The problem of the retrospective consideration of capacity troubled Costs Judge Whalan in Furley Page LLP v KFL [2025] EWHC 1703 (SCCO). The question arose in relation to the detailed assessment of costs due by the defendant (a distinguished – unnamed – barrister who is now living with dementia) to those solicitors acting for him in complex proceedings ultimately leading to the appointment of a property and affairs deputy and the execution of a statutory will (see for a summary: T & Anor v L & Ors (Inherent Jurisdiction : Costs) [2021] EWHC 2147 (Fam).
As a preliminary point on the detailed assessment, the point was taken on behalf of the barrister that:
At the time of the Claimant’s instruction, the Defendant did not have contractual capacity to enter into a contract to retain the Defendant. The Claimant took no steps to establish if the Defendant had contractual capacity prior to acting for him in circumstances where the Claimant knew, or ought to have known that the Defendant lacked contractual capacity. Consequently, the alleged retainer between the Claimant and the Defendant is unenforceable and no costs are payable by the Defendant.
The solicitors asserted that the barrister had had the capacity at the material time. This meant that Costs Judge Whalan had to engage in a detailed reconstruction exercise both as to the Defendant’s contractual capacity at the relevant item, and the solicitors’ knowledge of his contractual capacity.
Costs Judge Whalan’s judgment is commendably succinct on the key points, reproduced below:
40. Capacity is presumed under the MCA 2005 until the party challenging the presumption discharges the burden of proving otherwise. Although the Claimant has referred to a “high burden of proof”, the standard of proof is the balance of probabilities. For a party to avoid a contract due to lack of capacity, it is clear, following the Supreme Court judgment in Dunhill v. Burgin(ibid), that the other party must have actual or constructive knowledge of the incapacity. I reject the Claimant’s narrow construction purporting to limit the test to actual knowledge only.
41. In the extended chronology of this matter, two propositions are tolerably clear. First, that on 15thOctober 2019, when the Defendant executed a Lasting Power of Attorney for health and welfare, and property and finance, he had the capacity to do so. Second, that by June 2021, when Dr Warner and Professor Howard (experts in the High Court proceedings) conducted a joint meeting, the Defendant no longer had capacity as a result of his dementia. Although the High Court proceedings concentrated necessarily on the Defendant’s testamentary capacity, it seems to me that the Defendant’s capacity to contract certainly followed a similar trajectory. The Defendant’s condition, in other words, deteriorated to the extent that he effectively lost capacity to contract sometime between October 2019 and June 2021. All the evidence I have seen suggests that his downturn was characterised by a gradual, steady deterioration, rather than a precipitous bright-line moment when his status notably changed.
42. I am not satisfied that the Defendant has discharged the burden of proving that the Defendant had lost capacity to enter into a contract by October 2020. Indeed, I find as a fact that he had such capacity when the retainer with the Claimant was concluded on 4thOctober 2020. I am satisfied that the reports of Peterkin Ofori of Mental Capacity Consults in October and November 2020, accurately recorded and assessed the Defendant’s capacity as it was at that time. Whatever Mr Ofori’s precise status as an expert, he was instructed properly and carefully by the Claimant, who was aware of the Defendant’s dementia diagnosis and keen to ensure that he had capacity, and his reports suggest a structured, informed and accurate analysis. The Office of the Public Guardian, moreover, recorded in late January 2021, that it was ending it’s investigation, having ‘received mental capacity assessments’ which found that the Defendant had capacity ‘to make their own decisions about their lasting power of attorney (sic)’.
43. Insofar as I have noted that the Defendant had lost capacity by June 2021, it seems to me that this represented the first point in time when this conclusion could be justified and stated with any confidence. Although the High Court had made a number of interlocutory orders in April and May 2021 which appear to have been predicated on the Defendant’s lack of capacity, a joint experts meeting (Dr Warner and Professor Howard) on 10thMay 2021 ‘failed to yield any clear consensus on key issues relevant to a determination of capacity’ (Cobb J, JB 92, para. 16). Accordingly, and doing the best I can on the available evidence, I find as a fact that the Defendant had no capacity to contract from 22ndJune 2021.
44. It would be hard for the Claimant to argue that it was not affixed with actual knowledge of the Defendant’s lack of capacity from, at the very latest, 29thJuly 2021, when Cobb J delivered his judgment in Re K: T (& Another) v. L (& others) (Inherent Jurisdiction: Costs)(ibid). Indeed, while the Claimant was not instructed in the High Court claim, it seems clear from the parties’ respective submissions in this case, that the material produced in the High Court, specifically the medical evidence, was available contemporaneously. To be cautiously clear, however, I find as a fact that the Claimant had actual knowledge of the Defendant’s lack of capacity as a contracting party on 29th July 2021. I have seen no persuasive evidence to suggest that the Claimant had constructive knowledge of the Defendant’s condition prior to that date. As ever, reaching such absolute conclusions in a case in which bright-line certainty is characteristically absent, is a challenging process. But my conclusions accord with the expert findings and the manner in which this evidence was construed in the High Court proceedings.
45. In summary, therefore, the Defendant had capacity to enter into the contractual retainer agreed with the Claimant on 4thOctober 2020. He maintained such capacity until 22ndJune 2021 when, on the balance of probabilities, his dementia had deteriorated to the extent that he no longer had the capacity to contract. The Claimant’s solicitors had actual and/or constructive knowledge of this from 29th July 2021.
I would respectfully suggest that it would have assisted Costs Judge Whalan considerably had been addressed on whether his assumption that “[c]apacity is presumed under the MCA 2005 until the party challenging the presumption discharges the burden of proving otherwise” is correct when considering matters retrospectively. For the reason that I have discussed in greater detail in this paper (which is framed around testamentary capacity, although the principles are the same[1]), I would suggest that:
- The statutory presumption of capacity is ‘real time’ – i.e. it applies when considering whether the person currently has capacity to make the relevant decision.
- When assessing the position in retrospect, the question is whether proper doubts have been raised that the person lacked the relevant capacity. The evidential burden then shifts to those person(s) seeking to establish that the relevant capacity was present.
Looking through this lens, the question for Costs Judge Whalan would have been whether the barrister had adduced evidence sufficient to give rise to proper doubts as to his lack of capacity at the material time. It may well have been that he would have reached the same conclusion, but he would have done so by an analytically different route.
[1] Not least because the capacity to make a will is, at present, a common law test, in the same way as capacity to enter into a contract.
