Judge was wrong not to order fundamental dishonesty hearing, says High Court

Liverpool: Judge was wrong in law

A circuit judge wrongly exercised his discretion in refusing to order a hearing on whether a claim was fundamentally dishonest, the High Court has ruled.

Mrs Justice Yip ruled that it was “reasonable” to give the defendant insurer, Alpha, the chance to put its case.

The claim for minor whiplash injuries by a woman and her 13-year-old son followed a road traffic accident in a car park. The defendant’s insureds admitted negligence but maintained that the boy was not in fact in the car.

The claim was discontinued without reason on the day before trial. His Honour Judge Gregory in Liverpool then refused the defendant’s application to issue a direction that the question of fundamental dishonesty be determined.

He said it would be a “disproportionate use of limited and precious court resources” in the circumstances.

He continued: “There is nothing, in my judgment, which suggests that there is any particular exceptional quality about this particular case that should cause me to give further directions and to set aside further court time to allow this particular isolated issue of dishonesty to be ventilated.”

On appeal, Yip J said the judge was wrong in law to subject the application to an exceptionality test.

Practice direction 44, paragraph 12.4(c) – which deals with discontinued claims – makes no reference to the need for exceptional circumstances, unlike paragraph 12.4(b), which refers to settled claims.

Sitting in Liverpool, Yip J said: “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.”

Exercising the discretion afresh, she ruled that the defendant insurer’s evidence raised a triable issue. “I do not regard the defendant’s case as being particularly strong, but it was nevertheless based upon evidence that was capable of being accepted.”

She added that the two factors that weighed “heavily” in the balance were the very late stage at which the claim was discontinued and the complete absence of an explanation from the claimants.

“I accept that there may be many reasons why a claimant will discontinue. However, where liability is not disputed save for the allegation of fundamental dishonesty and where the matter is close to trial, I believe some explanation can reasonably be expected…

“I bear in mind that the defendant has incurred costs in defending this claim to trial and has done so because it believes that a false claim has been made.

“The defendant seeks to enforce recovery of its costs by disapplying the QOCS regime. In the absence of any explanation, it is understandable that the defendant would feel that the late discontinuance was an attempt to avoid that consequence and would feel aggrieved at being deprived of the opportunity to establish fundamental dishonesty and so recover costs.

“On balance, looking at all the circumstances of this case, I consider that it is reasonable for the defendant to be given the opportunity to put forward its evidence and to test the claimants’ evidence on the issue of fundamental dishonesty.”

Yip J also noted that, in considering proportionality about holding such a hearing, “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”.

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