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

This case concerns a claimant with fluctuating capacity to conduct legal proceedings. At a time when she had capacity, she retained a firm of solicitors under a conditional fee agreement (“CFA”). The issue is whether the CFA terminated automatically by reason of frustration when she subsequently lost capacity, so that it did not govern the continued conduct of the proceedings by a receiver/deputy appointed by the Court of Protection to act on her behalf. Phillips J, sitting in the Queen’s Bench Division with assessors, held in a clear and cogent judgment that the CFA was not frustrated (see [2014] EWHC 168 (QB), [2014] 1 WLR 2683). Permission to appeal was granted by Jackson LJ. At the conclusion of the hearing of the appeal we announced that the appeal would be dismissed for reasons to be given in writing at a later date. These are my reasons for dismissing it.

The background facts are summarised at paragraphs 5-12 of Phillips J’s judgment but because of their importance for the main issue in the appeal I will repeat and expand upon aspects of them here.

On 6 August 1999 the claimant underwent a suction termination and laparoscopic sterilisation at St Mary’s Hospital, Manchester (part of the defendant Trust) which resulted in cardio-respiratory arrest and anoxic brain damage.

In July 2000 a legal aid certificate was granted to the claimant. On 5 August 2002 she issued proceedings in the County Court, claiming damages for the alleged negligence of the defendant in relation to the procedure. At that stage she was conducting the proceedings without a litigation friend. The firm of Linder Myers acted as her solicitors.

In December 2002 a consultant neuropsychiatrist concluded that the claimant lacked capacity, in consequence of which her father was appointed her litigation friend.

The proceedings were complex and contested but in February 2005 the parties reached agreement on liability and judgment was entered for the claimant for damages to be assessed on the basis of 95% liability.

By May 2005 the claimant was assessed to have regained mental capacity and an order was made that she carry on the proceedings without a litigation friend. On 7 July 2005 the legal aid certificate was discharged. The next day, 8 July 2005, the claimant entered into a CFA with Linder Myers. There is no dispute that the CFA was valid when executed.

The CFA was in a Law Society model form and was expressed to cover the claimant’s claim against the defendant (at that time, of course, limited to the issue of quantum), any appeal and any proceedings to enforce a judgment, order or agreement. It provided that if the claimant won her claim she would pay the firm’s basic charges, its disbursements and a success fee of 25%, and that she would be entitled to seek recovery of these costs from the defendant. It included the following Law Society standard conditions:

“1.

Our responsibilities

We must:

•

Always act in your best interests, subject to our duty to the court ….

2.

Your responsibilities

You must:

•

Give us instructions that allow us to do our work properly;

…

•

Co-operate with us;

….

7.

If this agreement ends before your claim for damages ends

…

(b)

Paying us if we end the agreement

(i)

We can end this agreement if you do not keep to your responsibilities in condition 2. We then have the right to decide whether you must:

•

pay our basic charges and our disbursements including barrister’s fees when we ask for them; or

•

pay our basic charges, and our disbursements including barrister’s fees and success fee if you go on to win your claim for damages.

…

(c)

Death:

This agreement automatically ends if you die before your claim for damages is concluded. We will be entitled to recover our basic charges up to the date of your death from your estate.

If your personal representatives wish to continue your claim for damages, we may offer them a new conditional fee agreement, as long as they agree to pay the success fee on our basic charges from the beginning of the agreement with you.”

On about 9 February 2007 further psychiatric assessments of the claimant determined that she had once more lost the capacity to conduct her own affairs and could not provide instructions in relation to her ongoing claim. On 26 February 2007 an application was made to the Court of Protection for the appointment of Mr Cusworth, a trusts partner in Linder Myers, as the claimant’s receiver. On 16 April 2007 the Court of Protection duly made such an order, expressly providing that the receiver had authority to conduct the proceedings on the claimant’s behalf. On 1 October 2007, on the coming into force of section 66 of the Mental Capacity Act 2005, and by virtue of the transitional provisions in schedule 5 to that Act, receivers automatically became Court of Protection deputies. It was subsequently confirmed that Mr Cusworth, as such deputy, was entitled to act as a litigation friend of the claimant as of right.

On 16 July 2007 Mr Slater, a litigation solicitor at Linder Myers, sent a copy of the claimant’s CFA to Mr Cusworth’s assistant. On 4 September 2007 Mr Slater wrote to Mr Cusworth, stating “as you know we are proceeding with this case on a conditional fee basis” and providing an update on fees and rates. Mr Slater sent a similar client care letter to Mr Cusworth every six months thereafter, each stating that Linder Myers was proceeding on a conditional fee basis. At the end of his letter dated 26 February 2009 Mr Slater added a manuscript note asking Mr Cusworth “Do you feel that a new [CFA] is needed now that you have taken over conduct or do you just assume any contractual relationship that [the claimant] was already in?” It appears that a draft of a new CFA was prepared by Linder Myers in March 2009 but no-one was able to locate an executed version of that agreement.

The quantum proceedings eventually resulted in a settlement of the claim in the amount of £2.6 million plus costs, the settlement being approved by the court on 5 March 2010.

Linder Myers submitted a bill of costs on behalf of the claimant in the total sum of £387,724.42, including disbursements, subsequently amended to £372,724.42. The defendant disputed the parts of the bill that related to the period from March 2007 when the claimant was acting through Mr Cusworth as her receiver/deputy. The defendant’s contention was that the CFA had terminated automatically before that time as a result of the claimant’s incapacity, leaving Linder Myers without any retainer.

In two separate judgments, Regional Costs Judge DN Harris accepted the defendant’s contention and rejected a number of alternative bases on which it was argued on behalf of the claimant that Linder Myers’ fees were recoverable. The matter came before Phillips J by way of linked appeals against those judgments.

On behalf of the claimant, it was argued before Phillips J that (i) supervening incapacity on the part of the claimant did not frustrate or otherwise terminate the CFA; (ii) if the CFA was frustrated, it was adopted by the receiver/deputy following his appointment; (iii) alternatively, the claimant was liable for Linder Myers’ reasonable fees because the services were necessary within the meaning of section 7 of the Mental Capacity Act 2005 which came into force on 1 October 2007 and, prior to that, within the common law concept of necessaries; (iv) in the further alternative, the defendant was estopped by convention from denying that Linder Myers had authority to act for the claimant; (v) in any event, Linder Myers and the deputy (on behalf of the claimant) entered into a new CFA in March 2009 by executing the draft 2009 CFA which covered work done since March 2007 retrospectively. The judge found in the claimant’s favour on issue (i) but went on for the sake of completeness to consider issues (ii) to (v) inclusive, on each of which he found against the claimant.

The defendant’s primary ground of appeal to this court is against the judge’s finding on issue (i). By a respondent’s notice the claimant seeks to uphold the judge’s order on the alternative basis that he ought to have found in the claimant’s favour on issues (ii), (iii) and/or (iv). Our decision that the defendant’s appeal on issue (i) should be dismissed made it unnecessary for us to hear argument on the points in the respondent’s notice but those points remain open to the claimant should the case go further.

The defendant made a late application to amend its grounds of appeal in response to an argument in the claimant’s written submissions. The argument was understood to be to the effect that, on the judge’s findings, if the claimant’s CFA was terminated by frustration, there was a conventional retainer between the receiver/deputy and Linder Myers, so that the solicitors’ base costs would be recoverable from the defendant in the usual way. By the additional ground of appeal the defendant sought to challenge any such finding. Again, our conclusion on issue (i) made it unnecessary to consider the amendment but the point remains open to the defendant should the case go further.

For the remainder of this judgment I concentrate on issue (i) and my reasons for concluding that Phillips J was correct to find that the claimant’s supervening incapacity did not cause the CFA to be terminated by frustration.

The way the defendant’s case on that issue proceeded below can be seen from the following paragraphs of Phillips J’s judgment:

28.

It appears to be established (and is not disputed by the claimant in these appeals) that the supervening mental incapacity of a principal has the effect of terminating the actual authority of his agent. That was the conclusion of Brett LJ. in Drew v. Nunn (1879) 4 QBD 661 at 666 (although Bramwell LJ expressed the view at p. 669 that only insanity amounting to dementia would suffice to annul the authority of an agent) and was the basis on which the Court of Appeal proceeded in Yonge v Toynbee [1910] 1 KB 215. The agent may have continuing ostensible authority to bind the principal (as in Drew v. Nunn) or might otherwise be liable for breach of warranty of authority (as in Yonge v Toynbee), but it appears settled that an agent’s actual authority terminates automatically and immediately upon the mental incapacity of his principal.

29.

However, where an agent’s authority arises from a contract (such as a solicitor’s authority under the contract of retainer between the solicitor and his client), a further question arises as to whether the termination of the principal’s authority by reason of supervening mental incapacity also has the effect of terminating the underlying contract. Contrary to Judge Harris’ finding, the Court of Appeal in Yonge v. Toynbee considered only the question of the consequences of a solicitor’s lack of authority and did not consider, let alone decide, whether the underlying contract of retainer terminated on the client’s mental incapacity. In Drew v. Nunn there was no contract at all between principal and agent (who were husband and wife).

30.

For the defendant, Mr Smith accepted that, whilst a client’s loss of mental capacity has the legal effect of terminating the existing authority of his solicitor, such loss of capacity does not, in itself, have the legal effect of terminating the underlying contract of retainer. That concession was entirely realistic. The normal rule (often referred to as the rule in Imperial Loan Co. v Stone [1892] 1 QB 599) is that contracts entered into by a mentally incapacitated person are not void but only voidable, and only then if that person can show he was, at the time of contracting, incapable of knowing what he was doing, and that the other party was aware of the incapacity: see Bowstead & Reynolds on Agency 19^th edition, paragraph 2-009. 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.

31.

Mr Smith’s contention was that, although a client’s mental incapacity does not terminate a solicitor’s retainer as a matter of law, the practical effect of the termination of the solicitor’s authority is that the contract of retainer can no longer be performed: the client cannot perform his obligation under the contract to give instructions and the solicitor cannot take any steps as he lacks authority. Mr Smith argued that, as the contract of retainer cannot be performed due to an event outside the control of either party, the contract is frustrated and therefore automatically and immediately discharged. This, he pointed out, was the conclusion of the Senior Costs Judge in Findley v BarringtonJones [2009] EWHC 90130 (Costs) at paragraph 122: ‘I find, therefore, that as from [the date the Claimant lost mental capacity] the Claimant was no longer able to give instructions, and the contract was at that point frustrated.’

32.

In relation to the retainer in the present case, Mr Smith pointed to clause 2 of the CFA under the heading ‘Your responsibilities’, which provided that the claimant must ‘[g]ive us instructions that allow us to do our work properly’ and ‘[c]o-operate with us’. He contended that such provisions were at the heart of the contract, so that any interruption to the claimant’s ability to perform those obligations, however short, frustrated the CFA.

33.

Mr Smith further submitted that the possibility that the authority of the solicitors might in due course be restored was no answer to his argument that their retainer was immediately frustrated when that authority was terminated. He referred to the dictum of Lord Sumner in Bank Line Ltd. v. Arthur Capel & Co. [1919] AC 435 at 454 (referred to by Viscount Simonds in Davis Contractors Ltd. Fareham Urban District Council [1956] AC 696 at 715) that ‘Rights ought not to be left in suspense or to hang on the chances of subsequent events’. Mr Smith further relied on clause 7(c) of the CFA, which provided that the agreement would automatically terminate on the death of the claimant: this, he argued, demonstrated that the parties did not intend the contract to be suspended whilst steps were taken to provide an alternative route for instructions to be given on behalf of the claimant or her estate.”

It can therefore be seen how the issue came down to whether the claimant’s supervening incapacity caused the contract to be frustrated.

There was and is no dispute between the parties as to the relevant legal test for frustration. The judge covered it at paragraphs 34-36 of his judgment by reference to two leading authorities, namely 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.

First, the judge quoted the classic statement of the modern law by Lord Radcliffe in Davis Contractors at pages 728-729:

“So perhaps it would be simpler to say at the outset that frustration occurs whenever the law recognises that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.”

In related passages of his speech, Lord Radcliffe stated that “full weight ought to be given to the requirement that the parties ‘must have made’ their bargain on the particular footing”, i.e. on the footing that a particular thing or state of things would continue to exist, and that frustration is not to be lightly invoked as the dissolvent of a contract (page 727). It also pertinent to note that the reasons given by Lord Radcliffe for finding against the application of the principle of frustration in the particular case included that “the cause of the delay was not any new state of things which the parties could not reasonably have foreseen” (page 731).

Phillips J also quoted a passage from Lord Reid’s speech in the same case, at page 721:

“there is no need to consider what the parties thought or how they or reasonable men in their shoes would have dealt with the new situation if they had foreseen it. The question is whether the contract which they did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end.”

In support of that view, Lord Reid cited passages from authorities emphasising that a frustrating event must be fundamentally different from anything contemplated by the contract: “If … a consideration of the terms of the contract … shows that [the parties] never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point …”; “In each case a delay or interruption was fundamental enough to transmute the job the contractor had undertaken into a job of a different kind, which the contract did not contemplate and to which it could not apply …”; “additional or varied work, so peculiar, so unexpected, and so different from what any person reckoned or calculated upon”.

The other passage quoted by Phillips J was from the judgment of Bingham LJ in The Super Servant Two, at page 8, in which the following five propositions were set out as being “established by the highest authority” and “not open to question”:

“1.

The doctrine of frustration was evolved to mitigate the rigour of the common law's insistence on literal performance of absolute promises …. The object of the doctrine was to give effect to the demands of justice, to achieve a just and reasonable result, to do what is reasonable and fair, as an expedient to escape from injustice where such would result from enforcement of a contract in its literal terms after a significant change in circumstances ….

2.

Since the effect of frustration is to kill the contract and discharge the parties from further liability under it, the doctrine is not to be lightly invoked, must be kept within very narrow limits and ought not to be extended ….

3.

Frustration brings the contract to an end forthwith, without more and automatically ….

4.

The essence of frustration is that it should not be due to the act or election of the party seeking to rely on it …. A frustrating event must be some outside event or extraneous change of situation ….

5.

A frustrating event must take place without blame or fault on the side of the party seeking to rely on it ….”

Having summarised the defendant’s case and the relevant principles governing frustration, Phillips J expressed his conclusion on issue (i) as follows:

“37.

Applying the established test and the above principles it is clear, in my judgment, that termination of a solicitor’s authority by reason of mental incapacity does not, in itself and in the usual case, frustrate the underlying contract of retainer. 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.

38.

First, whilst the giving of instructions and the consequent authority of a solicitor to act on behalf of a client according to those instructions is certainly central to the contract in question, the manner and capacity in which those instructions is given is not. The supervening inability of a party to give instructions personally, with the likelihood (if not the certainty) that a deputy will be appointed, does not change the nature of the contract of retainer, radically or even significantly. The position would seem no different to a company providing instructions to its solicitors through its board of directors. If the entire board resigned, there might be no individual capable of giving instructions until a new director was appointed, but that would not in itself change the nature of the contract of retainer so as to frustrate it.

39.

Second, the obligation to provide such instructions is express in the CFA and would in any event be implied, from which it follows that an inability to provide such instructions cannot be said to be a matter not dealt with by the contract. The supervening incapacity of a client may cause a delay in performance of the obligation, but such a delay and its consequences (including whether the contract was repudiated) would be a matter for the application and enforcement of the terms of the contract.

40.

Third, even if any delay caused by supervening incapacity was not within the scope of the contractual terms, it is clear that mere delay does not frustrate a contract. It would only amount to a frustrating event if the delay is ‘abnormal, in its cause, its effect or its expected duration, so that it falls outside what the parties could reasonably contemplate at the time of contracting’: see Chitty on Contracts31^st ed. para 23-035. Given that a claimant may regain capacity or otherwise have a deputy in place in short order, the delay arising from supervening incapacity would not seem to be of sufficient expected duration to regard the retainer as having been frustrated.

41.

Fourth, in cases such as the present, the possibility that the client will at some point lose mental capacity is plainly a matter which was within the reasonable contemplation of the parties. The fact that the CFA here contained an express provision that the retainer would terminate on the death of the claimant, far from supporting the case that supervening incapacity was a frustrating event, indicates that the parties did not regard incapacity of the claimant as something which should bring the contract to an end. They could equally have provided that the retainer would terminate on incapacity, but did not do so.

42.

Fifth, far from being unjust to hold the parties to their literal bargain, it would plainly give rise to an unjust and unreasonable result to treat a retainer as terminated by reason of what may be a fleeting period of incapacity. To do so would be contrary to the principle that the doctrine of frustration should be confined within narrow limits and cannot be lightly invoked: it would result in the frequent termination of retainers (on the basis of arguments advanced by a non-party to the contract, such as the defendant) where neither party wished that to be the outcome and neither saw any difficulty in continuing to perform their obligations.

43.

Sixth, it is established that supervening incapacity of an employee does not necessarily frustrate a contract of employment, despite the personal nature of that contract: see Chitty on Contracts31^st ed. para 23-038. In deciding whether the employment is frustrated by such incapacity, the court will consider the nature and likely duration of the incapacity, the prospects of recovery and whether performance of the contractual duties would be either impossible or radically different. A client’s role in a contract of retainer is far less personal than a contract of employment and can readily be assumed by a deputy, further indicating that incapacity does not in itself frustrate such a contract.

44.

I acknowledge that the decision of the Senior Costs Judge in Findley v BarringtonJones (above) is highly persuasive authority in the opposite direction. However, that decision was based on what I consider to be a misreading of Yonge v Toynbee. Further, the Senior Costs Judge did not consider the principles governing the frustration of contracts as set out above, nor their application to the effect of supervening incapacity on a solicitor’s retainer.”

The starting point for the defendant’s case on the appeal, as advanced by Mr Hutton QC, is that the supervening incapacity of a principal terminates the authority of an agent to act on the principal’s behalf. That proposition is said to be derivable from Drew v Nunn and was the basis on which the court proceeded in Yonge v Toynbee, in relation to the termination of a solicitor’s authority to take steps on behalf of a client to defend actions brought against him. It is submitted that the client’s loss of capacity terminates the solicitor’s authority to take any step on his or her behalf, so that the solicitors in this case were acting without authority (albeit in accordance with good practice) even in applying to the Court of Protection for the appointment of a receiver.

It is acknowledged that an observation in The Fore Street Warehouse Company Ltd v Durrant & Co (1883) 10 QBD 471 suggests that a solicitor’s retainer would extend to the taking of necessary steps in consequence of the client’s incapacity. In that case a judgment was set aside because the writ had been served at a time when the defendant was of unsound mind but Grove J, having dealt with that point, added this:

“As for the objection that the solicitors are not qualified to appear for the lunatic, there is no doubt that they were authorized to act when she was first taken ill, and I think that the retainer would extend to enable them to take such steps as became necessary in consequence of her lunacy.”

Mr Hutton describes that as a throwaway remark and submits that it is inconsistent with Drew v Nunn and with Yonge v Toynbee.

It is submitted that the distinction drawn by the judge between the effect of supervening incapacity on the solicitor’s authority to act and its effect on the contract of retainer was wrong. A solicitor’s contract of retainer is at its heart a contract of agency. If the authority to act on behalf of the client is lost, the contract giving rise to the agency cannot survive – there is nothing left of it. But the argument is put more particularly on the basis that a contract of retainer is personal in nature and depends on the ability of the client to give instructions to the solicitor. In this case the claimant’s supervening incapacity created a situation in which she was unable to give instructions; and, for the purposes of the retainer, instructions could not be given on her behalf by a receiver/deputy subsequently appointed to act for her. Her inability to give instructions meant that the contract became incapable of performance and was therefore frustrated. In a case of fleeting incapacity the contract would still have been capable of performance, but the medical assessment in February 2007 that the claimant no longer had capacity was not time-limited.

The judge referred at paragraph 30 of his judgment to a concession by the defendant that a client’s loss of capacity “does not, in itself, have the legal effect of terminating the underlying contract of retainer”. Mr Hutton stresses that the defendant’s case was and is that the contract does not terminate automatically as a matter of law but that it is frustrated. Further, in so far as the judge relied in paragraph 30 on the rule in Imperial Loan Co Ltd v Stone as supporting the concession as he understood it, it is submitted that Imperial Stone was not concerned with personal contracts and that, because this was a personal contract, the rule would not have applied if the claimant had lacked capacity at the time of entry into the CFA in July 2005.

In support of his submissions, Mr Hutton took us to lengthy passages in Treitel, Frustration and Force Majeure, 3^rd ed., at paragraphs 4-018 et seq., concerning the effect of death on “personal” contracts and the effect of supervening incapacity. Those passages are, however, far from clear-cut in their conclusions. For example, paragraph 4-023, on supervening incapacity in a case of agency, states (with the omission of footnote references, and with original emphasis):

“The application of the above principles [concerning physical and legal incapacity] at first sight gives rise to some conceptual difficulty in relation to the law of agency. Here it has been held that a power of attorney was ‘void’ on the ground that it had been executed by a person of ‘unsound mind’ who did not ‘know what he was doing’; and it has been said to be a ‘general rule of law that a lunatic cannot appoint an agent’. A similar rule has been applied in cases of the supervening insanity of the principal …. In all these statements it is the fact of the principal’s insanity (actual or supervening) which is regarded as decisive. They give rise to difficulty because they make no reference to the agent’s knowledge of the insanity; and it is this factor of knowledge which is normally decisive in determining the validity of contracts with mental patients. The statements are, however, all concerned with the agent’s authority rather than with the contract of agency: indeed, in the leading case on the effect of the principal’s supervening insanity there was no contract at all between principal and agent (who were husband and wife). The statements also all appear to be concerned with forms of ‘insanity’ so extreme as to give rise in fact to an incapacity to continue the relationship of principal and agent. Thus they can be explained on the ground that, in the present context, a factual (as opposed to a legal) incapacity suffices to bring a contract to an end ….”

In conclusion, the defendant takes issue with each of the judge’s six reasons for finding that the contract of retainer was not frustrated (paragraphs 38-43 of his judgment). As to the first reason, the submission that instructions had to be given personally by the claimant is repeated and it is submitted that the judge’s analogy with a company awaiting the appointment of directors was inapposite. In relation both to the company example and to the second and third reasons given by the judge, it is submitted that delay is not the issue; the defendant’s point is not that performance has been delayed but that the contract entered into between claimant and solicitor is no longer capable of performance; the whole character of the adventure has changed. As to the judge’s fourth reason, it is submitted that he has read too much into the fact that the Law Society’s model form deals with termination on death but not with supervening incapacity. As to the fifth reason, the point is repeated that fleeting incapacity would not render the contract incapable of performance but that there was no time limit placed on the assessment of incapacity in this case. Thus it is said that the judge’s concern about frequent termination of retainers is misplaced, and in any event it is submitted that it would not be difficult to enter into a new agreement which could be retrospective in effect. The judge’s sixth reason is said to be another aspect of his mistaken reasoning with regard to delay: in the present context the incapacity is fundamental because it is a contract to litigate as the claimant’s agent and the contract cannot be performed; and the suggestion that a contract of retainer is far less personal than a contract of employment is rejected.

For the claimant, Mr Spearman QC puts the focus on the particular facts of this case, which he describes as very stark. The CFA was made in July 2005 in circumstances where the claimant was known to have had fluctuating capacity and it was plainly in contemplation that her capacity might continue to fluctuate in the future and that the conduct of the proceedings might at some point have to be continued by a litigation friend on her behalf. Even if the duty on a client with regard to the giving of instructions to the solicitor were normally a duty to give instructions personally (which is not accepted), that cannot have been intended to apply in this case. Moreover the CFA related to the issue of quantum, which essentially involved expert assessments rather than requiring personal input from the claimant. There is no reason why the claimant’s obligations under the CFA could not be discharged by a receiver/deputy acting on her behalf, and no reason why performance of the contract should be regarded as having become impossible in the event of her supervening incapacity. The fact that there was a period during which instructions could not be given, pending appointment of a receiver/deputy, did not make performance impossible or terminate the retainer. The company example given by the judge at paragraph 38 of his judgment is apposite and is supported by Donsland Ltd v Van Hoogstraten & Others [2002] EWCA Civ 253, [2002] PNLR 26.

Moreover, if the defendant were correct that the duty to give instructions was a duty that could be discharged only through personal instructions from the claimant, so that the claimant could not discharge it in the event of incapacity, the situation was covered by the terms of the CFA itself. Condition 7(b) of the CFA provided that the solicitors were entitled to end the agreement if the claimant did not keep to her responsibilities, which included the obligation to give instructions that allowed the solicitors to do their work properly; and in that event the clause gave the solicitors the right to require payment of their basic charges and disbursements. It cannot, however, be correct that supervening incapacity was intended to have the consequence, extraordinarily unfair to the claimant, of giving the solicitors an immediate right to such payment. The solution lies in rejection of the defendant’s contention that the obligation to give instructions was personal to the claimant. But if, as the defendant contends, the obligation to give instructions was personal to the claimant, it follows from the above that the situation was covered by the contract and that no question of frustration could arise.

Whilst submitting that those arguments provide a sufficient basis for dismissing the appeal, Mr Spearman has made clear that he does not accept the correctness of the principle in Yonge v Toynbee, that supervening incapacity terminates the agent’s authority, which forms the starting-point for the defendant’s case. He submits that the principle was not subject to argument in Yonge v Toynbee and that it is inherently unfair that a solicitor should be exposed to costs for steps taken in the perceived best interests of the client without knowledge of the client’s incapacity. Further, even if the client’s incapacity causes the solicitor’s authority to terminate vis-à-vis third parties, what was said in The Fore Street Warehouse Company Ltd suggests that the principle does not extend to terminating the solicitor’s authority to make applications to the court consequential upon the client’s incapacity.

In support of the submission that the principle in Yonge v Toynbee must be viewed with caution, Mr Spearman has drawn our attention to the recent, 20^th edition of Bowstead & Reynolds on Agency, at paragraph 10-020, though it should be borne in mind that the judgment of Phillips J at first instance in the present case is one of the authorities cited in the supporting footnotes (which I omit from the following quotation):

“Mental incapacity. Mental incapacity in this context means inability to appreciate the nature and quality of the act done, but plainly there can be varying degrees of incapacity. In such circumstances, it is perhaps not surprising that the blunt rule assumed to apply to cases of death, viz. that actual authority automatically ceases, probably does not apply to cases of incapacity. As with the position in respect of mental incapacity in a principal existing at the date of appointment, the law is currently unsettled on the effect of an agent’s actual authority of supervening incapacity in the principal. It is submitted that the better view is that supervening mental incapacity does not terminate an agent’s actual authority until the agent becomes aware, or at least ought to have become aware, of the incapacity, unless the parties have expressly agreed that incapacity is to terminate the mandate. Recent authority has confirmed that where the agent has a contract of appointment, that contract at least is not automatically determined by supervening illegality [sic - i.e. supervening incapacity]. In the relatively few other relevant cases, the notion of automatic termination has generally been assumed by the parties rather than contested and decided, or it appears that the agent was aware of the incapacity ….”

The need for caution is underlined by the observation of Baroness Hale of Richmond DPSC in Dunhill v Burgin (Nos 1 and 2) [2014] UKSC 18, [2014] 1 WLR 933, at paragraph 31, that the authorities relating to the effect of incapacity in the agency context are “in a state of some confusion”. The Supreme Court found it unnecessary to express any opinion on the point in Dunhill v Burgin itself, and Mr Spearman submits that it is unnecessary for us to grasp this “hot potato”.

There is much to be said in favour of a fresh examination or reconsideration of the principle in Yonge v Toynbee and related authorities in this area. It is potentially unfair and unsatisfactory for a client’s supervening incapacity to have the effect of terminating automatically the solicitor’s authority to act on the client’s behalf in the litigation, exposing the solicitor to the risk of liability to other parties for breach of warranty of authority in respect of steps taken in the litigation even when the solicitor is not aware of the incapacity, and depriving him of authority to take any steps to protect the client’s position when he does become aware of it – to the extent that it is said that he acts without authority, albeit apparently in accordance with good practice, in applying to the court for the appointment of a deputy and/or litigation friend. One might at least expect the principle to be qualified so that (i) the solicitor retains authority to act so long as he is unaware of the incapacity and (ii) he retains authority to take necessary steps in consequence of the incapacity, including an application to the court for the appointment of a deputy and/or litigation friend, when he does become aware of it. It might also be preferable to talk in terms of “suspension” rather than “termination” of authority, on the basis that the solicitor’s authority is restored if the client regains capacity or a litigation friend is appointed to continue the litigation on the client’s behalf.

The present appeal, however, does not require us to re-examine the principle in Yonge v Toynbee or to grasp the “hot potato” left on one side by the Supreme Court in Dunhill v Burgin. The issue in the appeal is a much narrower one and can be resolved on the assumption that the principle in Yonge v Toynbee is good law. The defendant’s essential case is that the claimant’s supervening incapacity caused the CFA to be terminated by reason of frustration because the claimant could not give instructions to the solicitor and the contract therefore became incapable of performance. The judge rejected that case. If he was correct to do so, as in my view he was, it is unnecessary to address any underlying issues concerning the principle in Yonge v Toynbee.

The defendant’s case that the CFA was frustrated depends on the proposition that the obligation to give instructions was personal to the claimant and could not be discharged by the giving of instructions by a receiver/deputy acting on her behalf. Whilst a solicitor’s retainer is in one sense a personal contract, I very much doubt whether it requires instructions to be given by the client personally even in the general run of cases. It must be commonplace for instructions to be given through an agent, such as an accountant or managing agent or a spouse. But whatever the general position, the parties must have contemplated in the particular circumstances of this case that the claimant might suffer from a further period of incapacity in which she would be unable to give instructions personally but they could be given by a litigation friend or a receiver/deputy or on her behalf. I accept Mr Spearman’s submissions on that point (see paragraph 31 above). The fact that supervening incapacity prevented the claimant from giving instructions personally did not render the contract of retainer impossible of performance; it simply gave rise to a short period of delay pending appointment of a receiver/deputy who could continue the conduct of the proceedings on the claimant’s behalf and give instructions to the solicitors for that purpose.

I also accept Mr Spearman’s submission (paragraph 32 above) that if the claimant was under an obligation to give instructions personally and was unable to comply with that obligation by reason of her supervening incapacity, the situation was covered by the express terms of the CFA, which entitled the solicitors in that event to end the contract and to require payment of their basic charges and disbursements. The unattractiveness of such a result is a further indication that it cannot have been the intention of the parties that the claimant had to give instructions personally; but if that was their intention, and the situation arose in which the claimant was unable to give such instructions, the contract catered expressly for the consequences and it cannot possibly be said that this was a fundamentally different situation from anything contemplated by the contract.

Those points, which reflect the specific way in which the case for the claimant was argued before us on the appeal, are sufficient to show that the defendant’s case that the CFA was frustrated must fail. More generally, however, I agree with the reasons given by the judge (paragraph 24 above) for concluding that the CFA was not frustrated. I find no force in any of Mr Hutton’s detailed criticisms of those reasons.

I was tempted to cut this judgment right back to a simple expression of agreement with the judge. I have taken the long route in order to deal fully with the arguments of counsel and to make clear that, notwithstanding the interesting questions thrown up by some of those arguments, the actual issue in the appeal is a narrow one and can be disposed of accordingly.

Those are my reasons for dismissing the appeal.

I agree.

I also agree.