From Mental Health Law Online
PRACTICE — Parties — Mental capacity — Action for damages for personal injuries compromised by claimant before proceedings commenced — Subsequent lack of mental capacity leading to appointment of litigation friend — Whether valid approval of compromise — CPR Pt 21. The established principles relating to mental incapacity and the conduct of litigation were to be applied to the compromise of an action by a claimant before he became a “patient” within the meaning of CPR r 21.1 and which was made before any proceedings were commenced. (ICLR summary.)
The Court of Appeal so held in reserved judgments dismissing an appeal by the claimant, Ronald Harry Bailey (acting by his sister and litigation friend, Janet Ashton) from the judgment of Holland J in November 2004 approving a pre-action agreement for shared liability for a traffic accident with the defendant, Matthew George Warren.
In 1998 the claimant suffered severe head injuries in a road traffic accident. His physical recovery was good but in 1999 he developed epilepsy and was unable to work. In November 2000, having taken legal advice, the claimant agreed liability for the accident on a 50/50 basis. Proceedings were commenced and in December 2001 judgment was entered for 50% liability and with damages to be determined. In January 2003 medical evidence suggested that the claimant lacked mental capacity. A litigation friend was appointed, raising issues as to the effect of the 2000 agreement. The judge, holding the claimant to have been a patient in December 2001 but not in November 2000, directed pursuant to CPR r 21.3(4) that the 50/50 apportionment should stand. The claimant, seeking to set aside the November 2000 agreement, appealed.
WARD LJ said that CPR r 21.1(2) defined a “patient” as a person “who by reason of mental disorder … is incapable of managing and administering his property and affairs”. The claimant’s case was that the judge was wrong in law (i) to find the claimant was not a patient in 2000 and, if wrong about that so that he was a patient, (ii) in the exercise of his discretion approving the agreement. It seemed that counsel had approached the case on the wrong basis. A “patient” was a creature of the CPR, the rules governing the conduct of proceedings. Thus the earliest moment at which a person could become a patient was at the commencement of the proceedings. A party might have all the attributes of a patient before proceedings were begun but until they were under way there was no such thing as a patient. When a claim was being made by a person who was not a patient and the settlement related to that claim, then, pursuant to r 21.10(1) the agreement was to be treated as invalid and of no legal effect unless and until the court approved it. The claimant’s case, however, was that the judge applied the wrong test for establishing whether an individual had the necessary capacity to manage and administer his property and affairs. The test was that adumbrated in White v Fell (unreported) 12 November 1987 and approved in Masterman-Lister v Brutton & Co (2002) EWCA Civ 1889,  1 WLR 1511, CA. The inquiry had to focus on the capacity to conduct the proceedings: see per Lord Denning MR in Kirby v Leather (1965) 2 KB 367, 384. Thus the
claimant had to understand all aspects of the proceedings and be able to take an informed decision. If he understood what was meant by a 50/50 split but lacked the capacity to understand the concept of damages thereby resulting, then he lacked true capacity to conduct the proceedings. That made much more sense where one was considering the capacity to conduct the proceedings at the moment when they were instituted. If it was pertinent to ask whether the claimant was a patient in November 2000—not His Lordship’s primary view—then the judge had approached the matter too narrowly and the claimant made good his attack on the judgment. But the matter was not to be remitted for rehearing. The judge had already explained how he would have exercised his discretion on the assumption that he was wrong. His discretion was unfettered and was not susceptible to an appeal.
ARDEN LJ and HALLETT LJ gave concurring judgments.
Bailey v Warren  EWCA Civ 51
CA: Ward, Arden and Hallett LJJ: 7 February 2006
Appearances: Augustus Ullstein QC and Shirley Hennessy (Alexander Harris) for the claimant; Howard Elgot and Roger Quickfall (Ricksons) for the defendant.
Reported by: Harriet Dutton, barrister