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No escape from alleged fundamental dishonesty

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Mrs Justice Yip in Alpha Insurance A/S v Roche & Anor [2018] EWHC 1342 (QB) found that a notice of discontinuance should have been set aside to allow a claim of fundamental dishonesty to be heard.

Background to the claim

The main action related to damages for personal injury sustained by a driver (the first claimant) and her 13 year old son (the second claimant). The defendant admitted liability but contended that the claim brought by the second claimant was fraudulent as at the time of the accident the driver was the sole occupant in the vehicle. In addition it was the defendant's position that the first claimant’s claim was tainted by dishonesty. The matter was listed to be heard on 14 February 2018 but on 13 February 2018 a notice of discontinuance was filed by the claimant.

The important factor to note in this matter was that the QOCS regime was applicable and therefore any liability for costs could not be enforced without the leave of the Court unless CPR 44.16 provision relating to fundamental dishonesty could be fulfilled. In the circumstances the defendant made an application for an Order setting aside the claimants' notice of discontinuance so the issue of fundamental dishonesty could be determined.

The defendant’s application came before a circuit judge who refused the same on the basis that to identify a further trial date in order to determine an isolated issue such as fundamental dishonesty was, on balance, a disproportionate use of limited and precious Court resources. When refusing the defendant’s application to set the notice of discontinuance aside the circuit judge stated that:

 “there is nothing… which suggests that there is any particular exceptional quality about this particular case that should cause me to give further directions and set aside further court time to allow this particular isolated issue of fundamental dishonesty to be ventilated".

On appeal

In their appeal the defendant submitted that the circuit judge “failed to give any or any sufficient weight to the public interest in maintaining the integrity of the legal system and ensuring that dishonest claimants should be exposed as such and pay the costs of the litigation”. In addition it was said that too much emphasis was put on the issue of Court’s resources necessary to determine allegations of fundamental dishonesty and not enough consideration was given to the wasted resources by the claimant serving their notice of discontinuance at the eleventh hour. Furthermore it was alleged that the judge placed an unnecessary burden on the defendant to establish a “particular exceptional quality”. 

The defendant’s appeal came before Mrs Justice Yip when she found that the ultimate decision in this appeal involved a generous ambit of Court’s discretion which needed to be exercised within the parameters of the overriding objective under CPR 1.1. As such it was imperative that the circuit judge considered all the circumstances of the case before him which he did. However, he made an error in law in relation to the test to be applied under CPR 44PD 12.4 (c ) which states that:

“<…> 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.”

Mrs Justice Yip clarified the application of the test under CPR 44PD 12.4 by stating that:

“The relevant sub-section does not require exceptionality. This may be contrasted with sub-section (b) which applies where proceedings have been settled rather than discontinued, where it is expressly provided that the court will not order that issues arising out of an allegation that the claim was fundamentally dishonest be determined "save in exceptional circumstances". The distinction highlights that "exceptional circumstances" are not required for directions to be given under sub-section (c). <…> The correct approach is to regard the discretion under CPR 44PD 12.4(c) as an unfettered one, requiring the weighing of all relevant considerations in accordance with the overriding objective.”

Attention was also drawn to the issue of proportionality of allocating further Court resources to allow determination of fundamental dishonesty. It was emphasised that when considering proportionality, for the purpose of a public interest, it was important that false claims were identified and claimants who pursue such claims were required to meet costs of the litigation.

Ultimately Mrs Justice Yip found that the claimants' notice of discontinuance should have been set aside to allow a claim of fundamental dishonesty to be heard on the basis of the two main factors- the claim was discontinued on the eve of the trial without any explanation of such decision by the claimants. Accordingly the defendant’s appeal was allowed and it was directed that the issue relating to fundamental dishonesty was determined at a further hearing.

Lessons to learn

The most important lesson for any claimant to take from this case is that there are consequences of pursuing a false claim.

However, if fundamental dishonesty is alleged by the defendant, when filing and serving a notice of discontinuance, make sure to explain the reason for the decision to discontinue as it might persuade the judge not to direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined. But be aware that Courts will unlikely be lenient on this issue given that there is a significant public interest in identifying false claims and punishing claimants who bring these claims.