At a time when the claimant had had capacity, she had entered into a conditional fee agreement with a firm of solicitors in respect of proceedings that she had issued. She subsequently lost capacity. She succeeded in her claim and her solicitors submitted their bill of costs. The defendant disputed the costs that related to the period when the claimant had been acting through the deputy appointed on her behalf. 

Blankley v Central Manchester and Manchester Children’s University Hospitals NHS Trust: Court of Appeal, Civil Division: 27 January 2015

Solicitor instructed by claimant in personal injury claim under conditional fee arrangement (CFA) – Claimant losing mental capacity – Deputy being appointed over claimant’s affairs – Claimant succeeding in proceedings – Solicitor submitting bill of costs to seek recovery from defendant

Due to apoxic brain damage that had occurred during a suction termination and laparoscopic sterilisation, the claimant had fluctuating capacity to conduct legal proceedings in respect of alleged medical negligence on the part of the defendant NHS Trust. At a time when she had capacity, she retained a firm of solicitors (LM) under a conditional fee agreement (CFA).

Following an earlier agreement on liability and judgment having been entered for the claimant, the issue was limited to that of quantum. The CFA was in a Law Society model form (see [8] of the judgment) and was expressed to cover the claimant’s claim against the defendant, any appeal and any proceedings to enforce a judgment, order or agreement. It provided that if the claimant won her claim, she would pay the firm’s basic charges, its disbursements and a success fee of 25%.

Further, she was entitled to seek recovery of those costs from the defendant. Subsequently, further psychiatric assessments determined that the claimant had, once again, lost capacity. The Court of Protection made an order appointing a partner at LM as her deputy with express authority to conduct the proceedings on her behalf. The quantum proceedings eventually resulted in a settlement being approved by the court in the sum of £2.6m plus costs. LM submitted a bill of costs on behalf of the claimant in the total sum of £372,724 inclusive of disbursements.

The defendant disputed those parts of the bill that related to the period when the claimant had been acting through her deputy. It contended that the CFA had terminated automatically before that time as a result of the claimant’s incapacity, having left LM without any retainer. The regional costs judge accepted the defendant’s contention. The claimant appealed to the High Court. The judge held that the CFA had not been frustrated or otherwise terminated by reason of the claimant’s supervening incapacity (for the judge’s reasons, see [24] of the judgment). The defendant appealed.

The defendant submitted that the supervening incapacity of a principal terminated the authority of an agent to act on the principal’s behalf. A solicitor’s contract of retainer was at its heart a contract of agency. If the authority to act on behalf of the client was lost, the contract that gave rise to the agency could not survive.

More particularly, a contract of retainer was personal in nature and depended on the ability of the client to give instructions to the solicitor. In the present case, the claimant’s supervening incapacity had created a situation in which she had been unable to give instructions; and, for the purposes of the retainer, instructions could not have been given on her behalf by a deputy subsequently appointed to act for her. 

Her inability to give instructions had meant that the contract had become incapable of performance and had, therefore, been frustrated. In a case of fleeting incapacity the contract would still have been capable of performance, but the final medical assessment that the claimant had no longer had capacity had not been time-limited.

The appeal would be dismissed.

The parties had to have contemplated, in the particular circumstances of the present case, that the claimant might suffer from a further bout of incapacity in which she would be unable to give instructions personally, but they could be given by a litigation friend or deputy on her behalf. The fact that supervening incapacity had prevented the claimant from giving instructions personally had not rendered the contract of retainer impossible of performance; it had simply given rise to a short period of delay pending appointment of a deputy who could continue the conduct of the proceedings on the claimant’s behalf and give instructions to the solicitors for that purpose.

If the claimant had been under an obligation to give instructions personally and had been unable to comply with that obligation by reason of her supervening incapacity, the situation was covered by the express terms of the CFA, which entitled the solicitors in that event to end the contract and to require payment of their basic charges and disbursements. 

The unattractiveness of such a result was a further indication that it could not have been the intention of the parties that the claimant had to give instructions personally; but if that had been their intention, and the situation arose in which the claimant was unable to give such instructions, the contract catered expressly for the consequences and it could not possibly be said that that was a fundamentally different situation from anything contemplated by the contract. Further, the judge had been correct in his reasoning (see [38]-[40], [43], [44] of the judgment).

Decision of Phillips J [2014] 2 All ER 1104 affirmed.

Richard Spearman QC and Vikram Sachdeva (instructed by Linder Myers LLP, Manchester) for the claimant; Alexander Hutton QC and Matthew Smith (instructed by Clyde & Co LLP) for the defendant.