piBlawg

the personal injury and clinical negligence blog

A collaboration between Rebmark Legal Solutions and 1 Chancery Lane

Government Whiplash Reforms - On Hold?

The Law Society Gazette is reporting that the Justice Secretary is not intending to proceed with the personal injury reforms set out in last year’s Autumn Statement “at the moment”. We blogged on those proposals at the time here which, as a reminder, were that the small claims track limit should be raised to £5,000 and the removal of the right to general damages for minor soft tissue injuries. Apparently the MOJ has stressed that it is still committed to tackling the high cost of whiplash claims. The Gazette reports that fresh proposals are in the works and could be introduced by the end of the year. It seems the original proposals came very much from the Treasury rather than the MOJ so it will be interesting to see what the MOJ’s solution is. Hopefully they will find a formula which will satisfy everyone by effectively tackling fraud while maintaining access to justice. As ever, watch this space for updates.

Fighting fraud

Judgment in the case of Da Costa v Sargaco [2016] EWCA Civ 764 was handed down last week and represents the latest round of the struggle between claimants bringing claims for injury or damage arising out of road traffic accidents and defendant insurers alleging that claims are fraudulent. The case deals with the cogency of evidence required to establish an allegation of fraud, with the inferences which can be drawn from evidence and with the exclusion of a claimant from court whilst the other is giving evidence. The facts of the case conform to a familiar pattern: a claim for losses arising out of damage to mopeds brought by members of a certain community in London. The claimants’ case was that their parked mopeds were struck by a vehicle, the driver of which had apparently disappeared or at least had not participated in proceedings*. One of the claimants had had three other accidents despite having only arrived in the country in 2010. One of the claimant’s mopeds was involved in another accident etc… The judge ordered each claimant be excluded from court whilst the other gave evidence. She subsequently found that the claimants had not proved their case, she went further and made a finding of fraud and she found they had failed to establish their claim for damages. The judge’s decision was challenged on the ground that the case of Hussain v Hussain and Aviva [2012] EWCA Civ 1367 established “the parameters of appropriate inferences that can be drawn in a case where fraud is alleged, but there is no direct evidence connecting parties alleged to be in a fraudulent conspiracy.” Black L.J. found that “what inferences are appropriate depends entirely on the particular facts of the particular case” and dismissed this ground of appeal. The Court of Appeal was not willing to interfere with the judge’s finding that the claimant’s cases were not proven illustrating the mountain appellants have to climb to overturn a judgment on this basis. Black L.J. spelt out that a finding of fraud does not inevitably follow from a rejection of an accident claim as not proved. She went on to find that the judge did not make sufficient findings or provide sufficient reasoning to substantiate the fraud finding she made against the claimants – that finding was set aside. The judge’s decision was also challenged on the basis that one of the claimants had been excluded whilst the other gave evidence. The Court of Appeal held that there was not an absolute requirement that claimants had the opportunity to be present personally throughout the entirety of the hearing. It gave the example of a litigant who disrupts the hearing by unruly behaviour and may have to be excluded to allow progress to be made. The starting point is that claimants are entitled to be present throughout trial. Black L.J. said that she found it extremely difficult to contemplate there being any sufficient reason for taking excluding one claimant from hearing the evidence of the other in a case such as that of Da Costa. However she did not find that the claimant’s exclusion was automatically fatal to the whole trial. Both claimants were represented by the same counsel, no application was made at the end of cross examination to take instructions from the absent claimant and counsel for the claimant was unable to point to any part of the transcript where things would or might have been different had the claimant been in court during the second claimant’s evidence. The court therefore found that the trial had not been rendered unfair and therefore this ground of appeal failed. The normal incentive to seek a finding of fraud is that it leads into a finding of fundamental dishonesty and the disapplication of qualified one-way costs shifting. This case did not include a claim for personal injury and therefore QOCS did not apply. The defendant did not therefore need a finding of fraud to win or fundamental dishonesty to get its costs. Defendants may therefore want to discourage a judge from going further than he or she needs to in order to dismiss a case. Claimants will want to impress on a judge the requirement for “sufficient findings” and “sufficient reasoning to substantiate” any fraud finding. The cogency of the evidence required makes it difficult for defendants who harbour plenty of understandable suspicions but lack the hard evidence to get a finding of fraud or fundamental dishonesty. As to the finding about excluding claimants from hearing evidence of other claimants, the position is now clear in cases of this sort. What is not so clear is what stance a court can take about the exclusion of witnesses who are not claimants – that is a point which still needs to be argued.   *Black L.J. says that the driver was "untraced" but he was named as the First Defendant and one of the allegations was that he used the same address as the claimants. I assume therefore she was not using the word in its technical sense and meant that noone knew of his whereabouts. I am grateful to Steven Templeton for pointing out that it was not the case that Mr Sargaco was "untraced".

Claims of alleged fraud not exempt from Denton

“The court cannot ignore that insurers are professional litigants, who can properly be held responsible for any blatant disregard of their own commercial interests.” - Gentry v Miller & Anor [2016] EWCA Civ 141 at 34. Such was the warning sent to insurers by the Court of Appeal earlier this month in allowing a Claimant’s appeal against a decision to set aside default judgment in what the Defendant’s insurer alleged was a fraudulent claim. The Facts The Claimant, Mr Gentry, alleged that he was in a road traffic accident with a Mr Miller on 17th March 2013 in a claims notification form valuing the claim at under £10,000. On 2nd April 2013 Mr Miller’s insurer admitted liability. On 8th April the Claimant’s solicitors wrote requesting immediate payment of the pre-accident value of his car (being £16,000) and warning that until that was received he was hiring a replacement vehicle under a credit hire facility. Proceedings were issued against Mr Miller alone on 3rd July and on 8th August the Claimant obtained default judgement. At no point in this period did the insurer instruct solicitors and it replied to only one of seven letters. In late August the insurer made a voluntary interim payment of £14,000 and a Part 36 Offer of £1,870. A further interim payment of £2,000 was ordered in September and paid. At a disposal hearing on 17th October 2013, DJ Benson awarded the Claimant damages of £75,089 consisting mostly of hire charges. On receipt of notification of this award the insurer instructed solicitors who, on 25th November, issued an application referring to CPR 13.3 (1). On 10th February 2014 those same solicitors applied to come off the record for Mr Miller, to add the insurer as the second defendant and to set aside both the default judgment and the order of 17th October. For the first time they alleged that Mr Gentry and Mr Miller were well known to each other and that the claim was a fraud. The application to set aside was granted by DJ Henthorn on 17th March 2014 and on 4th February 2015 Mr Recorder Gregory (as he then was) dismissed the Claimant’s appeal. The decision of the Court of Appeal The Court of Appeal considered the applications under CPR 13.3 and 39.3. In relation to the former Vos LJ was satisfied that the Defendant had demonstrated that it had a real prospect of successfully defending the claim but had to consider under CPR 13.3 (2) whether the application was made promptly. The delay to the application of 25th November was inexcusable. In particular Vos LJ noted that the insurer: Failed to adduce any evidence of its postal systems to explain how documents might not have reached it; Must have been aware after admitting liability at the beginning of April 2013 that it was at risk if it did not defend or attempt to settle the claim; Did not instruct solicitors or investigate fraud in the seven months after that admission; Was repeatedly warned of hire charge risks so that the suggestion that it believed the claim to be small and therefore impliedly not worth investigating did not hold water; In ignoring those warnings allowed the claim to grow; While not notified of the default judgment of 8th August as promptly as it might have been, clearly knew that proceedings were on foot when it made a Part 36 offer on 22nd August; Must also have been aware of proceedings when it paid the interim payment ordered by the court; Upon receiving costs schedules on 19th and 23rd September sent “ahead of the upcoming application hearing”, made no enquiry as to what that hearing was about. The court’s analysis then continued by application of the Denton test. It was common ground that Mr Miller’s default in not filing an acknowledgment of service was serious or significant. The fact that it was not served with the proceedings gave the insurer some reasonable excuse or explanation but it could and should have protected itself when it knew proceedings were being issued by appointing solicitors to accept service on behalf of Mr Miller. Finally, looking to all of the circumstances and in particular factors a) and b) it was held that “insurers are in a particularly good position to conduct litigation efficiently and proportionately and to comply with rules and orders”. It cannot avail an insurer who knows the risk from the moment it admits liability to say it was not a party at the time. The application under CPR 39.3 to set aside the order of 17th October, despite the insurer having notice, (although not a copy), of that order since 25th October, was not made until 26th February 2014. It had not been made promptly and therefore, even if the insurer could show it had a good reason for not attending the trial and a reasonable prospect of success, the application could not be granted. Again, it would in any event probably have failed the third stage of the Denton test. Key Lessons There are two key lessons for insurers arising out of this decision. The first is the reminder at the start of this post that insurers will be treated as professional litigants capable of protecting their own interests. The second is that a credible allegation of fraud is not a trump card. When weighing the competing policy interests of the desirability of testing the allegation of fraud against the requirement that there be finality of litigation, the latter at least can outweigh the former. At some point the insurer must be left to bring its own action in relation to the fraud.