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The Supreme Court decision in Dunhill v Burgin and its implications.

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1 The Supreme Court decision in Dunhill v Burgin and its implications

2 The accident 25 June 1999 RTA in South Yorkshire Mr Burgin’s motor-cycle struck Mrs Dunhill crossing from the nearside between stationary vehicles in the nearside lane Severe head injury Some pre-existing psychiatric troubles

3 The Legal Proceedings - Sheffield 13 May 2002 claim issued for severe head injury Alleging on-going symptoms but … Claim limited to £50,000; none for future loss Significant contributory negligence At Court, Mrs Dunhill, a mental health advocate, counsel and trainee solicitor but a lay witness did not attend Decision presented to Mrs Dunhill: whether to negotiate or apply to adjourn, but steered towards negotiation Compromise at £12,500 - 25% of the limitation on value Complications as to actual valuation never discussed Consent order and mentioned in court

4 The Legal Proceedings - Manchester July 2006, Mrs Dunhill saw new solicitors 2008 proceedings issued and stayed against solicitors and counsel 2009 Masterman-Lister proceedings commenced The Defendant accepted that the case as it should have been framed and explained by the legal advisers was complex; beyond the Claimant’s capacity to understand and decide; worth c. £800,000 on full liability … but maintained that Mrs Dunhill did have capacity to make the decisions required of her in the actual proceedings

5 The 1 st preliminary issue defined “In order to decide if the consent order … might be set aside on the grounds of lack of capacity, the fundamental question is whether, in considering the issue of capacity historically rather than prospectively, should the Court: Confine itself to examining the decisions in fact required of the Claimant in this action; or Expand its considerations to include decisions which might have been required if the litigation had been conducted differently?”

6 Mr Justice Silber Decided the pure point of law in favour of the Defendant – it was the proceedings as brought (defined in the pleadings and the schedule of loss) which formed the backdrop to the actual the decisions – not any other proceedings If not, decisions actually taken could be set aside for lack of capacity on no better ground than that a different question might have been posed This result was required for consistency in other areas where capacity has to be determined e.g. consent to medical treatment On the expert evidence the presumption of capacity was not rebutted in respect of any decision(s) put in issue in evidence or on the pleadings

7 The capacity test appeal - CA Court of Appeal disagreed with Silber J Ward LJ asserted at [2012] EWCA Civ 397 [29]: “Since capacity to conduct proceedings includes... the capacity to give proper instructions for and to approve the particulars of claim, the claimant lacked that capacity. For her to have capacity to approve a compromise she needed to know... what she was giving up and, as is conceded, she did not have the faintest idea that she was giving up a minor fortune without which her mental disabilities were likely to increase.”

8 2 nd preliminary issue – CPR construction point Does CPR 21.10 apply to catch proceedings like these where a claim is brought without a litigation friend, contrary to CPR 21.10(2), so that, in the eyes of the Court and the Defendant, the Claimant does not appear to lack capacity? Mr Justice Bean decided it does but for reasons which did not stand scrutiny in the Supreme Court Leapfrog appeal to join the 1 st preliminary point, for which permission had now been granted in the Supreme Court

9 The capacity test appeal – the underlying issues at stake The Mental Capacity Act is designed to empower people, presupposing that those to whom they turn for advice will take pretty extensive steps to explain things The wisdom of the actual decision is beside the point of having the capacity to make it – it is the ability to understand the broad picture with advice and decide – Boreham J in White v Fell, approved in Masterman-Lister Medical decisions – Chatterton v Gerson: the fallacy of mistaking [1] the capacity to consent with [2] the breach of duty going under the label of lack of informed consent The duty of care - emptied of its content Does compromise of litigation warrant a special case?

10 The CPR construction appeal – the stakes? Ordinary principles of statutory interpretation: Primary intention Delegates not to travel beyond the primary intent Law not to be subject to casual change – strive to avoid adopting a construction which involves breaching the principle The Rule in Imperial Loan: a person is bound by his contract unless he can show that he lacked capacity and [1] his lack of capacity entailed that he did not know what he was doing and [2] the other party was aware of the incapacity Clash between CPR 21.10 (if widely construed) and the “general law of the land” Read into CPR 21.10 the requirements of Imperial Loan

11 Make an exception for the compromise of litigation for represented parties? Why? Litigation can always be run differently and made more complex – an easy dodge? Pandora’s box? Is economic loss in litigation any more important than economic loss by other means? Fry v Lane – independent advice was always an answer against granting relief from a bad bargain before Imperial Loan toughened up the law Expert and insured legal advisers In a Post-Mitchell nuclear winter, why should legal advisers take responsibility in many areas but not in respect of poor advice in the formulation of claims? Many who have capacity may under-settle based on poor advice: how many personal injuries claimants in large claims really understand the detail of the advice they receive? Should the remedy (whether against the lawyer or the original tortfeasor) turn on capacity when the real cause is the poor advice?

12 And so to the Supreme Court … Lady Hale Lord Kerr Lord Dyson Lord Wilson Lord Reed 3-5 February 2014

13 Issue Specific The general approach of the common law, now confirmed in the Mental Capacity Act 2005, is that capacity is to be judged in relation to the decision or activity in question and not globally. Hence it was concluded in Masterman-Lister that capacity for this purpose meant capacity to conduct the proceedings (which might be different from capacity to administer a large award resulting from the proceedings).

14 Issue Specific The general approach of the common law, now confirmed in the Mental Capacity Act 2005, is that capacity is to be judged in relation to the decision or activity in question and not globally. Hence it was concluded in Masterman-Lister that capacity for this purpose meant capacity to conduct the proceedings (which might be different from capacity to administer a large award resulting from the proceedings). This was also the test adopted by the majority of the Court of Appeal in Bailey v Warren [2006] EWCA Civ 51, [2006] CP Rep 26, where Arden LJ specifically related it to the capacity to commence the proceedings (para 112).

15 Patient Defined Under the Rules as amended when the Mental Capacity Act 2005 came into force (the Civil Procedure (Amendment) Rules 2007 (SI 2007/2204 (L20)), “patients” in rule 21.1(1)(a) has been replaced by “protected parties”, and in rule 21.1(2)(d) a “protected party” is defined as “a party, or intended party, who lacks capacity to conduct the proceedings”. Thus the current test is stated in the same terms as that which was applicable to these proceedings.

16 Proceedings Defined What is meant by the “proceedings” which the party must have the capacity to conduct? This is a question of construing the Rules … The proceedings themselves may take many twists and turns, they may develop and change as the evidence is gathered and the arguments refined. But a party whose capacity does not fluctuate either should or should not require a litigation friend throughout the proceedings. It would make no sense to apply a capacity test to each individual decision required in the course of the proceedings, nor, to be fair, did the defendant argue for that.

17 Proceedings Defined ‘But on the defendant’s argument, the claimant’s capacity would depend upon whether she had received good advice, bad advice or no advice at all. If she had received good advice or if she had received no advice at all but brought her claim as a litigant in person, then she would lack the capacity to make the decisions which her claim required of her. But if, as in this case, she received bad advice, she possessed the capacity to make the decisions required of her as a result of that bad advice. This cannot be right.’ ‘I would hold, therefore, that the test of capacity to conduct proceedings for the purpose of CPR Part 21 is the capacity to conduct the claim or cause of action which the claimant in fact has, rather than to conduct the claim as formulated by her lawyers. Judged by that test, it is common ground that Mrs Dunhill did not have the capacity to conduct this claim.’

18 Retrospective Validation CPR r 21.3(4) does suggest a solution. It provides: ‘Any step taken before a child or patient has a litigation friend, shall be of no effect, unless the court otherwise orders’”. Not an option here where value was many times that of settlement

19 CPR 21.10(1) “Where a claim is made – (a) by or on behalf of a child or patient [now protected party] (b) against a child or... patient [now protected party], no settlement, compromise or payment and no acceptance of money paid into court shall be valid, so far as it relates to the claim, by, on behalf of or against the child or patient [now protected party], without the approval of the court.”

20 And so Were the settlement and court order automatically of no effect?

21 The First Argument In Imperial Loan Co Ltd v Stone [1892] 1 QB 599, the Court of Appeal held that a contract made by a person who lacked the capacity to make it was not void, but could be avoided by that person provided that the other party to the contract knew (or ought to have known) of his incapacity. This rule is consistent with the objective theory of contract, that a party is bound, not by what he actually intended, but by what objectively he was understood to intend. This rule, it was argued, applies just as much to the settlement of civil claims as it does to any other sort of contract. Once the parties to ordinary civil litigation have reached agreement, it is not for the court to interfere in their bargain.

22 And so for consistency The compromise rule applies only when litigation friend in place Only then is the other party on notice of incapacity. No Because that involves writing words into the rule which are not there. The words “having a litigation friend” would have to be written into the rule.

23 Or the nuclear option Neither the Rules of the Supreme Court nor the Civil Procedure Rules can change the substantive law unless expressly permitted so to do by statute: see In re Grosvenor Hotel Ltd (No 2) [1965] Ch 1210. Thus, the Rule Committee power to make rules governing “the practice and procedure” to be followed in the civil courts and as further provided in Schedule 1 to the Act did not empower it to change the common law

24 Dietz v Lennig Chemicals Ltd [1969] 1 AC 170 This argument was dealt with by Lord Pearson (with whom Lord Reid and Lord Pearce certainly agreed) as follows, at p 189: “In my view, the making and re-making of the Compromise Rule were valid exercises of the rule-making power under the Judicature Acts, which is now contained in section 99 of the Act of 1925.” Nevertheless, we are bound by Dietz unless there is a very good reason to depart from it.

25 Para 1 Schedule 1 : Civil Procedure Act 1997 “Among the matters which Civil Procedure Rules may be made about are any matters which were governed by the former Rules of the Supreme Court or the former county court rules... ” This could certainly be read as conferring an express power to make rules of court modifying the substantive law to the extent that the previous rules did so, whether or not those rules were within the powers which the previous rule-making bodies had been given.

26 Policy Mr Rowley emphasised the need for finality in litigation, the stresses and strains which prolonged litigation places upon both litigants and the courts, the difficulty of re-opening cases such as this so long after the event, and the alternative protection given to the parties by their legal advisers, who should bear the consequences of their own mistakes.

27 Policy Against this Mr Melton emphasised the disadvantages of claims for professional negligence when compared with claims for personal injuries, principally the discount for the chance that the claim might not have succeeded and the inability to make a periodical payments order that lack of insight is a common feature in head injury cases, so that the parties should be encouraged to investigate capacity at the outset. That a litigant in person would have no legal advisers against whom to make a claim, but the legal position cannot differ according to whether or not a party is, or is not, represented by lawyers. the policy underlying the Civil Procedure Rules is clear: that children and protected parties require and deserve protection, not only from themselves but also from their legal advisers.

28 Lessons Investigate the issue carefully Take good witness statements What does the claim involve Is capacity likely to fluctuate Involve C as much as possible anyway From whom do you take instructions pre-issue With whom do you sign a retainer – Blankley

29 Dunhill v Burgin

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