Hussain v Amin & Anor
The comments made by Lord Justice Davis in this costs appeal reinforce the benefits of clear and unequivocal pleading of defences in fraud cases.
Repercussions for poorly pleaded defences in fraud claims
The comments made by Lord Justice Davis in this costs appeal reinforce the benefits of clear and unequivocal pleading of defences in fraud cases. However, in cases where there are insufficient grounds to plead fraud but it is appropriate to put the claimant to proof, speculative applications to strike out defences should be robustly contested.
The case arose out of a road traffic accident. Liability was disputed and the second defendant’s defence put the claimant to proof and expressed a “number of significant concerns in relation to the parties and the claim intimated”. The case proceeded to trial where it was conducted as a fraud case. The judge found in favour of the claimant. The defendant appealed the order for costs in favour of the claimant.
The appeal was dismissed and Lord Justice Davis commented:
“It was perfectly proper to join issue on the primary facts alleged in the Particulars of Claim and as to whether there had indeed been negligence and whether the claimed losses had been caused thereby. But the pleaded defence went much further in paragraphs 7 and 9, setting out a number of matters which, it was alleged, raised “significant concerns” as to whether or not this had been a staged accident requiring further investigation. Possibly, although I have my reservations, such a pleading could be justified as an initial holding defence. But it is a case pleaded on insinuation, not allegation. If the second defendant considered that it had sufficient material to justify a plea that the claim was based on a collision which was a sham or a fraud, it behoved it properly and in ample time before trial so to plead in clear and unequivocal terms and with proper particulars. Thereafter the burden of proof would of course have been on the second defendant to establish such a defence. In the event, as I see it, the claimant was faced with a hybrid, he in effect being required at trial to deal with an insinuation of fraud without any express allegation to that effect pleaded. Realistically, the trial judge dealt with the matter in the round, concluding that the claim was not fabricated or fraudulent and that the accident had not been staged. But this sort of pleading should not be sanctioned. It is in fact something of an irony that the second defendant seeks to criticise the conduct of the claimant’s solicitors, when in part at least they were having to deal with an abusive defence. But ultimately it will be a matter for the costs judge to assess what is an amount reasonable to be paid by way of costs having regard to all the circumstances”
Lord Justice Davis was clearly of the view that the defendant in that case should have expressly alleged fraud and not simply insinuated it.
Much has been made of the comments by some claimants’ solicitors and applications have been made, sometimes without notice at a CMC, to strike out the defence on the grounds that the defence constitutes an abuse of process. Such applications are prevalent in Liverpool County Court.
This case reinforces the need for careful consideration and expert handling of fraud cases.
Since the implementation of the Jackson reforms on 1 April 2013, cases will be subject to greater scrutiny by judges prior to trial to fulfil the revised “overriding objective” so that cases are dealt with justly and at proportionate cost.
Whilst we are unaware of any cases actually being struck out, we have learnt that the courts have made orders compelling defendants to amend their defence to plead fraud, and in default, the case will be struck out. Serious consideration should be given to appealing each and every order of this type. Whilst each case will turn on its own facts, even if a judge concludes a particular paragraph in the defence is ‘abusive’, it will still be appropriate to put the claimant to proof in relation to his/her claim and the defendant should be allowed to put their case before a trial judge.