Discontinuance offers no escape for dishonest litigants

Zurich Insurance PLC v David Romaine | Court of Appeal – 17 May 2019

Zurich Insurance PLC v David Romaine | Court of Appeal – 17 May 2019

Summary

The Court of Appeal has allowed an appeal by Weightmans against a High Court decision which refused permission to bring committal proceedings against a noise-induced hearing loss (“NIHL”) claimant.

Background

Mr Romaine made a number of allegedly false statements about his hobbies when pursuing an NIHL claim against a long-dissolved Zurich insured.

He had stated to his medical expert that he had no noisy hobbies but records revealed that he may have owned a motorbike and also played in a band. When Part 18 questions were raised on this subject, he denied playing in a band. His witness statement repeated the same information and denied that he rode a motorcycle.

However, an intelligence report on Mr Romaine set out that, not only did he ride motorcycles; he was also the lead singer in a rock-and-roll band. Numerous videos, photographs and gig dates were available on the band’s website and Mr Romaine’s Facebook page, which set out a long history of playing loud live music. When the evidence was presented to him and his former solicitors, along with a declared intention to apply to strike out the claim, he discontinued his claim.

Mr Justice Goose determined that there was a strong case to be made that Mr Romaine had been dishonest. He also considered that there was a public interest in allowing committal proceedings in instances such as this. However, he declined to grant permission because he considered the public interest test was not satisfied, as Mr Romaine had not been given a warning and had discontinued his claim promptly when confronted with the intelligence evidence.

Decision

The Court of Appeal could not support the reasoning that the lack of a warning that committal proceedings would be commenced went against the public interest. Haddon-Cave LJ distinguished the principle in the leading authority of Barnes v Seabrook by looking back to the genesis of that guidance in KJM Superbikes v Hinton.

In KJM, the maker of the false statements had been a witness who had provided evidence in a strike-out application. The application was unsuccessful and the claim proceeded. Documents then came to light which showed his earlier evidence to be false. The Court of Appeal recognised that the circumstances in this case were different from KJM as the person bringing the claim was the person making the false statements. Lord Justice Haddon-Cave stated:

“It is difficult to conceive of circumstances where a claimant can be heard to say that he was prejudiced by the absence of warning about the risks of contempt proceedings if he, himself, has been responsible for bringing a fraudulent claim."

Lord Justice Davis also identified that where the signatory was a solicitor signing on a client’s behalf, as had been the case with the particulars of claim in this matter, the mandatory guidance in Practice Direction 22 that a solicitor needs to advise a client of the penalties for making a false statement would have applied.

Equally, the Court of Appeal did not consider that a prompt discontinuance was a relevant feature against committal proceedings and the court’s comments on this issue have a wider-ranging significance across the entirety of the personal injury market. The court stated:

“It is clear that the modus operandi of some of those involved in fraudulent insurance claims has been to issue tranches of deliberately low-value claims (sometimes on an industrial scale) for e.g. whiplash, slips and trips etc and when confronted with resistance or evidence of falsity, simply then to drop those particular claims, in anticipation that it would probably not be worth the candle for insurers to pursue the matter further, particularly since recovery of costs can itself be time-consuming and costly and nominal claimants may be impecunious. The problem has become even more acute in recent times because of one-way cost shifting (“QOCS”) and the costs of proving “fundamental dishonesty” under CPR 44.16 (and c.f. section 57 of Criminal Justice and Court Act 2015).”

The court particularly recognised the problem that insurers face in deafness and other long-tail insurance claims when dealing with long dissolved or inactive insureds and events that took place a considerable time ago. The court considered the issues in this case to be a paradigm example of those problems.

The matter has been remitted to the High Court for directions.

Comment

The Court of Appeal has sent a clear message with this judgment that fraudulent personal injury claims remain a significant problem that must be addressed in strong terms. The courts will not excuse dishonest litigants from penalty simply because they discontinue when confronted. The judgment itself makes this clear:

“Finally, I would add 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.” 
Lord Justice Haddon-Cave

This judgment is a positive result for those across the insurance industry that deal with low-value, high-volume claims. The option of pursuing litigants for contempt remains a clear deterrent in the arsenal of insurers, particularly in the era of qualified one-way costs shifting.

David Callow (12KBW) was instructed by Weightmans LLP.

For further information, please contact Andrew Ball, Paralegal, at andrew.ball@weightmans.com or Paul Debney, Partner, at paul.debney@weightmans.com.

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