In the case of Alpha Insurance A/S v (1) Roche (2) Roche  EWHC 1342 (QB), the Court of Appeal exercised its discretion under CPR 44PD 12.4(c) and allowed Alpha Insurance, a motor insurer, to have the issue of fundamental dishonesty determined after two personal injury Claimants had discontinued their claims one day before trial.
CPR 44PD 12.4(c)
CPR 44PD 12.4(c) states:
"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".
Summary of Facts
On 6 April 2012, the Defendant's insured collided into a vehicle being driven by the First Claimant ("C1"). The Second Claimant ("C2") was a front seat passenger. C2 was 13 years old at the time of the accident and C1 was his mother. C1 and C2 submitted claims for personal injuries.
The Defendant insurer ("D") admitted that the accident was caused by the negligence of their insured, but alleged that C1 was the sole occupant of the vehicle and her claim was tainted by dishonesty and C2's claim was fraudulent. The court made case management directions and the claim was listed for trial on 14 February 2018.
On 13 February 2018 a Notice of Discontinuance was filed and served on behalf of C1 and C2. D sought a direction that the issue of fundamental dishonesty be determined.
HJJ Gregory refused D's application under CPR 44PD 12.4(c). He noted that there are no guidelines or guidance on how CPR 44PD 12.4(c) should be applied. He determined that "there is nothing… which suggests there is any particular exceptional quality about this particular case" and it would be a disproportionate use of the court's limited and precious resources to give further directions on the issue of fundamental dishonesty.
D appealed the decision on the grounds that it was perverse and/or wrong in law.
On appeal, the Court found that the first instance decision did contain an error in respect of the test to be applied when exercising discretion under CPR 44PD 12.4(c).
The discretion under CPR 44PD 12.4(c) was in fact unfettered, requiring consideration of all relevant factors with regard to the overriding objective of the CPR, and there was no separate requirement for "exceptionality". Also, the test under CPR 44PD 12.4(c) was not analogous to an application for summary judgment under CPR 24.2.
The decision at first instance was flawed and the Appeal Court therefore had to exercise its discretion under CPR 44PD 12.4(c).
On the issue of proportionality, the Court found that although claims of this nature involve relatively modest costs, it must be recognised that there is a public interest in identifying and deterring fraudulent claims and making Claimants meet the costs of pursing such claims.
As to the evidential issues, there was a conflict of evidence between the parties as to whether or not C2 was a passenger in C1's car, which gave rise to a triable issue. D's evidence was not particularly strong on this issue but it could be preferred at trial.
There were two factors that weighed against C1 and C2, namely (i) they discontinued their claims the day before trial and (ii) they failed to provide any explanation for doing so. An explanation should have been provided to the Court and D, particularly where liability was admitted, save for an allegation of fundamental dishonesty.
The Court also considered the age of C2, who was 13 at the time of the accident and would soon be 16. The fact that he was a minor and might be distressed by the allegation that his claim was fraudulent did not outweigh the above factors that militated towards the issue of fundamental dishonesty being determined.
The Court therefore held that, on balance, it was reasonable for D to advance its evidence and test C1 and C2's evidence on the issue of fundamental dishonesty. The appeal was allowed and the parties were directed to agree directions. However, the Court did observe that the case was "quite finely balanced", "[D's] case may well not succeed" and "any reasonable explanation for the late discontinuance may well have tipped the balance [in favour of C1 and C2]".
This decision gives helpful guidance on the issues that the Court will consider when determining an application for directions under CPR 44PD 12.4(c).
The Court has an unfettered discretion under CPR 44PD 12.4(c) and will consider all relevant factors (such as costs, the reasonableness of the Claimant's explanation for discontinuing and the strength of the parties' evidence on the issue that is subject to the allegation of fundamental dishonesty) having regard to the overriding objective. There is no requirement for the case to be "exceptional" for the Court to exercise its discretion. The test under CPR 44PD 12.4(c) is not comparable to an application for summary judgment.
Prior to applying for directions under CPR 44PD 12.4(c), it would be prudent for a Defendant to assess (i) the reasonableness of a Claimant's excuse where a claim is discontinued a day before, or shortly before, the trial (ii) the strength of parties' evidence on the issue, or issues, that led a Defendant to allege fundamental dishonesty and (iii) any other relevant factors. This is because a successful CPR 44PD 12.4(c) application might not necessarily result in a finding of fundamental dishonesty against a Claimant.
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