In a long-awaited judgment, the Supreme Court yesterday unanimously came down in favour of prohibiting the recoverability from the losing party of success fees payable under a conditional fee agreement in claims under the 1975 Act.
The key facts of this case can be summarised relatively briefly. The deceased died in 2016, leaving behind a widow, a son, and a daughter. The deceased’s will left his entire estate to his widow. The daughter, being in necessitous financial circumstances and receiving no benefit under the will, made a claim for reasonable financial provision under the 1975 Act. Her claim was successful, and the first instance judge (Cohen J in the Family Division of the High Court) awarded her the sum of £138,918. So far, so simple. Where the complexity arose in this case was that, as part of the award, the court allowed the sum of £16,750 towards a liability that would arise between the claimant and her solicitors as a result of their success in the case. The defendant appealed this element of the decision.
Conditional fee agreements are commonly used in litigation where a claimant does not have the financial means to fund legal fees on a standard private-paying basis. They are perhaps most often used in personal injury litigation; however, they frequently appear elsewhere due to the lack of availability of legal aid funding and are a means of providing an alternative route to access to justice. For the solicitors handling the case, the conditional fee agreement offsets the risk of receiving no payment at all (if the claim fails) and the cashflow disadvantage of having to postpone payment of their fees until the end of the case (which may often be several years after taking the instruction) by enabling them to charge the client a success fee uplift on their basic fees. While conditional fee agreements are permitted, since the Jackson reforms the public policy position has been that success fees should not be recoverable from the losing party. This means that the claimant is left with a liability to their solicitor for the success fee (often this is capped at a percentage of damages).
The first instance decision in Hirachand was therefore somewhat surprising in that it appeared to allow recovery of the success fee in 1975 Act claims as part of the substantive award, or ‘by the back door’. The Court of Appeal upheld the first instance decision and the appellant thus appealed to the Supreme Court.
The Supreme Court judgment, delivered by Lord Richards with unanimous support, allowed the appeal and disallowed the success fee element of the first instance award. Lord Richard emphasised the separation of substantive awards and costs orders, and explained that other parts of the Civil Procedure Rules (notably CPR 36) may cease to operate effectively if the lines between the two types of order are blurred. As he summed up in paragraph 85 ‘The position is simply that the judge cannot in determining the appropriate relief include directly or indirectly any allowance for the success fee.’
The judgment is a blow for claimants and a win for defendants, but overall brings welcome clarity and returns the law to the previously generally accepted position that success fees are not recoverable.
Steven Organ is an associate solicitor in our contentious probate team, which regularly deals with claims under the 1975 Act, taking instructions from both claimants and defendants. Curzon Green Solicitors will continue to offer conditional fee agreements to claimants in appropriate cases.