News Category 3
Expanding the Arsenal - Richard Paige, Park Square Barristers Chambers
18/05/15. On 12th February 2015 the Criminal Justice and Courts Act 2015 received Royal Assent. Buried in the midst of this legislation are five sections which address issues of significant importance and interest to personal injury lawyers – cases of fundamental dishonesty and inducements. No doubt of greatest interest to those at the coalface of personal injury fraud litigation is section 57, which this article addresses.
Personal injury claims: cases of fundamental dishonesty
Section 57 provides that:
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in a personal injury claim (‘the primary claim’);
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where it is found that the claimant is entitled to compensation for that claim; but
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on application by the defendant, it is found on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim;
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the court must dismiss the primary claim;
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unless the court is satisfied the claimant would suffer substantial injustice if the claim were dismissed.
This can be seen as a very significant evolution in the power of the courts to strike out genuine claims of dishonest claimants, a power which was confirmed by the Supreme Court in Summers v Fairclough Homes [2012] UKSC 26. Whereas in Summers it was held that it would only be in a very exceptional case that it would be just and proportionate for the court to strike out an action after trial, under the Act the new power must be exercised unless it would cause the claimant substantial injustice. The section expressly confirms that the genuine elements of the claim must be struck out.
There are a number of questions that the legislation raises: On what basis might a claimant be found to have been fundamentally dishonest? What amounts to ‘a related claim’? What might amount to ‘substantial injustice’ to the claimant if the claim is dismissed? All of these will require some judicial guidance.
Fundamentally dishonest
The concept of ‘fundamental dishonesty’ was introduced as a legal term in 2013 by CPR 44.16(1) at the same time as the other provisions relating to qualified one-way costs shifting. No doubt the meaning that was intended in s.57 is the same meaning that was intended within CPR 44.16(1). Already, a small body of case law has started to grow as to the meaning of ‘fundamentally dishonest’. In particular, in Gosling v Hailo (29/4/14) HHJ Moloney QC provided useful guidance, stating that the phrase should be interpreted purposively and contextually; that fundamental dishonesty could be distinguished from collateral dishonesty; and a relevant questions was whether the claimant, by reason of his dishonesty, had waived his right to the costs protection offered by QOCS.
Related claim
This writer anticipates that a ‘related claim’ is likely to include claims made by the claimant which do not form part of the primary claim (i.e. are not for personal injury), such as vehicle damage, recovery, storage and hire. It is also likely to include fraudulent claims by persons other than the claimant, but supported by the claimant, arising from the same accident, such as the claimant confirming the presence of a ‘bogus passenger’. Indeed, in the working paper “Tackling unjustified personal injury claims” published by the Government before the Act was passed it stated that a related claim included “for example where the claimant colludes in a fraudulent claim brought by another person in connection with the same incident or series of incidents in connection with which the primary claim is made.”
Substantial injustice
Although difficult to anticipate the variety of judicial views on this phrase an example might include cases where the claimant has suffered substantial genuine losses, but has then sought to exaggerate those losses further, as occurred in Summers. It is likely that judges will be called upon to carry out a balancing exercise – the lower the level of genuine damages and the greater the level of exaggeration, the less likely that the claimant will suffer ‘substantial’ injustice if the claim is dismissed.
Limited benefit
Whilst all this can only be seen as a significant weapon in the arsenal of insurance companies and their legal representatives, this silver lining does have a cloud. Section 57 also provides that when dismissing the claim the court must still assess the value of the genuine elements of the claim (i.e. the amount that the claimant would have received had he been honest) and deduct this figure from any amount of costs that the claimant is ordered to pay the defendant. The rationale behind this being that the claimant should not have to pay twice for his dishonesty.
The section also provides that the dismissal of the genuine parts of the claim must be taken into account in any subsequent criminal or contempt proceedings.
QOCS
In cases where QOCS applies the defendant will still be able to apply for the Court’s permission to enforce costs against a claimant whose claim is fundamentally dishonest (CPR 44.16(1)) and where fixed costs also apply this can be to the full extent of the costs incurred and not just fixed recoverable costs (CPR 46.29F(10)). However, it should be noted that the language of s.57 of the Act and CPR 44.16(1) is subtly different. Section 57 can apply where a related claim is fundamentally dishonest, but CPR 44.16(1) only applies when the Claimant’s claim is fundamentally dishonest. It is doubtful that many judges will allow this to act as a bar to ordering costs against a claimant which has been found to have supported a dishonest claim.
Commencement
Section 57 of the Act came into force on 13th April 2015 (The Criminal Justice and Courts Act 2015 (Commencement No. 1, Saving and Transitional Provisions) Order 2015). As a result, both claimants and defendants should be aware that for any claims issued after this date the provisions apply. Although a Defence would not have to plead reliance on s.57 of the Act, in suitable cases raising the issue at an early stage may encourage claimants to reassess their own claims or their support for the fraudulent claims of others.
The Future
In the coming months there will no doubt be an increasing number of cases where s.57 is pleaded in Defences. Towards the end of 2015 these cases are likely to come to trial and judicial opinion on ‘fundamental dishonesty’, ‘related claim’ and ‘substantial injustice’ will be come clearer. Other questions are also likely to arise. For example, how will the Courts deal with a claimant that pleads an exaggerated schedule at the outset but then revises that to an honest schedule after disclosure of surveillance or other damning evidence.
Resources
The Act can be found at:
www.legislation.gov.uk/ukpga/2015/2/contents/enacted
Summers v Fairclough Homes can be found at:
www.supremecourt.uk/decided-cases/docs/UKSC_2010_0212_Judgment.pdf
Gosling v Hailo can be found on Lawtel.
Richard Paige
Park Square Barristers Chambers
(www.psqb.co.uk), Leeds
Image cc flickr.com/photos/buggolo/2097137765/
Summary of Recent Cases, May 2015
16/05/15. Here is a summary of the recent notable court cases over the past month. You can also receive these for free by registering for our PI Brief Update newsletter. Just select "Free Newsletter" from the menu at the top of this page and fill in your email address..
Summary of Recent Cases - Substantive Law
Spencer v Hillingdon Hospital [2015] EWHC 1058 (QB)
The claimant had suffered deep vein thrombosis following a pulmonary embolism on each of his lungs. He alleged that the defendant hospital had been negligent in failing to advise him of the risk of contracting deep vein thrombosis and for failing to advise him of the signs and symptoms should that...
Image ©iStockphoto.com/spxChrome
Cooper v Royal Berkshire Hospital NHS Foundation Trust: Brain Injury From Post-Natal Seizure & Claimant’s Part 36 Offers - John De Bono QC, Serjeants’ Inn Chambers
14/05/15. On 13th March 2015 Jeremy Baker J. gave judgment for Christian Cooper, the claimant, in this complex brain injury case. The case is of interest to practitioners with cases where a mother has suffered a seizure or brain injury in the post-partum period.
The case is also an example of the benefits to a claimant of beating her own part 36 offer. The claimant had made a part 36 offer for 75% of the full value of the claim. The offer was beaten and the court ordered, by consent, that in addition to penalty interest at 10% above base rate on the claimant’s liability costs from 21 days after the offer was made the defendant should also pay the claimant the sum of £50,000 as the claimant had beaten her own part 36 offer. This was a trial of liability only and damages will be assessed at a future date.
Factual background
Christian Cooper was 36 years of old when she gave birth to her third child. Her first pregnancy had ended with a traumatic removal of the placenta after a vaginal birth. In her second pregnancy she had elected for caesarean delivery. In the index, third, pregnancy she had elected a trial of vaginal birth after caesarean section (VBAC). It was alleged that she had not been adequately advised of the risk of this (about a 1 in 250 risk of uterine rupture leading to significant risk to the baby) and would not have consented to VBAC with adequate antenatal advice.
On 14th July 2005 Christian was in labour when she suffered uterine rupture. She underwent emergency Caesarean section and suffered significant blood loss, later requiring a transfusion. Her baby, Gene, was profoundly injury by hypoxia and died just under two years later. His claim was compromised some time ago.
On 19th July 2005, five days post partum, Christian was found face down on the floor in her hospital side room. Her heart was not beating (asystole following cardiac arrest). After emergency treatment her heart started beating but she did not regain consciousness. Since then she has remained in a minimally responsive state. The claim was brought on her behalf by her former partner, claiming damages on Christian’s behalf for psla, care costs, lost earnings and the costs of replacing the care that Christian would have provided to her two surviving children.
The claimant’s case was that the cardiac arrest which had led to her massive brain injury was the result of a cerebral vein thrombosis (CVT). A CVT is a clot in the small veins in the brain which leads to an area of infarction (a lack of blood). This in turn had caused a focal seizure which propagated into a generalised seizure. As in epilepsy, a generalised seizure can cause a cardiac arrest. The claimant argued that the CVT was materially contributed to by the uterine rupture and by the admitted failure of the defendant to administer the heparin (for anti-coagulation) which had been prescribed post-partum.
The defendant accepted that the cardiac arrest was probably the result of a seizure but contended that given the rarity of CVT it was more probable that Christian’s seizure was a case of eclampsia. Eclampsia would not have been contributed to by either the uterine rupture or the failure to administer heparin.
At the start of the trial the parties agreed that the case would be determined by the court’s finding as to the cause of the seizure. If the claimant proved that she had suffered CVT she would win – given the admission that CVT would have been materially contributed to by a failure to give heparin (per Bailey v. MoD) there was no need to determine the additional issue of whether or not appropriate ante-natal advice had been given or whether had she been properly counselled the claimant would have avoided uterine rupture by opting for an elective caesarean section.
CVT v. eclampsia
Key to the claimant’s success was the evidence of Dr David Williams. Dr Williams is one of only five consultant obstetric physicians in the UK. An obstetric physician does not deliver babies but instead specialises in managing maternal complications of pregnancy including eclampsia and clotting disorders. He practices from University College Hospital, London and was described by the judge as being “an expert of the first calibre in his field.” I would strongly recommend him for any case involving a maternal, medical (rather than surgical) complication of pregnancy.
Dr Williams told the court that whilst CVT was extremely rare it was responsible for between 5 and 10 maternal deaths associated with pregnancy every three years. Its incidence has fallen as thromboprophylaxis has improved. CVT (along with the better known Deep Vein Thrombosis/ DVT) is precisely why mothers are given heparin post-partum. CVT is a condition associated with hypercoagulability of the blood. In Christian’s case it was contributed to by her immobility post Caesarean, by dehydration, vomiting, possibly infection and by the failure to provide heparin.
It was possible that Christian had suffered eclampsia but Dr Williams identified a number of significant reasons against this thesis. Eclampsia is poorly understood and by definition involves a seizure. It is commonly associated with pre-eclampsia which is a description of the mother’s condition either before, during or after labour (think Lady Sybil, Downton Abbey). Pre-eclampsia is associated with proteinurea and significant increases in blood pressure although eclampsia can occur without these features. Eclampsia is much more common than CVT but is very rare more than 24/48 hours after delivery.
The court rejected the opinion of the defendant’s obstetric expert, Dr Pirie, that Christian had probably suffered eclampsia. Dr Pirie had based his opinion on the greater prevalence of eclampsia compared to CVT without making allowance for the rarity of eclampsia at five days post-partum.
The Claimant’s case was assisted, as so often, by evidence from the late Dr Brian Kendall who gave evidence by video link. The undisputed expert of choice in neuroradiology for so many years, his passing at the beginning of this month will be a cause of great sadness to many who have had the privilege of working with him.
The claimant having won the case the defendant conceded her entitlement to an ‘additional payment’ under the post April 2013 amendments to CPR 36. The agreed amount was £50,000 on the basis that the claim was worth not less than £500,000. Under the rules an additional amount can be awarded on the basis of 10% of the first £500,000 and up to 5% of any amount above that figure subject to a maximum £75,000.
Since judgment was given in this case there has been a further amendment to CPR 36. The new 37.17(4)(d) provides that such an additional amount cannot be awarded until the case has been decided i.e. ‘all issues in the case have been determined, whether at one or more trials’. From 6th April 2015, beating a liability offer in a split trial still entitles the successful claimant to an additional amount but not until the end of the case.
John De Bono QC
Serjeants’ Inn Chambers
Instructed for the Claimant, by Susan Brown, Boyes Turner LLP
Image ©iStockphoto.com/STEFANOLUNARDI
Insurers’ Proposals for Further Reform to the PI Sector - Ian Miller, 1 Chancery Lane
09/05/15. The Association of British Insurers' website recently set out its top 10 insurance and savings priorities for the next parliamentary session. The most striking of these for personal injury lawyers is the proposal for “Modernising the civil justice system to get compensation to claimants rather than lawyers.” The ABI fleshes this out by suggesting increasing the small claims track limit for PI claims, considering a reduction in the current 3-year limitation period and using fixed legal fees to address the rise in industrial deafness claims and ensuring people suffering from asbestos related conditions get compensation quicker.
Another of the ABI proposals which would also affect the PI sector is a proposal for “Cracking down on the behaviour of Claims Management Companies” by requiring them to comply with a more robust regulatory regime and stopping nuisance calls and texts.
Some consider that pressure from the insurance industry played an important role in bringing about some of the reforms which occurred in the last parliament. The themes in the proposals are familiar and are not new. Indeed the last government consulted on some of these matters. However the ABI clearly wants to keep these issues on the agenda and it will be interesting to see what pressure is exerted in the next parliament for further reforms which could have far reaching consequences for PI lawyers and litigants.
The whole list can be viewed on the ABI Website
Ian Miller
1 Chancery Lane
Image ©iStockphoto.com/courtneyk
Can an Insurer Claw Back a Compensation Payment When It Finds New Evidence of Fraud Years Later? - Michael Mulcare, Mayo Wynne Baxter LLP
07/05/15. The Court of Appeal considered this point in March 2015 in the case of Hayward –v- Zurich Insurance Co plc (2015) following an earlier Judgment, which set aside a previous settlement in a personal injury claim. It rejected the insurer’s arguments and decided that the original settlement was binding.
Background to Appeal
The Claimant injured his back after an accident at work in 1998. He claimed that he suffered serious back pain, which restricted his mobility and ability to work. But the Defendant was suspicious at an early stage and obtained surveillance footage of the Claimant doing heavy work at home. Although he had suffered some injury, they argued that he had exaggerated his claim.
Liability was admitted, albeit with a degree of contributory negligence. Just before a quantum hearing in 2003, agreement was reached in full and final settlement of the claim just short of £135,000. The claim had been pleaded in the region of £420,000.
About two years later, the Claimant’s neighbours contacted the Defendant as they believed that the claim had been dishonest. Based on their observation of his conduct and activities, they provided witness statements stating that he had fully recovered from his injuries about a year before his claim settled and there was nothing wrong with him.
In 2009 – 10 years after the original accident – Zurich commenced proceedings for damages for deceit. They argued that the statements which the Claimant made about the extent of his injury in his particulars of claim and witness statements were fraudulent misrepresentations. In light of these arguments, the Court ruled that the Claimant had “dishonestly exaggerated the effects of his injury” and set aside the original settlement agreement. The Claimant was awarded damages reduced to £14,720 and ordered to repay the original settlement sum, less that amount.
Appeal
Although he did not challenge the finding of dishonesty against him, in December 2014 the Claimant appealed the decision regarding the revised settlement on the basis that it had been final and that Zurich were stuck with it.
Zurich sought to rescind the contract to settle the claim on the basis it could now show that the Claimant's factual statements of the case were false.
But, for a misstatement to be the basis of a claim to rescind a contract, Zurich had to have believed it to be true and been induced into settlement on that assumption. This was not the case here - they suspected fraud. In fact, they had positively asserted that statements in the particulars of claim and witness statements were dishonest. By entering into an agreement to settle the claim, they had implicitly agreed not to later set aside the settlement on the basis that these statements were false. Zurich’s’ decision to settle had been influenced by their fear that the Court might believe the Claimant’s misrepresentations - not their own belief in them.
The Court of Appeal decided that the original settlement was binding. Zurich had struck the settlement deal “with their eyes wide open”. They had the option to take the case to trial to disprove the statements but by settling it, had foregone that opportunity. They could not revive a claim just because better evidence came along later, regardless of how unattractive the result was of the Claimant retaining his “reward for dishonesty”. If that were the case, no settlement could ever be final.
Litigation Risks
The case underlines the wider principal at stake as to the finality of settlements. There were litigation risks at play and here the insurer decided to settle, rather than take the gamble of a trial, even though there was a risk that some of the Claimant’s statements may have been untrue.
Michael Mulcare
Associate
Mayo Wynne Baxter LLP
Image ©iStockphoto.com/BrianAJackson
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