Dunhill v Burgin

Where a claimant in fact lacks capacity to conduct proceedings, a settlement or consent judgment concerning the claim requires court approval, even if the incapacity was unknown when the agreement was made and the claimant acted without a litigation friend. CPR Part 21 applies to claims made by, as well as on behalf of, a protected party. Its compromise rule governs the settlement of litigation and takes precedence over the general law of contract where the proceedings are before the court. A settlement made without the required approval has no binding effect. The consent judgment founded on it may be set aside, and the substantive claim may proceed.

The claimant suffered serious injury in a road accident and commenced proceedings limited to £50,000. Liability was compromised for £12,500 at the door of the court in January 2003, without court approval. The claimant later acted by a litigation friend and sought to set aside the consent judgment after it was established on appeal that she had lacked capacity when the compromise was made.

The issue was whether CPR Part 21, particularly rule 21.10, applied where the claimant had brought proceedings in her own name and her incapacity was unknown to the defendant and the court. The court also considered whether the rule conflicted with the common law principle in The Imperial Loan Company Ltd v Stone.

1. The compromise was invalid, the consent judgment was set aside, and the substantive personal injury claim was directed to proceed to trial on liability and quantum.

2. Under CPR 21.2(1), a protected party must have a litigation friend. CPR 21.3(4) provides that steps taken before appointment generally have no effect. CPR 21.10(1) applies where a claim is made by or on behalf of a protected party. The definition in CPR 21.1(2) turns on whether the party in fact lacks capacity to conduct the proceedings; formal identification as a protected party and knowledge of the incapacity are unnecessary.

3. The court followed the reasoning of Ward and Arden LJJ in Bailey v Warren. A compromise involving a person who was in fact a patient or protected party when the agreement was made is not binding without court approval, even where the incapacity was unknown to both sides.

4. The common law rule in The Imperial Loan Company Ltd v Stone does not control the compromise of litigation. When a claim is issued, the Civil Procedure Rules are impliedly incorporated into any agreement settling the dispute, particularly where the settlement is embodied in a court judgment. The rules governing compromise therefore take precedence over the general law of contract.

5. The court considered that the same result was strongly supported by policy. Although finality and certainty in litigation matter, protection of persons lacking capacity to conduct litigation was the stronger consideration on these facts. A certificate was granted under section 12 of the Administration of Justice Act 1969 for a possible leapfrog appeal. The defendant was ordered to pay the claimant’s costs of the preliminary issue.

• High Court (Queen's Bench Division): the court proceeded after the Court of Appeal had declared that the claimant lacked capacity at the time of settlement and remitted the matter for case management. The compromise was held invalid and the claim was directed to proceed.
• Court of Appeal: Silber J’s decision that the claimant had capacity was reversed, and a declaration was granted that she lacked capacity at the time of the purported settlement: [2012] EWCA Civ 397; [2012] PIQR P15.
• High Court: the court granted a certificate under section 12 of the Administration of Justice Act 1969 for a possible direct appeal to the Supreme Court.