Conditional Fee Arrangement Case Study

The recently reported case of In Re: H (2020) EWHC 1134 (Fam) may well be of interest to practitioners who regularly act in claims brought under the Inheritance (Provision for Family and Dependants) Act 1975 and, in particular, those who act in cases where the claimant is funding their claim by way of a Conditional Fee Agreement (‘CFA’).

The facts of the case of itself are to a large extent familiar, in that this was a claim by a largely estranged adult child against her late father’s estate, precipitated by her financial needs arising from unfortunate health issues from which she was suffering. The beneficiary of the estate was the claimant’s elderly mother who was living in a residential care home, was of failing health and was automatically debarred from participating in the hearing due to multiple breaches of orders. The judge, Mr Justice Cohen, noted that this presented him some difficulties as he only had very limited information as to her circumstances.

The more unique aspect of the judgment, however, arises from the submission made on the claimant’s behalf that the success fee that she had (or may) incur as a result of the CFA she entered into with her lawyers should be payable from the estate, as part of her award. In this case that success fee was 72%, which apparently amounted to £48,175. That was the figure that the judge was asked to include as part of her award.

As the judge noted in his judgment, as a matter of law, the other party to litigation cannot be ordered to pay the uplift element. On the other hand, as the claimant argued, the reality was that the purpose of any award to the Claimant under the 1975 Act was specifically to meet her needs. Any required significant deduction from that award to pay the success fee to her lawyers would therefore be likely to diminish the positive impact of any award upon her circumstances.

The judge indicated that he had only been directed to two authorities on the point. The first was Re Clarke (2019) EWHC 1193 and 1194 (Ch) in which Deputy Master Linwood declined to increase his award to take into account a success fee (which in that case was £192,000) on the 5 following grounds:

  1. i) The calculation of damages is a matter of procedure carried out before costs are considered and has never included an element of costs;
  2. ii) To allow it would contrary to legislative policy that the losing party should not be responsible for a success fee – s.58A(6) Courts and Legal Services Act 1980;

iii) It would amount to an increase in damages by way of costs;

  1. iv) It may put a CFA funded litigant in a better position in terms of negotiation due to the risk of a substantial costs burden;
  2. v) It would put a claimant in Inheritance Act proceedings in a better position than, say, a claimant in a personal injuries claim.

The second was the unreported case of Bullock v Denton, a judgment handed down just 9 days earlier in Leeds County Court. In that case there was a success fee, although the precise amount of that fee was (for some reason) not clear. In that case, the judge added the figure of £25,000 to the claimant’s award in respect of the CFA. Mr Justice Cohen surmised (based on the figures that were known) that that award was likely to be less than half of the full uplift likely to be claimed by the claimant’s lawyers.

In this case, the judge accepted that it was appropriate for him to consider liability for the success fee as part of the claimant’s needs. He did not expressly address all of the reasons for declining such a request in Clarke but did note that the award he was making was not a large one, such as in that case, and that it did not allow ‘much elasticity’. In particular, he was mindful that if he did not make an allowance for the success fee then one of the claimant’s primary needs would not be met.

The judge was also clearly very mindful, however, that he was not, by necessity, in receipt of all relevant information at that stage, particularly around Part 36 offers and what constituted ‘success’ under the terms of the CFA.

On that latter point he reserved the right to revisit this element of his award if his judgment did not trigger the uplift.

On the former he reiterated unease previously expressed by Mr Justice Briggs (as he then was) as to the disparity of approaches between Inheritance Act cases and divorce cases when it came to costs regimes and the transparency of offers.

Weighing all of the above up (and acknowledging the potential for injustice to both the claimant and the estate) the judge ultimately added the sum of £16,750 (roughly 25% of the uplift) to his award to reflect the success fee liability.

It obviously remains to be seen whether this approach will be followed and, of course and as Mr Justice Cohen stressed, his reasons for making his decision were specific to this particular case.

It seems highly likely, however, that more claimants funding their case via a CFA will, in the light of these recent decisions, at least seek to recover some or all of the uplift as part of their award. That may well make for some interesting judgments in the future, and also some interesting negotiations in the interim.

 

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