Blankley v Central Manchester And Manchester Children's University Hospitals NHS Trust

Supervening mental incapacity does not ordinarily frustrate a solicitor’s retainer or a conditional fee agreement, even if it terminates the solicitor’s actual authority to act. Frustration requires performance to have become impossible or radically different from the contractual undertaking, and the doctrine is narrowly confined.

Where the parties knew that a client’s capacity fluctuated, instructions could be given through a litigation friend, receiver or deputy. The client’s inability to instruct personally therefore caused, at most, a short delay. Contractual provisions dealing with instructions and termination, together with the omission of any incapacity termination clause, supported the conclusion that the agreement continued.

The claimant brought a clinical negligence claim against the defendant Trust. After liability was resolved, she regained capacity and entered into a conditional fee agreement with her solicitors. She later lost capacity again, and a receiver, subsequently a deputy, was appointed to conduct the proceedings on her behalf.

Following settlement, the Trust disputed costs incurred after the claimant lost capacity, arguing that the agreement had automatically terminated by frustration. A Regional Costs Judge accepted that argument. On linked appeals, Phillips J held that the agreement was not frustrated, but rejected the claimant’s alternative arguments. The Trust appealed to the Court of Appeal, which considered whether supervening incapacity frustrated the underlying retainer, assuming that it terminated the solicitor’s actual authority.

1. Appeal dismissed. The Court of Appeal upheld the finding that the conditional fee agreement was not frustrated. The alternative issues raised by the claimant’s respondent’s notice were not argued because the Trust’s principal ground failed.
2. Applicable test. Frustration, under Davis Contractors Ltd v Fareham Urban District Council [1956] AC 696 and J Lauritzen AS v Wijsmuller BV (The Super Servant Two) [1990] 1 Lloyd’s Rep 1, requires an external event, without fault, which makes performance impossible or radically different from the contractual undertaking. The doctrine operates automatically, but is confined within narrow limits and cannot be invoked lightly. The court must construe the contract and consider whether it covers the new situation.
3. Application to the retainer. Even assuming that loss of capacity terminated the solicitor’s actual authority under Yonge v Toynbee [1910] 1 KB 215, that did not determine whether the underlying contract of retainer was frustrated. The CFA had been made when the claimant’s fluctuating capacity was known. The parties must therefore have contemplated that instructions might later be given by a litigation friend, receiver or deputy. The inability to give personal instructions did not make performance impossible or radically different. It created only a short period of delay while an appropriate representative was appointed.
4. Contractual provisions and surrounding circumstances. If personal instructions were required, the CFA expressly dealt with failure to provide instructions and specified the solicitors’ contractual remedies. The situation was therefore addressed by the contract. The possibility of incapacity was reasonably foreseeable; the agreement expressly provided for termination on death but not incapacity; and the retainer was less personal than a contract of employment because a deputy could assume the client’s role. These considerations reinforced the conclusion that frustration was unavailable.
5. Findley. Findley v Barrington Jones [2009] EWHC 90130 (Costs), which reached the opposite conclusion, was based on a misreading of Yonge v Toynbee and did not apply the governing frustration principles. It was therefore not followed.
6. Unresolved agency issue. The court expressly left open the wider question whether supervening incapacity terminates or merely suspends a solicitor’s authority, noting the uncertainty identified in Dunhill v Burgin (Nos 1 and 2) [2014] UKSC 18. That issue was unnecessary to the determination of the appeal.

• Court of Appeal (Civil Division). The Trust’s appeal was dismissed. The court upheld the conclusion that the conditional fee agreement was not frustrated.
• High Court, Queen’s Bench Division. On linked appeals from the costs decisions, Phillips J held that the agreement was not frustrated: [2014] EWHC 168 (QB); [2014] 1 WLR 2683.
• Regional Costs Judge. The defendant’s contention that the CFA had terminated when the claimant lost capacity was accepted, and the claimant’s alternative bases for recovering costs were rejected.