Was anybody surprised by the court’s decision in this case? (link: http://www.bailii.org/ew/cases/EWCA/Civ/2015/18.html)
I thought not.
I have lifted the background from the judgment because (i) it is well drafted; and (ii) I am lazy:
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.
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.
What happened next?
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.
As I have already linked to the decision and lazily copied-and-pasted most of it above, you will be now understand the appeal came down in its most basic form to frustration of contract, the ability of a third party to provide instructions on behalf of a client and incapacity.
Unsurprisingly the court ruled that the CFA was valid.
Now let us focus upon all of the above. There are some pertinent points to be made.
- This was an opportunistic defendant trying to be clever; and
- It was an attack on all innocent victims that rely on CFAs for access to justice.
The first limb was the defendant, or their costs counsel, getting terribly excited in an attempt to get around the intricacies of the law. A caveat some would say if they were at law school. This happens in nearly every law office – there is talk of how one would like to run a defence on a certain angle, but it is too risky as the court may punish you for such audacity. On this occasion, they took a punt.
While there was some academic merit in the defendant’s approach, and their suave tongued barrister must have been very persuasive at first instance; they could not get away from the fact that the client had capacity at the time she entered into the CFA. I love the phrase used in the judgment of “fluctuating capacity” for its accuracy. When laying bare some of the fundamentals of contract law, the defendant faced an uphill battle because there was acceptance of capacity when the CFA was entered into.
The second limb is identical in its importance.
It would be absolutely unforgiveable for a defendant to benefit from a lack of capacity argument when it has been their actions which has caused or contributed towards the incapacity.
Road Traffic insurers and employers of healthcare professionals would rub their hands with glee if they could (i) injure a party [causing a lack of capacity some time in the future following the CFA] who is forced onto a CFA due to having limited funds, and (ii) then refuse to pay costs as the person they have injured lacked capacity at some stage.
Access to justice is a very important concept. The courts enjoy it. The government destroyed legal aid and CFAs provide injured claimants with an opportunity to instruct lawyers to represent them. It should be at the defendant’s cost as opposed to the claimant.
I will step down from my soapbox now. But seriously, the decision was easy to predict. We now just have the Coventry decision to follow suit in its predictability.
Over and out.