In the case of Kumari v Kumar & Advantage Insurance, 9 St John Street Chambers worked closed with Keoghs Solicitors to secure discontinuance of an estimated up to £10 million alleged Fundamental Dishonesty claim following ground breaking costs protection order in QOCs era.
As the Claimant was wheeling her bins back to her house her husband reversed his car into her. Liability for the accident was admitted. The husband was insured by Advantage Insurance Company Limited (named as Second Defendant), placed through Hastings Insurance Services Ltd.
Medical Causation was contested but it was accepted that the Claimant suffered injuries including fractures to her right leg with a delayed union. She did not make the expected (or any noticeable) recovery and contended that she remained in pain and dependent on mobility aids. She alleged that she had developed complex regional pain syndrome (CRPS) in her right leg and was dependent on a wheelchair and an electric mobility scooter but could use crutches for short distances. She needed help with transfers. Her description of her days suggested that she did little for herself, that she was unable to manage stairs and required help with day to day and overnight personal care. A significant claim for care was advanced.
The insurers solicitors were approached by a member of the Claimant’s family stating that the claim was dishonest and providing video and photographic evidence. However they later attempted to retract this assertion, advising of a family feud and claiming that the videos and photos had been “photo-shopped”. Surveillance was undertaken of the Claimant at a local airport as she returned back from a family trip and it was alleged that her mobility within that footage was inconsistent with her presentation to the Parties’ medical experts and her pleaded case generally.
The Second Defendant gathered witness evidence from various individuals including neighbours who confirmed that they had seen the Claimant mobilising without walking aids post-accident. Through Intel searches and material recovered through specific disclosure requests, the Second Defendant was also able to gather information which they said evidenced that the Claimant was running a business from home and deriving an income which hadn’t been declared during the course of the claim.
Owing to the evidence coming to light the Second Defendant amended their Defence in September 2020 to aver that the Claimant has been Fundamentally Dishonest in relation to her claim. The Claimant disputed the allegations, claiming that the evidence presented could be innocently explained, and that she had not been dishonest.
Litigation was highly contentious and the matter was due to be set down for a 15 day trial at the end of 2023. Intelligence revealed that the Claimant has transferred the ownership of her share in the matrimonial home to another family member shortly after the allegation of FD has been made in 2020. In 2022 the house was sold and the family member proceeded to buy another property where the Claimant and her family began to reside. The Second Defendant, keeping a keen eye on developments immediately sought an order for security for costs under CPR 25.12(1), to protect themselves, insofar as possible, against the risk of being unable to enforce a future costs order against the Claimant.
Security for Costs Applications - Background
Such an application is rarely made in personal injury claims, and so the necessary conditions are worth mentioning.
Under CPR 25.12 (1) a Defendant to any claim may apply for security for his costs of the proceedings. The purpose of an order for security for costs is to protect the Defendant against the risk of being unable to enforce any costs order they may later obtain. There are 2 pre-requisites for an Order for Security for Costs; the Court must be satisfied that:-
- (i) Having regard to all the circumstances of the case, it is just to make an Order: (CPR 25.13(1)(a)), and
- (ii) One or more of the conditions in Rule 25.13(2) applies.
In the current case, the Second Defendant maintained that CPR 25.13(2)(g) was met; namely the Claimant had taken steps in relation to her assets that would make it difficult to enforce an Order for Costs against her.
However, there is a dearth of legal authority concerning security for costs applications in personal injury actions. This case considered an untested issue, namely whether such an order could be made in a case falling within the qualified one-way costs-shifting regime (QOCS regime) under CPR 44.14 and 44.15.
The Second Defendant’s application for security for costs was heard by District Judge Griffiths, sitting in the Cardiff County Court on 7 March 2023. The Second Defendant was represented by Julie-Anne Luck of 9 St John Street Chambers, and the Claimant was represented by Mr Craig Ralph of King’s Chambers.
The court readily accepted that pre-condition CPR 25.13(2)(g) was met, namely by transferring her share in the matrimonial home to another family member, who then sold the home and bought another property, the Claimant had “put assets otherwise available for enforcement outside the reach of the Defendant’s to seek enforcement of costs”.
The most contentious part of the application was whether CPR 25.13(1)(a) was met, namely whether having regard to all the circumstances of the case, it was just to make the security for costs order. Mr Ralph argued that the order would be unjust, because:
- (a) The security for costs discretion should not be used to stifle a genuine claim that is governed by QOCS as to costs (the “QOCS issue”).
- (b) The Claimant was impecunious, and so an order for security would stifle her claim;
The arguments relating to the QOCS issue, are undoubtedly of wider interest. Mr Ralph relied upon the judgment of HHJ Walden-Smith in Stannard v Euro Garages Ltd  (unreported), in which he examined the concept of Fundamental Dishonesty (albeit in the s57 CJ&C Act) and the interplay with evidence yet untested by a Court. Mr Ralph submitted that this being a QOCS case, the Claimant had an expectation that her claim will be costs neutral. Whilst a finding of Fundamental Dishonesty can remove that protection, such a finding can only be made after the testing of the evidence at Trial.
Ms Luck argued there was no case law or civil procedure rule to suggest QOCS cases per se, were immune to security for costs orders. She also relied upon the obiter of Mrs Justice Lambert, in GL v PM, BM  EWHC 2268 (QB), in which the Claimant had sought to appeal a security for costs orders in a QOCS case. One of the Claimant’s submissions on appeal in GL v PM, BM, was that such an order contradicted the underlying philosophy of the costs scheme and deprived her of the anticipated costs protection available under the scheme. However, Mrs Lambert refused to hear this particular argument, as it was raised for the first time at the appeal hearing. She stated ;
“However, even if I had taken a different view, I do not accept that the point raised is the knock-out blow that Mr. Roy suggests it to be. One of the conditions for setting aside the usual costs regime in a QOCS case is dishonesty, or bad faith, and this is one of the grounds upon which the claim is being defended by PM. It does not inevitably follow therefore that if the Defendants are successful at trial the Claimant will not be burdened with a costs liability.”
DJ Griffiths accepted that whilst an application for security for costs is an unusual application in the context of personal injury claims, this does not mean an order cannot be made in the right case. He took note of the “knock-out blow” phrase used by Mrs Lambert in obiter, and concluded “Just because it is a QOCS case, doesn’t mean I can’t make a security for costs order”.
DJ Griffiths next considered whether the Claimant was impecunious and whether an order for security for costs would stifle her claim, in other words force her to give up her action. The only substantive evidence on these issues, was a witness statement prepared by the Claimant’s Solicitor, stating the Claimant had confirmed:
- (a) She could not give security, her share in the matrimonial home had been gifted;
- (b) The new property was not hers to pledge; and
- (c) She has no other money to pledge.
Ms Luck argued this was hearsay evidence and was wholly inadequate, given the legal principles as confirmed within the case law:
- Where a Claimant opposes the making of an Order for Security, or seeks to limit the amount of security by reason of their own impecuniosity, the onus is upon them to put proper and sufficient evidence before the Court, and in doing so, they shall make full and frank disclosure (NV Yorke Motors (a firm) v Edwards  1 WLR 444);
- Lord Diplock observation in NV Yorke Motors [page 449 to 450], that “the party claiming impecuniosity and consequential stifling of the claim must demonstrate, not that the security would be difficult to meet, but that the security would be “impossible to fulfil”;
- The burden is on the Claimant to show that he is unable to provide security, not only from his own recourses but by way of raising the amount needed from others who could assist him in pursuing his claim, such as relatives and friends: Keary Developments Limited v Tarmac Construction  3All ER 534 at 540, para 6;
- In GL v PM, BM, Mrs Justice Lambert had been unimpressed with an argument that she should take a common-sense approach and infer impecuniosity, given the Claimant told the Judge she had not worked recently and was in receipt of state benefits. Mrs Justice Lambert stating, “Inference is not enough”;
As to impecuniosity/stifling of the claim, District Judge Griffiths noted the above case law, and concluded:
- “The impecuniosity argument is a key element of the Claimant’s argument. The Claimant hasn’t come up to proof on that and the onus was on her to do so”… …
- “I need to be satisfied it would be impossible for the Claimant to meet security for costs, and I cannot reach that conclusion given the lack of evidence. This cannot simply be inferred from the hearsay evidence of the Claimant’s Solicitor’s witness statement”.
- “There is not enough information on the question of stifling the claim before the Court, in particular whether there are other means to provide the security. I cannot say that an order for security will inevitably lead to strike out”.
District Judge Griffiths concluded that it was just to make an order for security. He noted that the matrimonial home had been sold for £160,000, and the value of the Claimant’s share in the property was likely to have been £80,000. Consequently he made an order for security for the Defendant’s costs in the sum of £80,000, with the sum to be paid into Court within 21 days. Finally, District Judge Griffiths ordered the Claimant to pay the application costs of the Second Defendant.
Following the order the Claimant discontinued her claim on 28 March 2023, over 9 years post-accident, and 6 years from the commencements of litigation in 2017. According to Keoghs solicitor’s, “the result sees perhaps one of the largest savings by any insurer in a case where allegations of Fundamental Dishonesty were made”. Although a final schedule of loss was yet to be provided, the insurer reasonably estimated damages to be around £5-£10million with the Claimant’s budgeted costs standing at almost £700k with a further budgeting request having been made to increase it.
Rob Gray and Lee Cook of Keoghs worked alongside various members of 9 St John Street Chambers to obtain the best possible result. Richard Bonner handled the matter on behalf of Hastings Insurance Services Ltd. Chris Kennedy KC and Matthew Snarr represented the Second Defendant throughout the main action. Andrew Clark provided specialist advice on assets movements by the Claimant and recommended the application for security for costs. As already noted, Julie-Anne Luck provided representation at the hearing of this key application.