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CAN EXEMPLARY DAMAGES BE SEEN AS A TOOL
TO COMBAT SMALL CLAIMS FRAUD?
The changes in the field of personal injury litigation over the past seven years have succeeded in drastically reducing the number of cases brought to trial. The perceived advantages of speedy resolution and cost reduction have seemingly encouraged the increasing practice of the advancement of fraudulent claims. These claims are often for modest sums for minor injuries which may not receive the investigation necessary to expose them as false.
When identified, the insurer concerned understandably wishes to do all possible to punish the cheat and deter similar behaviour. Police action is encouraged but in most cases is not forthcoming. Once proceedings have been commenced the Court may be able to take action pursuant to Rule 32.1 of the Civil Procedure Rules should a false statement have been advanced in a pleading or witness statement. No such steps can be taken before a claim is formally brought.
On 8th November 2005 in the Altrincham County Court a District Judge was asked to assess damages in a claim brought by insurers against three Defendants who had asserted that they had been passengers in a car driven by a woman and had suffered whiplash injuries in a collision. Previous findings in the case made by another Judge had concluded that the woman was alone in the car at the time of the accident. The claim was brought in the tort of deceit and exemplary damages were sought.
The District Judge asked how much each Defendant hoped to recover for his injuries and was told that the bracket for the damages they were seeking was £2,000 to £2,500. He awarded £2,250 in each case as exemplary damages. In doing so he said "There are a number of claims such as this going through the courts and it is necessary to teach wrongdoers that dishonesty does not pay and that they should not do it." His was a robust approach full of common sense and many would have thought that it met the justice of the case. Costs of £3,000 per Defendant were awarded in addition, one imagines on an indemnity basis.
Reports of the case such as they are make no mention of recitation of authority. Had the case law been drawn to his attention would the Learned Judge have made the same Order? In my belief it is at the very least doubtful.
Rookes -v- Barnard (1964) 1 All England Reports at page 367 established that exemplary damages could be awarded in claims for damages but in three restricted categories. The action was brought in the common law tort of intimidation and concerned some very unpleasant bullying of Mr. Rookes by three members of a Trade Union in an effort to get him sacked because he had resigned from that Union. A closed shop agreement had been entered into between the Union and the employer BOAC.
The jury awarded exemplary damages of £7,500 (£110,00 in today's money). The House of Lords through Lord Devlin reviewed this area of the law of damages and concluded that English law did recognise an award of exemplary damages namely damages whose object was to punish or deter and which were distinct from aggravated damages (where the motives and conduct of the Defendant aggravating the injury to the Plaintiff could be taken into account when assessing compensatory damages). There were three categories of cases in which an award of exemplary damages could serve a useful purpose namely in the case of oppressive arbitrary or unconstitutional action by the servants of the Government and secondly in the case where the Defendant's conduct had been calculated by him to make a profit for himself which might well exceed the compensation payable to the Plaintiff. The third category is that authorised by statute.
Mr. Rookes lost his £7,500 and the case was remitted on the issue of aggravated damages to the court of first instance. Aggravated damages as noted above do not have the character of punishment which is the hallmark of exemplary awards.
In Broome -v- Cassell (1972) 1 All England Reports at page 801 the celebrated libel action concerning the actions of Captain Broome as commander of the escort to convoy P.Q. 17 in 1942 the House of Lords upheld Rookes -v- Barnard and the award of £25,000 (now over £270,000) made in Broome against the author David Irving.
The state of the law entered a hiatus when the scope of Rookes -v- Barnard was considered by the Court of Appeal in A.B. -v- South West Water Services (1993) 1 All England Reports at page 609. In Kuddus -v- The Chief Constable of Leicestershire (2001) 3 All England Reports at page 193 the House of Lords overruled the decision in A.B. and affirmed Rookes -v- Barnard. In the course of so doing Lord Scott of Foscote gave vent to his personal view that exemplary damages are an anomaly in English law. At paragraph 121 of his speech these words appear:-
"My Lords I view the prospect of any increase in cases in which exemplary damages can be claimed with regret. I have explained already why I regard the remedy as no longer serving any useful function in our jurisprudence. Victims of tortious conduct should receive due compensation for their injuries, not windfalls at public expense. "
He was of course dealing with a case in the first of Lord Devlin's categories.
Should the Order of the District Judge have been as he made it? Could it fall within the Rookes -v- Barnard categories? Plainly categories 1 and 3 do not apply and category 2 surely cannot be engaged. The losses suffered by the insurers were met by an indemnity costs order enabling them to recover their costs in investigating and meeting the fraudulent claims. He might have taken action against the Defendants for contempt of court pursuant to his inherent powers and to rule 32.14 of the CPR. Silber J. imprisoned a man named Hughes for 14 days to punish him for advancing a claim of the order of £10,000 for injuries allegedly sustained when he tripped on a pothole for which a local authority was responsible. Video footage showed him playing football on the day of the injury and after it was said to have occurred and if injury there had been it was shown to have been suffered during the match. Two of his friends who supported him in his account were also dealt with by the Judge.
The American courts believe that a social purpose is advanced by allowing juries to punish as well as to compensate. Such a view does not prevail in this jurisdiction but it would be a foolish commentator who might suggest that this Government would baulk at a further consideration of the third category. The Law Commission reported on aggravated exemplary and restitutionary damages (Law Com. No. 247) in 1997. They did not recommend an extension of Rookes -v- Barnard. The Government's view in 1999 was that it would be right to defer a decision on further legislation in this area in the hope that further judicial development of the law might help clarify issues. There are no present indications that the senior judiciary would support an extension of the current restricted scope for exemplary damage awards. While no-one would be quick to criticise the District Judge's Order as lacking common sense or justice it will be unlikely to survive an appeal should one be made.
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