Furley Page LLP v KFL

Capacity to contract is assessed in relation to the particular decision, rather than globally. The statutory presumption of capacity is rebuttable, and the party alleging incapacity bears the burden of proving it on the balance of probabilities. A contract made by a person lacking contractual capacity is avoidable where the other contracting party had actual or constructive knowledge of that incapacity. The court rejected the submission that only actual knowledge could suffice. Capacity may deteriorate gradually, so the evidence need not identify a single bright-line moment of incapacity. The court found that the relevant individual retained capacity to enter into a legal retainer when it was made, but later lost capacity to contract.

This was a preliminary issue in a Part 8 claim for detailed assessment under section 70 of the Solicitors Act 1974. Furley Page LLP sought payment of fees under a retainer entered into with KFL in October 2020. KFL contended that he lacked contractual capacity when the retainer was made and that the firm knew, or ought to have known, of that incapacity.

The evidence included capacity assessments, expert psychiatric evidence, evidence concerning lasting powers of attorney, and the firm’s attendance notes. The central questions were whether KFL had capacity to enter into the retainer on 4 October 2020 and, if not, whether Furley Page had actual or constructive knowledge of that fact.

1. The court held that capacity under the Mental Capacity Act 2005 is decision-specific. The issue was whether KFL could understand the nature, terms and effect of the contractual retainer, rather than whether he possessed capacity in every area of life.

2. The presumption of capacity had not been displaced. The burden lay on KFL, and the applicable standard was the balance of probabilities, not a heightened or high burden of proof.

3. Applying the principle stated in Dunhill v Burgin [2014] UKSC 18, the court held that avoidance for incapacity requires the other contracting party to have actual or constructive knowledge of the incapacity. The court rejected the contention that constructive knowledge was insufficient.

4. On the evidence, including the reports of Peterkin Ofori and the Office of the Public Guardian’s conclusions, KFL retained capacity to contract when the retainer was concluded on 4 October 2020. His condition had deteriorated gradually, without a clearly identifiable earlier bright-line moment.

5. The court found that KFL lost capacity to contract on 22 June 2021. Furley Page had actual knowledge of that incapacity by 29 July 2021, but there was no persuasive evidence that it had constructive knowledge before that date.

6. The implications of those findings for the fees and the detailed assessment were reserved for the adjourned part-heard assessment.

This was a first-instance determination of a preliminary issue in a Part 8 detailed assessment claim. The judgment does not state an appellate history.