Court of Appeal recognises client capacity in entering CFAs

The Court of Appeal has upheld a High Court ruling that a conditional fee arrangement (CFA) was not terminated by reason of frustration after a client lost capacity.

The court's ruling in Blankley v Central Manchester And Manchester Children's University Hospitals NHS Trust [2015] EWCA Civ 18, has been hailed by lawyers as a 'common sense decision' that provides 'useful clarification' to the issue of client capacity to enter into CFAs.

Diann Blankley 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. Two years later the parties agreed that judgment should be entered for the claimant, but she was subsequently diagnosed as lacking mental capacity.

In addition, the hospital contested the costs bill, arguing that 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.

At first instance, the deputy district judge said he was bound by Yonge v Toynbee [1909 1KB 215]. This was, however, overturned in the High Court by Mr Justice Phillips who held that the intervening incapacity did not frustrate or otherwise terminate a solicitor's retainer.

Commenting on the Court of Appeal's judgment, Trevor Ward, head of bodily injury at Linder Myers Solicitors, said: "In this particular case, our client 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. This is the first time that a challenge has been brought in relation to whether a CFA is frustrated if a claimant loses mental capacity post signing an agreement.

"[The] Court of Appeal judgment, following the defendant's appeal against the same decision last year, has once again provided useful clarification, amongst other things, that the standard CFA documentation is not terminated by such supervening incapacity. This gives comfort to both claimants and their advisors pursuing claims for severely injured victims."

Sue Nash, chairman of the Association of Costs Lawyers, said: "This is a common sense decision that recognises the practicalities of the situation where a client loses capacity. It will lead to swifter access to justice in that there will be no need to enter into a further funding arrangement and it should also avoid further satellite litigation."

The Court of Appeal's full ruling can be read here.