CFA Success Fees are Excluded from Awards

The Supreme Court has delivered a landmark judgment in the case of *Hirachand v Hirachand & Another*, clarifying the treatment of success fees under Conditional Fee Agreements (CFAs) in inheritance claims brought under the Inheritance (Provision for Family and Dependants) Act 1975. The unanimous decision confirms that success fees are not recoverable as part of a substantive award made under the Act.

The dispute arose from a family inheritance claim where the claimant daughter sought financial provision from her late father’s estate. The High Court initially awarded her a lump sum, which included £16,750 specifically allocated as a reasonable CFA mark-up to cover legal costs. However, her CFA with solicitors stipulated a success fee uplift of 72%, amounting to £48,175. The widow, acting as the opposing party, appealed this decision.

The High Court justified including part of the success fee in the award by arguing it formed part of the claimant’s financial needs. The Court of Appeal upheld this decision, but the widow took her appeal to the Supreme Court.

In its judgment, the Supreme Court overturned the lower courts’ decisions and ruled that awards under the 1975 Act cannot include contributions toward CFA success fees. Lord Richards, delivering the judgment with agreement from Lords Lloyd-Jones, Leggatt, Burrows, and Stephens, emphasized that inheritance claims remain civil proceedings governed by the Civil Procedure Rules (CPR). He stated:

– Including success fees in awards would undermine the established costs regime under CPR.

– Costs incurred during proceedings—including success fees—must be dealt with exclusively within the costs regime and not as part of substantive relief.

– Success fees are considered part of legal costs and are not recoverable from opposing parties under current rules governing civil litigation.

The judgment further clarified that allowing recovery of success fees through substantive awards would produce incoherent results and conflict with Parliament’s intent when it excluded success fees from recoverable costs in civil proceedings.

This decision has significant implications for claimants pursuing inheritance claims under CFAs. It means that while CFAs remain a viable funding option for such claims, any agreed success fee will remain payable by claimants themselves and cannot be recovered as part of their award. Claimants may need to explore alternative funding arrangements or seek interim awards to cover legal costs during proceedings.

The ruling has sparked mixed reactions within the legal community:

– **Katie Alsop**, partner at Wright Hassall (representing the appellant), welcomed the clarification, stating it ensures consistency in cost recovery principles.

– **Alistair Spencer**, inheritance disputes legal director at Lime Solicitors, noted that this decision provides clearer guidelines on legal cost recovery and reduces uncertainty for parties involved in inheritance disputes.

– **Cathryn Culverhouse**, partner at DMH Stallard, described the judgment as “bad news for claimants” but acknowledged it was legally sound.

Legal professionals have suggested that legislative reform may be necessary to address funding challenges for claimants under the 1975 Act. Proposals include allowing awards to focus solely on claimants’ maintenance needs rather than legal costs or introducing mechanisms to better support claimants unable to afford litigation.

This ruling underscores the importance of understanding CFA terms and exploring funding options carefully before pursuing claims under inheritance law.

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1: https://www.lawsociety.org.uk/en/contact-or-visit-us/helplines/practice-advice-service/q-and-as/can-i-use-a-conditional-fee-agreement-for-a-claim-under-the-inheritance-act-1975

2 https://www.hilldickinson.com/insights/articles/hirachand-supreme-court-judgment-clarity-recoverability-cfa-success-fees