Dunhill v Burgin

Capacity in litigation is assessed by reference to the capacity required to conduct the proceedings as a whole, not merely to understand the particular compromise ultimately made. Litigation is ordinarily a connected, multi-faceted transaction. The court must consider the decisions likely to be necessary in the proceedings, including decisions about pleadings, advice, settlement and the consequences of rejecting an offer.

Where a claimant lacked that capacity, a litigation friend was required. A compromise by or on behalf of a patient requires court approval under Civil Procedure Rules 1998, r 21.10. The Court of Appeal allowed the appeal because the claimant’s inability to understand the true value and implications of her claim meant that she lacked capacity to conduct the proceedings and the compromise could not stand without approval.

The claimant suffered severe brain damage in a road accident. She brought a personal injury claim without a litigation friend and settled it at court for £12,500. The settlement was not submitted for approval because the proceedings had not been treated as involving a patient.

She later contended that she had been incapable of managing and administering her property and affairs and applied to set aside the compromise. On a preliminary issue, Silber J held on 7 March 2011 that historical assessment of capacity was confined fundamentally to the decisions actually required in the action as drafted. The central issue on appeal was whether the court had instead to assess capacity to conduct the litigation, including decisions that would have been required had it been conducted properly.

1. Appeal allowed. The judge had wrongly treated the relevant transaction as the compromise negotiated outside court. The proper question, established by Masterman-Lister v Brutton & Co and Bailey v Warren, was whether the claimant had capacity to conduct the proceedings.
2. Litigation is not a self-contained compromise followed by separate procedural steps. It is a connected and multi-faceted transaction. As a matter of common sense, the court must ask whether the individual steps form part of a larger sequence of events or are genuinely self-contained. Capacity therefore extends to decisions likely to be necessary during the proceedings, including giving proper instructions, approving the particulars of claim and approving a compromise.
3. The distinction between actual and potential decisions does not require the court to speculate about unrelated hypothetical transactions. It does require assessment of how the litigation would have been conducted if it had been conducted properly. Proper legal explanation is part of the capacity test.
4. On the accepted facts, proper advice would have prevented the claim from being advanced for the limited sums pleaded. The claimant did not understand that she was surrendering a claim potentially worth between £800,000 and more than £2 million. She therefore lacked capacity to conduct the proceedings and to approve the compromise. A litigation friend should have been appointed, at the latest when settlement was under discussion.
5. Under Civil Procedure Rules 1998, r 21.3(4), steps taken before a patient has a litigation friend are ineffective unless the court orders otherwise. Under r 21.10, a compromise by or on behalf of a patient requires court approval. The court could allow earlier steps to stand while refusing to approve the settlement.
6. Lord Justice Lewison and Sir Mark Potter agreed with Ward LJ.

• Court of Appeal (Civil Division): allowed the appeal from Silber J’s preliminary ruling of 7 March 2011.
• Queen’s Bench Division, Manchester District Registry: held that historical capacity was confined fundamentally to decisions actually required in the action as drafted.