The Inheritance (Provisions for family and Dependants) Act 1975 (Act) allows certain individuals to bring claims against a Deceased’s estate for reasonable financial provision when that individual has not been adequately provided for by the Deceased’s estate. More information surrounding these claims can be found in our previous blog here.
In claims made pursuant to the Act, the general costs rules set out in the CPR apply, being that the loser pays the winning party’s costs. The Courts do, however, have ultimate discretion and when making costs awards will consider the parties’ conduct and without prejudice offers. Given the Court’s discretion, the cost outcome may not always follow the outcome of the overall case; by way of example, if the claim is successful but a claimant fails to beat an early costs offer, the claimant may not be awarded the recovery of their costs.
The matter of costs in any claim falling within the CPR should be considered after the final decision has been made. This allows the Court to then consider any without prejudice correspondence and make a costs order they find appropriate in the circumstances. This was not initially the position in the recent case of Jassal v Shah (as executor and beneficiary of the estate of Fiaz Ali Shah) and another. However, this was a claim brought by the Deceased’s partner as a cohabitee who had failed to be provided for under the terms of the Deceased’s Will.
Jassal v Shah (as executor and beneficiary of the estate of Fiaz Ali Shah)
Background
The claim was defended on the basis that the Claimant did not co-habit with the Deceased and was instead registered as living at another property. The Claimant confirmed this was only the documented position and admitted to such a position arising out of benefit fraud. The Court preferred the evidence of the Claimant and the Claimant was awarded a half share of the Deceased’s property and a further award of £385,000.
The £385,000 was calculated on the basis the Claimant’s financial needs were assessed to be £435,000, which would be reduced to £345,000 after taking into account the half share of the property, and then there would be a further reduction of £100,000 as a result of the Claimant’s benefit fraud however there would be a further sum of £140,000 to cover the Claimant’s legal costs. On the basis that the Claimant’s legal costs were accounted for within the award itself, there was no order as to costs. This conclusion conflicted with the general costs position as the Judge sought to deal with the matter of costs within the financial award and the award was appealed by the Defendants on that basis.
On appeal, the Court noted that when considering a claim made pursuant to the Act, the Court is required to take into account a claimant’s financial needs, which would include their obligation to pay litigation costs. The Court further noted that these claims are subject to the CPR and therefore the usual CPR rules regarding costs should apply, meaning costs are dealt with subsequently. Deviating from that position would undermine the process of negotiations as without prejudice offers would not otherwise be considered. The Court therefore allowed the appeal and reduced the Claimant’s award to £245,000 so that costs could be dealt with separately. The Court went on to consider the matter of costs and with the Claimant’s claim being successful overall, awarded recovery of costs against the estate on the standard basis.
Comment
This case confirms that claims brought pursuant to the Act are subject to the usual CPR rules of cost recovery and therefore costs should be considered after the event. Whilst the Court appreciated the reason for the initial decision, it was felt until the legislation was changed to allow costs to be assessed on that basis, they must stick to the usual rules. As we all eagerly await the decision in Hirichand v Hirichand, this case reaffirms that parties should at all times consider whether or not a claim is suitable for settlement outside of Court as failure to engage in negotiations may result in an adverse costs order undoing the work of any financial award attained.
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