From Mental Health Law Online
Disability Discrimination Act, and lack of capacity, used to annul bankruptcy order.
The following has been reproduced with kind permission from 39 Essex Street's February 2011 newsletter.
This fascinating case shows the reach of the MCA 2005. It came before HHJ Pelling QC (sitting as a Judge of the High Court) as an application for a bankruptcy order to be annulled or rescinded. The application was made on the basis that either the applicant lacked relevant capacity on 2.5.08 (in relation to the purported service upon her by HMRC of a Statutory Demand) and/or during the period between 8.7.08 and 29.8.08 (in relation to the purported service by HMRC on the applicant of a bankruptcy Petition and hearing of that Petition) or that in serving the Statutory Demand and/or the Petition and/or inviting the Court to make a bankruptcy order HMRC acted in unlawful breach of the duties HMRC owed to the applicant under the Disability Discrimination Act 1995 (“DDA”).
The applicant lacked litigation capacity, and was represented by the Official Solicitor as litigation friend.
The judge conducted an extremely extensive reconstruction exercise to seek to determine whether the applicant had the relevant capacity at the material times, reminding himself by reference to the MCA 2005 that it was issue and situation specific. As regards the Statutory Demand, the issue was whether the Claimant had established that she lacked the capacity to respond to the Demand on or after 2.5.08. The judge found (at paragraph 56) that:
- The decisions and the steps that the applicant would have to have taken when she was served with the Statutory Demand was whether to open the envelope, understand the contents, retain the information long enough to take a decision as to what to do and then communicate that decision or decide to seek assistance from a third party. As I have already found, the applicant did not open the envelope containing the Statutory Demand. At the time that the applicant was served with the Statutory Demand it is common ground between the experts that the applicant was suffering from an impairment of the mind. The issue is whether the failure to open the letter was a consequence of this disorder as to which [the Claimant‟s expert] maintains that it was but [the expert instructed by HMRC] apparently does not.
Having set out the respective evidence of the experts in some detail, HHJ Pelling QC concluded (at paragraph 69) that:
- “the Claimant has established the existence of a condition that prevented her from opening mail at the time the Statutory Demand was served. Put simply at that time she could not and did not open the envelope containing the Statutory Demand.”
He continued, however:
- “Since capacity is concerned with the ability to understand retain and evaluate information, and since the information that I am here concerned with is the information contained in the Statutory Demand and the importance of that document, an issue arises as to whether an irrational inability to access the information is relevant at all. The applicant’s submission was that without opening the envelope containing the Statutory Demand she could not make a decision to respond because she could not understand or evaluate the contents of the Statutory Demand or its overall importance. I have concluded that the applicant was unable to open the envelope because she suffered from a phobia which irrationally precluded her from taking that action. If, therefore, the true decision I am concerned with is not the evaluation of the contents of the Statutory Demand or its importance but the decision whether to open the envelope then the decision not to open the envelope is not a true decision at all because the applicant’s judgment has been so distorted by the phobia so as to render it an invalid [sic].”
HHJ Pelling therefore concluded that the applicant did not have the mental capacity to respond to the Statutory Demand either when it was served on her or thereafter down to the date when the bankruptcy order was made.
He therefore turned to consider whether the applicant had established that she lacked at the material time the capacity to understand the importance of the Bankruptcy Petition and act upon it. He noted (at paragraph 75) that the questions were more difficult than those in relation to the Statutory Demand, largely because there was evidence which appeared to point towards the applicant having at least had some understanding of its importance. However, having reviewed the totality of the evidence, he declared himself satisfied (at paragraph 84) that it was more probable than not that (a) at the date the applicant was served with the Petition she was suffering from an acute anxiety episode and (b) the effect of that episode was to deprive her of the capacity to understand the contents or significance to her of the Petition or the need for her to seek help from others or to retain that information for sufficiently long to seek the assistance of others. Whilst not strictly relevant for readers of this Newsletter, it is perhaps also worth noting that the Judge further concluded that, were he to be wrong as to the conclusions on capacity, he would have found that HMRC had breached their obligations under the (then) DDA in essence by failing to have have any or any sufficient regard to the fact that the applicant could not respond or was impaired from responding by reason of her inability to respond to postal communications or otherwise manage her own affairs either adequately or at all. Not the least of the failings of HMRC identified was the failure to bring to the Court‟s attention as at the date the Petition came on for hearing the information available to them as to the applicant‟s disability.
The facts of this case are extremely unusual, and it is in the authors‟ view very unlikely that many individuals will successfully defend claims against them on the basis that Ms Haworth did. It is, however, noteworthy as a case study in careful forensic analysis by experts and, in particular, the Court, of the capacity of a particular individual to take particular decisions and particular steps at specific times. It is also noteworthy as a reminder of the fact that practitioners and professionals must always be alert to the fact that incapacity to make decisions can manifest itself in unusual ways and in unexpected circumstances.
 All ER (D) 23 (Mar)
Bailii - No transcript on Bailii at time of writing