Furley Page LLP v KFL

This judgment determines a preliminary issue raised in this Part 8 claim for a detailed assessment pursuant to s.70 of the Solicitor’s Act 1974 (‘SA 1974’). The issue is summarised by the Defendant at Point 1 of the Points of Dispute (‘POD’) entitled ‘Capacity’:

In this judgment references in parenthesis refer to the Hearing Bundle (‘HB’) paginated 1–1449, the Defendant’s Supplementary Bundle (‘DSB’) 1-22, and an Authorities Bundle (‘AB’), 1–136.

The Defendant is a well-known and distinguished barrister and academic, and an acknowledged expert in European law. He was born on 23^rd June 1933 and is currently 91 years of age. He suffers from significant deafness, a lifelong condition, and in August 2020 he was diagnosed with mixed Alzheimer’s disease and vascular dementia.

In October 2009, the Defendant executed Lasting Powers of Attorney for Property and Affairs to JT and SK, (‘the Attorneys’), two former colleagues and friends from his Chambers.

In late 2020, the Attorneys received notice that the welfare and property LPAs had been revoked, and they were to be replaced by new attorneys, namely SL and TL, a nephew and niece of the Defendant.

The ‘new attorneys’, asserted that the Defendant had engaged the Claimant firm of solicitors in October 2020. The purported purpose of this instruction was to enable the Defendant to create a new will. Indeed, at about this time, the Defendant had created a new will, leaving significant bequests to SL and TL.

In early 2021, the Attorneys issued an application to seek the court’s directions in relation to the matters raised by the appearance of the new attorneys. On 21^st January 2021, Hayden J made an Order directing the Office of the Public Guardian to suspend its processing of the deed of revocation of the 2019 Lasting Power of Attorney and the registration of the new 2020 Lasting Power of Attorney. The Official Solicitor was invited to act as the Defendant’s Litigation Friend.

Capacity assessments were then undertaken by experts instructed by the Attorneys and the new attorneys. The Attorneys’ expert, Professor Robert Howard, Consultant Psychiatrist, found that the Defendant ‘lacked capacity in a number of areas of his life’ (Cobb J, AB 91, para. 10). The new attorneys’ expert, Dr James Warner, Consultant Psychiatrist, acting informally and without an order of the court, concluded that the Defendant had testamentary capacity, although he expressed concern that the Defendant was about to lose his capacity (Cobb J, AB 91, para. 11).

In May 2021, by agreement, Martin Terrell of Warners Solicitors was appointed as the Defendant’s Deputy for Property and Financial Affairs.

By June 2021, the experts agreed collectively that the Defendant’s condition had ‘significantly deteriorated’ and that, as a result, he lacked capacity as a result of his dementia (Cobb J, AB 92, para. 17). In the light of this settled evidential position, the parties agreed that an application should be made to the Court of Protection for the execution of a statutory will. This was set out in a Consent Order made by Cobb J on 23^rd July 2021. In a further written judgment on 29^th July 2021, Cobb J gave reasons for his decision that all parties to the dispute should bear their own costs: Re K: T (& Anor) v. L (& Others) (Inherent Jurisdiction: Costs) [2021] EWHC 2147 (Fan) (AB, 88-99).

The retainer relied on by the Claimant is dated 4^th October 2020. It comprises a Client Care Letter, dated 29^th September 2020 (HB 370-374) and additional Terms of Business (HB 376-378).

Pursuant to this contract, the Claimant delivered to the Defendant seven invoices between 23^rd October 2020 and 17^th December 2021 in the total sum of £72,850.64. A payment of £1000 was made on account on 2^nd October 2020. The outstanding balance against the invoices is accordingly £71,850.64.

It is submitted by the Defendant that he lacked capacity to enter into a contract of retainer with the Claimant on 4^th October 2020 and that, accordingly, there is no enforceable retainer and he has no liability for the fees claimed.

Reference is made to the Mental Capacity Act 2005 (‘MCA 2005’), specifically, s.3 ‘Inability to make decisions’ with particular reference to ss. 3(2) and (3), and s.4 ‘Best interests’, particularly ss.4(1) to (7). The parties also cite the Codes of Practice which supplement the MCA 2005, specifically paragraphs 4.1 ‘What is mental capacity’, 4.3 ‘Lack of capacity’, 4.4, 4.13, 4.14 ‘Inability to make a decision’, 4.16, 4.17, 4.18, 4.19, 4.20 ‘Retaining instructions’ and 4.21.

Capacity, pursuant to the MCA 2005, is to be judged in relation to the decision or activity in question and not globally. In this case, therefore, the issue is whether or not the Defendant had on 4^th October 2020 the capacity to enter into a contractual retainer with the Claimant. Put more directly, was the Defendant, at the relevant time, capable of understanding the nature, terms and effect of the contract entered into with the Claimant?

There is a presumption of capacity, but this presumption is rebuttable. The burden of proof falls on the party alleging incapacity.

In Dunhill v. Burgin [2014] UKSC 18, the Supreme Court gave some guidance in respect of a capacity to contract. Hale LJ stated (AB 133, para. 25) that:

The submission that the Defendant lacked capacity to enter into a contract with the Claimant on 4^th October 2020 raises five broad factors: (i) Context; (ii) Lack of any Claimant’s witness evidence; (iii) the reports of Peterkin Ofori at Mental Capacity Consult; (iv) Expert evidence; and (v) the witness statement of Jon Turner dated 20^th January 2021.

Ms Aldred, counsel for the Defendant, notes that the Defendant had little or nothing to do with the agreement in October 2020. Any contact with the Claimant was dealt with by SL and TL, the new attorneys, and it seems that the Defendant’s only involvement was to sign the document. This may be explained by the Attendance Note, dated 25^th September 2020 (HB 722) in which it was noted that the Defendant was ‘very vulnerable’. No relevant contact was maintained with JT and/or SK, the Defendant’s actual Attorneys. The Terms of Business (HB 376-379), moreover, appear to be incomplete. (The document copied in the Hearing Bundle was incomplete undoubtedly, but I suspect that this is because the scanning of this double-sided document was incomplete, rather than because of a substantive deficiency with the document itself.) How, submits Ms Aldred, could the contract be properly understood by the Defendant if several pages were missing?

Ms Aldred points out that the only witness evidence filed by the Claimant is the statement of Richard Waters, an Associate & Costs Lawyer with Furley Page LLP, dated 13^th September 2022. Although Mr Waters has produced a lengthy statement, he had no involvement with or at the time signing of the retainer in October 2020. There is no witness evidence from any relevant fee earner and, as such, Ms Aldred invites the Court “to draw an inference that the fee earners with conduct of this matter are unwilling to provide witness evidence to the court as the information they knew or should have known would have led them to the conclusion that the Defendant lacked capacity to enter into a retainer” (Skeleton Argument, 15^th December 2024, para. 30).

The Claimant relies on four capacity assessments undertaken by Peterkin Ofori of Mental Capacity Consult (‘MCC’) dated 22^nd October 2020 (x 2), 3^rd November 2020 and 4^th December 2020. Although these assessments all concluded that the Defendant had mental capacity to revoke his existing Attorneys and appoint new attorneys, and settle a new will, they are, submits Ms Aldred, of “little evidential value”. Mr Ofori “is not a solicitor” and “it is unclear what qualifications he holds” (Skeleton Argument, para. 24).

The assessment on 22^nd October 2020 (the Report is actually dated 30^th October 2020) was compiled almost three weeks after the retainer was signed. The Defendant, submits Ms Aldred, was evidently very compliant and his answers were largely restricted to him agreeing with Mr Ofori’s leading questions. Paragraph 22 of the Report states:

The second MCC report that arose from the consultation on 22^nd October 2020 (it was also dated 30^th October 2020), also suggests that the Defendant made very limited, yet contradictory responses to Mr Ofori’s questions. Moreover, the Attendance Note relevant to this meeting (HB 726-29) suggests that the Defendant ‘was unable to remember who his existing attorneys were without being told’. The overall impression, in other words, was – or at least should have been – one of a generally passive, compliant individual who was suffering from significant memory impairment.

The MCC assessment carried out on 3^rd November 2020 (the report is dated 27^th November 2020) again reflects “a conversation that was highly leading” (Skeleton Argument, para. 31). Again, submits Ms Aldred, the Defendant struggled to remember important details, suggesting that his cognitive ability had significantly deteriorated. The assessment carried out on 4^th December 2020, meanwhile, was of “little evidential value” (Skeleton Argument, para. 32).

Ms Aldred summarised her assessment of the MCC assessments at paragraph 33 of her Skeleton Argument:

The papers contain three expert reports compiled by Professor Robert Howard, a Professor of Old Age Psychiatry & Psychopathology, dated 2^nd December 2020, 31^st March 2021 and 20^th April 2021. These reports were available to the Claimant, although not commissioned by the solicitors and the evidence, submits Ms Aldred, “puts beyond any real doubt the Defendant’s incapacity during the life of the alleged retainer” (Skeleton Argument, para. 34).

The assessment conducted by Professor Howard on 29^th November 2020 was carried out almost two months to the Defendant’s retainer with the Claimant. Professor Howard concluded (HB 618) that ‘[He] retained adequate capacity to revoke his LPAs and make a new Will if he was appropriately supported to do so’. Nonetheless, Professor Howard was concerned about the Defendant’s cognitive abilities, to the extent that his ‘susceptibility to influence’ raised ‘serious concerns’ at the circumstances surrounding the LPA revocations and the execution of his new will. Specifically, the Defendant’s episodic memory functioning was ‘extremely impaired’ and he exhibited little awareness of his dementia.

Professor Howard’s next report is dated 21^st March 2021. By this stage, the Defendant was exhibiting significant memory impairment that was manifest in an obvious inability to recall and report events. This assessment was summarised at paragraph 10 (HB, para. 666) of the report:

Professor Howard’s third report is dated 20^th April 2021. In a long and very detailed analysis, in which he considered and answered 123 specific questions, Professor Howard concluded that by that stage the Defendant, inter alia, had no capacity to contract. This was expressed at 15 (HB, 679) as follows:

Jon Turner, the Defendant’s existing Attorney, gave evidence in the High Court proceedings, in a (long and very detailed) statement dated 20^th January 2021. This evidence, notes Ms Aldred, suggests “that around the time that the retainer was purportedly entered into, the Defendant’s cognitive abilities were significantly impaired” (Skeleton Argument. Para. 37). Ms Aldred cites a number of specific points that evidence this impairment at sub-paragraphs (i) to (viii) of para. 37 of her Skeleton Argument. This evidence, submits Ms Aldred, suggests that the Defendant’s condition was not subject to any rapid deterioration after October 2020, but rather that his impairment was relatively stable and consistent throughout the relevant period, specifically in October 2020, when the retainer with the Claimants was concluded. The Defendant, in other words, lacked the capacity to enter into the contract on 4^th October 2020.

The Claimant, moreover, knew or ought to have known (i.e. had actual and/or constructive knowledge) of the Defendant’s lack of capacity to enter into the contract. Ms Aldred’s submissions in this regard are set out at paras 40-49 of her Skeleton Argument, and overlap necessarily with her substantive submissions as to the facts of the Defendant’s capacity. Nonetheless, she submits, in distilled summary, that:

Ultimately, submits Ms Aldred (Skeleton Argument, para. 49):

The Claimant, relying on the oral submissions of Mr Waters, Costs Lawyer, submits that the Defendant retained capacity to enter into a contractual retainer for legal services. Further, or alternatively, the solicitor submits that if, contrary to its primary submission, the Defendant lost capacity at any relevant point, the Claimant had no actual or constructive knowledge of this fact. The Claimant relies on the oral submissions of Mr Waters, a Costs Lawyer at Furley Page LLP.

Mr Waters emphasised that the burden of displacing the presumption of capacity under the MCA 2005 falls on the Defendant. He refers to a “high burden of proof”. That presumption, he submits, has not been displaced by Ms Aldred’s citation of “selective snippets” from the papers. The Claimant was aware from the outset that the Defendant had been diagnosed with dementia/ Alzheimer’s disease and, as such, it was predisposed, from the outset, to conduct a careful assessment of his status to ensure that he was competent to enter into the contractual retainer. In doing so, the Claimant was aware necessarily that the Defendant was not a typical lay client, but an experienced and eminent legal professional.

The Claimant commissioned three (in effect four) Assessment Reports from Peterkin Ofori at MCC between October and December 2020. The instruction of MCC was undertaken carefully, pursuant to a ‘Capacity Assessment referral form’ (HB 4574-78), which not only summarised the Defendant’s known health issues, but also the relevant legal principles relevant to capacity. In no sense, therefore, was the Claimant pleading ignorance of the Defendant’s issues; on the contrary, it is clear that the solicitor was keen to investigate and address this matter.

The MCC Assessment Reports dated 30^th October 2020 (x2), 27^th November 2020 and 8^th December 2020 all concluded that the Defendant retained the capacity to revoke and appoint Attorneys, and settle a new Will. No valid criticism or challenge has been advanced to the expertise or experience of Mr Ofori – indeed his legal and medical experience are summarised in the reports – the Claimant was entitled to rely reasonably on this evidence.

The Claimant subsequently returned to Mr Ofori, whose response is set out in an e-mail dated 22^nd December 2021 (HB 818):

In the context of the High Court proceedings, the Office of the Public Guardian (‘OPG’) undertook an investigation on the concerns raised about the Defendant’s health and welfare, and the management of his property and financial affairs. On 26^th January 2021, (HB 780-81) the OPG wrote to the Claimant and set out its conclusions:

The MCC assessments and the conclusions of the OPG were consistent with the Claimant’s own observations in attendances with the Defendant. On 19^th November 2020, for example, the solicitors held a 3½ hour meeting attended by the Defendant, and recorded in an Attendance Note (HB 750-53). These observations – and the Attendance Note – records the Defendant as being alert and aware, and desirous of not becoming a burden to his old friends and colleagues. The overall impression, therefore, was one of a gradual and relatively gentle process of deterioration of the Defendant’s capacity, without there being a bright line that marked a moment precipitous decline, whereupon it could be said that he had lost capacity.

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.

In the extended chronology of this matter, two propositions are tolerably clear. First, that on 15^th October 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.

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 4^th October 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)’.

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 10^th May 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 22^nd June 2021.

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, 29^th July 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 29^th 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.

In summary, therefore, the Defendant had capacity to enter into the contractual retainer agreed with the Claimant on 4^th October 2020. He maintained such capacity until 22^nd June 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 29^th July 2021.

After handing down this reserved judgment, I will consider the implications of my findings with the parties at the adjourned part-heard detailed assessment, on a date to be fixed.