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Written on 8th April 2015 by Ruth Meyer

Last year, the Court of Appeal handed down a judgement regarding an appeal in a case that concerned a claimant with a fluctuating capacity to conduct legal proceedings.

“Loss of capacity”

The question considered by the Court was whether a “loss of capacity has the automatic and immediate effect of terminating their solicitor’s retainer”.

This question of capacity is central to all Court of Protection work, and it is interesting to see how issues of capacity are dealt with across the judicial system.

This case began in 2002, when a patient brought proceedings claiming damages for clinical negligence. This was a complex and contested case, and it was not until February 2005 that the parties agreed that judgement should be entered for damages to be assessed on the basis of 95% liability.

Conditional Fee Agreement

At the commencement of proceedings, the claimant was deemed to lack the mental capacity to instruct solicitors and therefore she acted through her father as her litigation friend. However, when the claimant regained mental capacity in May 2005 her legal aid certificate was discharged and she immediately entered into a Conditional Fee Agreement (CFA) with her solicitors. As this was prior to the changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, the claimant’s solicitors were entitled to recover a success fee from the defendant upon the settlement of her claim.

Appointment of a deputy

However, in February 2007, the claimant was again assessed as lacking mental capacity and the Court of Protection appointed a receiver who then became the claimant’s deputy with the introduction of the Mental Capacity Act. The deputy continued to liaise on behalf of the claimant with the litigating solicitors with regards to the ongoing clinical negligence claim.

After a considerable time, the quantum proceedings were settled and approved by the Court. As such, the claimant’s solicitors entered their Bill of Costs for assessment by the Court. Unfortunately, following a dispute from the defendant, the bill was required to be amended to exclude all costs claimed following the claimant’s loss of capacity in 2007.

The Judge commented that the decision in Findley v Barrington Jones [2009] (where it was found that a claimant who lost capacity was no longer able to give instructions and therefore the contract of retainer was frustrated) supported the defendants dispute and this led him to the “desperately unfair” conclusion that the claimant’s solicitors should be deprived of their costs, following their client’s lack of capacity.

Application for appeal

The claimant’s solicitors then applied for an appeal, which was eventually granted as a re-consideration on the basis that the arguments put forward were recognised to be of considerable importance. Mr Justice Phillips found that the defendant’s application to disallow the claimant’s solicitor’s costs following the loss of capacity in 2007 should be dismissed. He gave detailed responses to all of the points raised, and in some instances was in agreement with the initial judgement. However, the fundamental question remained as to whether a change to incapacity should terminate a solicitor’s retainer.

Change to mental capacity

The Judge held that a change in mental capacity does not automatically terminate a solicitor’s retainer. Contracts entered into by a mentally incapacitated person are not void, but voidable. Therefore, “as a contract is not void even if one party lacked mental capacity when it was made, it cannot be the case that subsequent mental incapacity would in itself automatically terminate the contract as a matter of operation of law”.

Further to this, in cases of a loss of capacity where a claim is ongoing a deputy will be put in place in the short term, until capacity is regained. A loss of capacity is also a possibility that should be understood by both parties, and should therefore not be a situation that would frustrate the contract should it occur.

Fluctuating mental capacity and the Court of Protection

For clinical negligence and personal injury solicitors this is an important judgement that gives clarity on the issue of fluctuating capacity, which is one that is likely to be present in many cases that they take on.

For deputies and those working the Court of Protection, it is equally important to be aware of the importance of confirming the validity of any pre-existing contracts that were entered into, prior to the loss of capacity. Clarification as to whether a contract is still valid, and then taking steps to make a new contract if required, will avoid potentially costly situations such as the one above.