In the fourth part of our series on contract management pitfalls, we look at the risks arising out of varying the terms of construction contracts.
Facts of the case – The County Court
Mr Werrett, the tenant and Defendant in possession proceedings, had suffered brain damage as a child. In January 2014 Mr Werrett admitted causing his neighbours a nuisance and annoyance and he agreed to an injunction under the Housing Act 1996 and a suspended possession order. The Court approved both orders.
Mr Werrett breached both orders resulting in findings of contempt and an eviction date. His solicitors filed evidence from a psychiatrist contending that, because of his brain injuries, Mr Werrett did not – and had never had – capacity to conduct the proceedings. Mr Werrett’s representatives intended to set aside the suspended possession order and the injunction. At a hearing in May 2014, the Court found that the psychiatrist’s report did not establish a lack of capacity. As well as closely considering the psychiatrist’s report, the Court also noted that Mr Werrett had actively participated in the proceedings, including giving witness statements. As such he had demonstrated capacity at all material times.
In July 2014 Mr Werrett’s solicitors applied to vary or revoke the judge’s order that Mr Werrett had capacity at all material times, relying on new and better evidence from a psychologist. The housing association argued that the order of May 2014 had been a final order and could not be varied or revoked under Rule 3.1(7) of the Civil Procedure Rules; instead Mr Werrett should have appealed and applied for permission to submit new medical evidence. They also argued that Mr Werrett’s condition had not changed; he had simply obtained evidence from a psychologist that he could have obtained from his psychiatrist in May 2014 and so in effect he now wanted a “second bite at the cherry”.
At the hearing in July 2014 the Court found that Mr Werrett had proved his capacity by participating actively in the proceedings, which included him filing a defence, admitting breaches, applying to stay his eviction and filing two detailed witness statements. The circuit judge at the County Court found for the housing association on all arguments.
The High Court appeal
Mr Werrett’s solicitors appealed. However, the High Court found that Mr Werrett’s appeal had no real prospect of success. Firstly Mr Justice Nicol concluded that the order of May 2014 had been a final order which had determined the issue of Mr Werrett’s capacity past and present; Mr Werrett could not therefore rely on rule 3.1(7) CPR to revoke it. If he had been dissatisfied with the order, he should have appealed at the time.
Secondly, in a detailed judgment, Mr Justice Nicol reviewed the Circuit Judge’s assessment of whether Mr Werrett lacked capacity when measured against the criteria in the Mental Capacity Act 2005. Nicol J agreed with the circuit judge that the expert medical evidence failed to demonstrate that Mr Werrett did lack the capacity to litigate. It had therefore not been shown that Mr Werrett was a protected party.
The High Court’s judgment should be of comfort to housing providers when dealing with cases involving tenants with potential capacity issues. It is a helpful reminder of the significance of the presumption of capacity in Section 1 of the Mental Capacity 2005 Act and that a tenant who is raising a potential lack of capacity to litigate must provide the best possible medical evidence to show how the presumption of capacity is displaced. A housing provider should not shy away from carefully reviewing and if appropriate challenging such evidence.
In terms of seeking to vary or revoke an earlier court order, parties cannot count on a “second bite at the cherry” simply because they obtain better evidence, even on an issue as significant as mental capacity. The circumstances in which a party may invoke Rule 3.1(7) CPR to vary or revoke an order of the court are limited, particularly if the order was a final order intended to dispose of issues between the parties, as the circuit judge’s decision in May 2014 had been. An appeal instead was required.
For more information
To read the full judgment click here. Robert Whitehouse, Associate who joined our team in April 2015 previously acted for the housing association in this case. Should you wish to discuss the implications of this case further, please contact him on 0121 214 3558 or via email Robert.Whitehouse@anthonycollins.com.
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