I recently represented a claimant at trial in relation to a personal injury claim arising out of a road traffic accident.
The defendant indicated an intention to pursue a finding of fundamental dishonesty. There were certain aspects of the evidence that might have led to such a finding, but such an outcome was far from certain.
On the morning of the trial, I warned the claimant of the potential consequences of a finding of fundamental dishonesty. One of those consequences was the risk of imprisonment. The claimant seemed shocked. He told me that he had specifically asked his solicitor the previous day whether or not there was any risk of him going to prison. He was apparently told that there was no such risk as “this is a civil case and not a criminal one.”
If that is the advice that the claimant was given then it was plainly wrong. There are plenty of reported cases involving claimants who have received custodial sentences having been found to have pursued fundamentally dishonest claims.
In EUI Ltd v (1) Stephen Dodd (2) Adam Tyrrell (3) Mark Fitzpatrick [2018] 11 WLUK 267 that is exactly what happened to three such claimants. A note of the judgment is available on Lawtel.
The facts of the case are as follows:
The respondents (who were the claimants in the original action) were involved in a staged road traffic accident in June 2012. The accident was part of a larger fraud ring, facilitated by persons other than the respondents, which was uncovered after another individual made a confession in September 2014.
All three respondents were present at the scene of the staged accident and were aware that an attempt was being made to defraud the insurer.
Following the September 2014 confession, the insurer put its suspicions to the respondents. The respondents maintained that their claims were genuine. In a Reply to Defence, they threatened to seek indemnity costs on the basis of the applicant’s “baseless allegation.” The first and third respondents served witness statements supported by signed statements of truth.
Ultimately, having considered the evidence against them, the respondents abandoned their claims prior to trial. The respondents did not, therefore, give oral evidence.
The applicant insurer applied for committal for contempt of court. The judge at the committal hearing stated that the court took a serious view of fraudulent claims, the cost involved to the insurance industry, the effect of increased premiums for policyholders and the waste of court time and resources.
Set against that, the court took account of the fact that the respondents had sought to purge their contempt by not proceeding to trial, there was no evidence given on oath, the respondents had made early admissions in relation to the contempt proceeding and all were persons of previously good character.
Ultimately, the court took the view that custodial sentences were an important deterrent against fraudulent claims. The first and third respondents were sentenced to nine months’ imprisonment, reduced to six in view of mitigation. The second respondent was sentenced to six months’ imprisonment, reduced to four, the shorter sentence attributable to the fact that he had not signed a statement of truth.
The case is a further reminder of the serious view that the court quite rightly takes of fraudulent claims. It also serves as a reminder that any claimant who potentially faces an allegation of dishonesty should be warned of the possible consequences at the earliest opportunity. Such consequences might include:
(i) Loss of damages for any element of the claim found to be fundamentally dishonest;
(ii) Loss of damages for other elements of the claim, whether dishonest or not (s 57 Criminal Justice and Courts Act 2015)
(iii) Liability to pay their own costs and disbursements;
(iv) Liability to pay the defendant’s costs and disbursements on an assessed, rather than fixed costs, basis (CPR 45.29F(10));
(v) Liability to pay the defendant’s costs on the indemnity basis;
(vi) Loss of QOCS protection (CPR 44.16(1));
(vii) Committal proceedings for contempt, potentially resulting in a fine or custodial sentence;
(viii) Proceedings in the tort of deceit, with the possibility of an order for exemplary damages;
(ix) Entry onto the Insurance Fraud Register;
(x) Knock-on effect on employment, social standing etc.
Of course, many claims where fraud is alleged or hinted at are not actually fraudulent at all. Nonetheless, when it becomes clear that an element of fraud might be suspected, the relevant warning should be given as soon as possible. There are very few matters in personal injury litigation that are best dealt with for the first time on the morning of trial.
Zenith PI: PERSONAL INJURY LITIGATION IN PRACTICE 