LACK OF CAPACITY – A TRAP FOR LAWYERS REMOVED?

 By John M. Collins

 

Increasingly, nowadays, solicitors find themselves acting in personal injuries claims for people who may lack mental capacity.  This may or may not be the result of the injuries that they have suffered.  Unquestionably, the fact that persons may be at one stage fully capable of conducting litigation and at another stage not presents real difficulties for a solicitor. We have seen recently a settlement set aside because the Claimant, who did not have a Litigation Friend, but did not have capacity could not settle the claim. See the recent local case of Dunhill v Burgin in the Supreme Court, [2014] 1WLR 933.  So solicitors face a potentially disastrous situation. 

Furthermore, they need no reminding of the leading case of Yonge v Toynbee [1910] 1KB215, namely that supervening insanity of the client annuls the agency of the solicitor, even if the solicitor does not know that his client has become insane.  An agent’s actual authority terminates automatically and immediately on the mental capacity of his principal.  The solicitor may therefore be liable for breach of warranty of authority.

However, in the recent case of Blankley v The Central Manchester and Manchester Children’s University Hospitals NHS Trust [2014]1WLR 2683, Phillips J restored an element of common sense to the situation.  The essential facts are simple.  The Claimant underwent an operation at St Mary’s Hospital, Manchester, which resulted in cardio-respiratory arrest and anoxic brain damage.  She commenced a claim as a patient with a Litigation Friend and Messrs Linder Myers acted as her solicitors.  Eventually the parties agreed that judgment should be entered for her for damages to be assessed on the basis of 95% liability.  By May 2005 she had regained mental capacity and an order was made that she should carry on the proceedings without a Litigation Friend.  She entered into a CFA with Linder Myers.  Unhappily, in February 2007 it was determined that she no longer had mental capacity to conduct her own affairs and could not provide instructions in relation to her ongoing claim.  So it was arranged for the appointment of a partner in Linder Myers to be the Claimant’s Receiver with authority to conduct the proceedings on the Claimant’s behalf.  At the end of the litigation, Linder Myers submitted a costs bill, but the Defendant Hospital Trust contended that the costs relating to work carried out after the appointment of the Receiver were not recoverable because as a result of the Claimant’s mental incapacity, the Conditional Fee Agreement had automatically terminated.  Following Yonge v Toynbee, the Judge agreed with that contention.  Indeed, there was a case, Findley v Jones [2009] EWHC90130 (Costs), where the Senior Costs Judge had held that where a Claimant lost capacity so that he was no longer able to give instructions, the contract of retainer was at that moment frustrated. 

Phillips J allowed the appeal and rejected as incorrect the decision in Findley v Jones. He held that since a contract entered into by a mentally incapacitated person was not void but only voidable, the supervening mental incapacity of a party to a contract would not in itself automatically terminate the contract.  He accepted that the supervening mental incapacity of the solicitor’s client would have the effect of terminating his authority to act on behalf of his client for so long as incapacity occurred, but it did not in itself frustrate the underlying contract of retainer.  Accordingly, the Conditional Fee Agreement, which had been validly made when the Claimant had capacity, was not automatically terminated, but continued notwithstanding the supervening mental incapacity.

It will therefore be seen that so long as the solicitor enters into a contract with a client, that contract will continue, notwithstanding the client loses capacity.  Of course, the solicitor should immediately take steps, as soon as he or she is aware that the client has lost capacity, to have at the very least a Litigation Friend appointed, and if the solicitor fails to do so, the solicitor will be liable in negligence. 

There was a further point made in Blankley which is also helpful to a solicitor faced with this problem.  Under Mental Capacity Act 2005 s.7, a person who lacks mental capacity to contract for the supply of goods or services, if he is supplied with necessary goods or services, must pay a reasonable price for them.  In other words, any goods or services which are suitable to a person’s condition in life and to his actual requirements at the time when the goods or services are supplied are necessaries.  That includes the services of a solicitor.  So the solicitor may be able to obtain his or her costs from the client under section 7, quite apart from the rights under contract.

There are still hazards in acting for a person who lacks capacity, but those hazards

have been significantly reduced.

 

JOHN M. COLLINS

 

Zenith Chambers

10 Park Square

Leeds

LS1 2LH

29 August 2014