The termination of a solicitor’s actual authority by reason of a client’s supervening mental incapacity did not, it itself, automatically frustrate the underlying contract of retainer.

Phillips J, sitting in the Queen’s Bench Division, so held in allowing an appeal by the claimant, Diann Blankley, by her litigation friend Andrew M. G. Cusworth, against a decision of Judge Harris, sitting in the Manchester District Registry on 8 August 2011, in which he held that as a matter of law, the claimant’s supervening mental incapacity automatically frustrated and terminated a contract of retainer she had entered into with her solicitors. Judge Harris struck out those parts of the claimant’s costs bill relating to work undertaken by the solicitors after 6 March 2007 in relation to her claim against the defendant, Central Manchester and Manchester Children’s University Hospitals NHS Trust.

The claimant suffered brain damage at the defendant’s hospital and, in 2002, brought a claim for damages. She acted through her father as litigation friend. In 2005 judgment was entered for the claimant with damages to be assessed. By May 2005 the claimant had regained mental capacity and an order was made that she carry on the proceedings without a litigation friend. In July 2005 the claimant’s legal aid certificate was discharged and she entered into a conditional fee agreement (“CFA”) with her firm of solicitors (“LM”). In February 2007 it was determined that the claimant no longer had the mental capacity to conduct her own affairs or to provide instructions and on 6 March 2007 a partner in LM was appointed as the claimant’s receiver. The quantum proceedings were concluded and LM submitted a costs bill on behalf of the claimant. Part of the claimant’s costs bill related to a period after 6 March 2007 when she was acting through her receiver. The defendant contended that no costs were recoverable in relation to work done and disbursements incurred for that period on the ground that, as a result of the claimant’s mental incapacity, the CFA had automatically terminated.

PHILLIPS J said that it was established that supervening mental incapacity of a principal had the effect of terminating the actual authority of his agent. However, where an agent’s authority arose from a contract, such as a contract of retainer between a solicitor and client, a further question arose as to whether the supervening mental incapacity also had the effect of terminating the underlying contract. A contract was not void even if one party lacked mental capacity when it was made, so it could not be the case that subsequent mental incapacity would, in itself, automatically terminate the contract. Applying the principles governing the frustration of contracts set out in J Lauritzen AS v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1, it was clear that termination of a solicitor’s authority by reason of mental incapacity did not, in itself, frustrate the underlying contract of retainer. The appeal was allowed.