Litigation Friend Requirement and Retrospective Nullity of Proceedings for Protected Parties under CPR 21: Johnston v Financial Ombudsman Service

Introduction

This case involves Kenneth Johnston, a complainant with longstanding mental health disabilities, who sued the Financial Ombudsman Service (FOS) for alleged breaches of the Equality Act 2010. After multiple rounds of strike-out and appeal hearings, the Court of Appeal was asked to decide whether Mr Johnston lacked legal capacity throughout the proceedings, thereby rendering all orders and steps taken nullities under the Civil Procedure Rules (CPR) Part 21. The central issues were:

Whether Mr Johnston was a “protected party” who required a litigation friend to conduct proceedings;
The effect of CPR 21.3(4) and the Mental Capacity Act 2005 on steps taken without a litigation friend;
The FOS’s statutory immunities and exemptions under the Financial Services and Markets Act 2000 and the Equality Act 2010;
The fairness of court proceedings in light of requests for reasonable adjustments.

The appeal was heard by Baker LJ, Coulson LJ and Asplin LJ in May 2025.

Summary of the Judgment

The Court of Appeal dismissed Mr Johnston’s appeal on two principal grounds:

Capacity and Litigation Friend: Mr Johnston failed to rebut the presumption of capacity. The expert evidence (from Dr Attavar and Dr Rao) was deficient or contradictory and did not satisfy the balance of probabilities that he lacked capacity at any material time. Accordingly he was not a “protected party” under CPR 21 and no retrospective nullification of proceedings arose.
Procedure and Permission to Appeal: The proposed grounds concerning the FOS’s immunity and the absence of a ground-rules hearing lacked real prospects of success. Mr Johnston’s counsel had abandoned the immunity point on the first appeal and no fresh compelling reason existed to revisit it. The fairness point was not pursued at first appeal by counsel and, absent incapacity, could not justify a second appeal.

Baker LJ refused permission to appeal on all remaining grounds. Coulson LJ and Asplin LJ agreed, the former adding that CPR 21.3 does not permit an unrepresented person who lacks capacity to issue valid proceedings; if incapacity invalidated orders it would also invalidate the initial claim.

Analysis

Precedents Cited

Masterman-Lister v Brutton [2002] EWCA Civ 1889: common-law test for capacity to conduct litigation—understanding issues with legal assistance.
Mental Capacity Act 2005: core principles (ss 1–3) and CPR 21.1–21.3 on protected parties and litigation friends.
Dunhill v Burgin [2014] UKSC 18: orders made for a protected party without a litigation friend are nullities.
MTA v Lord Chancellor [2024] EWCA Civ 965: confirms the effect of nullities where a litigation friend is absent.
A Local Authority v JB [2021] UKSC 52: decision-specific and time-specific test for capacity under the MCA.
Public Guardian v RI [2022] EWCOP 22: importance of contemporaneous evidence when assessing past capacity.
Cannon v Bar Standards Board [2023] EWCA Civ 278: critique of deficient psychiatric evidence on capacity and distinction between capacity and fairness adjustments.
V v R [2011] EWHC 822 (QB): applying MCA principles to litigation capacity.
Galo v Bombardier [2016] NICA 25: duty to adjust procedures for vulnerable litigants.

Legal Reasoning

The Court applied the statutory presumption of capacity under the MCA 2005. To displace it, Mr Johnston bore the burden on the balance of probabilities to show inability to:

Understand the information relevant to the decision;
Retain it;
Use or weigh it;
Communicate the decision.

Baker LJ identified fatal defects in Dr Attavar’s evidence:

No proper instruction letters or full contemporaneous records;
Failure to specify which proceedings were assessed;
Insufficient analysis linking diagnosis to incapacity;
Contradiction with his own July report that Mr Johnston could instruct a lawyer;
Bare assertion of incapacity since 2010 without support.

In contrast, Dr Rao (September 2023 and March 2024) found Mr Johnston capable of conducting litigation with reasonable adjustments. The Court held Dr Rao’s clear opinion more persuasive.

Accordingly Mr Johnston was not a “protected party” under CPR 21.1. No retrospective nullity arose under CPR 21.3(4). On the appeal grounds:

The immunity point on the FOS’s compulsory jurisdiction had been abandoned by counsel on first appeal;
The procedural fairness point (lack of ground-rules hearing) was not pursued at first appeal and lacked real prospects of success given absence of pleaded particulars and subsequent legal representation;
No compelling reason existed to grant a second appeal.

Impact

This decision clarifies that:

Parties are strongly presumed to have capacity unless expertly and rigorously rebutted.
Expert evidence must comply with CPR 35 and PD 35: full instructions, review of contemporaneous records, clear linkage between diagnosis and decision-making ability.
CPR 21 protections apply symmetrically to claimants and defendants: lack of capacity invalidates the claim itself.
Courts will not reopen abandoned issues on successive appeals absent a compelling rationale (e.g., newfound incapacity evidence).
The duty to make reasonable adjustments arises at all stages but absent arguable unfairness will not alone justify setting aside decisions straightforwardly taken in breach of that duty.

Complex Concepts Simplified

Protected party: A person who lacks capacity to conduct litigation and must be represented by a “litigation friend.”
Litigation friend: A guardian or next friend appointed to conduct proceedings on behalf of a protected party (CPR 21.2).
Nullity of steps: Under CPR 21.3(4), any step taken without a litigation friend where one was required “has no effect” unless the court orders otherwise.
Presumption of capacity: Section 1(2) MCA 2005 imposes that every adult is assumed able to make decisions unless proved otherwise on the balance of probabilities.
Reasonable adjustments: Steps that courts or service providers must take to enable disabled persons to participate fully, not favouritism but fair access (Equal Treatment Bench Book).
Statutory immunity: Under FSMA 2000 Sch 17 para 10, the FOS is immune from damages for acts in its compulsory jurisdiction, subject to bad-faith or HRA 1998 exceptions.

Conclusion

Johnston v Financial Ombudsman Service establishes that:

The presumption of capacity is robust and will only yield to expert evidence that is complete, contemporaneous and analytically sound.
Absent capacity, all proceedings and orders are automatically void unless the court dispenses with the requirement for a litigation friend.
Counsel’s decision to abandon a ground on first appeal generally bars its revival on a second appeal, absent a compelling change in circumstances (such as newly discovered incapacity).
Claims for procedural unfairness based on failure to make reasonable adjustments require timely assertion and clear nexus to prejudice, failing which they will not sustain further appeals.

This ruling reinforces procedural safeguards for vulnerable litigants while safeguarding the finality of court decisions and the policy of encouraging parties to advance all grounds at the earliest opportunity.