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             Incapacity after Bailey v. Warren


                              Howard Elgot
                     Park Lane Chambers, Leeds



                              Mental Incapacity



1. Mental incapacity is a growing problem – Law Commission Report 231,
   1995
      Continuing increase in the proportion of old people in the population
      Longer life expectancy
      Care in the Community – increased opportunity for decision making.


2. The law on mental incapacity involves the taking away by the state of
   rights enshrined in the Human Rights Act. Consider Winterwerp v. The
   Netherlands 2 EHRR 387, 414 “The capacity to deal personally with
   one‟s property involves the exercise of private rights and hence affects
   “civil rights and obligations” within the meaning of Article 6(1). Divesting
   Mr. Winterwerp of that capacity amounted to a “determination” of such
   rights and obligations”.


3. As lawyers we are particularly concerned with the right to litigate. A
   patient needs a litigation friend to litigate (Part 21.2 (1) CPR).
   Compromise of a claim requires the approval of the court (Part 21.
   10(1) CPR). A person who does not have the mental capacity to
   instruct a solicitor, or a barrister, cannot be our client. Thus we can do
   nothing in his or her name. A solicitor who acts in ignorance of the fact
   that the client is mentally incapable is not entitled to be paid and is
   liable for the costs of the opposing party insofar as those actions
   cannot be regularised ex post facto under the CPR.




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4. To prevent a person compromising his own claim may cast an intrusive
   shadow on his life for years. He may be made to fight a lengthy claim
   for many years, say with no interim payment, to give evidence and be
   cross-examined at great emotional cost, when he would have preferred
   to settle early. It is only the minimum necessary state interference with
   a person‟s rights that can be supported.


5. The Law Commission report led to the Mental Capacity Act 2005, via
   much detailed study, see e.g. para. 3, page 1, House of Commons
   Explanatory Notes to Mental Capacity Bill 2004. The new Act is not yet
   in force.


6. Although the Act does not deal with capacity to litigate, relevant
   provisions in the Act are paralleled in the current law on litigation
   capacity asset out in Masterman-Lister 2003 Lloyd‟s Law Rep, Med.
   244; compare also the philosophy of Hoffman J in Re K 1988 Ch. 310
   (see e. g. 313F, 315B, 316C).


7. The Mental Capacity Act 2005 is designed to be compatible with the
   ECHR and a declaration of compatibility has been given. (See also
   para. 9, page 3 of the House of Commons Explanatory Note.)
   Fundamental to this approach is s. 1 (3) of the Act “A person is not to
   be treated as unable to make a decision until all practicable steps to
   help him to do so have been taken without success”. The Explanatory
   Notes say that a person must be supported to make his own decisions,
   as far as it is practicable to do so. The Disability Rights Commission
   guidance on the current law is valuable (page 3). “It should not …..be
   assumed that the question of capacity arises simply because the client
   requires assistance from friends and family in order to make decisions
   in respect of the particular case in question.”


   8. S. 2 (1) of the Act refers to a person lacking capacity “in relation to
      a matter”. The Explanatory Notes state that “a person may lack
      capacity in relation to one matter but not in relation to another

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       matter.” Might a person have capacity to compromise the liability
       part of his dispute yet not have the capacity to compromise
       quantum?


9. In Bailey v. Warren 2005 PIQR P15 Holland J held that the Claimant
   had capacity to instruct solicitors to deal with his road traffic claim, had
   capacity to compromise liability at 50:50, but had no capacity to
   institute and conduct litigation under CPR Part 21 (and therefore would
   not have had capacity to compromise the quantum aspects of the
   case). Although Hallett L J agreed with the trial judge, both Ward LJ
   and Arden LJ said that litigation capacity was indivisible.


10. In any case where the capacity of a litigant is in issue, the evidence of
   lay and medical witnesses is required. In borderline cases expert
   evidence alone is unlikely to be sufficient to discharge the burden of
   proving incapacity.


11. In Masterman – Lister various, relatively similar, tests areapproved.


   Para. 18, the Boreham J test
   “The expression 'incapable of managing her own affairs and property' must be
   construed in a common sense way as a whole. It does not call for proof of
   complete incapacity. On the other hand, it is not enough to prove that the
   plaintiff is now substantially less capable of managing her own affairs and
   property than she would have been had the accident not occurred. I have no
   doubt that the plaintiff is quite incapable of managing unaided a large
   sum of money such as the sort of sum that would be appropriate
   compensation for her injuries. That, however, is not conclusive. Few
   people have the capacity to manage all their affairs unaided. ... It may be that
   she would have chosen, and would choose now, not to take advice, but that is
   not the question. The question is: is she capable of doing so? To have that
   capacity she requires first the insight and understanding of the fact that
   she has a problem in respect of which she needs advice ... Secondly,
   having identified the problem, it will be necessary for her to seek an

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  appropriate adviser and to instruct him with sufficient clarity to enable
  him to understand the problem and to advise her appropriately. ...
  Finally, she needs sufficient mental capacity to understand and to make
  decisions based upon, or otherwise give effect to, such advice as she may
  receive."


  Para. 20, the Wright J test
  “The decision of Boreham J in White's case gives a clear indication of how he
  thought that capacity should be judged in the context of personal injuries
  litigation, and Wright J followed the same path. He said that the court should
  only take over the individual's function of decision making "when it is shown
  on the balance of probabilities that such person does not have the capacity
  sufficiently to understand, absorb and retain information (including advice)
  relevant to the matters in question sufficiently to enable him or her to make
  decisions based upon such information." (see paragraph 29 of the judgment)
  .
  Para. 26, the Langstaff/Francis test, in effect adopted by Kennedy LJ.
  This includes an exhortation to the court to consider the complexity of
  the decision, not its gravity.


  “Mr Langstaff's formulation of that test for present purposes was that there
  must be (1) understanding and (2) retention of matters relevant to the decision,
  followed by (3) evaluation. Mr Francis submitted that a person' s ability to
  manage his or her property and affairs requires an ability to make and
  communicate, and where appropriate give effect to, all decisions required in
  relation to them. So the mental abilities required include the ability to
  recognise a problem, obtain and receive, understand and retain relevant
  information, including advice; the ability to weigh the information (including
  that derived from advice) in the balance in reaching a decision, and the ability
  to communicate that decision. Mr Francis further submits that the court
  should have regard to the complexity of decisions under consideration but
  not to the court's own valuation of the gravity of those decisions because it
  is not for the court to decide in a non-medical treatment case what is or is
  not serious in the life of the person before it. To that extent he is critical of

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   the use by Wright J of the word "sufficiently" in paragraph 29 of his judgment
   and also of the judge's failure specifically to refer to the ability to weigh
   information in the balance. Whilst I agree with the approach put forward
   by Mr Francis, I do not accept his criticisms of the trial judge. In my
   judgment the judge's use of the word "sufficiently" was appropriate on each
   occasion, and the concept articulated by the judge of having sufficient
   information to enable one to make decisions based on that information is
   simply another way of referring to the ability to weigh information in the
   balance.”




12. At para. 53 Kennedy LJ also approved the approach of Wright J in
   respect of the taking of advice “where more formidable problems
   arise……..”
   Compare Disability Rights Commission Guidance, pages 2 and 3.


13. At para. 83 Chadwick LJ said that there as no logical reason why a
   person who understands that something needs to be done but who
   does not have requisite understanding to do it for himself, should not
   confer upon another the power to do what needs to be done.


14. CPR Part 21.10 requires that “where a claim is made [ a ] by or on
   behalf of a child or patient; or [b] against a child or patient ……… no
   settlement, compromise or payment or no acceptance of monies paid
   into court shall be valid , so far as it relates to a claim by, on behalf or
   against the child or patient , without the approval of the court”.


15. In Bailey v. Warren (another claim brought by a patient) judgment had
   been entered in respect of liability, with a 50% discount for contributory
   negligence, before there was a litigation friend, and without the
   approval of the court as required by Part 21.10 (1) CPR. Given that
   Holland J considered that Mr. Bailey was not mentally incapable of
   compromising liability, he validated the judgment ex post facto using
   the power to do so in Part 21.3 (4) CPR.

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16. By a majority of 2 to 1 the Court of Appeal rejected this approach
   (2006 EWCA Civ 51) and held that litigation capacity was indivisible.


17. However, Holland J. held that even if Mr. Bailey had been mentally
   incapable to compromise liability he would still have exercised his
   discretion to validate the judgment under Part 21.3 (4) CPR. He relied
   upon various factors, including


         The overriding objective, including the overall chronology and
          the position of the Defendant
         The likely situation had the Claimant been proceeding by a
          litigation friend at the time of the agreement
         The reasonableness or otherwise of the 50: 50 split.
         “The real nature of the present litigation friend‟s stance” – not
          that the Claimant lacked legal and/or other advice or failed to
          heed it, but that the advice was open to criticism.


    In Bailey v. Warren all 3 members of C A agreed that the 50:50
   judgment entered in ignorance of the Claimant‟s incapacity should
   stand, notwithstanding opposition by the litigation friend and his
   lawyers.
   However, on the approach to validation, the Court of Appeal was split.
   once again, this time along different lines.
   Hallett LJ agreed with the Holland J approach.
   Ward LJ – Discretion is unfettered. “Whilst the patient‟s interests
   do…predominate, the Defendant is not without an interest which the
   court must protect.”
   Arden LJ (dissenting on this point) - Holland J approach is too
   unfavourable to patient. Test is „what is in the interests of the patient?‟




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   18. The Court of Appeal in Masterman –Lister was keen to discourage the
      reopening of old cases following a late discovery that the Claimant was
      a patient, particularly if the patient was represented and, in effect, at no
      more of a disadvantage than any other litigant. Thus Kennedy LJ said
      at para. 33 that-
          “In the context of litigation, rules as to capacity are designed to ensure that
      claimants and defendants who would otherwise be at a disadvantage are
      properly protected, and in some cases that parties to litigation are not pestered
      by other parties who should be to some extent restrained. However finality in
      litigation is also important, and the Rules as to capacity are not designed
      to provide a vehicle for re-opening litigation which having apparently
      been properly conducted (whatever the wisdom of the individual decisions
      in relation to it) has for long been understood to be at an end.


      If that was the message that the Court of Appeal wanted to convey,
      however, another division of the Court of Appeal conveyed the
      opposite message when considering a case involving a minor in
      Drinkall v. Whitwood 2004 1 WLR 462.




                                       Minors




The Facts in Drinkall


   19. Kerry Anne Drinkall, a minor, was riding her bicycle, on 19 th January
      1998. She collided with a car driven by the Defendant. On 5 th April
      2000, and pre-issue of proceedings, the Claimant made a Part 36.10
      offer to settle the issue of liability on a 80.20 basis in her favour. The
      Defendant‟s insurers accepted the offer on 7 th April 2000. On 26th
      September 2001, 22 days before the Claimant‟s 18 th birthday, the

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      Defendant sought to resile from the agreement as it wanted to argue
      for a higher degree of contributory negligence. The Claimant issued
      proceedings on 11th January 2002, and amongst other things, pleaded
      that the April 2000 letter constituted a binding agreement on the issue
      of liability. The Defendant contended pursuant to CPR Part 21.10 that
      as the Claimant was a minor in April 2000, the parties were unable to
      enter into a binding settlement without the approval of the court.


Court of Appeal


   20. When the matter came before the Court of Appeal, those acting for the
      Defendant had discovered the existence of Dietz v Lennig Chemicals
      Ltd [1969 ] 1 AC 170 HL, in which the House of Lords had considered a
      similar issue under the RSC.


   21. . In Dietz, settlement had been reached between a widow for herself,
      her infant son and the defendants. The settlement was “ subject to the
      approval of the court “ in respect of the infant .The Master approved the
      settlement, but prior to the order being drawn up the Defendant‟s
      solicitors made the discovery that the plaintiff had remarried as
      between the date of the agreement and the hearing. The Defendant
      applied to set the order aside. The Lords held that there was no binding
      agreement. Lord Pearson delivering judgment said:-
   “The settlement, so far as it related to the £9,250, in which the infant was
   interested, was only a proposed settlement until the court approved it.
   Either party could lawfully have repudiated it at any time before the court
   approved it. It had no validity by reason of the parties’ agreement ……
   That which might have given it validity would have been an order made by
   the Master with the effective consent of the parties”.


   22. Simon Brown LJ considered that Dietz was “decisive upon the present
      appeal”. The Court of Appeal considered that CPR Part 21.10 could not
      be interpreted in any other way. Any settlement, albeit partial as in the


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       present case, must be the subject of court approval in order to be
       binding.




Practicalities


   23. Drinkall highlights the danger of relying on an agreement alone in
       respect of liability, even though the agreement might arise out of a Part
       36 offer. The court‟s approval must be sought, even if there is only
       partial settlement.


   24. It was mooted in Drinkall that it may be possible to advance an
       argument that the Defendant should be estopped from repudiating
       where the claimant has acted to his detriment in reliance on the
       agreement. The argument was not fully explored before the Court of
       Appeal.




   Is there a way around Drinkall?


   25. The Rules of the Supreme Court are by their very definition procedural
       rather than substantive and no longer exist. For example, Dietz v.
       Lennig Chemicals might be an important case on the impact of the
       Rules of the Supreme Court then in force where an infant was a
       dependant, but should it govern the modern law on the compromise of
       claims where there is incapacity?


   26. Part 21 CPR must be construed together with Part 1. Rule 1 (1)
       describes the CPR as a “new procedural code with the overriding
       objective of enabling the court to deal with cases justly”. Rule 1.2 CPR
       states that “the court must seek to give effect to the overriding
       objective….(b) when it interprets any rule” (including Part 21).




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27. In Biguzzi v. Rank Leisure 1999 1 WLR 1926 Lord Woolf M R criticised
   the recourse to authorities decided under the RSC in a passage
   headed “The position as to previous decisions” (1931H – 1932G). The
   point has been restated many times, for example, by Brooke L J in
   Price v. Price 2003 3 All E R 911, 920j.


29. It is unfortunate therefore that Simon Brown L J held at para. 16 of
   Drinkall v. Whitwood that Dietz was “decisive upon the present appeal,
   certainly with regard to the basis on which the matter was decided
   below”. Simon Brown LJ expressed surprise at para. 20 that Dietz was
   not referred to in the White Book or the Green Book. Was it so
   surprising given the views of Lord Woolf and Brooke L J as to reliance
   on authorities under earlier procedural rules?


30. Unfortunately neither Biguzzi nor Price were cited in Drinkall v.
   Whitwood. Nor was any reference made to rule 1.1 (1) CPR which
   refers to the CPR as constituting a “new procedural code”. It may be
   that the decision in Drinkall is per incuriam for these reasons alone.


31. Furthermore, the Court of Appeal appeared to recognise that the result
   did not enable the court to “deal with cases justly” as required by rule
   1.1 (1) CPR (see para. 19, “regrettable though it might seem, the
   defendant here was entitled to renege on his agreement as he did, for
   good reason or none”).


32. Still further, rule 1.2 CPR does not appear to have been cited and as a
   result the Court of Appeal did not consider:-


          CPR 1.1 (2) (b) - save “expense”
          CPR 1.1 (2) (d) - ensure that the claim was dealt with
           “expeditiously and fairly”.




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33. There is yet another possible solution. As we have seen above, Part
   21.3 (4) CPR allows validation of “any step taken before a child or
   patient has a litigation friend”. Traditionally, in the RSC, a “step” would
   mean a step in the proceedings, such as the judgment that was
   validated in Warren v. Bailey. Interestingly enough, although Part 21.3
   (2) and (3) CPR refer to steps “in the proceedings”, Part 21.3 (4) refers
   only to a “step”, leaving the possibility of an ex post facto validation of
   the agreement that the insurer had resiled from.


34. When Drinkall was reheard the insurers did worse than the 80:20 they
   had originally agreed. Permission to appeal was refused. There must
   be a moral in this somewhere.




                                                            HOWARD ELGOT


                                                         Park Lane Chambers
                                                                  19 Westgate
                                                               Leeds LS1 2RD




Howard Elgot Park Lane Chambers 19 Westgate Leeds LS1 2RD
                          0113 228 5000