Thomas Middlehurst, a partner in the contentious trusts and estates team at Moore Barlow discusses the impact of the Court of Appeal decision in the Hirachand v Hirachand [2021] case. Thomas Middlehurst represented the respondent in Hirachand.
In Hirachand v Hirachand [2021], the Court of Appeal was concerned with a claim under the Inheritance (Provision for Family and Dependents) Act 1975 (I(PFD)A 1975) and the decision is of particular interest at a time when remote hearings are more commonplace, and the vulnerabilities of a party in the context of such a hearing may fail to be considered. Here, the appellant’s previous lack of action in the proceedings was a consideration, as was the extent to which the respondent’s solicitors sought to keep the appellant informed of the steps in the proceedings. The decision is also of note due to the approach to the respondent’s success fee, payable under a conditional fee agreement, and how ‘debts’ and ‘costs’ may be differentiated in the context of a reasonable provision claim.
Background
Proceedings were originally brought by the respondent, who was the daughter of the deceased who died in a house fire in 2016. The deceased had left the totality of his modest estate to his wife, who was the appellant. The respondent had issued a claim as a child of the deceased under ss1(1)(c) and 1(2)(b), I(PFD)A 1975 for such financial provision as would, in all the circumstances of the case, be reasonable for her to receive for her maintenance.
The respondent had been estranged from her parents since 2011 at her own instigation but suffered from longstanding progressive mental health problems and was of limited financial means. The appellant was in her 80s, was frail and profoundly deaf. She had cancer, was in deteriorating health and had moved into a care home following the deceased’s death, as she could no longer live independently.
The proceedings
Despite her health issues, the appellant had capacity to litigate and was for a substantial period of time represented. For reasons of her own, the appellant chose not to co-operate with the proceedings once issued and, notwithstanding appropriate legal advice, failed to file an acknowledgment of service on repeated occasions and was eventually automatically debarred from participating in the hearing of the claim pursuant to r8.4, Civil Procedure Rules 1998 (CPR 1998) and relying on any evidence at the hearing of the claim pursuant to r8.6, CPR 1998 pursuant to an order of Lieven J.
Following Lieven J’s order, and the appellant’s solicitors coming off the record, the respondent’s solicitors kept the appellant informed of proceedings and served her with documents and disclosure. Despite the appellant’s inaction, the arrangements for the trial were discussed with her care home manager and arrangements made for her to attend via Skype. The only positive step that the appellant took was to file a six-page letter in opposition to the claim shortly before the trial in April 2020.
At the remote trial, the judge ensured that a care home worker was there to assist the appellant throughout including passing her notes of what was happening.
Cohen J had concluded at first instance that the deceased’s Will did not make reasonable financial provision for the respondent and that the award should be calculated by reference to what the respondent required ‘to meet her current financial needs’, but that it was not a case where the respondent should ‘in effect be set up with a home or income fund for life’. He therefore made an order that the personal representatives of the deceased should pay to the respondent out of the estate the total sum of £138,918, which included £16,750 for the respondent to meet a proportion of her success fee under a conditional fee agreement.
Appeal
The appellant appealed the judgment of Cohen J on two grounds, ie:
- whether the judge erred in proceeding with the trial in circumstances where the appellant, being deaf, was only able to attend remotely from her care home by Skype; and
- whether it was wrong in law for a judge to include a contribution in a maintenance-based award, calculated by reference to the financial need of the claimant, to a conditional fee agreement success fee.
The Court of Appeal took the view that the appeal needed to be considered against the following background:
- that the appellant had capacity to litigate and that despite legal advice she had failed to comply with rr8.4 and 8.6, CPR 1998 and had made no application to set aside the debarring order or for permission to participate in the hearing;
- all of the parties attended the trial remotely;
- the respondent had a legitimate claim, the outcome of which (save for the award toward the success fee) was not susceptible to appeal; and
- the award was a strictly needs based award.
Whether there was procedural irregularity
It was submitted on behalf of the appellant, that:
- despite being debarred from participating in the trial, she was still entitled to attend and that her attendance must be ‘meaningful’; and
- that in any event, she should have been entitled to make submissions in respect of costs.
The respondent’s position was that ‘the situation where a person has disqualified themselves from participating in the hearing by their conduct is wholly different from the duty to ensure effective participation by litigants who have engaged in proceedings.’ Further, the respondent’s solicitors had done everything in their power to ensure that the appellant was fully aware of what was happening and that she could attend the trial despite the debarring order.
King LJ considered there was no merit in the complaint that the appellant attended by video link. The appellant was in no worse position than any other litigant subject to a remote trial. The question therefore was solely whether the judge was wrong to allow the trial to proceed at all given the appellant was deaf. King LJ found that the judge had not been wrong to do so and that ‘…there is no obligation on a court proactively to manage the attendance of a debarred party’ (para 41).
Conditional fee agreement success fee
In his first instance judgement, Cohen J had considered the two competing cases on the recoverability of success fees, ieRe Clarke [2019], where Deputy Master Linwood declined to include the success fee in the award, and Bullock v Denton [2020], in which HHJ Gosnell made such provision.
In Re Clarke, Deputy Master Linwood held that to make such an award would be contrary to legislative policy and would put a conditional fee agreement claimant in a better position in terms of negotiation than a claimant in a personal injuries claim.
In Bullock, HHJ Gosnell, held that the ‘additional liabilities’ including the success fee fell into a different category from the costs incurred by both sides. He considered that in making an award the judge knows that the claimant has succeeded to a lesser or greater extent and that ‘success’ will trigger an obligation to pay additional liabilities to lawyers under the terms of a conditional fee agreement. He considered he was entitled to take such liabilities into account, as they fell within the claimant’s financial needs and were debts incurred since the death of the deceased.
Cohen J preferred the approach of HHJ Gosnell and though he acknowledged the risk of injustice, he considered that he should account for the success fee as a debt of the claimant. He did note however, that if the success fee was not actually triggered, then the award could be revisited.
King LJ similarly concluded that a success fee, which cannot be recovered by way of a costs order by virtue of s58A(6), Courts and Legal Services Act 1990, is equally capable of being a debt, the satisfaction of which is in whole or part a ‘financial need’ for which the court may in its discretion make provision in its needs based calculation.
However, she went on to caveat this,by noting that it would not always be appropriate to make such provision, unless the judge was satisfied that the only way in which the claimant had been able to litigate was by entering into a conditional fee agreement. Further, such provision should only be made to the extent necessary in order to ensure reasonable provision is made. Of importance was the fact that without such a contribution ‘one or moreof the claimant’s primary needs would not be met’.
Practice points
Remote hearings
The decision in Hirachand is instructive for a number of reasons over and above the Court of Appeal’s decision on the recoverability of success fees. The court’s approach to the first issue under appeal, and the lessons that can be learnt from it, is equally important.
In considering, whether the judge erred in proceeding with a remote trial with a deaf litigant in person, the court put great weight on three factors:
- the appellant’s own conduct;
- the conduct of the respondent’s solicitors; and
- the material effect of the trial continuing remotely.
In respect of the first of these points, it is clear that the court was distinctly unimpressed by the appellant’s unwillingness to co-operate or engage with the proceedings and notwithstanding appropriate legal advice she failed to file an acknowledgement of service on time. The appellant then went on to compound this procedural error by failing to meet a new deadline for filing the acknowledgement of service agreed by consent.
The consequence of this failure was the debarring order made by Lieven J. However, even with this, the appellant may have found some sympathy with the court, considering her position and disabilities, if she had applied for relief from sanctions and filed evidence in support of her position. However, she also failed to do this.
Rules 8.4 and 8.6, CPR 1998 allow the court to give permission for a defendant to take part in proceedings or rely on evidence out of time. Given the draconian nature of the punishment and the overriding objective at r1.1(2)(a), CPR 1998, the appellant may not have had that high a bar to persuading a court to grant relief.
However, in failing to take any steps to correct or explain her own failure, the appellant made it easy for the court to err on the side of enforcing compliance with rules, practice directions and orders and dealing with cases expeditiously (per r1.1(2)(d) and (f), CPR 1998) rather than ensuring the parties were on equal footing.
This point was emphasised by King LJ when she stated that debarring orders should mean what they say and ‘…a litigant who is debarred as a consequence of their own failure to comply with the rules cannot expect nevertheless to be entitled to have made available to him or her all the proper and carefully developed protections which have been put in place over the years to ensure that a participating party can put their case effectively’ (para 41, judge’s emphasis).
Further, the respondent’s solicitors conduct in providing assistance to the appellant, where possible, in ensuring she was served with and received, disclosure, witness statements and the trial bundle, as well as ensuring she could attend the trial, went a long way to mollifying any concerns that the court may have had over the appellant’s position. King LJ said (at para 42) that:
…the respondent’s solicitors did far more than could reasonably have been expected of them to ensure that the appellant had access to all relevant material and was able to attend the trial by Skype.
It is clear that if the respondent’s solicitors had not sought to facilitate the appellant’s attendance at the trial, a step she was unlikely to take on her own, then Cohen J and King LJ, may have been far more sympathetic with the appellant’s position and far more likely to conclude, despite the debarring order, that the appellant had not received a fair trial if it had proceeded in her total absence.
A further point to take from King LJ’s decision on the first ground of appeal is that the court was operating in the ‘real world’, and when considering her decision in all the circumstances of the case, she was at pains to consider the actual effect of the alleged error by Cohen J.
If the case had been adjourned, the appellant’s position would not have been any different. She still would not have been allowed to participate and as she was deaf, she still would not have been able to hear the proceedings. All she would have achieved was being in person and having a different person make notes for her other than the care home worker, who was assisting her. This was offset against the significant delay and cost increase that would have been incurred by any adjournment.
In the circumstances, given the above, it seems clear, in hindsight, that it was extremely unlikely that the court was ever going to conclude that Cohen J had erred in not adjourning the trial and that when considering an appeal, litigators should remember to look past the technical legal arguments that may be applicable and look at the ‘real world’ background to the issue as well as the likely consequences of success.
Costs
A critical point to take from this case is the willingness of the court to interpret debts widely, so as to bring success fees under the category of debts and out of the category of costs. In doing this the court was able to neatly sidestep the issue.
Both Cohen J and HHJ Gosnell acknowledged that a claimant’s cost liability for their own costs, or indeed the other side’s costs, following a successful defendant Pt 36, CPR 1998 offer, may undermine the provision of any award for financial provision.
By considering success fees in a different category from costs, and in taking the view that by making an award at all, the judge has decided that no reasonable provision has been made and will know that ‘the claimant is succeeding to a greater or lesser extent’ (para 46). The court will thus be able to bring success fees into the category of a debt to be paid in considering reasonable financial provision.
It may well be argued that this approach is highly artificial. A successful claimant will almost always have unrecoverable costs, which will often have to be paid out of the award, thus reducing it. As such, how are success fees any different? However, this argument misses the inherent balancing exercise that the court is trying to play in any I(PFD)A 1975 claim, and the potential injustice on both sides of the argument.
Awards in I(PFD)A 1975 claims are not always carefully crafted awards to meet a claimant’s needs, but can be more broad-brush approaches taking into account the s3, I(PFD)A 1975 factors to make some sort of reasonable financial provision for a claimant. In bringing success fees into this calculation, the Court of Appeal has empowered judges to help re-address some of the injustice that may be done to the most necessitous of claimant, who can only bring a claim via a conditional fee agreement. In such circumstances, a judge can avoid adding to the burden of meeting unrecoverable costs by allowing at least some of the success fee to be paid from the estate.
In doing this, the court is again taking a ‘real world’ approach and looking at the final position of the parties and the mischief that I(PFD)A 1975 was trying to meet.
The need to take a ‘real world’ approach and for judges to continue to carry out the balancing act inherent in all I(PFD)A 1975 claims, was re-emphasised by King LJ (at para 59), when she made it clear that it will not always be appropriate to include success fees in a reasonable financial provision order. The judge still needs to be satisfied that the only way a claimant can bring proceedings is via a conditional fee agreement and to consider the extent to which the claimant has ‘succeeded’.
While this caveat is a welcome relief to solicitors acting for defendants, it does raise some uncomfortable questions for claimant solicitors in relation what steps need to be taken to evidence that a conditional fee agreement was the only method of funding the claim. Evidencing this could be very difficult and there is a real risk that it would require the disclosure of privileged advice that all solicitors are required to provide on funding claims.
It also raises the question of how the court would treat the associated costs of other funding methods which were available in addition to a conditional fee agreement, such as a litigation loan. This is clearly a debt that the claimant has to meet, so should provision be made for it or at least for the interest from the estate?
Conclusion
This decision opens a number of avenues that solicitors acting for both sides will need to explore with their clients at an early stage. It is clear that this will be a live issue in future cases and will likely lead to satellite litigation, not least on what should and should not be disclosed relating to the funding of a claim.
Given King LJ’s comments that it will not always be appropriate to include success fees, it seems that the onus will likely fall on the claimant looking to recover a success fee to make sufficient disclosure to allow a judge to properly consider whether the recoverability of a success fee should factor into their decision.
Looking further ahead, and in light of King LJ’s comments comparing I(PFD)A 1975 claims to the approach to costs in financial remedy proceedings (see paras 51, 56, 58 and 63), it will be interesting to see whether there is further legislation to address the difference in the cost’s regimes applied to these types of cases. In the meantime, this decision simply highlights the many intricacies of I(PFD)A 1975 cases and the inherent uncertainty of taking these matters to court given the wide discretion that judges have in assessing reasonable financial provision.
As a final point, it is interesting to note the application of Hirachand in Higgins v Morgan [2021], which involved a successful claim under I(PFD)A 1975 and the recoverability of a success fee pursuant to a conditional fee agreement. In this case, the court agreed that the claimant’s liability for the success fee must form part of their financial need.
Cases
- Hirachand v Hirachand & Anor [2021] EWCA Civ 1498
- Re Clarke [2019] EWHC 1193
- Bullock v Denton [2020] Lexis Citation 191
- Higgins v Morgan and ors [2021] EWHC 2846 (Ch)
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