1. Eagle-eyed followers of the Farrar’s Building website may recall a report I filed just last month concerning a finding of fundamental dishonesty (FD) I obtained against a Claimant carer who had discontinued her claim for personal injury against the Defendant (her employer and a multiple sclerosis sufferer) just 3 days prior to trial. The claim was based upon the assertion that the Claimant had injured her back whilst assisting the Defendant off of the bathroom floor after she had fallen from her wheelchair. The Defendant applied for an FD finding some time after the notice of discontinuance was filed, leading to a hearing in which all issues were aired and adjudicated upon. The District Judge’s conclusion was that the alleged accident never happened, nor had the Claimant ever sustained any genuine injury. The obvious impact of the FD finding was that QUOCS were disapplied under CPR 44.16(1) and the Defendant was awarded costs of over £43,000.
2. The very recent case of Alpha Insurance A/S v (1) Lorraine Roche (2) Brendan Roche  EWHC 1342 (QB) now provides some very welcome guidance as to when lower Courts will direct that allegations of fundamental dishonesty should be heard and determined after Claimants have discontinued their claims (but where the notice of discontinuance has not been set aside).
3. As a quick reminder, paragraph 12.4 of 44PD.12 states that:-
“12.4 – In a case to which rule 44.16(1) applies (fundamentally dishonest claims) – ….
(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.”
4. It is clear that these rules were introduced specifically to deal with situations where suspicious claims are discontinued, giving Defendants an opportunity to recover their costs which would otherwise be irrecoverable under the QUOCS regime. Previously, there was no guidance as to when and in what circumstances the rules would be applied. That is no longer the position.
5. Alpha Insurance concerned a road traffic accident that took place in April 2016. The Defendant accepted that its insured drove into the rear of a vehicle being driven by the First Claimant. Although it was claimed that the Second Claimant was a front seat passenger in the First Claimant’s car, the Defendant denied that he was present, averred that his claim was fraudulent and argued that the First Claimant’s claim was tainted by that dishonesty. One day prior to trial, a notice of discontinuance was filed. The Defendant requested that the matter be left in the list so that it could seek a direction that FD be determined. His Honour Judge Gregory refused that application.
At First Instance
6. His Honour Judge Gregory noted the lack of guidance as to when CPR 44.PD 12.4(c) should be applied and felt it correct to take into account “a variety of considerations”. He concluded that,
“…to set aside and identify a further trial date for the ventilation of that particular, isolated issue in this particular case would be, on balance, a disproportionate use of limited and precious court resources, given the amount of time and court resources that have already been devoted to the pursuit of this case…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.”
7. Allowing the Defendant’s appeal, Yip J found that the wrong legal test had been applied. There was no requirement for “exceptionality” before a Court could order that issues arising out of FD should be determined. This was in direct contrast to the requirement of para. 12(b) of the same PD which did require exceptional circumstances before directing the same in circumstances “where the proceedings have been settled.”
8. As to what the appropriate test is under para. 12(c), Yip J said the following,
“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 (para. 16)
…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. (para. 17)
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 litigation”. (Para. 18)
9. Yip J emphasised that each case was to be considered on its own facts and that first instance judges should be afforded “a wide margin of appreciation” when deciding applications under para. 12.4(c). As long as all relevant considerations are weighed, an appeal court should not interfere merely because it may have reached a different conclusion. Then, in a warning to Defendants, she added, “Appeals against discretionary decisions as to whether it is appropriate for issues relating to fundamental dishonesty to be determined are not to be encouraged.”
10. The Appeal Court then exercised its discretion afresh and directed that issues relating to FD be determined at a separate hearing. The two issues that weighed heavily in the balance were first, the very late stage at which the claim was discontinued (1 day before trial) and second, the lack of any explanation for the discontinuance. Although finely balanced, those two factors, together with the costs incurred by the Defendant, were sufficient to justify a further hearing.
11. Although plainly not the last word in this new and developing area, Alpha Insurance now provides helpful guidance against which Defendants may now decide whether it is worth seeking a direction from the court that issues arising out of suspected FD be determined in a further hearing. Often, large sums are spent by insurers investigating and then disputing suspected fraudulent claims. If this new guidance assists them in their efforts to recover costs where those claims are discontinued (usually late and without adequate explanation) then it will be very welcome indeed.
25th June 2018