RONALD HARRY BAILEY (by his litigation friend, JANET ASHTON) v MATTHEW GEORGE WARREN [2006] EWCA Civ 51
FACTS:-
The Claimant suffered severe head injuries in a road traffic accident on the 3rd May 1998. He and a friend, who had been drinking were crossing a four lane urban dual carriageway late at night. (The friend later compromised her own personal claim on a 50/50 basis). Neither the Claimant nor his friend had any memory of stepping out into the road. The Defendant pleaded guilty to driving without due care and attention. He had little recall of the events.
He had made a good physical recovery to the extent that he was able to return to work in October 1998 albeit on light duties, but his injuries resulted in permanent damage to his cognitive functions, although there was disagreement about the extent of that damage according to the experts. In February 1999 he returned to his former duties as a machine operator but in March 1999 he developed post traumatic epilepsy and could no longer work.
In March 2000 the Defendant’s insurer wrote to the Claimant’s solicitors offering to settle the case on a 50/50 basis. Counsel advised in strong terms that such a settlement should be accepted. In September 2000, the Claimant was consulted and he discussed the offer with his family. His step-brother who was nominated on his behalf, contacted the Claimant’s solicitors giving his approval to the compromise.
Liability was settled on a 50/50 basis in November 2000. At that point no-one had considered whether the appointment of a litigation friend was appropriate and it appeared that those advising him were heavily influenced by the fact that the Claimant was being monitored by a consultant in rehabilitation medicine, who described his recovery as “excellent.” Proceedings were commenced in April 2001 and in December 2001, judgement was entered on a 50/50 basis on liability. At that point quantum still fell to be determined.
In January 2003 a professor of neurology suggested that the Claimant lacked capacity and application was made to appoint a litigation friend. In August 2003, there was a change of solicitors. Those solicitors expressed concerns about the level of investigation carried out by their predecessors and the settlement on liability. They argued that the settlement should have been on a full liability basis.
The Claimant’s father was appointed as litigation friend and he applied to set aside the judgment on liability on the basis that, at the time of the settlement, he was a patient under CPR Part 21. The Claimant’s father was later replaced by his sister. Mr Justice Holland found that although the Claimant was now a patient, and had been a patient in December 2001, he was not a patient in November 2000, for the purposes of agreeing a 50/50 split on liability.
Mr Justice Holland heard no oral evidence. There was a police report, photographs and three witness statements, two from the Defendant and one from an independent witness, who had not seen the collision. The layout of the junction had also changed since the time of the accident. Justice Holland said that in his view, whilst he would query an apportionment less favourable to the Claimant than 60/40, it might have been difficult to resist a strong submission in favour of a 50/50 split. Therefore the settlement of 50/50 would be approved.
The Claimant sought permission to appeal against the finding to the effect that he was not a patient in November 2000.
HELD:-
Lady Justice Hallett reviewed the existing medical evidence. Some of that evidence suggested that the Claimant was a patient and some suggested that he was not. She considered the terms of CPR 21, which states:
21.2(1): “A patient must have a litigation friend to conduct proceedings on his behalf.”
21.1(2) “Patient means a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of managing and administering his property and affairs.”
21.3(4) “Any steps taken before…a patient has a litigation friend shall be of not effect unless the court otherwise orders.”
21.10(1) “Where a claim is made by or on behalf of a patient….no settlement, compromise or payment….shall be valid, so far as it relates to the claim, by or no behalf of…the patient without the approval of the court.”
Lady Justice Hallett then considered the landmark case of Masterman-Lister v Brutton & Co. [2003] WTLR 259 which deals with the test for incapacity and the assessment of incapacity.
This establishes the following propositions:-
That case established that if a litigant was a patient for the purposes of administering his award, it did not necessarily follow that he was a patient for all purposes. Similarly there was no justification for the assertion that if the evidence supports a conclusion that a Claimant lacks the capacity to deal with matters of quantum that it necessarily follows that he lacks the capacity to decide whether or not he is prepared to accept that he was equally to blame for a road traffic accident. In this case the issue of liability was relatively straightforward whereas the issue of quantum was not. Here the issue in question was that of liability.
However much judges may wish to protect an individual from the ill-advised consequences of his or her own actions, courts should tread very carefully and only interfere with an individual’s rights when absolutely necessary.
If the Claimant had entered into a bad bargain as a result of negligence on the part of his legal advisers, then he was not without remedy.
The judge at first instance, Justice Holland asked himself four questions:-
Lady Justice Hallett said that in her view these questions adhered to the principles confirmed in the case of Masterman-Lister v Brutton & Co.
Expert evidence was of considerable assistance, but it was not conclusive.
Holland J saw and heard the witnesses including the Claimant. He bore in mind the fact that the applicant was living and working in the community. Mr Bailey shopped, he cooked, he entertained himself, and he had a bank account and knew the PIN number for his cash card. He personally instructed his solicitors and was able to communicate with them. He appeared to understand the liability issues and knew that attempts had been made to secure an interim payment. Holland J also had the solicitors’ file in front of him which recorded communications between the Claimant and his legal advisers. Lady Justice Hallett commented that the Claimant’s counsel had not got close to overturning the original judge’s decision.
There were no restrictions whatsoever on the court’s discretion to validate steps taken in proceedings before a litigation friend is appointed. A court can regularise the position retrospectively provided everyone has acted in good faith and there has been no manifest disadvantage to the party subsequently found to have been a patient at the time.
Lady Justice Hallett commented that she could understand why Holland J had approved the compromise on liability. However his comments on liability were not binding in any professional negligence claim against the Claimant’s former solicitors.
Lady Justice Arden (giving the following judgment) made the point that in a democratic society the law should maximise an individual’s contribution to the decision making process. The law presumed that a person had capacity and so the burden lay on those seeking to assert that he was not so competent to manage his own affairs.
A number of points arose out of CPR21:-
Lady Justice Arden considered the case of Masterman-Lister v Brutton & Co. That case showed that in determining issues as to capacity in relation to decision purportedly taken; the court is concerned with the quality of the decision making and not the wisdom of the decision.
However she did not agree with the distinction that Lady Justice Hallett (see following judgment) drew in relation to the test of mental capacity being issue specific. Lady Justice Arden said that the court in the Masterman-Lister case considered that litigation down to the administration of any award of damage was to be treated as a single transaction and not as a series of individual steps.
The right approach must be to ask as a matter of common sense whether the individual steps formed part of a larger sequence of events which should be seen as one, or whether they were in fact self-contained steps which were not connected with each other.
The appropriate test in this case should be whether the client had capacity to start proceedings. That would include the question whether he would have capacity for the purposes of an offer of compromise. Where a client sought damages for personal injury because he had suffered a brain injury, capacity was a question that ought in general routinely to be considered by those representing him. In cases of doubt, this would mean a medical opinion.
Turning to the issue as to whether the compromise on liability reached in this case was valid, Lady Justice Arden said that a compromise by a patient that has not been approved by the court is invalid unless it is approved by the court. Therefore a compromise made by an individual who was subsequently proved to have been a patient at the time of the compromise was of no effect until the court gave its approval.
The judge was satisfied that as at December 2001, Mr Bailey did not have capacity to conduct proceedings. However he was not asked to make a finding about Mr Bailey’s capacity as at November 2000. His own evaluation on that issue was very brief, and he did not specifically say whether he rejected or accepted the medical evidence as at November 2000 (which suggested that Mr Bailey did not have capacity). Therefore in Lady Justice Arden’s opinion, a retrial of the issue of capacity was inevitable.
However there was then the difficult question of whether the court should have retrospectively approved the compromise on liability. The Claimant’s counsel said that this relief had not been sought by the Claimant’s litigation friend. He referred to the case of Re Birchall (1880) 16 Ch D 41 where the court refused to enforce a compromise on infants against the opinion of their litigation friend and legal advisers. However that did not apply to cases where the only objection to the enforceability of the compromise made by the patient himself is that the approval of the court under CPR 21.10(1) is required. There was no requirement in CPR 21.10(1) that an application for approval should be made by the litigation friend in all cases. Indeed if the litigation friend acted unreasonably he could be removed.
Kennedy LJ had said in the Masterman-Lister case that the court could regularise the position retrospectively. It would not in general be in the interests of the patient for the court to decline to approve the compromise, if it were entered into in good faith and treated as valid for some time. If on the other hand, the court declined to approve the compromise, the other party to the compromise would of course be free to pursue such other remedy as he may have against anyone who represented that the patient was competent to agree to the compromise.
Lady Justice Arden said that in her judgment, the judge did not when considering the question of retrospective approval, apply the test of what was in the interests of the Claimant. Rather he asked whether the compromise was one that the court might have approved at the time and whether it was overwhelmingly favourable to the Claimant. However matters should be judged at the date on which the court is considering whether to give retrospective approval. On that basis, his exercise of discretion fell to be set aside and re-exercised by the court. However on the basis of that test i.e. was it now in the Claimant’s interests for the compromise to be approved? Lady Justice Arden said that she agreed with Hallett LJ and Ward LJ that the compromise (50/50 on liability) ought to be approved. The observations on the 50/50 split made by the judge would not be binding on the Claimant in any proceedings against his former solicitors.
Lord Justice Ward considered the terms of CPR 21. A patient existed only within the rules and for the purpose of giving effect to the rules. A patient was not a patient until proceedings were commenced. As at the time of the compromise in November 2000, the Claimant could not have been a patient before the claim was issued on the 27th April 2001.
It was agreed between both side’s counsel that if the Claimant was not a patient in November 2000, the appeal had to be dismissed and the compromise on liability entered into was entirely valid. Lord Justice Ward said that this did not necessarily follow. It was necessary to consider the validity of the actual agreement, given the possibility that the Claimant might not have been a patient.
Lord Justice Ward turned to the case of Imperial Loan Company v Stone [1892] 1 QB 599 which stated that where a person enters into a contract, and afterwards he is able to prove that he was of unsound mind at the time of entering into that contract, the contract is still binding on him unless he can prove that the person with whom he contracted knew him to be insane as not to be capable of understanding what he was about.
However that statement of the law had to be read in light of CPR 21.10(1) which provides that no settlement or compromise is valid unless it is approved by the court.
The case of Drinkall referred to by Lady Justice Arden (see above) said that it was possible to have a settlement which was partial, i.e. one on the issue of liability not quantum.
The next question was whether the fact that the settlement had been reached before or after the issue of proceedings, made any difference. The former RSC Order 80 Rule 11 made it clear that approval was required when the agreement was reached. Therefore it was right to construe CPR 21.10(1) in like manner.
There had been speculation in Masterman-Lister that procedural rules should not be allowed to change the substantive law as set out Imperial Loan Company. That point was not pursued in the present appeal, but Lord Justice Ward thought that the powers in the CPR were wide enough to include the power to protect a patient. He referred to a case Dietz v Lennig Chemicals Ltd [1969] 1 AC 170 where the court said that either party could have lawfully repudiated an agreement made in respect of an infant, at any time before it was approved by the court.
The judge had said that the agreement reached in November 2000 could not be impugned. If he refused to enter judgment on a 50/50 basis on liability, there would then be an accord and satisfaction issue between the parties, and that would not be in the Claimant’s interests. Lord Justice Ward did not agree. The agreement of November 2000 was impugned by the operation of CPR 21.10(1), Dietz and the Drinkall case.
However the judge had then addressed the issue of whether the November 2000 agreement could then be approved, on the basis that the Claimant was in fact a patient when he agreed liability. Ward LJ said that the judge did not need to go back to November 2000. It was enough that the Claimant was a patient when judgment was entered because that was when the decision had to be taken to approve the compromise.
In Re Birchall (see above) the court had made it quite clear that they could not compel a settlement only approve it. However Re Birchall was different from the present case insofar as here an agreement had been made, and at the time lawfully made with the approval of the Claimant’s family and on the advice of solicitors and counsel acting at the time. Therefore the jurisdiction of the court was not excluded.
Ward LJ then turned to the manner in which Holland J did exercise his discretion to approve the settlement. Here Ward LJ agreed with Hallett LJ and dismissed the appeal for those reasons.
The final issue was that of the proper test for capacity to manage and administer property and affairs. Chadwick LJ had said in the case of Masterman-Lister that there were two broad propositions:-
Kennedy LJ in the same case had stressed the issue specific nature of the test. It was not difficult to envisage Claimants in personal injury actions with capacity to deal with all matters and take all “lay client” decisions related to their actions up to and including a decision whether or not to settle, but lacking capacity to decide how to administer a large award. However capacity must be approached in a common sense way, not by reference to each step in the process of litigation.
Ward LJ said that the client must be able to understand all aspects of the proceedings and take an informed decision. If he had the ability to understand a 50/50 split on liability but cannot understand the concept of damages that results from that split, then he lacked true capacity. The judge had approached this question too narrowly.
However Ward LJ could see no point remitting the case back to the judge for a reconsideration of whether the Claimant had capacity as at November 2000. Even if that were done, the judge would simply decide to approve the settlement on behalf of the Claimant as before.
In relation to approving the 50/50 split the judge had an unfetter discretion, and he had to form some impression as to whether or not 50/50 was so outside the bracket that the agreement produce an unfair compromise for the patient. His views were not binding on any judge in a professional negligence action against his solicitors.
There were other factors. It might be in the patient’s interest to accept less money for a quicker end to the case, to avoid a painful trial, the fact that the Claimant’s companion on the night of the accident had accept 50/50, the fact that his family backed the settlement.
The Defendant was not without an interest. The agreement was openly negotiated and concluded after the patient had the opportunity to take advice. There was no reply to the Defence pleading accord and satisfaction, nor opposition to the entry of judgment a year later. By the time the point was raised in August 2003, memories would have faded. To seek to reopen the matter would cause the Defendant prejudice.
Finally there were the interests of good administration of justice.
Therefore Ward LJ would approve the original compromise and direct that the original judgment stood.
FACTS:-
The Claimant suffered severe head injuries in a road traffic accident on the 3rd May 1998. He and a friend, who had been drinking were crossing a four lane urban dual carriageway late at night. (The friend later compromised her own personal claim on a 50/50 basis). Neither the Claimant nor his friend had any memory of stepping out into the road. The Defendant pleaded guilty to driving without due care and attention. He had little recall of the events.
He had made a good physical recovery to the extent that he was able to return to work in October 1998 albeit on light duties, but his injuries resulted in permanent damage to his cognitive functions, although there was disagreement about the extent of that damage according to the experts. In February 1999 he returned to his former duties as a machine operator but in March 1999 he developed post traumatic epilepsy and could no longer work.
In March 2000 the Defendant’s insurer wrote to the Claimant’s solicitors offering to settle the case on a 50/50 basis. Counsel advised in strong terms that such a settlement should be accepted. In September 2000, the Claimant was consulted and he discussed the offer with his family. His step-brother who was nominated on his behalf, contacted the Claimant’s solicitors giving his approval to the compromise.
Liability was settled on a 50/50 basis in November 2000. At that point no-one had considered whether the appointment of a litigation friend was appropriate and it appeared that those advising him were heavily influenced by the fact that the Claimant was being monitored by a consultant in rehabilitation medicine, who described his recovery as “excellent.” Proceedings were commenced in April 2001 and in December 2001, judgement was entered on a 50/50 basis on liability. At that point quantum still fell to be determined.
In January 2003 a professor of neurology suggested that the Claimant lacked capacity and application was made to appoint a litigation friend. In August 2003, there was a change of solicitors. Those solicitors expressed concerns about the level of investigation carried out by their predecessors and the settlement on liability. They argued that the settlement should have been on a full liability basis.
The Claimant’s father was appointed as litigation friend and he applied to set aside the judgment on liability on the basis that, at the time of the settlement, he was a patient under CPR Part 21. The Claimant’s father was later replaced by his sister. Mr Justice Holland found that although the Claimant was now a patient, and had been a patient in December 2001, he was not a patient in November 2000, for the purposes of agreeing a 50/50 split on liability.
Mr Justice Holland heard no oral evidence. There was a police report, photographs and three witness statements, two from the Defendant and one from an independent witness, who had not seen the collision. The layout of the junction had also changed since the time of the accident. Justice Holland said that in his view, whilst he would query an apportionment less favourable to the Claimant than 60/40, it might have been difficult to resist a strong submission in favour of a 50/50 split. Therefore the settlement of 50/50 would be approved.
The Claimant sought permission to appeal against the finding to the effect that he was not a patient in November 2000.
HELD:-
Lady Justice Hallett reviewed the existing medical evidence. Some of that evidence suggested that the Claimant was a patient and some suggested that he was not. She considered the terms of CPR 21, which states:
21.2(1): “A patient must have a litigation friend to conduct proceedings on his behalf.”
21.1(2) “Patient means a person who by reason of mental disorder within the meaning of the Mental Health Act 1983 is incapable of managing and administering his property and affairs.”
21.3(4) “Any steps taken before…a patient has a litigation friend shall be of not effect unless the court otherwise orders.”
21.10(1) “Where a claim is made by or on behalf of a patient….no settlement, compromise or payment….shall be valid, so far as it relates to the claim, by or no behalf of…the patient without the approval of the court.”
Lady Justice Hallett then considered the landmark case of Masterman-Lister v Brutton & Co. [2003] WTLR 259 which deals with the test for incapacity and the assessment of incapacity.
This establishes the following propositions:-
- For the purposes of the definition of “patient” in the CPR, the “property and affairs” against which the person’s capacity has to be assessed is the specific transaction of commencing the litigation in question. When the litigation is a claim for personal injuries of a substantial amount, the capacity in question is limited to capacity to make decisions likely to be necessary in the course of the litigation. This would include decisions as to whether or not to settle but not the decisions that have to be made about the administration of an award of damages.
- In the context of litigation, the test to be applied is whether the party to legal proceedings is capable of understanding with the assistance of such proper explanation from legal advisers and experts in other disciplines as the case may require, the issues on which his consent or decision is likely to be necessary in the course of those proceedings. The Claimant has to understand and retain information relevant to the decision which has to be made (including information about the reasonably foreseeable consequences of deciding one way or another or of failing to make any decision). The Claimant then has to use that information in the decision making process. A person should not be considered unable to understand the information relevant to a decision if he can understand an explanation of that information in broad terms and in simple language.
- The court is concerned with the quality of the decision making and not the wisdom of a decision. A rational individual has the right to make an irrational decision about himself or his affairs.
That case established that if a litigant was a patient for the purposes of administering his award, it did not necessarily follow that he was a patient for all purposes. Similarly there was no justification for the assertion that if the evidence supports a conclusion that a Claimant lacks the capacity to deal with matters of quantum that it necessarily follows that he lacks the capacity to decide whether or not he is prepared to accept that he was equally to blame for a road traffic accident. In this case the issue of liability was relatively straightforward whereas the issue of quantum was not. Here the issue in question was that of liability.
However much judges may wish to protect an individual from the ill-advised consequences of his or her own actions, courts should tread very carefully and only interfere with an individual’s rights when absolutely necessary.
If the Claimant had entered into a bad bargain as a result of negligence on the part of his legal advisers, then he was not without remedy.
The judge at first instance, Justice Holland asked himself four questions:-
- Did the Claimant have the insight and understanding that he had a problem with respect to the disposal of the liability issue so as to need advice?
- Did he seek an appropriate adviser and instruct him with sufficient clarity?
- Did he have sufficient mental capacity to understand and to make decisions about the specific issue, namely liability, or otherwise give effect to such advice as he received?
- Did he have sufficient memory and independence and was he generally capable of communicating his decision to his advisers?
Lady Justice Hallett said that in her view these questions adhered to the principles confirmed in the case of Masterman-Lister v Brutton & Co.
Expert evidence was of considerable assistance, but it was not conclusive.
Holland J saw and heard the witnesses including the Claimant. He bore in mind the fact that the applicant was living and working in the community. Mr Bailey shopped, he cooked, he entertained himself, and he had a bank account and knew the PIN number for his cash card. He personally instructed his solicitors and was able to communicate with them. He appeared to understand the liability issues and knew that attempts had been made to secure an interim payment. Holland J also had the solicitors’ file in front of him which recorded communications between the Claimant and his legal advisers. Lady Justice Hallett commented that the Claimant’s counsel had not got close to overturning the original judge’s decision.
There were no restrictions whatsoever on the court’s discretion to validate steps taken in proceedings before a litigation friend is appointed. A court can regularise the position retrospectively provided everyone has acted in good faith and there has been no manifest disadvantage to the party subsequently found to have been a patient at the time.
Lady Justice Hallett commented that she could understand why Holland J had approved the compromise on liability. However his comments on liability were not binding in any professional negligence claim against the Claimant’s former solicitors.
Lady Justice Arden (giving the following judgment) made the point that in a democratic society the law should maximise an individual’s contribution to the decision making process. The law presumed that a person had capacity and so the burden lay on those seeking to assert that he was not so competent to manage his own affairs.
A number of points arose out of CPR21:-
- A compromise of a claim belonging to a patient without the approval of the court is of no effect
- There is no saving for the case where the person is not known to be a patient at the time of the compromise.
- A contract made by a person who is not known to be a patient is enforceable unless the other party was aware or ought to have been aware that the person was a patient. In that event, the contract is voidable.
- There is no requirement that proceedings should have been issued and approval is required even where the compromise is only part of the claim (Drinkall v Whitwood [2004] 1 WLR 462)
- If solicitors purport to enter into a compromise on behalf of a patient without obtaining the approval of the court, there is then the question of whether those solicitors are in breach of their warranty of authority to act on behalf of that person. Lady Justice Hallett expressed no view on that matter.
- The court may approve a compromise to which the patient agrees, although he has no litigation friend
- There is no definition of “claim” under the CPR.
Lady Justice Arden considered the case of Masterman-Lister v Brutton & Co. That case showed that in determining issues as to capacity in relation to decision purportedly taken; the court is concerned with the quality of the decision making and not the wisdom of the decision.
However she did not agree with the distinction that Lady Justice Hallett (see following judgment) drew in relation to the test of mental capacity being issue specific. Lady Justice Arden said that the court in the Masterman-Lister case considered that litigation down to the administration of any award of damage was to be treated as a single transaction and not as a series of individual steps.
The right approach must be to ask as a matter of common sense whether the individual steps formed part of a larger sequence of events which should be seen as one, or whether they were in fact self-contained steps which were not connected with each other.
The appropriate test in this case should be whether the client had capacity to start proceedings. That would include the question whether he would have capacity for the purposes of an offer of compromise. Where a client sought damages for personal injury because he had suffered a brain injury, capacity was a question that ought in general routinely to be considered by those representing him. In cases of doubt, this would mean a medical opinion.
Turning to the issue as to whether the compromise on liability reached in this case was valid, Lady Justice Arden said that a compromise by a patient that has not been approved by the court is invalid unless it is approved by the court. Therefore a compromise made by an individual who was subsequently proved to have been a patient at the time of the compromise was of no effect until the court gave its approval.
The judge was satisfied that as at December 2001, Mr Bailey did not have capacity to conduct proceedings. However he was not asked to make a finding about Mr Bailey’s capacity as at November 2000. His own evaluation on that issue was very brief, and he did not specifically say whether he rejected or accepted the medical evidence as at November 2000 (which suggested that Mr Bailey did not have capacity). Therefore in Lady Justice Arden’s opinion, a retrial of the issue of capacity was inevitable.
However there was then the difficult question of whether the court should have retrospectively approved the compromise on liability. The Claimant’s counsel said that this relief had not been sought by the Claimant’s litigation friend. He referred to the case of Re Birchall (1880) 16 Ch D 41 where the court refused to enforce a compromise on infants against the opinion of their litigation friend and legal advisers. However that did not apply to cases where the only objection to the enforceability of the compromise made by the patient himself is that the approval of the court under CPR 21.10(1) is required. There was no requirement in CPR 21.10(1) that an application for approval should be made by the litigation friend in all cases. Indeed if the litigation friend acted unreasonably he could be removed.
Kennedy LJ had said in the Masterman-Lister case that the court could regularise the position retrospectively. It would not in general be in the interests of the patient for the court to decline to approve the compromise, if it were entered into in good faith and treated as valid for some time. If on the other hand, the court declined to approve the compromise, the other party to the compromise would of course be free to pursue such other remedy as he may have against anyone who represented that the patient was competent to agree to the compromise.
Lady Justice Arden said that in her judgment, the judge did not when considering the question of retrospective approval, apply the test of what was in the interests of the Claimant. Rather he asked whether the compromise was one that the court might have approved at the time and whether it was overwhelmingly favourable to the Claimant. However matters should be judged at the date on which the court is considering whether to give retrospective approval. On that basis, his exercise of discretion fell to be set aside and re-exercised by the court. However on the basis of that test i.e. was it now in the Claimant’s interests for the compromise to be approved? Lady Justice Arden said that she agreed with Hallett LJ and Ward LJ that the compromise (50/50 on liability) ought to be approved. The observations on the 50/50 split made by the judge would not be binding on the Claimant in any proceedings against his former solicitors.
Lord Justice Ward considered the terms of CPR 21. A patient existed only within the rules and for the purpose of giving effect to the rules. A patient was not a patient until proceedings were commenced. As at the time of the compromise in November 2000, the Claimant could not have been a patient before the claim was issued on the 27th April 2001.
It was agreed between both side’s counsel that if the Claimant was not a patient in November 2000, the appeal had to be dismissed and the compromise on liability entered into was entirely valid. Lord Justice Ward said that this did not necessarily follow. It was necessary to consider the validity of the actual agreement, given the possibility that the Claimant might not have been a patient.
Lord Justice Ward turned to the case of Imperial Loan Company v Stone [1892] 1 QB 599 which stated that where a person enters into a contract, and afterwards he is able to prove that he was of unsound mind at the time of entering into that contract, the contract is still binding on him unless he can prove that the person with whom he contracted knew him to be insane as not to be capable of understanding what he was about.
However that statement of the law had to be read in light of CPR 21.10(1) which provides that no settlement or compromise is valid unless it is approved by the court.
The case of Drinkall referred to by Lady Justice Arden (see above) said that it was possible to have a settlement which was partial, i.e. one on the issue of liability not quantum.
The next question was whether the fact that the settlement had been reached before or after the issue of proceedings, made any difference. The former RSC Order 80 Rule 11 made it clear that approval was required when the agreement was reached. Therefore it was right to construe CPR 21.10(1) in like manner.
There had been speculation in Masterman-Lister that procedural rules should not be allowed to change the substantive law as set out Imperial Loan Company. That point was not pursued in the present appeal, but Lord Justice Ward thought that the powers in the CPR were wide enough to include the power to protect a patient. He referred to a case Dietz v Lennig Chemicals Ltd [1969] 1 AC 170 where the court said that either party could have lawfully repudiated an agreement made in respect of an infant, at any time before it was approved by the court.
The judge had said that the agreement reached in November 2000 could not be impugned. If he refused to enter judgment on a 50/50 basis on liability, there would then be an accord and satisfaction issue between the parties, and that would not be in the Claimant’s interests. Lord Justice Ward did not agree. The agreement of November 2000 was impugned by the operation of CPR 21.10(1), Dietz and the Drinkall case.
However the judge had then addressed the issue of whether the November 2000 agreement could then be approved, on the basis that the Claimant was in fact a patient when he agreed liability. Ward LJ said that the judge did not need to go back to November 2000. It was enough that the Claimant was a patient when judgment was entered because that was when the decision had to be taken to approve the compromise.
In Re Birchall (see above) the court had made it quite clear that they could not compel a settlement only approve it. However Re Birchall was different from the present case insofar as here an agreement had been made, and at the time lawfully made with the approval of the Claimant’s family and on the advice of solicitors and counsel acting at the time. Therefore the jurisdiction of the court was not excluded.
Ward LJ then turned to the manner in which Holland J did exercise his discretion to approve the settlement. Here Ward LJ agreed with Hallett LJ and dismissed the appeal for those reasons.
The final issue was that of the proper test for capacity to manage and administer property and affairs. Chadwick LJ had said in the case of Masterman-Lister that there were two broad propositions:-
- Mental capacity required by the law is capacity in relation to the transactions which is to be effected
- What is required is the capacity to understand the nature of the transaction when it is explained.
Kennedy LJ in the same case had stressed the issue specific nature of the test. It was not difficult to envisage Claimants in personal injury actions with capacity to deal with all matters and take all “lay client” decisions related to their actions up to and including a decision whether or not to settle, but lacking capacity to decide how to administer a large award. However capacity must be approached in a common sense way, not by reference to each step in the process of litigation.
Ward LJ said that the client must be able to understand all aspects of the proceedings and take an informed decision. If he had the ability to understand a 50/50 split on liability but cannot understand the concept of damages that results from that split, then he lacked true capacity. The judge had approached this question too narrowly.
However Ward LJ could see no point remitting the case back to the judge for a reconsideration of whether the Claimant had capacity as at November 2000. Even if that were done, the judge would simply decide to approve the settlement on behalf of the Claimant as before.
In relation to approving the 50/50 split the judge had an unfetter discretion, and he had to form some impression as to whether or not 50/50 was so outside the bracket that the agreement produce an unfair compromise for the patient. His views were not binding on any judge in a professional negligence action against his solicitors.
There were other factors. It might be in the patient’s interest to accept less money for a quicker end to the case, to avoid a painful trial, the fact that the Claimant’s companion on the night of the accident had accept 50/50, the fact that his family backed the settlement.
The Defendant was not without an interest. The agreement was openly negotiated and concluded after the patient had the opportunity to take advice. There was no reply to the Defence pleading accord and satisfaction, nor opposition to the entry of judgment a year later. By the time the point was raised in August 2003, memories would have faded. To seek to reopen the matter would cause the Defendant prejudice.
Finally there were the interests of good administration of justice.
Therefore Ward LJ would approve the original compromise and direct that the original judgment stood.