Funding for Inheritance Act 1975 claims: Success (fee) or gamble?

For many individuals, pursuing litigation is an expensive and daunting process. The Court of Appeal’s recent judgment in Hirachand v Hirachand [2021] EWCA Civ 1498 highlights the issues that can arise when it comes to funding and recovery of costs in Inheritance Act 1975 disputes. While the case provides useful guidance it also leaves open many questions on recovery of costs.

Hirachand dealt with two grounds of appeal, the key ground for this article being whether the Judge at first instance had erred by including a lump sum payment in the overall award to the Respondent, by way of contribution to her liability for a CFA success fee. The Courts and Legal Services Act 1990 prevents a costs order from including provision for a success fee under a CFA. Practitioners have long advised pre Re: H (Deceased((2020) (the first instance decision from which Hirachand arises) that a success fee could not be included as part of the claim pursuant to the Inheritance (Provision for Family and Dependants) Act 1975. In Hirachand the Court of appeal by unanimous decision found the success fee could be capable of being classed as a debt by the claimant (para 58) resulting in a financial need “for which the court may in its discretion make provision” (my emphasis). Para 59 continued that it may not “always be appropriate” for such an award.

Hirachand should be viewed with caution by those advising clients on CFAs and success fee issues. It is by no means a guarantee of recovering part of the success fee. Serious considerations will need to go into what other funding may be available for the client. As with every client, other funding options may be more appropriate which should be explored.

Some firms offer legal funding through a panel of third-party specialists invited to tender for such work. Usually, these relate to higher value claims with a minimal likely value in recovery and so may not be suitable for lower value 1975 Act claims such as here. Clients could be offered a deferred fee to which interest is attached after a certain period. This may be attractive if they are already due to receive a share of the estate or have another source of funds that will be realised at a later date, but which is still less than they need for maintenance (if they are claiming other than as a spouse) and the interest may result in a lower additional sum than a success fee percentage. 

Does the client have BTE or could they obtain ATE insurance? BTE can be limited in availability for these types of claims and can also be limited in value. ATE usually requires the provision of Counsel’s opinion which the client will probably need to fund in the first instance.

DBAs or Damages Based Agreements are another more complex area of litigation funding and, given the stringent requirements surrounding them and the uncertain nature of 1975 Act claim outcomes, may be unattractive.

Ultimately funding is a decision for the client and the firm together, assessing the merits of the claim as known and the risks both are willing to take. Hirachand at paragraph 59 tells us however that the courts will view a CFA and attempts to recover a success fee as a last resort option with Lady Justice King stating an award would be unlikely “… unless the judge is satisfied that the only way in which the claimant had been able to litigate was by entering a CFA…”. This suggests that the client may have to be prepared to disclose evidence of the various funding options discussed, considered and discounted where the success fee is included as a debt and recovery sought as part of the claim from any award made from the estate.

As is often the case, the judgment ends with a salutary reminder that wherever possible, all attempts to settle such claims should be attempted!