Diann Blankley (by her litigation friend Andrew Cusworth) v Central Manchester and Manchester Children's University Hospitals NHS Trust
| Jurisdiction | England & Wales |
| Judge | Lord Justice Richards,Lord Justice McCombe,Lady Justice Sharp |
| Judgment Date | 27 January 2015 |
| Neutral Citation | [2015] EWCA Civ 18 |
| Docket Number | Case No: A2/2014/0629 |
| Court | Court of Appeal (Civil Division) |
| Date | 27 January 2015 |
[2015] EWCA Civ 18
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr Justice Phillips, sitting with assessors
[2914] EWHC 168 (QB)
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Richards
Lord Justice McCombe
and
Lady Justice Sharp
Case No: A2/2014/0629
Alexander Hutton QC and Matthew Smith (instructed by Clyde & Co LLP) for the Appellant
Richard Spearman QC and Vikram Sachdeva (instructed by Linder Myers LLP) for the Respondent
Hearing date: 11 November 2014
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 factual background
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.
The issues
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...
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