged. On the other hand, it will incentivise Claimants to pursue otherwise finely balanced claims, the merits of their case seemingly improving, as their maintenance needs (in the form of costs) grow.
Nonetheless, this decision will prove controversial to many. This example may prove a great incentive for those who wish to bring an estate dispute claim, but who may not otherwise had been able to afford it. It also potentially creates a conundrum for those wishing to defend claims (that may have otherwise fallen short of being meritorious) as the costs risk associated with defending any claim is so high.
Debate remains around the court’s decision in this matter, which appears to tip the playing field in favour of the Claimants and places Defendants at a stark disadvantage. A growth in CFAs and 1975 Act claims seems inevitable.
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