Dunhill v Burgin

JurisdictionEngland & Wales
JudgeLady Hale,Lord Kerr,Lord Dyson,Lord Wilson,Lord Reed
Judgment Date12 March 2014
Neutral Citation[2014] UKSC 18
CourtSupreme Court
Date12 March 2014
Dunhill (a protected party by her litigation friend Tasker)
(Respondent)
and
Burgin
(Appellant)
Dunhill (a protected party by her litigation friend Tasker)
(Respondent)
and
Burgin No 2
(Appellant)

[2014] UKSC 18

before

Lady Hale, Deputy President

Lord Kerr

Lord Dyson

Lord Wilson

Lord Reed

THE SUPREME COURT

Hilary Term

On appeal from: [2012] EWCA Civ 397; [2010] EWCA QB 3163

Appellant

James Rowley QC

Matthew Stockwell

(Instructed by Keoghs LLP)

Respondent

Christopher Melton QC

Marc Willems

Maria Roche

(Instructed by Potter Rees)

Heard on 3, 4 and 5 February 2014

Lady Hale (with whom Lord Kerr, Lord Dyson, Lord Wilson and Lord Reed agree)

1

There are two issues in this case, both of them simple to state but neither of them simple to answer. First, 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)? Second, 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)? Can matters be re-opened long after the event or does the normal rule of English law apply, which is that a contract made by a person who lacks capacity is valid unless the other party to the contract knew or ought to have known that she lacked that capacity in which case it is voidable (the rule in Imperial Loan Co Ltd v Stone [1892] 1 QB 599)?

2

These issues are of very considerable importance, particularly in personal injury cases. On the one hand, there is the need to protect people who lack capacity from making settlements which are disadvantageous to them. On the other hand, people are assumed to have capacity to make their own decisions and should only be deprived of the right to do so in clear cases. There is also a public interest in upholding bargains which everyone, but particularly the other party, thought were valid when they were made and in putting an end to litigation. The spectre looms of many personal injury claims which insurers thought had been settled long ago being reopened on the basis of an incapacity which they had no reason to suspect at the time. The real culprits, they would say, are the claimant's original legal advisers (if she had any) against whom she will almost always have a claim for professional negligence.

The history of this case
3

On 25 June 1999, there was a road accident on a dual carriageway near the entrance to a roundabout in Goldthorpe (which is roughly half way between Doncaster and Barnsley in South Yorkshire). Mr Burgin, who was riding a motorcycle in the offside lane, struck Ms Dunhill, who was crossing the road having emerged from between parked vehicles in the nearside lane. She suffered a severe closed head injury along with soft tissue injury to both legs. On 13 May 2002, shortly before the limitation period ran out, she issued a claim for damages in the Barnsley county court. She claimed still to be suffering from a complete loss of the senses of smell and taste, some hearing loss, forgetfulness, headaches, personality change, low moods and tearfulness, anxiety, mood swings, occasional suicidal ideation and self-mutilation. She claimed general damages for pain, suffering and loss of amenity, and special damages (totalling £2,262.92) for travelling expenses and 10 hours' care a day for six months followed by one hour a day for two years, the total claim being limited to £50,000. It was accompanied by two reports from a consultant surgeon specialising in accident and emergency medicine. Mr Burgin denied liability and alternatively alleged contributory negligence.

4

The case was listed for a trial on the issue of liability at the Sheffield county court on 7 January 2003. Ms Dunhill was at court, accompanied by a mental health advocate, and represented by counsel and a trainee solicitor. One of her witnesses to the accident did not arrive and negotiations took place towards a settlement. The claim was eventually compromised for the total sum of £12,500 with costs. This was embodied in a consent order, which was signed by both counsel and placed before the judge. This provided that (i) the defendant pay the claimant the sum of £12,500 in full and final settlement of her claim by 28 January 2003; (ii) the defendant pay the claimant's costs, to be the subject of detailed assessment if not agreed; and (iii) there be detailed assessment of the claimant's community legal service costs. On any view this was a gross undervaluation of her claim, which her current advisers would put at over £2,000,000 on a full liability basis and the defendant's would put at around £800,000.

5

In July 2006, Mrs Dunhill sought the advice of new solicitors. In December 2008, nearly six years after the consent order was made, her litigation friend issued proceedings on her behalf for professional negligence against her former solicitors and counsel. Those proceedings have been stayed pending further order. On 11 February 2009, her litigation friend issued the present proceedings. These took the form of an application in the original action, seeking (i) a declaration that the claimant "did not have capacity at the time of the purported settlement of the matter on 7 January 2003", and (ii) that the consent order be set aside and directions given for the further conduct of the claim. Such applications are known as Masterman-Lister proceedings, after the case of Masterman-Lister v Brutton & Co (Nos 1 and 2) [2002] EWCA Civ 1889, [2003] 1 WLR 1511.

6

It was agreed between the parties that there should first be a trial of whether or not the compromise and consent order made on 7 January 2003 required the approval of the court. This depended on two issues: (i) whether Mrs Dunhill was a "patient" within the meaning of Part 21 of the Civil Procedure Rules, which regulates the procedure to be adopted in proceedings involving children and (as the Rules then were) "patients"; and (ii) what the consequences were if she was such a patient, specifically whether this meant that the compromise and consent order should have been approved by the court under CPR 21.10. The defendant has not sought retrospective approval of the settlement.

7

Issue (i) was tried by Silber J in February 2011: [2011] EWHC 464 (QB). The parties were agreed that the test of whether a person was a "patient" was whether she had the mental capacity to conduct the proceedings. They further agreed that this was to be judged by reference to her capacity to make the decisions likely to be required of her in the course of the proceedings, a test derived from the judgment of Chadwick LJ in Masterman-Lister. But they disagreed as to whether this test was to be applied to the proceedings which she had actually brought, on the advice of her legal representatives, or whether it was to be applied to the proceedings as they might have been brought had her lawyers given her different advice. If it was the former, then the most difficult decision she had to take was whether to accept the sum which was offered on 7 January 2003, so in practice the question was whether she was able to understand matters well enough to make that decision. If it was the latter, the defendant concedes that she did not have the capacity to conduct the larger and much more complicated claim which should have been brought.

8

Silber J decided that capacity was to be judged by reference to the decisions which the claimant was actually required to take in the action as drafted and not to the decisions which she might have been required to take had it been differently framed. In practice this meant whether she had capacity to make the compromise on 7 January 2003. He held that, on the evidence, the presumption that she did have that capacity had not been rebutted: [2011] EWHC 464 (QB), para 97. In the light of that decision, issue (ii) did not arise. The claimant appealed on the point of law. The Court of Appeal held that the judge should not have confined himself to the actual decision required of her on 7 January 2003, but should have considered her capacity to conduct the proceedings as they should have been framed. Ward LJ concluded at [2012] EWCA Civ 397, para 29:

"Since capacity to conduct proceedings includes … the capacity to give proper instructions for and to approve the particulars of claim, the claimant lacked that capacity. For her to have capacity to approve a compromise she needed to know … what she was giving up and, as is conceded, she did not have the faintest idea that she was giving up a minor fortune without which her mental disabilities were likely to increase."

9

As a result, the case was remitted to the High Court to determine issue (ii). This was now framed as whether CPR 21.10 has any application "where the claimant has brought a claim in contravention of CPR 21.2, so that in the eyes of the defendant and the court she appeared to be asserting that she was not under a disability?" No doubt this reformulation was intended by the defendant to hammer home that the general rule in contract is that laid down in Imperial Loan Co Ltd v Stone. Bean J decided that where a civil claim is issued, 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. Hence the settlement was void, the court order should be set aside and the case should go for trial: [2012] EWHC 3163 (QB); [2012] 1 WLR 3739.

10

Between the hearing before Bean J in early October 2012 and his judgment in November 2012, this court had given the defendant...

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