A useful reminder of the procedure for dealing with fundamental dishonesty defences post-discontinuance and the risks a discontinuing claimant runs in not providing an explanation.
The defendant raised a fundamental dishonesty point. The claimant discontinued the claim very shortly before trial. On appeal the High Court judge allowed the fundamental dishonesty point to proceed to trial notwithstanding the discontinuance of the claim.

Mrs Justice Yip said,

‘8. CPR 44PD 12.4 provides:
…(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;

9. The insurers were therefore seeking to have the allegation of fundamental dishonesty determined so that they could enforce their entitlement to costs.

12. The appellant contends that the judge failed to give any or any sufficient weight to the public interest in maintaining the integrity of the legal system and ensuring that dishonest claimants should be exposed as such and pay the costs of the litigation. It is further contended that the judge put too much emphasis on the court resources required for determination of the issue and insufficient emphasis on the waste of resources by the claimant in serving the notice of discontinuance at the eleventh hour. Then, it is said that the judge placed too much weight upon general difficulties faced by defendants challenging occupancy and insufficient weight on the substantive allegation and cogency of the evidence in this case. The appellant also complains that the judge placed too much weight upon a general acceptance that reasons for discontinuance are multi-faceted without any explanation being put before the court. Finally, it said that the judge placed an unnecessary burden on the defendant to establish a “particular exceptional quality”.

13. The respondent rightly identifies that this appeal concerns the exercise of a case management power. As such, this involves a generous ambit of discretion. That discretion is unfettered, save only that it must be exercised in accordance with the overriding objective under CPR 1.1. There is no presumption either way. The judge must have regard to all the circumstances of the case before him… The respondent contends that the judge correctly exercised his discretion having regard to the facts of this case and the evidence in the bundle before him. The respondent suggests that the judge clearly assessed the cogency of the evidence and made a merits-based assessment, reaching a decision he was entitled to reach in the exercise of his discretion.

16.  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.

18. 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 the litigation.

19.  Each case will depend on its own facts. This is an area in which judges sitting at first instance must be afforded a wide margin of appreciation. Provided that the judge has weighed the relevant considerations, an appeal court will not interfere merely because it might have arrived at the opposite conclusion. Appeals against discretionary decisions as to whether it is appropriate for issues relating to fundamental dishonesty to be determined are not to be encouraged.

20. However, in this instance, the judge having applied the wrong test, I must exercise the discretion afresh.

25. Two factors that weigh heavily in the balance for me are the very late stage at which the claim was discontinued and the complete absence of an explanation from the claimants.

26.  The claim was discontinued the day before trial. The defendant will therefore have incurred the costs of defending right through to preparation for trial. The defence was filed in January 2017, so the claimants had known what was being alleged for over a year. They had maintained their claim until the last moment. In addition to the expense and inconvenience caused to the defendant, court resources had been allocated for trial. I note that the defendant’s witnesses were prepared to attend trial and did in fact attend court on 14 February 2018.

27. Coupled with the lateness of discontinuance is the fact that no explanation was provided to the defendant or the court. I accept that there may be many reasons why a claimant will discontinue. However, where liability is not disputed save for the allegation of fundamental dishonesty and where the matter is close to trial, I believe some explanation can reasonably be expected.

29. I bear in mind that the defendant has incurred costs in defending this claim to trial and has done so because it believes that a false claim has been made. The defendant seeks to enforce recovery of its costs by disapplying the QOCS regime. In the absence of any explanation, it is understandable that the defendant would feel that the late discontinuance was an attempt to avoid that consequence and would feel aggrieved at being deprived of the opportunity to establish fundamental dishonesty and so recover costs.

30. On balance, looking at all the circumstances of this case, I consider that it is reasonable for the defendant to be given the opportunity to put forward its evidence and to test the claimants’ evidence on the issue of fundamental dishonesty.

31.  I do not say that a decision in this case not to direct the determination of the fundamental dishonesty issue would be perverse. I regard the position as quite finely balanced. The defendant’s case may well not succeed. It all depends on an assessment of disputed factual evidence. For my part, any reasonable explanation for the late discontinuance may well have tipped the balance the other way.

[Edited for ease of reading].