What could Hirachand mean for charities?

On 18 January 2024, the Supreme Court heard an appeal relating to a claim under the Inheritance (Provision for Family and Dependants) Act 1975. The question was essentially whether or not the court may factor in a success fee payable under a conditional fee agreement (CFA) when making an award under that Act.

Background

Navinchandra Hirachand died in August 2016. Under his Will, he left everything to his wife. His daughter brought a claim under the 1975 Act and the judge awarded her a sum of money, which included an amount towards the success fee payable under her CFA. Although as referenced above, the full success fee was 72% of the solicitors' fees (£48,175), the court awarded a contribution that approximately equated to a 25% success fee (£16,750).

The deceased's widow appealed to the Court of Appeal, arguing that the judge was not entitled to award the applicant any part of her success fee (under section 58A(6) of the Courts and Legal Services Act 1990). The Court of Appeal dismissed the appeal. It held that the daughter's liability for her success fee was nevertheless a debt that could be counted as a "financial need" for the purposes of the 1975 Act, and so the judge was entitled to make the order he did. The Supreme Court now has to decide whether or not the Court of Appeal was wrong in law, and ultimately whether or not it is possible for success fees to be included in awards made under the 1975 Act.

What could this mean for charities?

We await judgment. Ultimately, charities are likely to be better off if the Supreme Court decides that the court cannot factor in a success fee when making an award under the 1975 Act, for two main reasons:

1. Applicants may be deterred from intimating a claim in the first place. This could be because it becomes more difficult to obtain CFA funding and they cannot afford to make their claim, or because they know any award is going to be significantly reduced (or even eliminated) by the success fee they will ultimately owe to their solicitors.
2. The amount that a court can award a successful applicant will be limited, leaving more of the estate to pass to charities in accordance with the testator's wishes. This should also make settlement possible for a lesser sum and at an earlier stage.

All is not lost if the Supreme Court decides that the court is permitted to factor in a success fee when making an award under the 1975 Act. Successful applicants in these claims are still relatively rare, and clarity will be extremely helpful for charities and their legal teams. For the last few years, the position has been somewhat "up in the air", with applicants holding out for higher settlement sums to include a success fee contribution and representatives for charities often seeking to argue that they are not entitled to any such contribution. This has increased the issues in dispute between the parties, making settlement of the case much more difficult and increasing the costs.

If you have any questions about this case, please contact the Contentious Probate team.