S's financial deputy started an action in S's name seeking a declaration that gifts of money totalling over £500,000 made by S to D were procured by undue influence; S wanted the Chancery proceedings to be discontinued, so D sought a declaration that S had the capacity to do so. (1) Detailed consideration was given to the law (including that whether a decision is unwise or foolish is a relevant consideration in deciding on capacity, in particular where there is a marked contrast between the unwise nature of the decision and the former attitude when capacity was not in question) and to the conflicting medical evidence. (2) In order to have capacity: S must be able to understand, as a minimum, the nature and extent of the relationship of trust and confidence which he arguably reposed in Mrs D, the extent to which it may be said that his gifts to her cannot readily be accounted for by ordinary motives, and the general nature of the evidential burden resting on her to rebut any presumption of undue influence which might have arisen; also, since D's relationship with S is still subsisting, the court will need to scrutinise with particular care whether S is able to stand back from the impugned transactions with sufficient detachment truly to understand the nature of the claim. (3) On that basis, it was clear that S did not have capacity, as he could not (a) understand, (b) retain, or (c) use or weigh the relevant information. (4) The judge expressed the wish that, having regard to S's wishes and feelings, a settlement generous to D could be reached.
The following is an extract from Judiciary of England and Wales, 'Court of Protection Report 2010' (July 2011).
20. In the matter of S, D v R and S  EWHC 2405 (COP) (Mr Justice Henderson, 4 October 2010) www.bailii.org/ew/cases/EWHC/COP/2010/2405.html Mr S was born in 1933. He suffered a stroke in 2005 and was befriended by Mrs D, a legal secretary employed by his solicitors. On 15 separate occasions between 19 January 2006 and 11 April 2007 Mr S made gifts to Mrs D totalling £549,000. His daughter, R, was appointed as his deputy, and she commenced proceedings in the Chancery Division to set aside the gifts. The question before Mr Justice Henderson was whether Mr S has the necessary mental capacity to decide whether the proceedings should be discontinued or compromised.
At paragraph 43 the judge said that the decision whether to discontinue or to continue to prosecute the Chancery proceedings “cannot be taken, it seems to me, without at least a basic understanding of the nature of the claim, of the legal issues involved, and of the circumstances which have given rise to the claim. It would be an oversimplification to say that the claim is just a claim to set aside or reverse the gifts which Mr S made to Mrs D, because in the ordinary way a gift is irrevocable once it has been made and perfected by delivery or transfer of the relevant assets. If a gift is to be set aside or recovered, some vitiating factor such as fraud, misrepresentation or undue influence has to be established; and if the donor is to decide whether or not to pursue a claim, he needs to understand, at least in general terms, the nature of the vitiating factor upon which he may be able to rely, and to weigh up the arguments for and against pursuing the claim. Provided that the donor is equipped with this information, and provided that he understands it and takes it into account in reaching his decision, it will not matter if his decision is an imprudent one, or one which would fail to satisfy the “best interests” test in section 4. But if the donor is unable to assimilate, retain and evaluate the relevant information, he lacks the capacity to make the decision, however clearly he may articulate it.” At paragraph 153 the judge stated that he was “satisfied, on the balance of probabilities, that Mr S is unable to make the decision whether or not to continue the Chancery proceedings (or, if it becomes relevant, to settle them).”