Hirachand v Hirachand & another

In civil proceedings governed by the costs regime in the Civil Procedure Rules 1998, litigation costs must be dealt with under that regime. They cannot be recovered through the substantive relief, even where the governing statute requires consideration of the claimant’s financial needs.

A substantive order which directly or indirectly provides for another party to pay a conditional fee agreement success fee is a costs order for section 58A(6) of the Courts and Legal Services Act 1990. Such an allowance is prohibited in an award under the Inheritance (Provision for Family and Dependants) Act 1975. The different treatment of legal costs in matrimonial financial remedy proceedings reflects their distinct no-order costs regime.

The appellant widow was the sole beneficiary of her deceased husband’s estate. Their daughter successfully claimed reasonable financial provision from the estate under the Inheritance (Provision for Family and Dependants) Act 1975. The High Court awarded £138,918, including £16,750 towards a success fee payable under the daughter’s conditional fee agreement, and separately ordered payment of £80,000 in costs.

The Court of Appeal dismissed the widow’s appeal in Hirachand v Hirachand [2021] EWCA Civ 1498. It held that an irrecoverable success fee could be a financial need for which provision might be made under the 1975 Act.

The issue before the Supreme Court was whether section 58A(6) of the Courts and Legal Services Act 1990 prevented a success fee from being included in an award of reasonable financial provision from an estate.

1. Appeal allowed unanimously. Lord Richards, with whom Lord Lloyd-Jones, Lord Leggatt, Lord Burrows and Lord Stephens agreed, held that the daughter’s award under the Inheritance (Provision for Family and Dependants) Act 1975 could not include any sum for her success fee. That element was excluded from the order.

2. The statutory concept of maintenance is broad enough, considered by itself, to encompass payments for accrued or future legal costs. However, claims under the 1975 Act are civil proceedings governed by the Civil Procedure Rules 1998. The costs of those proceedings must therefore be dealt with separately under the applicable costs regime and cannot be included in the substantive award. This applies to base costs and irrecoverable success fees alike.

3. The exclusion preserves the integrity and coherence of the civil costs regime. That regime controls recoverable costs, protects access to justice for claimants and defendants, and gives effect to settlement incentives under Part 36. Permitting a success fee within the judgment sum would create uncertainty about offers and could defeat the costs consequences intended by Part 36.

4. Section 58A(6) of the Courts and Legal Services Act 1990 embodies a clear policy that success fees are to be paid by the party who entered the conditional fee agreement, rather than by the opposing party. A “costs order” includes any order dealing with the costs of the proceedings, regardless of the jurisdiction under which the order is made. The High Court’s order was therefore a costs order to the extent that it provided for the success fee. The prohibition also prevents indirect provision, transfers of property and payment in kind.

5. The analogy with matrimonial financial remedy proceedings was rejected. Those proceedings have a distinct no-order principle which generally treats each party’s costs as part of the available matrimonial resources and liabilities. There is no equivalent general costs regime for such costs to undermine. Proceedings under the 1975 Act remain fully subject to the ordinary civil costs regime.

6. The statutory power to order interim payments for legal costs was different in character. It may enable an otherwise unfunded claim to proceed before final determination, but it does not authorise litigation costs to be included in the final substantive award while those costs are governed by the CPR.

1. United Kingdom Supreme Court: Allowed the widow’s appeal unanimously and excluded the success-fee allowance from the substantive award: [2024] UKSC 43.

2. Court of Appeal: Dismissed the widow’s appeal and upheld the inclusion of a contribution towards the success fee: [2021] EWCA Civ 1498.

3. High Court, Family Division: Cohen J awarded the daughter £138,918 under the Inheritance (Provision for Family and Dependants) Act 1975, including £16,750 towards her conditional fee agreement success fee, and separately awarded costs of £80,000.