The Supreme Court has given a succinct and clear judgment in the case of Dunhill-v-Burgin  UKSC 18 . writes Nigel Poole QC
In 1999 Ms Dunhill, was a pedestrian when she was struck by a motorcycle driven by the appellant, Mr Burgin. She suffered a severe head injury. In May 2002 she brought a claim for damages and on the day of trial settlement negotiations took place and Ms Dunhill, after advice from her counsel and solicitor, decided to compromise her claim for £12,500 plus costs.
In fact Ms Dunhill had suffered very serious injuries and this settlement represented a gross undervalue of her claim (provided she could prove negligence). In 2006 she consulted new solicitors. A litigation friend was appointed to act on her behalf, and an application was made that the consent order should be set aside.
Two preliminary issues arose. What was the test for deciding whether a person lacks the mental capacity to conduct legal proceedings on her own behalf. Was it a test of here capacity to litigate in a general sense or was it a test of her capacity to consent to the settlement? Further, what were the consequences if a person lacked capacity but their claim was settled without court approval under CPR Part 21.10. The Defendant did not argue that retrospective approval should be given. In other cases that might very well be a pertinent issue.
The High Court held that capacity was to be judged by reference to the decisions which Ms Dunhill had actually been required to take in the action as drafted rather than those which she might have been required to take had the action been differently framed. On this basis she did have capacity. The Court of Appeal disagreed and held that she had to have capacity to conduct the more complicated action which ought to have been brought. When the case was remitted to the High Court, it held that her lack of capacity rendered the settlement void as it had not been approved by the court as required by CPR 21.10.
The Supreme Court gave permission to Mr Burgin to appeal against both findings and dismissed the appeals, lady hale giving the judgment of the court. The test properly to be applied was whether Ms Dunhill lacked the capacity to commence and conduct proceedings arising out of her claim. The test of capacity to conduct proceedings for the purpose of CPR 21 is the capacity to conduct the claim or the cause of action which the claimant in fact has rather than to conduct the claim as formulated by her lawyers which might depend on whether advice given was good or bad. On this test it was common ground that Ms Dunhill lacked that capacity [13-18].
The effect of incapacity
It followed that Ms Dunhill should have had a litigation friend when the proceedings were begun. Although the court had power to validate steps taken without a litigation friend retrospectively, it was not just to do so in this case in relation to a settlement and consent order made. The consequence was that the settlement was of no effect. The terms of CPR 21 did not enable Mr Burgin to rely on the fact that he had not been on notice of Ms Dunhill’s incapacity .
Although there was a need for finality in litigation, and the difficulty of re-opening cases such as this so long after the event was recognised, the policy underlying the CPR was clear: that children and protected parties require and deserve protection, not only from themselves but also from their legal advisers [32-33]. Accordingly the consent order must be set aside and the case go for trial .
The case appears to leave open the question of whether and in what circumstances it would be right retrospectively to approve a settlement notwithstanding that approval was needed but not obtained at the earlier time. In this case there was a large disparity between the damages recovered and the award which might be recoverable - that might be a salient factor in any future disputed case.
Manchester provided barristers for both sides in this appeal and the successful solicitors (Potter Rees).