The Mental Capacity Act 2005 makes it clear that capacity is to be judged on the basis of the activity or decision in question so somebody may have capacity to litigate a claim but not to manage a large damages award, for example.
When taking on a new client, it is important to consider if the client has the mental capacity to pursue the litigation themselves. If they lack capacity, the claim will need to be brought by a litigation friend on their behalf. A claim brought on behalf of a child or a protected party will require a litigation friend and any settlement will need to be approved by the court pursuant to CPR 21.
Sometimes a client will lack capacity as a result of the injuries caused by the negligent act or negligent treatment which forms the basis of the litigation but, on other occasions, a client may have a pre-existing cognitive impairment which means that they lack capacity in certain respects.
A question considered by the Supreme Court in the recent case of Dunhill v Burgin  was whether an individual should have mental capacity to simply enter into the compromise of their claim or whether they should have capacity to conduct the whole claim. The Supreme Court’s decision was clear, namely, that the ‘test of capacity to conduct proceedings...is the capacity to conduct the claim or cause of action which the claimant in fact has…’.
Alison Appelboam-Meadows, clinical negligence partner at Penningtons Manches, comments on the implication of this ruling: “It is very important to consider a client’s capacity at an early stage, arranging assessments by appropriate experts, such as psychologists, focussed on the individual’s capacity to understand and conduct the claim themselves. This will obviously entail having capacity to properly consider and give instructions in relation to any settlement proposed.
“As a separate issue, it will be necessary to consider whether the individual has capacity to manage a large damages award following resolution of the claim.”