ALPHA INSURANCE A/S v LORRAINE ROCHE (1) and BRENDAN ROCHE (2) [2018] EWHC 1342 (QBD) (Yip J) – 25TH MAY 2018
The claimant discontinued a claim. The defendant’s alleged that the claim was dishonest and asked the court to determine the issue of fundamental dishonesty so the defendant’s could enforce their entitlement to costs.
FACTS
The claim arose out of a road traffic accident on 6th April 2018. The defendant’s insured collided with a vehicle being driven by the first claimant. It was claimed that the second claimant was a passenger in the front seat. Both claimant’s sought damages for personal injury.
The defendant insurer’s admitted that their insured’s negligence had either caused or contributed to the accident, but alleged that the first claimant was the sole occupant of the vehicle. The defendant insurer’s alleged that the second claimant’s claim was fraudulent and further alleged that the first claimant’s claim was dishonest.
The claimant’s served a notice of discontinuance the day before the trial. At the defendant’s request the case was left in the list. The defendant’s then sought an order to dis-apply the effect of QOCS on the basis that the claim was fundamentally dishonest
The Judge refused the defendant’s application. The Judge referred to CPR PD 44 para12(4)(c) and stated that it would be “a disproportionate use of limited and precious court resources” and there was no “particular exceptional quality” about the case that persuaded him to dedicate further court time to it.
The defendant appealed the decision.
APPEAL
Appeal allowed.
The law
Pursuant to CPR 38.2(1):
“A claimant may discontinue all or part of a claim at any time”
CPR 44.16 provides an exception to QOCS. Orders for costs may be enforced without permission where the claim is found on the balance of probabilities to be fundamentally dishonest.
CPR 44PD 12.4 provides:
“(a) the court will normally direct that issues arising out of an allegation that the claim is fundamentally dishonest be determined at the trial;
(b) where the proceedings have been settled, the court will not, save in exceptional circumstances, order that issues arising out of an allegation that the claim was fundamentally dishonest be determined in those proceedings;
(c) where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;
(d) the court may, as it thinks fair and just, determine the costs attributable to the claim having been found to be fundamentally dishonest.”
Decision of the appellate judge
CPR PD 44 para 12(4)(c) – Yip J noted the Judge had erred in law regarding the test to apply when exercising his discretion under CPR PD 44 para 12(4)(c). Unlike PD 44 para 12(4)(b), subsection (c) did not require exceptional circumstances before the court could give directions for the determination of dishonesty allegations.
Yip J provided the following guidance as to the correct approach to applications under CPR PD 44 para 12(4)(c):-
(i) There is no requirement for exceptionality under CPR PD 44 para 12(4)(c) before the court give directions under it, unlike CPR PD 44 para 12(4)(b);
(ii) The correct approach to exercising the discretion required the court to weigh “all relevant considerations in accordance with the overriding objective.”
Further Mrs Justice Yip did not agree that the test for determining whether to grant a defendant’s application under CPR 44PD 12.4(c) should be analogous to the test for an application for summary judgment under CPR 24.2:
“The suggestion that a claimant would have to show that there was no real prospect of the allegation of fundamentally dishonesty succeeding and/or show compelling reasons why the allegation should not be pursued just does not fit with the wording of the Practice Direction. There is no presumption that the court should generally direct determination of the issues of fundamental dishonesty nor is there any presumption that the court should generally not make such a direction. In other words, giving such a direction should be seen to be neither routine nor exceptional.”
The provision has been introduced expressly to allow issues of fundamental dishonesty to be determined after discontinuance. Inevitably, this involves the allocation of further court resources to a case in which the claim is no longer being pursued. It will not be uncommon for such cases to involve relatively modest costs. However, in considering proportionality, it does need to be recognised that there is a public interest in identifying false claims and in claimants who pursue such claims being required to meet the costs of the litigation.
Mrs Justice Yip noted that each case would depend on its own facts and first instance Judges must be afforded a wide margin of appreciation. “Provided that the judge has weighed the relevant considerations, an appeal court will not interfere merely because it might have arrived at the opposite conclusion. Appeals against discretionary decisions as to whether it is appropriate for issues relating to fundamental dishonesty to be determined are not to be encouraged.”
As the Judge had erred in law, Yip J exercised the discretion afresh and directed that the matters concerning the allegation of fundamental dishonesty be determined. Yip J considered that in all the circumstances it was reasonable for the defendant to put forward its evidence and test the Claimant’s evidence on the issue of fundamental dishonesty.
TIPS
Important factors in this case were the very late stage of discontinuance and the absence of any explanation from the claimant’s.
Practitioners should take particular note of this case given the rarity of reported cases in this area and the volume of fraud allegations.
Zenith PI: PERSONAL INJURY LITIGATION IN PRACTICE 