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!
Our thinking
IBA Annual Conference
The IBA heads to Miami for its 2022 Annual Conference bringing together thousands hundreds of lawyers from around the world.
Sarah Rowley
Charity Training series: Session 2
Join us for the second session in our Charity Training series where we will cover training for Charity Trustees and Senior Executives.
Catrin Harrison
Dominic Lawrance and Catrin Harrison write for Tax Journal on the statutory residence test
The statutory residence test: an exceptionally useful case on ‘exceptional circumstances’
Julia Cox
Mind your business: Safeguarding your business against loss of mental capacity
Practical considerations to safeguard your business against loss of mental capacity.
Jack Carter
Jack Carter writes for eprivateclient on the registration requirements for trust structures holding UK real estate
Trust structures holding UK real estate: Reporting requirements under the Register of Overseas Entities
Shivi Rajput
A guide to protecting non-matrimonial assets in divorce
Learn what you need to know about non-marital assets and how to protect them in a divorce.
Alexia Egger Castillo
Wealth Structuring Developments In Switzerland
Careful considerations need to be given when setting up wealth and estate structures and vesting funds in them.
Tim Maxwell
Charles Russell Speechlys partners with London Art Week
We are proud to be partnering with London Art Week, supporting the world’s leading art galleries and auction houses.
Lisa Wong
New Legislation on Reciprocal Recognition and Enforcement of Judgements in Matrimonial and Family cases by the Courts Hong Kong and the Mainland
The implementation of the Ordinance offers better safeguards to the interests of parties to cross-border marriages.
Charlotte Posnansky
Reporting Restriction Order (reprised) - "Where there is no publicity there is no justice."
Richard Honey
Inheritance tax receipts continue to rise - and what to do about it
Grégoire Uldry
New Swiss succession law on the transfer of businesses
On 10 June 2022, the Federal Council adopted its Message amending the Civil Code on the transfer of businesses by succession.
Julia Cox
Citywealth publish a '60 second' interview with Julia Cox
Leaders List interview: 60 seconds with Julia Cox
Piers Master
Register of Overseas Entities
Read more about the registration requirements for trust structures holding UK real estate and reporting requirements under the TRS and ROE
Ray Ng
What happens if one party passes away during a divorce proceeding: Part II
What does all this mean for divorcing spouses?
Louise Paterson
Artnet quotes Louise Paterson on the Ivory Act
UK’s Ivory Act comes into force
Jeremy Arnold
Jeremy Arnold joins Charles Russell Speechlys as Tax Trusts and Succession Senior Counsel
Jeremy Arnold joins Charles Russell Speechlys as Tax Trusts and Succession Senior Counsel
Alastair Morrison
Charles Russell Speechlys strengthens its landed estates offering with the appointment of Alastair Morrison
Charles Russell Speechlys strengthens its landed estates offering with the appointment of Alastair Morrison
Alex Munday-Muir
SDLT Warning!
Lisa Wong
What happens if one party passes away during divorce proceedings?
Given the current chaos in the world, perhaps it is time to plan for the unknown.