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Clampdown by the Courts on claimants who fraudulently exaggerate the value of their claims

14 August 2012 #Dispute Resolution


Clarkslegal, specialist Dispute Resolution lawyers in London, Reading and throughout the Thames Valley.

A perennial problem faced by the Courts is the temptation by claimants to overstate the value of their claims.  The problem is particularly acute in personal injury claims with insurers often taking the brunt of the increased compensation awards which then filter down to consumers through higher insurance premiums.  However, the problem is not confined to personal injury cases.  Unscrupulous claimants often find ways of exaggerating losses in commercial cases.

An insurance company has now taken a case to the Supreme Court seeking an order that even though a claimant had a valid claim against their insurer, it should be struck out and the claimant awarded nothing because he had exaggerated the extent of his injuries and the amount of compensation he was due.

Facts

In May 2003, whilst working as a site supervisor for Fairclough Homes, a Mr Summers fell from a stacker truck, breaking his right hand and injuring his left heel. After undergoing several operations, he sued his employer in negligence and the employer admitted liability. The question then became how much compensation he should be awarded. At the trial, which was held several years later in January 2010,  Mr Summers made various false statements to the court about the nature of his injuries, including that he could not stand for more than 10-15 minutes at a time (as at October 2007) and that as at December 2008 he was still in constant pain and needed to use crutches and wear an ankle brace at all times. Mr Summers also stated that he had not worked since the accident and was unlikely to do so for the foreseeable future. In December 2008 Mr Summers claimed a loss of approximately £840,000, but by the time of the hearing he had reduced this claim to around £250,000.

Without Mr Summers knowing, however, Fairclough Homes’ insurers had in October 2007 begun to monitor his movements covertly. This surveillance, together with written extracts from Mr Summers’ wife’s diary and written medical evidence, revealed that Mr Summers had been grossly exaggerating the extent and consequences of his injuries. For example, he was filmed working without difficulty in October 2007, and his wife’s diary entries even record him playing football. On all the evidence, the judge was of the opinion that Mr Summers would have been fit to return to work by around June 2007, and that prior to that date he was not as incapable of activity nor as housebound as he had made out.

The judge concluded that Mr Summers had clearly lied and that there was sufficient evidence before him to sustain a claim of criminal fraud. Based on Mr Summers’ conduct, Fairclough Homes applied to the Supreme Court for his claim to be struck out in its entirety, meaning that Mr Summers would not even receive damages for the injuries and incapacity that he had genuinely suffered.

The Supreme Court held that under their wide case management powers, the courts do have the power to strike out claims in circumstances where a party has been found liable to a claimant, and that in this case, Mr Summers’ repeated falsifications clearly constituted an abuse of process. However, they also made it clear that the power of strike out is a draconian power that should only be used in very exceptional circumstances which were not satisfied in this particular instance. Were it to strike out Mr Summers’ claim he would be deprived of the damages for the real and substantial injuries he had suffered as a result of Fairclough Homes’ shortcomings and this would not be proportionate or just.

Additionally, the court noted that there are several other ways in which a court can penalise a dishonest claimant short of actually striking out his claim. These include viewing all evidence provided by him with scepticism, ensuring his dishonesty does not increase his damages award and ordering that he pay the costs incurred by the other side in defending the fraudulent aspects of his claim. A court may also reduce the level of interest awarded to the claimant.

Conclusion

This case was driven by the desire of Fairclough Homes’ insurers to persuade the highest court in the land that a fraudulent claim should be struck out, as this would serve as a useful deterrent to other potential fraudulent claimants. Although based on the facts of this particular case the claimant’s claim was not struck out, this does remain a real risk for fraudulent claimants, in addition to the risk of a criminal conviction.   Also, as confirmed in the current case, the court has a range of other, less severe options to penalise and deter fraudulent claims. Although Mr Summers was eventually awarded £88,716.76 in damages, the majority of that will go on repaying the money he fraudulently claimed on various state benefits and Fairclough Homes’ legal costs.

 

For further information about this or any other Dispute Resolution matter please contact Clarkslegal's dispute resolution team by email at disputeresolution@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Chris Tayton

Chris Tayton
Partner

E: ctayton@clarkslegal.com
T: 0118 960 4691
M: 07880 746 918

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