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CFA Costs Allowed in second 1975 Act Claim

Legal Update by Marisa Lloyd

 

Re H (Deceased), SH v NH and KH [2020] EWHC 1134 (Fam) was a claim under the Inheritance (Provision for Family and Dependants) Act 1975 heard on 24 April and 24 May 2020 before Cohen J. The successful adult claimant was awarded a contribution of 25% to her CFA uplift by Cohen J as part of her claim. Re H was a case heard hot on the heels of Bullock v Denton in which the successful adult claimant in a 1975 Act claim was also awarded a cost contribution as part of her award.

 Bullock v Denton was heard before HHJ Gosnell in Leeds County Court from 9 - 12 March 2020,with judgment just 9 days prior to start of the hearing in Re H.  In Bullock v Denton, the Claimant had entered into a Damaged Based Agreement (“DBA”) with her first set of solicitors with whom she subsequently parted company, and a Conditional Fee Agreement (“CFA”) with a second set of solicitors. Submissions were made that the liability of the claimant for her costs should be considered as part of her needs. Whilst it was arguable that she may be liable for irrecoverable costs under both the DBA and CFA, HHJ Gosnell disregarded the DBA liability (the enforceability of which he indicated may be open to challenge), but did consider the successful claimant’s liability under the CFA without being aware of the precise figure to include trial. The claimant’s liability to pay the success fee represented a 50% uplift on the costs. HHJ Gosnell was told that costs stood at £24,000 plus VAT around 9 months before the trial and therefore made an award of £25,000.

 In Re H Cohen J considered the claimant’s costs position as part of her award and prior to considering any relevant Part 36 offers (which he recognised could be problematic). The claimant had entered into a CFA with her lawyers giving them an uplift of 72% in the event of a successful claim. Whilst the uplift as a matter of law cannot be ordered to be paid to the claimant by a losing party, Cohen J was invited to make an order that an additional £48,175 formed part of the award in order that the claimant’s needs based award would not be reduced by the debt owed to her lawyers.

 In submissions, Cohen J was referred to both the case of Re Clarke [2019] EWCH 1193 (Ch) and the case of Bullock v Denton. In the former, Deputy Master Linwood sitting in the Chancery Division declined to increase an award made under the 1975 Act to include a success fee on 5 stated grounds:

 i) The calculation of damages is a matter of procedure carried out before costs are considered and has never included an element of costs;

ii) To allow it would be contrary to legislative policy that the losing party should not be responsible for the success fee - s58(A)(6) Courts and Legal Services Act 1980.

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

iv) It may put a CFA funded litigant in a better position in terms of negotiation due to the risk of the substantial costs burden;

v) It would put a Claimant in Inheritance Act proceedings in a better position than, say, a claimant in a personal injuries claim.

 In Bullock v Denton, It would not appear that HHJ Gosnell was referred to Re Clarke.  In any event he noted that [91] “neither Counsel produced any binding authority on this issue, perhaps because it has not been specifically considered before”. He did however consider in detail in his judgment the comments of Briggs J (as he then was) in Lilleyman and Lilleyman [2013] Ch 225 where there was consideration of how to deal with the parties contingent liabilities for costs. Briggs J stated inter alia [71]:-

 “The above summary of the net estate ignores the … contingent liability for the costs of these proceedings, which I am unable either to quantify or to guess as to their likely incidence, as between the estate and Mrs Lilleyman. Counsel were united in submitting that I have no alternative but to leave the contingent costs liabilities entirely out of account, however unrealistic  in the real world that might prove to be.”

 HHJ Gosnell also referred to the obiter comments of Briggs J in his separate judgment on costs when he observed the possible disadvantage that the civil costs regime applicable to 1975 Act claims may inflict on a successful Claimant in such proceedings, in contrast to the costs regime applicable to financial provision on divorce (Lilleyman v Lilleyman [2012] 1 WLR 2801). He concluded that the success fee that the claimant would have to pay to her solicitors were part of her future financial needs under the 1975 Act, accepting that they were a debt incurred since the death of the Deceased. He concluded that he was entitled to take them into account because :-

 i) They fall within the Claimant’s financial needs under section 3(1)(a) of the 1975 Act, and

ii) They are debts incurred since death and the court is enjoined to make the assessment under the 1975 Act at the date of trial and not at the date of death (section 3(5).

 Whilst he recognised that it would be wrong in principle to make an award that effectively indemnified the Claimant, he was told that the uplift had been around £24,000 plus VAT on 7 June 2019, and therefore made an award of a £25,000 on the basis that it was a contribution.

 In Re H,Cohen J considered Re Clarke, Bullock v Denton and the orbiter comments of Briggs J in Lilleyman  and Lilleyman. He concluded that he would adopt the same approach as HHJ Gosnell, as it would not be fair on the Claimant for him to ignore her costs liability. Whilst doing so, he recognised the risk of an injustice to the estate if an appropriate Part 36 offer had been made. In order to mitigate against such an injustice, he stated that if the award did not bring about the operation of the uplift, he would revisit the element of the award allowing the costs contribution. Whilst the uplift was 72%, Cohen J allowed what he referred to as the sum required to meet what he regarded as a reasonable CFA mark-up of £16,750 which equated to an uplift of 25%.

 It is unclear whether Re H will be appealed, but there appears to be a real change in the approach of the courts to 1975 Act claims which in effect override the Jackson Reforms. The recent cases highlight the real tension between an award that is intended to provide for the future financial needs of a successful claimant; the claimants liability to meet irrecoverable costs out of future financial provision and the position of an unsuccessful Defendant.

 The position of the parties where a Part 36 offer has been made (and potentially not beaten) and where a Claimant with unrealistic expectation has refused to mediate, may further muddy the waters if the approach to awards including a costs contribution is maintained. In essence making an award which contains a contribution to costs, prior to addressing offers and potential unreasonable refusals to mediate, may be seen as putting the cart before the horse.

 Whilst I understand there has been no appeal in the case of Bullock, some consideration of the issue from the higher courts would be welcome by practitioners dealing with 1975 Act claims. In the meantime, without any appeal and judgment from the higher courts clarifying the issue, claimant’s will continue to argue for the payment of the uplift element of their costs to be made part of their 1975 Act claim awards.

by Marisa Lloyd

 

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