Welcome to the first edition of the Casualty and Healthcare newsletter for 2015. In this issue we have included a selection of the latest case law and market developments and have explored their likely impact.
We are fast approaching the two year anniversary of the Jackson Reforms which is still making for very interesting times. There has been much judicial jostling with many of the new concepts and things have only just started to settle down. Views are mixed but Claimant lawyers seem to be largely unhappy; we leave it to you to decide whether this is a good thing or not!
UK CITIZENSHIP COMES
Two recent cases highlight the issue of mental capacity within litigation
Passing UK Citizenship test not an indication of mental capacity
Ali v Caton [2014] EWCA Civ 1313
Background
The Claimant claimed damages following a road traffic accident in which he was seriously injured.
The medical evidence was that the the Claimant has a significant cognitive deficit, yet he still managed to pass the UK Citizenship test. The Defendant submitted that this showed the Claimant had therefore exaggerated his injuries or was a malingerer.
The Court found that despite the medical evidence the Claimant had passed the UK Citizenship test without help, by learning the answer to the questions. It was found that the Claimant still lacked capacity for the purposes of the Mental Capacity Act 2005. As a consequence of this, the Claimant was found to need ongoing care and support for the rest of his life and had no residual earning capacity.
The Appeal
The Defendant appealed on the following grounds
- The Judge had failed to consider the implications of the Claimant passing the Test and had placed weight on medical evidence that was unreliable as a result.
- The Judge had failed to properly apply the provisions of the Mental Capacity Act 2005, particularly sections 1 – 3. It was submitted that the Claimant had capacity to manage his own affairs.
- The Claimant was thought capable of some profitable employment and therefore had a residual earning capacity.
Findings
The Court of Appeal dismissed the Appeal and found the following:
- The Claimant had passed the Test unaided. The medical evidence did not suggest it was impossible for the Claimant to pass the test, just unlikely. Moreover the test had to be considered in the wider context of all the evidence as a whole, which indicated the Claimant did suffer from a cognitive defect.
- The question of whether a person has
capacity is fact specific and depended on the answer to the
questions "capacity to do what?" The Court was concerned
with the Claimant's capacity to manage his property and
financial affairs in this instance.
The Judge was entitled to consider that the Claimant would struggle to handle large sums of money and to consider the evidence of experts from several disciplines, rather than solely relying on evidence from neuropsychologists. - There was no evidence to justify a "speculative calculation" of potential future earnings which had no evidential basis.
Key points for defendants
- The question of capacity was confirmed as being fact specific and is to be judged in relation to the specific decision or activity in question and not globally
- In cases where mental incapacity is considered, evidence that is not consistent with the general view of the Claimant's cognitive ability will be considered in the wider context of the case
- The burden on proof is on the Defendant to show that the Claimant has residual earning capacity. Defendants will need to evidence actual employment opportunities to have any prospects of success in argung for residual earning capacity
DEFENDANT CAUGHT IN COMPROMISING POSITION
Setting aside Compromise Agreements where the Claimant is a protected party
Dunhill v Burgin (2014) UKSC18
Background
The Claimant suffered a severe closed-head injury and soft tissue injuries to her leg when she stepped out from between parked cars on a dual carriageway and was struck by a motorcycle driven by the Defendant.
The Claimant obtained a report from an expert in Accident & Emergency medicine. There was no psychiatric evidence, despite reference in the documentation to various psychiatric issues.
The case was listed for trial on the issue of liability. When one of the Claimant's witnesses did not arrive at Court, the claim was compromised for GBP 12,500, plus costs. This settlement was recorded in a Consent Order and sealed by the Court.
The settlement was a gross undervaluation of the Claimant's claim which the Defendant and Claimant later estimated as being worth (on a full liability basis) around GBP 800,000 or over GBP 2 million respectively. There was no suggestion that at the time of original settlement the Defendant either knew or ought to have known of the Claimant's lack of capacity however.
Nearly six years after the Consent Order was made, the Claimant commenced professional negligence proceedings against her former solicitors.
That action was stayed pending the hearing of an application made in the original proceedings seeking a declaration that the Claimant did not have capacity at the time of settlement, so that the Consent Order should be set aside.
The Supreme Court was required to answer two questions, namely:
- What is the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on his/her own behalf (so that a litigation friend is required)?
- What happens if legal proceedings are compromised without it being recognised that one of the parties lacks capacity?
Findings
On the first question the parties agreed that the issue of capacity was to be decided by asking if the Claimant had capacity to make decisions likely to be required of her in the course of "the proceedings" – Mastermann Lister v Brutton & Co [2003] 1 WLR 1511 applied.
However, the Claimant and Defendant disagreed as to whether or not "the proceedings" were those which the Claimant had actually brought, or whether the test should be the proceedings that should have been brought had her lawyers given her correct advice. If it was the latter, the parties agreed that the Claimant did not have capacity to conduct the larger and much more complicated claim which should have been brought on her behalf.
The Supreme Court decided that the answer must be whether the Claimant had capacity to make decisions in the larger claim that should have been brought on her behalf.
The Court then considered whether it could regularise the settlement actually agreed, or whether it needed to be reopened notwithstanding the length of time that had passed.
The Court recognised that, provided everyone had acted in good faith and there was no manifest disadvantage to the Claimant, it would be usual for the Court to endorse the settlement actually agreed. However, each case turned on its facts and the Court did not consider it would be just to do that in this case.
The Court further considered that the normal rule of English law, namely that a contract made by a person who lacks capacity is valid (but voidable) except where the other party ought to have known about the lack of capacity does not apply to the compromise of civil claims.
The rules require that the Claimant should have had a litigation friend from the outset, and that any settlement should have been approved by the Court. Accordingly the Consent Order was set aside and the case was remitted for trial.
Key points for defendants
- When deciding whether a person has or lacks mental capacity to conduct legal proceedings, the capacity test has to be applied to the proceedings as they should have been brought, not as they were actually brought
- The Courts will set aside settlements entered by a person under a disability who has not had the benefit of a litigant in person and where the settlement has not been approved by the Court, unless there is no manifest disadvantage to the person under a disability in the position being regularised
- A Defendant, who acted in good faith throughout and had no reason to suppose a Claimant was under a disability, could find proceedings being reopened many years after they believe the matter had been resolved
- Defendants should ensure that the Claimant instructs the correct expert and ensure that the expert is instructed on the proper test of capacity (and if possible raise pertinent Part 35 questions)
- Defendants should ask the Court to invoke its inherent jurisdiction to approve settlement, even though it may be accepted that the Claimant is not a protected party at the particular juncture (in accordance with Coles v Perfect 2013)
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