The Supreme Court has today handed down judgment in the long awaited appeal of Hirachand v Hirachand.

The unanimous decision of the Supreme Court concludes that, in determining the appropriate relief to be awarded in a 1975 Act claim, a judge cannot include any allowance for a success fee - overturning the Court of Appeal decision and the judgment at first instance. 

The facts (in brief) are that the impecunious claimant (the deceased's adult estranged daughter) was awarded £138,918 from her father's estate, which included a contribution towards her success fee as the judge concluded this formed part of her “financial needs” to which the Court must have regard in determining her claim under the 1975 Act.

The rationale for the Supreme Court's decision in rejecting that success fees can form part of an award is that: 

1. Litigation costs can only be recovered by a separate costs order, not as part of a substantive award or damages - given the focus on the making of offers in civil proceedings, it would undermine the costs regime contained in the CPR if a party could recover base costs as part of their substantive award (for example, if the claimant had failed to beat a Part 36 offer at trial that would not necessarily be known to the judge at the time of making the substantive order).
2. Conditional fee agreements (CFAs) were identified as a major contributor to disproportionate costs in litigation by the Jackson reforms which led to the prohibition on the recovery of success fees by section 58A(6) of the Courts and Legal Services Act.

The Supreme Court dismissed outright the Court of Appeal's analogies with awards in financial remedy proceedings where the general rule is the “no order principle”. 

Whilst the conclusion may not come as a surprise to practitioners familiar with the costs regime under the CPR, it does leave the impecunious claimant in somewhat of a dilemma - if they have no option but to pursue their claim via a CFA (which is often the case with claimants under the 1975 Act and was certainly the case for Ms Hirachand), the risk is that their success fee will erode a substantial part of any award or settlement (which will in turn undermine a judge's attempt to ensure that any award meets their financial need). 

Conversely, it potentially leaves the defendant to a 1975 Act emboldened, knowing that the success fee will impact on the claimant's ability to pursue a claim to trial. 

Positively, this decision does remove any uncertainty about the position and the ability of the unmeritorious claimant to use a CFA as some kind of leverage.