Supreme Court places protection of vulnerable parties ahead of need for finality in litigation

Lord Dyson: sat with Lady Hale and three other judges

The policy underlying the Civil Procedure Rules is that protected parties need protection not only from themselves but also from their legal advisers, the Supreme Court ruled yesterday.

The Supreme Court dismissed an appeal against the finding that a person lacked the capacity to agree a settlement of her claim, saying that while there was a need for finality in litigation, a consent order made more than a decade ago must be set aside.

Giving the unanimous judgement in Dunhill v Burgin [2014] UKSC 18, deputy president Lady Hale ruled the respondent, Ms Dunhill, lacked capacity and should have had a litigation friend from the outset. Any settlement should have been approved by the court under CPR 21.10(1).

An issue that arose was the time that had elapsed since the original claim had been settled, because proceedings were issued on Ms Dunhill’s behalf nearly six years after the original consent order was made.

Lady Hale made reference to the Imperial Loan Co Ltd v Stone [1892] 1 QB 599, which established the rule “that a contract made by a person who lacks capacity is valid unless the other party to the contract knew or ought to have known that she lacked that capacity in which case it is voidable”.

She acknowledged the importance of finality: “The spectre looms of many personal injury claims which insurers thought had been settled long ago being reopened on the basis of an incapacity which they had no reason to suspect at the time. The real culprits, they would say, are the claimant’s original legal advisers (if she had any) against whom she will almost always have a claim for professional negligence.”

She summarised “policy arguments” made for the appellant – “the need for finality in litigation, the stresses and strains which prolonged litigation places upon both litigants and the courts, the difficulty of re-opening cases such as this so long after the event, and the alternative protection given to the parties by their legal advisers, who should bear the consequences of their own mistakes”.

Against these points, she said, counsel for the respondent “emphasised the disadvantages of claims for professional negligence when compared with claims for personal injuries, principally the discount for the chance that the claim might not have succeeded and the inability to make a periodical payments order.

“He also points out that lack of insight is a common feature in head injury cases, so that the parties should be encouraged to investigate capacity at the outset.

“A litigant in person would, of course, have no legal advisers against whom to make a claim, but the legal position cannot differ according to whether or not a party is, or is not, represented by lawyers.”

But Lady Hale dismissed the appeal, concluding: “Policy arguments do not answer legal questions. But to the extent that they are at all relevant to the issues before us, the policy underlying the [CPR] is clear: that children and protected parties require and deserve protection, not only from themselves but also from their legal advisers… The consent order must be set aside and the case go for trial.”

Alongside Lady Hale sat the Master of the Rolls, Lord Dyson, with Lord Kerr, Lord Wilson, and Lord Reed.

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