In Joanne Dunhill (by her litigation friend Paul Tasker) v Shaun Bergin (2012) EWCA Civ 397 the Court of Appeal confirmed that, when determining whether a previous compromise agreement to settle a personal injury claim could be set aside for want of capacity, the proper question was not whether the claimant had capacity to enter into that compromise, but whether she had capacity to litigate in the first place.
Those acting for Miss Dunhill, who suffered severe brain damage after being knocked down by Mr Bergin, appealed against a decision in which preliminary issues were determined concerning her capacity. The original claim had been settled for the sum of £12,500; however, Mr Bergin himself acknowledged that if the claim had proceeded to a hearing it would have been worth at least £800,000.
Those advising Miss Dunhill subsequently applied to set aside the settlement on the grounds that she had lacked the capacity to enter into the compromise agreement and that a court had not approved the settlement under CPR 21.
At first instance, the judge determined, as a preliminary issue that, when considering the issue of capacity historically rather than prospectively, the court should confine itself fundamentally to examining what was in fact required of the claimant in her claim against the defendant. It should not expand its considerations to include her capacity to make decisions which might have been required if the litigation had been concluded differently. It was against this finding that Miss Dunhill’s representatives appealed.
On appeal, the Court applied Masterman-Lister v Jewell  EWCA Civ 1889,  1 W.L.R. 1511 and Bailey v Warren  EWCA Civ 51,  C.P. Rep. 26. These cases highlighted the proper question to ask in judging capacity was “whether the claimant had the necessary capacity to conduct the proceedings or, to put it another way, the capacity to litigate”. Since the compromise was not a self-contained transaction but inseparably part and parcel of the proceedings as a whole, the question was not the narrow one of whether Miss Dunhill had capacity to enter into that compromise, but the broad one of whether she had the capacity to conduct the proceedings.
Having considered the facts, the Court held that Miss Dunhill lacked the capacity to give proper instructions and to approve the particulars of claim. In addition, for her to have capacity to approve a compromise, she needed to know what she was giving up. As Miss Dunhill did not have the faintest idea that she was giving up a minor fortune, without which her disabilities were likely to increase, she should have been represented by a litigation friend and the Court should have been required to approve the settlement.