Zenith Insurance Plc v LPS Solicitors Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Freedman |
| Judgment Date | 19 May 2020 |
| Neutral Citation | [2020] EWHC 1260 (QB) |
| Date | 19 May 2020 |
| Docket Number | Case No: QB-2018-000-099 |
| Court | Queen's Bench Division |
[2020] EWHC 1260 (QB)
Mr Justice Freedman
Case No: QB-2018-000-099
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
William Irwin (instructed by DWF Law LLP) for the Claimant
Ghazan Mahmood (instructed by LPS Solicitors) for the Defendant
Hearing date: 1 May 2020
I Contents
| PARAGRAPH NUMBER | SUBJECT |
| I Contents | |
| 1–3 | II Introduction |
| 4–10 | III Background facts |
| 11–22 | IV Nature of the Application |
| 23 | V The Legal Framework |
| 24–28 | (a) Application under CPR 31.16 |
| 29–34 | |
| (b) Norwich Pharmacal Application | |
| 35 | VI The ten categories of document (a)-(j) |
| 36–40 | VII The documents at categories (a) – (d) |
| 41 | VIII The documents at category (e) |
| 42–43 | IX The documents at categories (f) and (g) |
| 44–45 | X The documents at categories (h) and (i) |
| 46–47 | XI The documents at category (j) |
| 48–49 | XII The need for an originating application? |
| 50–52 | XIII Conclusion and disposal |
II Introduction
This is an application for further disclosure pursuant to CPR 31.16 (pre-action disclosure) and/or in the nature of Norwich Pharmacal relief (as preserved by CPR 31.18). An order has been made in this action by Cockerill J on 17 July 2019 (“the Cockerill J Order”), and that elicited almost 500 pages of documents. The Applicant (“Zenith”) says that that disclosure was incomplete. It has now reformulated the disclosure sought into about 10 categories of documents. Its primary case is that the documents sought go no further than the Cockerill J Order, and the Court ought to make the order sought because it is in effect compelling the Respondent (“LPS”) to comply with that which has been already ordered. Its secondary case is that to the extent that it goes beyond that which has been sought, it comes within CPR 31.16 or Norwich Pharmacal, and that the Court ought to make the orders sought.
The Cockerill J Order provided for disclosure of all documents held by the Respondent in respect of claims brought by three people in whose names claims for damages were brought in 2014. Their claims were that they were passengers in a motor vehicle and they had suffered minor personal injuries in a road traffic accident. The accident had occurred in June 2014. They used the services of an agency called Bancroft who referred their matter to LPS, a firm of solicitors. Within 4 months, their cases were settled one for the sum of £3,000 and costs and two for £3,150 each and costs.
The three persons named in the claims have confirmed in additional witness statements that the identification documents provided by LPS are not theirs. In those statements they say that they were not involved in the motor accident and did not receive the compensation. Zenith submits that there has been a fraud practised on it since it was represented fraudulently that these persons had suffered personal injuries and they had not, and that therefore the insurance claims were fraudulent. It does not know who imitated the identity of the three people.
III Background facts
The background to these applications is set out in the second witness statement of Elizabeth Fergus in support of this application, as well as her first witness statement in support of the application made to Cockerill J. Zenith is seeking to recover the damages and costs paid out in satisfaction of what it says has been fraudulent claims. Zenith suggests that it has potential claims in deceit against anyone who knowingly participated in a fraudulent claim for damages brought against it including any person who knowingly facilitated such a claim. The core questions for Zenith in seeking to construct its case is to establish who was responsible for defrauding it, how it was done and what was the state of mind of the various people involved in bringing and facilitating the claims against Zenith.
LPS does not accept that the statements of the three persons can be correct and believes that there must be a cover up on their part about their claims. As a result, in a statement of Mr Khan of 23 April 2020 at paragraphs 87 and following, LPS does not accept that the case of a fraudulent recovery of money hangs together and so it is said that Zenith has failed to establish a good arguable case. According to LPS, it is not credible that there were attendances on a doctor who confirmed that he had seen the passengers' identification evidence, and that the reports had been undertaken and then three years later, it is alleged to have been a fraud, without an explanation as to how the fraud was perpetrated. In my judgment, that does cast some doubt and raises questions to be answered. However, at this stage, I shall assume for the purpose of this application only that a good arguable case has been raised to the effect that a fraud was committed on Zenith in the making of the claims. Otherwise, this would involve finding that it was more likely than not that each of the additional statements of the three claimants comprised a series of lies to cover up the claims which they had made. I do not intend to conduct at this stage a mini-trial to seek to unravel what did occur. I also do not intend to preclude the arguability of a fraud being investigated by another court
There are a number of possible defendants in the claim of the tort of deceit. It includes the claims management company – Bancroft & Co Ltd (“Bancroft”). The three passenger claims are said to have been referred to LPS by Bancroft. Medical reports for the claim were provided or sourced by a company called Acquire Medicals Ltd (“Acquire Medicals”) which was controlled by the same individuals as controlled Bancroft, and so there is the possibility that they may have participated in any deceit. There is also the possibility that the three claimants themselves or any people who may have committed an identity fraud by using their identities were liable in deceit. Zenith puts the case at present in the terms “if these three passengers were indeed knowingly participating in fraudulent claims, actions in the tort of deceit would lie against them.”
As regards LPS, Zenith's skeleton argument at paragraph 12 is as follows: “If a court were convinced that the Respondent knowingly facilitated a fraud then the Respondent would be liable to the Applicant in the tort of deceit.” It is difficult to understand what this means since it begs the question as to whether fraud is alleged against LPS. The Court was told that in fact it was written in careful terms so as not to make the allegation of deceit. On that basis, there then must be added to it that there is not material from which the Applicant regards itself as able professionally to make an allegation of deceit against the Respondent. This is notwithstanding the Cockerill J Order and the documents produced pursuant to it.
As regards LPS, it is said that there is a possible claim in negligence against it. The thrust of an action in negligence is said to be its negligent failure to satisfy itself of the true identity of the claimants in whose name it brought a claim. It is said that it owed a duty of care to the Applicant to take basic steps to ensure that the persons for whom it acted were clients acting in good faith. It is conceded by Zenith that there is no directly analogous case to the instant one and the case would involve a “new factual matrix”. As a general rule, a solicitor acting for a party in adversarial litigation does not owe a duty of care to that party's opponent: see [1988] Q.B. 665. The case of White v Jones [1995] A.C. 207 was an exception to that principle where if there was no duty owed to a disappointed beneficiary in respect of a negligently drafted will, there would be no duty at all. Zenith relies upon a Scottish case of Frank Houlgate Investment Company v Biggart Baillie LLP [2014] CSIH 79 where a solicitor became aware, after the fraud, of a fraud perpetrated by a client but failed to take any action in order to warn the victim of a fraud, the counterparty to a transaction. The Inner House of the Court of Session held that the solicitors did – in those circumstances – owe a duty to the victim, relying in part upon the House of Lords analysis in Caparo v Dickman (see e.g. Frank Houlgate at para 81 per Lord Malcolm).
In my judgment, whilst not ruling out at this stage that a sustainable claim in negligence may be formulated against LPS (it is too early to say whether it would survive a strike out application since it has not yet been formulated), there are some serious obstacles to the same. The first is to be able to formulate an innovative claim and to depart from the general starting point that a solicitor does not generally owe a duty of care to the other party in adversarial litigation. The second is that there is no evidence in the instant case which has been put before the Court by Zenith to show that LPS was or may have been aware of a fraud in respect of the claims such as to bring the case close to the Frank Houlgate case. Thirdly, at this stage, there is no evidence as to the respects, if any, in which LPS fell below any standards reasonably expected of them in order to check the identity of their clients.
There is no other cause of action advanced by Zenith at this stage other than fraud or negligence, and so only those causes of action arise for the Court's consideration. The foregoing analysis leads to the conclusion that fraud will not be pursued without more because Zenith is of the view that there is no evidence currently available to it on which it feels able professionally to advance a claim of fraud against LPS. A claim has been formulated in negligence, but there are serious obstacles to such a claim.
IV Nature of the...
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