Mental Ability to Retain a Lawyer
There are times where a lawyer may suspect a potential client does not have the mental ability (“capacity”) to hire (“retain”) them as their representative. This worry comes up more frequently in areas like will and estate law. If a potential client may not have capacity to retain them, what should the lawyer do?
This was addressed directly in Guardian Law Group v LS, a 2021 case from the Court of Queen’s Bench of Alberta. RL hired Guardian Law Group (“GLG”) with a contract (“retainer agreement”) to represent him and challenge previous declarations of his own incapacity. The matter never got to the hearing stage, but GLG then claimed against RL’s guardian and trustee, LS, for the legal fees GLG was owed. LS disputed them, alleging RL did not have capacity to sign a retainer agreement with GLG in the first place. The Court used this opportunity to add clarity to the law in Alberta.
The Justice stated a retainer is above all a contract, albeit a special one, so it is governed by contract law rules and principles. Capacity is required to enter a contract and is assessed at the time the contract was formed. For adults, their capacity to contract is presumed to exist until proven otherwise. Capacity here means the client could understand what the retainer agreement said and how it would or could affect them. Capacity is fact specific and task specific, so whether a person had capacity depends on the circumstances and the task they needed capacity to do. Individuals can have at the same time the capacity to do one kind of task but not another. Capacity can come and go, increase and decrease. It is irrelevant when considering a contract’s validity whether a person later lost capacity. If a person without capacity enters a contract, the contract can be cancelled (“become voidable”) if that person chooses.
However, even if the Court finds a retainer agreement to be voidable due to the client’s incapacity at the time it was made, the Court will not want to void the retainer agreement immediately. If it did this, lawyers may not represent clients with questionable capacity for fear they may later not get paid for their work. This could leave already vulnerable individuals in danger of being exploited or suffering other kinds of injustice.
Instead, the Justice developed a test. If a client did not actually have capacity to retain their lawyer, were there circumstances that caused or should have caused the lawyer to be suspicious about whether they had capacity? If so, the lawyer must take sufficient steps to investigate whether the client had capacity and mitigate possible incapacity. Mitigation here means doing things to help the client understand the retainer agreement, such as simplifying it. Sufficient steps are ones a lawyer would take while exercising reasonable care and diligence. If the lawyer, after investigating and mitigating, still reasonably determined the client had capacity to retain them, the Court will not cancel the retainer agreement even though it is technically voidable.
As for GLG, LS, and RL, the Court made no determination yet on their retainer agreement. The Justice asked the parties to return with more arguments considering the information the Justice had given them.
