Hussain & Anor v Sarkar & Anor

The Court of Appeal allowed the insurers' appeal against the Recorder's refusal to give permission to amend their defence to plead that the collision had been staged. The court applied the Civil Procedure Rules' objective of doing justice and held that, on the material available to the insurers, there was a prima facie case based on circumstantial evidence sufficient to found an allegation of fraud. The Recorder had treated the application as a fishing expedition and failed to exercise the discretion properly in relation to the lateness of the proposed amendment. Because the refusal to allow the amendment materially constrained the insurer's ability to present its defence, the trial judgment was set aside and a retrial ordered.

Background and parties

The personal injury claims arose from a road collision on 10 September 2005. Two rear-seat passengers in a Mercedes (Mr Liaquat Hussain and Mr Sachin Shah) sued following a collision with a van driven by Mr Birenda Sarkar. The claimants initially sued the insurer, Brit Insurance Limited, later amending to name Mr Sarkar as first defendant and Brit as second defendant. Proceedings were before the Southampton County Court (Mr Recorder Gardner QC) and then on appeal to the Court of Appeal.

Nature of application and procedural posture

• The principal application concerned permission for the second defendant (Brit) to amend its defence shortly before trial to allege that the collision had been staged (fraud).
• That application was refused by the Recorder two days before trial. The trial proceeded and judgment was entered for the claimants. Brit appealed both the refusal to allow the amendment and the substantive awards of damages; the Court of Appeal concentrated on the amendment issue.

Issues framed

1. Whether, on the material then available to the insurer, there was a sufficient foundation to establish a prima facie case of fraud to permit amendment of the defence.
2. If a prima facie case existed, whether the lateness of the proposed amendment nevertheless justified refusal because the insurer should bear the risk of prejudice from delay.

Court's reasoning and subsidiary findings

The court observed that allegations of fraud may properly rest on circumstantial evidence and that a lack of an obvious single "hard fact" does not preclude a prima facie case. The Court of Appeal accepted that, following further disclosure and witness statements received after the case management conference, the insurers had reasonably credible material (connections between the parties, inconsistencies about employment and pay documentation, and unusual circumstantial aspects of the collision) that, cumulatively, amounted to a prima facie case. The court rejected the Recorder's characterisation of the insurers' case as a mere fishing expedition and found that the late application was not unjustified because much of the material had only recently become available to the insurers.

Result

The Recorder's decision was overturned, the trial judgment was set aside and a retrial ordered so that the insurers may put forward the pleaded fraud defence. The Court indicated that costs consequences should be reserved for the trial judge, observing that costs should follow the outcome of the retrial on the fraud issue.

Appeal allowed. The Recorder erred in concluding there were no sufficient grounds to permit an amendment to plead fraud. On the material available at the time of the application the insurers had reasonably credible material establishing a prima facie case based on circumstantial evidence, and the lateness of the application did not justify refusal. The trial judge's judgment was set aside and a retrial ordered; costs to be determined by the trial judge.

Appeal from Southampton County Court (Mr Recorder Gardner QC) arising from claims first issued against Brit Insurance Limited and amended to name Mr Sarkar; Court of Appeal decision reported at [2010] EWCA Civ 301 (Case Nos B3/2009/0318 & 0647).