A judge has been criticised by the Court of Appeal for failing to take into account tactics used by “unscrupulous claimants and lawyers”, particularly in noise-induced hearing loss (NIHL) cases.
Ruling that committal proceedings for contempt should go ahead in a case handled by failed Bolton personal injury firm Asons, Lord Justice Haddon-Cave said early discontinuance should not be used as protection against the consequences of dishonest conduct.
The judge said early discontinuance was “likely to be a relevant factor”, because the claimant who discontinues the moment ‘the game is up’ could be contrasted with the one who pressed on, wasting time and costs.
However, he went on: “The stratagem of early discontinuance should not be seen to be used by unscrupulous claimants or lawyers as an inviolable means of protecting themselves from the consequences of their dishonest conduct.”
Haddon-Cave LJ said it was clear that some of those involved in fraudulent insurance claims issued “tranches of deliberately low-value claims”, sometimes on an “industrial scale”, and simply dropped them when confronted with “resistance or evidence of falsity”, anticipating it would not be cost-effective for insurers to pursue them.
The judge said the problem had become “even more acute in recent times” because of qualified one-way costs shifting (QOCS) and the costs of proving ‘fundamental dishonesty’.
While the trial judge, Mr Justice Goose, was right in noting that discontinuance was not a bar to committal proceedings, he failed to take into account the “very real mischief” of the early discontinuance stratagem used by those engaging in “low-value wide-scale insurance fraud”, particularly in the field of NIHL claims.
The court heard in Zurich Insurance v Romaine  EWCA Civ 851  that David Romaine issued proceedings in November 2015 against Stanley Refrigeration Limited, a dissolved company insured by Zurich.
Mr Romaine, who had worked as a refrigeration engineer, claimed damages of £5,000 for breach of statutory duty and/or negligence, which caused him long-term NIHL and mild tinnitus.
The defendants, having seen medical evidence suggesting Mr Romaine was a professional singer, asked him whether he performed in a live band.
He denied being a professional singer and performing, but searches on his Facebook page revealed that he was the lead singer and performed live, with an electric guitar, in a rock-and-roll band.
The Facebook page contained “numerous still images and video clips” of Mr Romaine and his band performing in pubs, clubs and larger venues.
Zurich applied to strike out Mr Romaine’s claim for fundamental dishonesty in March 2017. A week afterwards, the claimant served a notice of discontinuance. A week after that, the Solicitors Regulation Authority closed Asons.
In his defence, the retired engineer argued that he had been cold-called by Asons, who visited him in his home and told him it would make a claim of between £1,000 and £5,000 on his behalf.
Mr Romaine, now 69, said he “felt he had been a victim of a claims management scheme to make money from his hearing loss predicament”.
Mr Justice Goose ruled on the papers that it was not in the public interest for committal proceedings to go ahead in August 2018.
Zurich challenged this on the grounds that two of the reasons given by Goose J were not valid – that there was an “absence of warning” and there had been “immediate discontinuance of proceedings”.
Haddon-Cave LJ said the absence of warning was not relevant in this case because, by the time the surveillance report had shown that Mr Romaine’s assertions were “demonstrably false”, the “die was already cast”.
He said absence of warning was unlikely to be relevant where the alleged contemnor was the claimant, who had signed statements of truth.
Haddon-Cave LJ said Mr Romaine’s arguments that he was “unaware of what was being said or written” by his solicitors could be dealt with at the committal hearing.
He added that “the message needs to go out to those who might be tempted to bring – or lend their names to – fraudulent claims: that dishonest claimants cannot avoid being liable to committal proceedings merely by discontinuing their original fraudulent claim”.
He allowed Zurich’s appeal. Lord Justice Davis agreed.