Civil courts get tougher on exaggerated claims

In a developing line of authority, the courts have widened the grounds for strike out of a statement of case under the doctrine of abuse of process.

Nield v Loveday

The precursor of a tougher line on personal injury fraud was seen in Nield v Loveday. Mr Loveday’s witness statement declared, among other falsehoods, that he had been unable to drive and so had gone on holiday to Lake Garda by air. He was found to have driven himself and his wife there and back and was imprisoned for nine months. She got six months suspended. However, in order to secure that result, insurers had to bring committal proceedings in what amounts effectively to a private prosecution, requiring proof to the criminal standard of “beyond reasonable doubt”.

Coming into possession of evidence of dishonesty, for example, a faked witness statement, or surveillance footage, presents a dilemma for insurers when defending personal injury actions on behalf of their policyholders. Already embroiled in one civil action, do they incur the additional cost and risk of committal proceedings?

Fairclough Homes Limited v Summers

Earlier this year the Supreme Court issued guidance in Fairclough Homes Limited v Summers. On the face of it, the judgment affirmed the established approach, distinguishing exaggerated claims from concocted ones, and the damages award by the trial judge for the honest elements of the claim was left undisturbed.

However, the court also affirmed its power to strike out a statement of case for dishonesty, as an abuse of process, even where the first instance court has awarded damages for the honest elements of the claim. Moreover, the application to strike out could be made to the trial judge, who could also, (in “special circumstances”), hear the contempt proceedings. However, strike out would always be “a last resort”. In paragraph 49 of the judgment, the court found it very difficult indeed to think of circumstances where striking out would be proportionate but they might include a case “where there had been a massive attempt to deceive the court but the award of damages would be very small”.

Fari v Homes for Haringey

In Fari v Homes for Haringey (10 October 2012 Central London County Court), HHJ Mitchell struck out the claim of a “tripper” claimant on the ground that surveillance evidence showed she had grossly exaggerated her symptoms. The judge found she had suffered a very minor injury worth no more than £1500, less than 0.5 per cent of the pleaded value of the case. The judge also awarded costs to the defendant, and gave permission for transfer of the action to the High Court to permit the defendant to pursue committal for contempt.

The Supreme Court in Summers had pondered the reluctance of the defendant to issue proceedings for contempt. However the majority of personal injury claims are brought in the county court, which has no jurisdiction to hear applications for committal for contempt.

Profoundly dishonest claimants are the exception, not the norm. Insurance claims managers would probably not identify dishonest individuals as a core cause of spiralling costs and premiums. Rather, they would point to the perception of indifference of the civil courts to all but the most egregious dishonesty as permitting low-level dishonesty to both flourish and be sponsored.

Yes, sponsored. Does anyone else have experience of an ATE insurer, presented with compelling evidence of the faking of evidence, complacently declaring that, if the court finds fraud, it would avoid cover?

Let there be no mistake – exaggeration of symptoms is attempted fraud. The concern of liability insurers is the cost–effective handling of claims, not policing public morals. Therein lies the explanation for their aversion to the private prosecution of individuals.

Ms Fari was granted 21 days for appeal, but Summers is a Supreme Court decision and here to stay. Exactly what amounts to “a massive attempt to deceive the court “, and “very small” claims, may require further exploration.

Statements of truth

Note the emphasis on deception of the court. A proper understanding of the significance of the statement of truth (as explained by CPR 32.14) is critical. Every statement of case, witness statement of fact, and expert report, is required to contain a statement of truth. The statement is addressed not to lawyers, nor to the opponents, but to the court.

A person who makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth, risks not only a period of enforced contemplation of CPR 32.14 at Her Majesty’s pleasure but, now also, the striking out of their claim in its entirety with adverse costs.

Paragraph 49 claimants, their advisers and ATE insurers will wish to take note.