The UK Supreme Court’s recent ruling in Hirachand v Hirachand has provided much-needed clarity on how costs are handled in Inheritance Act claims, specifically regarding the recovery of success fees under conditional fee agreements (CFAs). In a key decision, the Court ruled that success fees cannot be included as part of an award for “reasonable financial provision” under the Inheritance (Provision for Family and Dependants) Act 1975. This means that success fees, as part of CFAs, cannot be considered a financial need for maintenance under the Act.
The case centres around the Inheritance Act, which allows courts to make financial provision from a deceased person’s estate if their will or the intestacy rules fail to provide for their family or dependants. The law takes into account the applicant’s financial needs, the size of the estate, and other factors to decide on an appropriate amount.
The Supreme Court’s involvement came after the Court of Appeal ruled that a success fee—an additional fee paid to a lawyer for taking on a case on a no-win, no-fee basis—could be considered a “financial need” and included as part of a claimant’s award. In essence, the Court of Appeal had treated the success fee as a debt that could be satisfied from the estate. However, the Supreme Court disagreed, clarifying that success fees should not be part of the financial provision made under the 1975 Act.
A disincentive for Claimants
The decision is significant because it sets clear boundaries on how financial provision is assessed in inheritance claims. By ruling that success fees are not recoverable from the estate, the Court aims to maintain a fair balance between enabling claimants to seek provision and protecting the estate from excessive claims that could deplete it for other beneficiaries.
If success fees were allowed to be part of the claim, it could have made it easier for individuals with limited resources to pursue claims under the Inheritance Act, but also potentially led to a rise in speculative or vexatious claims. This could have resulted in higher legal costs and larger awards, leaving less for the other beneficiaries named in the will or entitled by law.
Impact on the Legal Landscape
This judgment is expected to reduce speculative claims, as it makes it clear that legal costs, specifically success fees, cannot be added to an award under the 1975 Act. As a result, claimants may now be more cautious in bringing forward claims, knowing that they cannot automatically recover these fees from the estate.
Moreover, the ruling highlights the complexities of the probate process. With growing concerns over rogue executors and recent changes in inheritance tax rules, it’s likely that disputes over wills, trusts, and estates will continue to rise in 2025. As such, it’s crucial for both claimants and beneficiaries to seek expert legal advice to navigate any potential inheritance conflicts effectively.
Conclusion
The Supreme Court’s decision in Hirachand v Hirachand provides guidance on the handling of legal costs in inheritance claims, helping to ensure a fairer and more predictable process for all involved. As the landscape of inheritance disputes evolves, this case serves as a reminder of the importance of proper legal counsel in managing the complexities of estate and probate issues.
Contact our Litigation and Dispute Resolution experts
Nadine Esaid is a Solicitor in the Bishop & Sewell Litigation and Dispute Resolution team. If you would like to contact a member of the team please call on 020 7631 4141 or email nesaid@bishopandsewell.co.uk.
The above is accurate as at 23 December 2024. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
