When Allegations of Fraud are not Enough

PI_Nicola_PhilipsonBy Nicola Phillipson

Gentry v Miller [2016] EWCA Civ 142

By Nicola Phillipson

A default judgment will not be set aside as a matter of course just because arguable fraud is alleged.

In March 2013 the Claimant reported that he had been in a road traffic accident and sought damages including PI and credit hire. Liability was admitted under the portal on 2nd April 2013 and stage 1 costs paid, but this was not followed by a substantive settlement offer.

Proceedings were issued directly upon the Defendant driver (who was subsequently also accused of being involved in the fraud), and the disposal hearing on 17th October 2013, at which the Claimant was awarded £75,089 in damages and £12,945 in costs, took place unopposed.

Upon being advised of the sums awarded, the insurers instructed solicitors, and on 25th November 2013, issued an application to set aside judgment.  A further application was issued on 10th February 2014 in which, for the first time, fraud was alleged.

At first instance the judgment was set aside, on the basis that claims of alleged fraud were outside the Mitchell regime (Denton not yet having been decided).  The circuit judge upheld the decision as being “within the generous ambit of [the DJ’s] discretion”.  The Claimant appealed to the Court of Appeal.

At the Court of Appeal, both sides accepted that the DJ had been wrong to find that allegations of fraud provided an exemption from Denton, and the Court of Appeal agreed – Denton does apply.

It was accepted that the insurer had adduced evidence to show that it had a real prospect of sucessfully defending the claimn on the basis of fraud, but the delay by the insurer in instructing solicitors and making the application – it was found to have “delayed inexcusably”, was such that the application should have been refused.

Comment

There was clear, significant, and unexplained delay in this case, and it should also be noted that liability was admitted, and interim payments had been made. The Claimant could also point to correspondence to show that the insurer was at least aware that proceedings were about to be issued.  However, this judgment is also a reminder to parties and lower courts that delay will not be tolerated, and the courts must be robust in ensuring that parties act with promptuitude, even in circumstances where there is a real possibility that a sum in excess of £75,000 was obtained fraudulently.

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