Legal Costs Update by Partner and Costs Lawyer Gary Knight

April showers April showers produced the darling buds of May and we now look forward to a flaming June.

The General Election has been and gone and what impact the result will have on the legal landscape dominates the legal websites and blogs.

What is certain is no matter how the future unfolds there will be costs decisions to peruse and consider and a brief summary of a few that caught the eye follows:

DIANN BLANKLEY (By her Litigation Friend Andrew M. G. Cusworth) - and - CENTRAL MANCHESTER AND MANCHESTER CHILDREN’S UNIVERSITY HOSPITALS NHS TRUST - MR JUSTICE PHILLIPS Sitting with Assessors MASTER CAMPBELL and GREG COX Esq.- 5 February 2014- [2014] EWHC 168 (QB)

The above related to costs appeals raising the question of whether, where a party loses mental capacity in the course of proceedings, such loss of capacity had the automatic and immediate effect of terminating their solicitor’s retainer.

Mr Justice Phillips acknowledged that the question was currently of particular importance for solicitors conducting personal injury claims pursuant to conditional fee agreements entered into before 1 April 2013, in respect of which success fees continue to recoverable from defendants (see s.44(6) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012). If such an agreement is found to have terminated by reason of the supervening incapacity of the claimant (such incapacity being by no means a rare occurrence in serious personal injury cases), it would not now be possible to replicate the effect of the original contractual arrangements between solicitor and client given that success fees are not generally recoverable in respect of agreement made on or after 1 April 2013 (see s.58(A)(6) of the Courts and Legal Services Act 1990). No matter  how short the period of incapacity (theoretically, even a scintilla of time), nor how quickly a deputy was appointed by the Court of Protection in respect of the claimant, the original CFA would be lost and could not, in real terms, be replaced.

In Points of Dispute, the defendant had contended that no costs were recoverable in relation to work done and disbursements incurred as claimed in parts 4 to 7, asserting that, as a result of the claimant’s mental incapacity, the CFA had automatically terminated prior to 6 March 2007, leaving Solicitors without any retainer.

That contention came before Judge Harris on 9 May 2011 as a preliminary issue. In a judgment dated 11 July 2011, but formally handed down 8 August 2011 (“the First Judgment”), the Judge took as his starting point the Court of Appeal decision in Yonge v Toynbee [1909] 1 KB 215, a case in which solicitors had conducted the defence of proceedings against their client whilst unaware that he had lost mental capacity shortly before the action commenced. The Judge set out the headnote to that decision as follows:

“Where an authority given to an agent has, without his knowledge, been determined by the death or lunacy of the principal, and, subsequently, the agent has, in the belief that he was acting in pursuance thereof, made a contract or transacted some business, with another person, representing that, in so doing, he was acting on behalf of the principal, the agent is liable, as having impliedly warranted the existence of the authority which he assumed to exercise, to that other person, in respect of damage occasioned to him by reason of the non-existence of that authority.”

The Judge went on to conclude that:
“Yonge v Toynbee is clear authority that the loss of capacity in itself terminates the contractual arrangements, and therefore it is necessary for the Claimants to show that the process that they entered into is one that would show the retainer was maintained”. 

You can read the rest of Gary's detailed Legal Update here.