Navigating the Impact of CFA Success Fee Uplifts in Inheritance Act Litigation: A Legal Analysis

Landmark Court of Appeal Decision Raises Stakes in Inheritance Litigation

In a pivotal ruling that is set to reshape the landscape of inheritance litigation, the Court of Appeal has confirmed that Conditional Fee Agreement (CFA) success fees can be recovered as part of a claim under the Inheritance (Provision for Family and Dependants) Act 1975. This decision, stemming from the case of Hirachand v Hirachand and Anor [2021] EWCA Civ 1498, builds upon the groundwork laid by HHJ Cohen in Re H (Deceased) [2020] EWHC 1134 (Fam), marking a significant shift in how financial needs are assessed in these claims.

The ruling has far-reaching implications, particularly for defendants in Inheritance Act claims, as litigation costs are expected to climb. It underscores the importance for contentious trusts and probate specialists to prioritize negotiation and settlement wherever feasible, as the financial stakes at trial have now been elevated.

Understanding the Significance

Lady Justice King’s judgment in the Hirachand case has been a focal point of discussion. She posited that a success fee, previously non-recoverable through a costs order due to section 58A(6) of the CLSA 1990, could indeed be considered a debt. This interpretation allows for the success fee to be included in the court’s needs-based calculation, addressing the claimant’s financial need.

This decision diverges from the stance taken post-Jackson Reforms and the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO), where the burden of success fees fell squarely on the party entering into a CFA. The Court of Appeal’s stance now opens the door for these fees to be acknowledged as part of a claimant’s financial necessity.

Potential for Supreme Court Appeal?

The split opinion among inheritance litigation specialists on whether CFA success fees should be recoverable in 1975 Act claims hints at the contentious nature of this issue. While speculation about a Supreme Court appeal or legislative changes abounds, the prevailing view suggests that the current decision will likely stand without further legal challenges or amendments to legislation.

Implications for Defendants

Defendants in inheritance disputes must now brace for potentially higher costs, as claimants gain the ability to include CFA uplift costs as part of their ‘financial needs’. This development could encourage claimants and their solicitors to adopt more aggressive litigation strategies, knowing that the possibility of recovering success fees may put additional pressure on defendants.

However, the Court of Appeal also provided a caveat, indicating that success fees would not always be recoverable. The judgment suggests that such fees would only be considered if the claimant had no other viable means to fund litigation, emphasizing the need for thorough financial disclosure.

Looking Ahead

The Hirachand ruling undeniably alters the dynamics of Inheritance Act litigation, making it more crucial than ever for parties to consider early settlement and alternative dispute resolution methods. For defendants, making a well-considered Part 36 offer could provide a safeguard against escalating costs, emphasizing the need for strategic litigation planning in the face of this new legal landscape.

As the dust settles on this landmark decision, both claimants and defendants in inheritance disputes will need to navigate these changes with careful consideration, potentially reshaping the approach to litigation in this area for years to come.