Dunhill (by her litigation friend P Tasker) v Burgin [2014] UKSC 18

Ms Dunhill (“D”) was involved in a road traffic accident where she was hit by Mr Burgin, who was driving a motorcycle.  She suffered a severe head injury and injury to both legs.  She subsequently issued a claim for damages which were compromised at £12,500.  This was a gross undervaluation of her claim.

Three years later D sought the advice of new solicitors.  D’s litigation friend issued proceedings on her behalf for professional negligence against her former solicitors and counsel.  In addition, proceedings were issued to seek a declaration that the claimant “did not have the capacity at the time of the purported settlement of the matter” and that the consent order be set aside and directions given for further conduct of the claim.

Lady Hale stated that the first issue in the matter was: “what is the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on her own behalf (in which case the Civil Procedure Rules require that she has a litigation friend to conduct the proceedings for her)?”  The second issue was “what happens if legal proceedings are settled or compromised without it being recognised that one of the parties lacked that capacity (so that she did not have the benefit of a litigation friend and the settlement was not approved by the court as also required by the CPR)?”

The court at first instance held that there had been no rebuttal of the presumption that D had had capacity. In light of that decision the second issue did not arise.  The Court of Appeal reversed the decision of the presumption of capacity, holding that in order for D to have had the capacity to approve the compromise, she needed to know what she was giving up, and that she had been unaware of the extent of her injury and potential claim. As a result the case was then remitted to the High Court for determination of the second issue.  Did CPR 21.10 have any application?  The High Court concluded that the Civil Procedure Rules are incorporated into any agreement made to settle the case and that CPR 21.10(1) required that this settlement be approved by the court irrespective of how matters appeared at the time.  The consent order required approval and was therefore void.

Lady Hale stated that the general approach of the common law, now confirmed in the Mental Capacity Act 2005, is that capacity is to be judged in relation to the decision or activity in question and not globally.  The court approved the decision in Masterman-Lister v Brutton & Co (Nos 1 and 2) [2002] EWCA Civ 1889 that capacity meant capacity to conduct the proceedings (which might be different from capacity to administer a large award resulting from the proceedings).  The court agreed that CPR 21.2(1) and 21.4(3) suggested a focus on the proceedings in general rather than on “the proceedings” as framed and that, read as whole, rule 21 posits a person with a cause of action who must have the capacity to bring and conduct proceedings in respect of that cause of action.

The court held that the test of capacity to conduct proceedings for the purpose of CPR Part 21 is the capacity to conduct the claim or cause of action which the claimant in fact has, rather than to conduct the claim as formulated by her lawyers.  Judged by that test it was agreed that D did not have the capacity to conduct the claim.

It followed that D should have had a litigation friend from the beginning of the proceedings, as was required by CPR 21.2(1).  The purpose of the rule is to impose an external check on the propriety of the settlement and the practice directions sets out the evidence that must be placed before the court when approval is sought.

The defendant argued that the rule in Imperial Loan Co Ltd v Stone [1892] 1 Q.B. 599 that a contract made by a person who lacked the capacity to make it was not void, but could be avoided by that person provided that the other party to the contract knew (or ought to have known) of his incapacity.  The defendant argued that once the parties to ordinary civil litigation had reached an agreement, it was not for the court to interfere in their bargain. If they desire to embody it in a consent order they can do so simply by having it entered and sealed by a court officer under CPR 40.6(2).  They do not have to submit it for the approval of any judicial officer.

The court did not agree.  The policy underlying the Civil Procedure Rules was clear: children and protected parties required and deserved protection, not only from themselves but also from their legal advisers.

The court therefore dismissed both appeals.  D lacked the capacity to commence and to conduct proceedings arising out of her claim.  She should have had a litigation friend from the outset and any settlement should have been approved by the court.  The consent order was to be set aside and the case listed for trial.

Leave a Reply

Your email address will not be published.