Dunhill v Burgin

When capacity is assessed retrospectively to determine whether a settlement may be set aside, the court examines the decisions actually required by the litigation as conducted. It does not consider hypothetical decisions which might have been required had the litigation proceeded differently.

Capacity to conduct proceedings remains issue-specific. The question is whether, with appropriate explanations and assistance, the litigant could understand, retain and use or weigh the information necessary for the particular transaction. A presumption of capacity applies. Anxiety, cognitive impairment and an unwise decision do not, without more, rebut that presumption.

The claimant suffered severe brain injury in a road traffic accident and settled her personal injury claim for £12,500 by a consent order made on 7 January 2003. No litigation friend acted for her and the settlement had not been approved by the court.

She later applied to set aside the consent order, asserting that she lacked capacity under the law applicable before the Mental Capacity Act 2005. The preliminary issues concerned whether retrospective assessment should include hypothetical decisions and whether the evidence rebutted the presumption that she had capacity to enter the compromise.

1. Retrospective scope of inquiry. The court held that the inquiry was confined to the decisions actually required in the action as drafted, ultimately the claimant's decision whether to accept the compromise. It was inappropriate to assess capacity by reference to decisions which might have arisen had the litigation been conducted differently. The judge relied on the issue-specific approach in Masterman-Lister v Brutton & Co (Nos 1 and 2) [2002] EWCA Civ 1889 and the guidance in Bailey v Warren [2006] EWCA Civ 51, while distinguishing their prospective focus.
2. Applicable capacity test. The relevant question was whether the claimant could understand, with proper explanation from legal advisers and others as necessary, the issues on which her decision was required. The assessment was fact-sensitive and concerned the actual transaction, its nature and complexity. The presumption of capacity applied.
3. Application to the evidence. The contemporaneous attendance note was given substantial weight. The claimant initially regarded the offer as inadequate but, after repeated explanations about the absent witnesses, litigation risks, contributory negligence and the likely reduction in damages, she eventually understood the information and accepted the offer. Her change of mind and subsequent unhappiness showed an informed, though possibly unwise, decision rather than incapacity. The evidence of Professor Wilkinson and Dr Berry addressed the actual decision and supported capacity. The claimant's neuropsychological testing did not sufficiently address the effect of the repeated explanations or the particular transaction.
4. Disposition. The presumption of capacity was not rebutted. The court answered the agreed issue by holding that the inquiry was limited to the decisions actually required and adjourned the issue concerning the application of CPR 21.10(1), with liberty to apply.

First-instance determination of preliminary issues in an application to set aside a consent order. The judgment records no earlier appellate decision in the same proceedings.