Hirachand v Hirachand – opening the door for recoverable success fees in Inheritance Act Claims?

Note: this blog only deals with one limb of appeal in the case of Hirachand v Hirachand within which success fees under a CFA were considered and awarded in part.

Navinchandra Hirachand (“the deceased”) died in a house fire in 2016, leaving his entire estate to his wife, Nalini Hirachand (“the Appellant”), a frail woman in her 80s, profoundly deaf and in poor health.  Following the death of the deceased, the Appellant moved into a care home, no longer able to live independently.

Sheila Hirachand (“the Respondent”) is the adult daughter of the deceased and the Appellant.  The Respondent has significant mental health problems, which have rendered her unable to work since 2011.  She lived at home for almost all of her life up to the age of 30, leaving her parents’ home in 1999.  Thereafter, the only financial support she received from the deceased and the Appellant was a monthly allowance of £400 whilst she undertook an MA from 2007-2011.  The Respondent was wholly estranged from her parents from 2011 and they never met her two children.

In November 2017, the Respondent issued proceedings as a child of the deceased under section 1(1)(c) and 1(2)(b) of the  Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”).  On 7 May 2020, Cohen J, having been satisfied that the will of the deceased failed to make reasonable financial provision for the Respondent, ordered that she should receive the sum of £138,918 from his estate. 

In calculating the said sum, Cohen J included the amount of £16,750 as a contribution towards the Respondent’s liability to pay a success fee under the terms of the CFA which she had entered into with her solicitors to fund her litigation.  The Appellant brought an appeal, inter alia, against this element of the award, contending that it was wrong in law for a judge to include the same within a maintenance-based award calculated by reference to the financial needs of a claimant.

Dismissing the appeal, the Court of Appeal decided that a success fee under a CFA was capable of being treated as a debt of the Respondent and, therefore, could be considered as a “financial need” when calculating an award under the Act.

It is, of course, the case that, in most forms of litigation, a success fee payable under a CFA cannot be recovered by way of an adverse costs order (as per amendments to the Courts and Legal Services Act 1990 made by the Legal Aid, Sentencing and Punishment of Offenders act 2012).  In the case of Hirachand, Lady Justice King stated that “…the judge was right in concluding that an order for maintenance could contain an element referable to a success fee…the judge concluded that without such contribution ‘one or more of the claimant’s primary needs would not be met’…[T]he judge was entitled to regard the success fee as a debt capable of inclusion in a maintenance award.”

This decision will bring hope to claimants under the Act, who are often without the financial means to mount litigation and, absent of the availability of Legal Aid to support their claims, are increasingly reliant upon the availability of a CFA to fund their proceedings.  If an element of the CFA success fee can be included within the award for financial provision, more of the total award will be retained by the claimant.  This may, of course, also encourage defendants to negotiate, with a view to achieving settlement before any success fee becomes payable.

It should be noted that the Respondent was only awarded a portion of the success fee payable (a sum equivalent to 25% of her base costs awarded whereas her CFA provided for a success fee of 72% of base costs).  Solicitors acting for claimants within such proceedings should be mindful that it is not certain that the full success fee will be awarded. 

It is also important to note that Lady Justice King observed that “…it will by no means always be appropriate to make such an order…unless the judge is satisfied that the only way in which the claimant had been able to litigate was by entering into a CFA arrangement and…the extent to which the claimant has ‘succeeded’ in his or her claim.”  Solicitors will need to ensure that all funding discussions with clients are clearly recorded on the file and are capable of disclosure without compromising the privilege of the rest of the file.

The full judgment can be read at: https://www.bailii.org/ew/cases/EWCA/Civ/2021/1498.html

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Here at Box Legal we have been offering after the event legal expense insurance since 2004 and have a wealth of experience. We have competitively priced ATE insurance policies available for all types of personal injury claims and can also arrange legal expense insurance cover for non-personal injury claims such as housing disrepair and financial mis-selling.

The number and variety of cases we arrange cover for is always increasing and so please contact us to discuss any after the event insurance requirements. We are happy to discuss and develop ATE insurance for case types we do not already insure.

If you would like to speak to us or obtain further information then please call on 0870 766 997, or email info@boxlegal.co.uk

Disclosure of ATE premiums Rejected by the Competition Appeal Tribunal

The extent to which ATE premiums and the detail of litigation funding arrangements are disclosable within proceedings has been considered at two Case Management Conferences in the Competition Appeal Tribunal, heard remotely in December 2021 and January 2022.

In Kent v Apple Inc & another and Coll v Alphabet Inc & others Dr Rachael Kent and Ms Elizabeth Coll are, respectively, the proposed class representatives for almost 40 million users of Apple and Google products, alleging abusive conduct in relation to app distribution and payment processing services provided by Apple’s App Store and Google’s Play Store.

Within their applications for collective proceedings orders (CPO), Dr Kent and Ms Coll served  litigation plans and budgets to trial, specifying budget levels exclusive of ATE insurance premiums.  They each also produced a litigation funding agreements and after the event insurance policies.

Pursuant to rule 101 of the Competition Appeal Tribunal Rules 2015, Dr Kent and Ms Coll requested confidential treatment for (and accordingly redacted) certain parts of their litigation funding agreements and ATE insurance policies on one or more of three grounds: commercial confidentiality, strategic sensitivity and privilege.  Apple and Alphabet objected to such redactions.

In advance of both CMCs, the parties were able to reach agreement with regard to certain redactions within the funding documents, leaving two points in contention in each case:

• Kent v Apple – the premiums payable under the ATE policy and the Solicitors Excess Provision (SEP) within the litigation funding agreement.
• Coll v Alphabet – the deposit premium payable under the ATE policy and the percentage level of the success fees payable under the CFAs entered into by the parties to the class action.

In Kent v Apple, the Tribunal was not satisfied that ATE premiums were subject to legal advice privilege; however, they were not persuaded that the precise amount of the premiums was relevant to any question it would be required to decide at the CPO hearing, where there had already been disclosure of the amount of cover provided by the ATE policy.  The Tribunal accepted Dr Kent’s submission that disclosure of the premiums might disclose an assessment of risk and merits, stating that “…we exercise our discretion not to order their disclosure, on the basis that to do so would confer and unfair tactical advantage on Apple.”

Turning to the SEP, the Tribunal noted that the effect of the same is that there is a “slice” of costs above the budgeted amounts which the funder never pays and which are at the solicitors’ risk.  Such costs are not recoverable from anyone, save in the case that the claim is successful when they are recovered out of damages.  A small excess “slice” may indicate that the solicitor considers the claim to be weak, whereas a large “slice” may indicate confidence that there are strong prospects of success.

Primarily, the Tribunal found that Apple had failed to demonstrate that disclosure of the SEP was relevant to the issues at the CPO hearing, agreeing with Dr Kent that, as it is an amount above the budgeted sums and is at the solicitors’ risk, it has no bearing on whether she is able to fund her own costs.

Secondly, the Tribunal considered – without deciding – that “…disclosure of the level of the excess might disclose legal advice on merits and thus in principle might be privileged…it is likely to disclose the solicitors’ assessment of risk and thus has strategic sensitivity… [giving Apple] tactical advantage [and] the opportunity to engage in litigation tactics to drive up costs beyond the budgeted amounts…”.

In Coll v Alphabet, the Tribunal endorsed the general findings in Kent v Apple while emphasising the importance of transparency with Chair Bridget Lucas QC making the following points:

“The starting point in collective proceedings must be that the whole of a PCR’s funding arrangements are relevant to the tribunal’s assessment of the CPO application.  Subject to issues of privilege or confidentiality, we consider that the presumption should be that if the litigation funding agreement or ATE policy is relevant then, prima facie, all of its terms are relevant and any redaction to the documents must be properly justified.”

Noting that the ‘special regime’ for collective proceedings requires a claimant to make ‘extensive disclosure’ of their funding arrangements, Lucas QC added: “That may give rise to some degree of tactical advantage but, because it is required under the statutory regime, that advantage cannot be considered to be unfair.  The issue then becomes what additional unfair tactical advantage arises if further disclosure, over and above that already made, is required.”

In light of the conclusions reached, the Tribunal ruled in both cases that the redactions should remain.

It follows that solicitors should give very careful consideration to the parameters of a client’s duty of disclosure of the detail of their funding arrangements, ensuring that the same is fully compliant with the CPR whilst also protecting any sensitive tactical and strategic elements.

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Here at Box Legal we have been offering after the event legal expense insurance since 2004 and have a wealth of experience. We have competitively priced ATE insurance policies available for all types of personal injury claims and can also arrange legal expense insurance cover for non-personal injury claims such as housing disrepair and financial mis-selling.

The number and variety of cases we arrange cover for is always increasing and so please contact us to discuss any after the event insurance requirements. We are happy to discuss and develop ATE insurance for case types we do not already insure.

If you would like to speak to us or obtain further information then please call on 0870 766 997, or email info@boxlegal.co.uk