Hirachand v Hirachand and another [2024] UKSC 43

A daughter claimed financial provision from her deceased father's estate under the Inheritance (Provision for Family and Dependants) Act 1975. The Supreme Court held that a success fee payable under a conditional fee agreement cannot be included in an award for reasonable financial provision, as this would circumvent section 58A(6) of the Courts and Legal Services Act 1990 which prohibits recovery of success fees through costs orders.

Facts

Navinchandra Dayalal Hirachand died in 2016, leaving his entire estate to his widow. His daughter, Nalini Hirachand, who had severe health problems and insufficient income to support herself, brought a claim under the Inheritance (Provision for Family and Dependants) Act 1975. She had entered into a conditional fee agreement (CFA) with a 72% success fee uplift. Cohen J at first instance awarded her £138,918, which included £16,750 towards her CFA success fee. The Court of Appeal dismissed the widow’s appeal.

Background to CFAs and Success Fees

Following Sir Rupert Jackson’s Review of Civil Litigation Costs, Parliament enacted section 58A(6) of the Courts and Legal Services Act 1990 (inserted by LASPO 2012) to prohibit the recovery of success fees from opposing parties, reversing the previous position where such fees were recoverable.

Issues

Whether section 58A(6) of the Courts and Legal Services Act 1990 prevents a court from including payment of a success fee as part of an order for reasonable financial provision under the 1975 Act.

Judgment

The Supreme Court unanimously allowed the appeal. Lord Richards delivered the sole judgment.

Key Reasoning

The Court held that litigation costs in civil proceedings subject to the CPR costs regime cannot be recovered as part of substantive relief. Lord Richards stated:

“while claims under the 1975 Act remain civil proceedings subject in the usual way to the costs regime in the CPR, it would undermine the costs regime and produce an incoherent result if a party could recover base costs not under that regime but by way of the substantive award.”

The Court rejected the argument that section 58A(6) applied only narrowly to costs orders made under section 51 of the Senior Courts Act 1981:

“Given the clear public policy underpinning the prohibition on the recovery of success fees in civil proceedings contained in section 58A(6), it would be very surprising if a success fee, which is not recoverable under the costs regime, was nonetheless recoverable as part of the substantive award.”

Lord Richards construed “a costs order” in section 58A(6) as including any order dealing with costs of proceedings, irrespective of the statutory provision under which it was made.

Distinction from Family Proceedings

The Court distinguished proceedings under the MCA where the “no order principle” applies to costs, meaning there is effectively no costs regime to undermine. Furthermore, CFAs are prohibited in family proceedings, so no direct analogy could be drawn.

Implications

This judgment confirms that the policy behind section 58A(6) cannot be circumvented by including success fees in substantive awards under the 1975 Act. The decision reinforces the integrity of the civil costs regime and ensures consistency with Parliament’s intention that success fees should not be recoverable from opposing parties in civil litigation. The ruling has significant implications for funding arrangements in inheritance claims, as claimants using CFAs must bear their own success fees.

Verdict: Appeal allowed. The sum of £16,750 included for the success fee was excluded from the order made in favour of the Daughter under the 1975 Act.

Source: Hirachand v Hirachand and another [2024] UKSC 43