The Supreme Court has recently given its ruling in an English appeal case concerning mental capacity at the time of a personal injury settlement.
The case concerned Ms Dunhill, who was struck by a motorcycle driven by the appellant, Mr Burgin, when crossing the road in June 1999 and suffered a severe head injury.
In May 2002 she issued a claim against Mr Burgin for damages limited to £50,000 for her injuries. On the day of the trial, settlement negotiations took place and Ms Dunhill, after advice from her counsel and solicitor, decided to compromise her claim for £12,500 plus costs, which was embodied in a consent order put before the judge.
Ms Dunhill had in fact suffered very serious injuries and this settlement represented a gross undervalue of her claim, if she could establish that Mr Burgin had been negligent. In 2006 she consulted new solicitors. A litigation friend was appointed to act on her behalf, who applied for a declaration that she had not had mental capacity at the time of the settlement and that the consent order should be set aside with directions for the future conduct of the claim.
Two preliminary issues arose. The first was the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on her own behalf. The second was the consequence if legal proceedings were compromised without it being recognised that one of the parties lacked that capacity, so that the requirement in Part 21.10 of the Civil Procedure Rules (CPR) that the compromise must be approved by a court was not complied with.
The High Court held that capacity was to be judged by reference to the decisions which Ms Dunhill had actually been required to take in the action as drafted rather than those which she might have been required to take had the action been differently framed. On this basis she did have capacity.
The Court of Appeal ruled that she had to have capacity to conduct the more complicated action which ought to have been brought and Ms Dunhill had lacked that capacity. When the case was remitted to the High Court, it held that her lack of capacity rendered the settlement void as it had not been approved by the court as required by CPR 21.10.
The Supreme Court gave permission to Mr Burgin to appeal against the two findings but has now unanimously dismissed both appeals.
It holds that, on the test properly to be applied, Ms Dunhill lacked the capacity to commence and conduct proceedings arising out of her claim against Mr Burgin. Therefore the consent order must be set aside and the case must proceed to trial.
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