horwich farrelly

Court Rules Discontinuances no Obstacle to Fundamental Dishonesty Applications

March, 21, 2016

A recent ruling in the case of Rouse v Aviva Insurance Ltd indicates that – in the event a claimant files a notice of discontinuance – courts could have the power to order claimants to attend a fundamental dishonesty application hearing.

The case, could also challenge the established legal principle that a claimant can file a notice of discontinuance without having to provide a reason for doing so, when faced with an application that the claim was fundamentally dishonest.

As a result, the risk of a spurious claim being litigated and subsequently being discontinued – with the claimant receiving the benefit of Qualified One Way Cost Shifting (QOCS) protection – should diminish.

The ruling also has the potential to put insurers in a stronger position to recover their litigation costs where fundamentally dishonest claims are dropped before trial.

Background

The claimant, Wayne Rouse, alleged that as he was travelling behind the defendant on a motorway, parts of a birdcage attached to the defendant’s roof fell from the vehicle.

Rouse went on to submit a personal injury claim to the defendant’s insurer, Aviva, worth approximately £2,000. This related to an alleged whiplash injury sustained when swerving to avoid the falling debris.

The defendant categorically disputed the claimant’s version of events, pointing out that when he arrived at his intended destination, an auction house, the bird cage was in good condition with no parts missing and was sold at auction. He denied any fault for the alleged incident and the matter was listed for trial.

Rouse, who was represented by Hampson Hughes Solicitors, discontinued the claim just three days before trial.

Having incurred substantial costs defending the claim, following our advice, Aviva made an application for a finding of fundamental dishonesty. This would allow costs to be enforced against the claimant in the event he did not pay them voluntarily.

Permission for a hearing was granted.

An open birdcage

The Hearing

Given the evidence, we asked for the parties to be ordered to attend the hearing for the purpose of cross-examination. On listing our application, the court agreed to the request. However, the claimant failed to attend the hearing.

Following a lengthy debate the judge bowed to pressure from claimant’s counsel and decided that attendance by the parties was not actually necessary and a decision on the application could be made on the papers.

We asked the court to draw an adverse inference from the claimant’s failure to explain the reason he brought the claim, only to discontinue it so late in the day. However, DDJ Edwards maintained that it was an established principle of law that a claimant could discontinue a claim at any time, pre-trial, without giving a reason for doing so.

The judge considered the filing of a discontinuance could and should end the case, therefore, it followed that the court could not draw adverse inference from a claimant failing to divulge the reason they discontinued.

With the bulk of the three-hour hearing taken up by consideration of the procedural issues, DDJ Edwards decided that the matter would need to be concluded at a later date, without the attendance of the parties.

The Appeal

We considered the reason for the discontinuance was central to our application for a finding of fundamental dishonesty and appealed the interim judgement on the grounds that:

  1. The judgment appeared to be wrong;
  2. The case was strong enough that securing a finding of fundamental dishonesty would be possible if the matter was to proceed to trial;
  3. It was not reasonable to deny the defendant access to a “trial” to prove fundamental dishonesty; and
  4. The reason the claim was discontinued so late in the day could be pivotal in deciding whether the claim was fundamentally dishonest or not, and the absence of an explanation should not create a place for the claimant to “hide”. The rules have evolved and that could mean fresh focus should be given to long established principles.

The appeal was granted by HHJ Gosnell who rejected each limb of DDJ Edward’s reasoning. He concluded that, whilst it would be a matter for individual case management decisions, the court could fairly draw an inference where the claimant had discontinued his claim without explanation or good reason.

The case will therefore be re-listed for our application for a finding that the claim was fundamentally dishonest to be heard, with the parties to be in attendance, which the judge concurred was required in this case.

Commentary

The first issue at stake in the case was whether a claimant and/or defendant could and should be expected to attend to give oral evidence and, in essence, be cross examined. Until now, the only reported case on the issue is Gosling & Screwfix which suggested the court could require parties to attend if desirable, i.e. in the interests of justice.

The ruling in Rouse v Aviva provides further weight to the argument that courts can, when appropriate, require parties to attend a fundamental dishonesty application hearing.

The second issue is whether a claim being discontinued – in a post-QOCS landscape – effectively draws a line under the matter, potentially leaving any subsequent application to determine fundamental dishonesty on weak grounds.

The outcome in this case suggests that courts can, in fact, invite a limited enquiry or full trial to determine whether a discontinued claim was fundamentally dishonesty.

In future, whilst each case will still turn on its own merits, there is a much stronger case for claimants and defendants to be ordered by the court to attend a defendant’s fundamental dishonesty application, following the claimant’s filing of a notice of discontinuance.

Equally, where a claimant fails to give adequate reason for discontinuing a litigated claim, the court can draw inference from the same.

To discuss any of the issues raised contact Jared Mallinson, Counter Fraud Partner, on 0161 413 1733 or email jared.mallinson@h-f.co.uk.

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