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Mental incapacity does not terminate retainer

Ruling will provide reassurance to personal injury solicitors acting on the basis of a conditional fee agreement entered into before April 2013

10 February 2014

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A client's mental incapacity does not automatically terminate their solicitor's retainer, the High Court has ruled in a case likely to be welcomed by personal injury lawyers acting under a conditional fee agreement entered into before 1 April 2013.

Diann Blankley had entered into a 'no win, no fee' agreement with Linder Myers to pursue compensation for injuries suffered during an operation at Manchester's St Mary's Hospital.

About two years later the parties agreed that judgment should be entered for the claimant, with damages being assessed at 95 per cent, but she was then diagnosed as lacking mental capacity, leading to one of the firm's partners being appointed her receiver - and then her 'deputy' after a change to the Mental Capacity Act 2005.

In the meantime, the hospital contested the costs bill, arguing the CFA had automatically terminated following the diagnosis of incapacity, leaving Linder Myers without a retainer and a bill for its own costs of £185,000.

"Whilst such incapacity does have the effect of removing the authority of the solicitor to act on behalf of the party lacking mental 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," Mr Justice Phillips held in Blankley v Central Manchester and Manchester Children's University Hospital NHS Trust [2014] EWHC 168 (QB).

"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," Phillips J said.

At first instance, the deputy district judge said he was bound by the 1909 Yonge v Toynbee case that "the loss of capacity in itself terminates the contractual arrangements, and therefore it is necessary for the claimants to show that the process that they entered into is one that would show the retainer was maintained."

Overturning this finding, Phillips J said where an agent's authority was based on a contractual arrangement, as was the case with a solicitor's retainer, it was clear that the underlying contract did not automatically terminate as a result of mental incapacity.

"It is even clearer in my view that a retainer such as the CFA in this case entered into with a person known to have fluctuating capacity, is not frustrated by the loss of such capacity," he said.

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