Loss of capacity does not terminate solicitor’s retainer, High Court rules

High Court: unjust and unreasonable

A client’s loss of mental capacity in the course of proceedings does not automatically terminate their solicitor’s retainer, the High Court ruled yesterday.

Mr Justice Phillips acknowledged that his decision was particularly important for solicitors conducting pre-April 2013 personal injury claims under conditional fee agreements (CFAs), given the change in recoverability.

Overturning the first instance ruling of Regional Costs Judge Harris in Manchester, he said that whilst incapacity has the effect of removing the authority of a solicitor to act on behalf of the party lacking capacity for the duration of that incapacity, “such authority can be restored when a deputy is appointed and provides instructions to the solicitors in that capacity, or otherwise if and when the claimant regains capacity.

“There is no reason, as a matter of authority or legal principle, why an inability to instruct solicitors in the intervening period (which may be quite short) should be taken to have the effect of immediately ending a solicitor’s retainer.”

The case, Blankley v Manchester NHS Trust [2014] EWHC 168 (QB), involved a clinical negligence claim that started in 2002 with the client lacking capacity, then regaining it in May 2005, only to lose it again in February 2007. The costs of Manchester firm Linder Myers under dispute for the period when she had capacity were £185,000.

Phillips J considered the issues of capacity and contractual frustration. He said: “The supervening inability of a party to give instructions personally, with the likelihood (if not the certainty) that a deputy will be appointed, does not change the nature of the contract of retainer, radically or even significantly.” Any delay caused would not on its own frustrate the contract, he noted.

The judge added: “The possibility that the client will at some point lose mental capacity is plainly a matter which was within the reasonable contemplation of the parties. The fact that the CFA here contained an express provision that the retainer would terminate on the death of the claimant, far from supporting the case that supervening incapacity was a frustrating event, indicates that the parties did not regard incapacity of the claimant as something which should bring the contract to an end.”

He also ruled that it would be “unjust and unreasonable” to treat a retainer as terminated by reason of what may be a fleeting period of incapacity.

To do so would be contrary to the principle that the doctrine of frustration should be confined within narrow limits and cannot be lightly invoked. “It would result in the frequent termination of retainers (on the basis of arguments advanced by a non-party to the contract, such as the defendant) where neither party wished that to be the outcome and neither saw any difficulty in continuing to perform their obligations.”

Mark Walmsley, senior costs draftsman and head of costs management at Linder Myers, said: “This was a significant ruling which challenges previously held judgments that a solicitor’s retainer is automatically terminated if a client becomes incapacitated during proceedings.

“In this particular case, the claimant had suffered significant brain injury as a result of medical negligence so it was reasonable to expect that there was a risk that she would lose mental capacity after temporarily regaining it. Linder Myers acted properly when this occurred and continued to win a substantial amount of compensation.”

Phillips J sat with Master Campbell and Colemans-ctts partner Greg Cox as assessors.

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