PI Brief Update

Developments in Personal Injury Fraud Cases - Adam Gadd, Pump Court Chambers

05/12/11. This year has seen a number of decisions of the appellate courts regarding fraudulent, or allegedly fraudulent claims in personal injury cases. Typically, these have tended to arise around staged or  invented road traffic accidents but there have been decisions that do not quite fit that mould. 

This article will attempt to give a brief summary of those decisions.

The first case of note is Zurich Insurance Co plc v Hayward [2011] EWCA Civ 641. This was an action by the insurance company alleging that settlement of an earlier personal injury action had been obtained by fraud. That action had been struck out and the insurance company subsequently appealed. The original action had been compromised by way of consent order and a Tomlin order. The Judge at first instance struck out the claim on the basis that the consent order created an estoppel by res judicata and that the fraud issue, pleaded as an exaggerated claim, had been compromised.

The insurance company appealed the strike out decision. The Court of Appeal found that a consent order created an estoppel if the parties to the second action were the same as the parties to the first and the issues raised in the second action were necessarily compromised in the first action, Kinch v Walcott (1929) AC 482 PC (Bar) considered. Before an estoppel could arise, there had to be congruence between the allegation of fraud which was determined or compromised in the first action and the allegation of fraud made in the second action. Although in the instant case an allegation that a disability was being exaggerated for gain amounted to fraud and that allegation of fraud was similar to the allegation made in the second action, it was not the same allegation and it was not clear exactly what was compromised in the first action.

The Court of Appeal held that finality of litigation was desirable for many reasons but in the context of the instant case the principle was designed to protect a litigant from being vexed more than once by the same allegations. That consideration did not weigh heavily in the instant case. There was nothing apparently harassing about the insurer’s conduct in bringing the action. It appeared to be acting in response to fresh evidence of which it was previously unaware and could not with reasonable diligence have been expected to discover at the time of the first action. The public interest in the integrity of the administration of justice and the private interests of the insurer in seeking the investigation of the allegations of fraud far outweighed the public interest in the finality of litigation and the Defendant’s understandable wish to avoid a second action. The insurer’s appeal was therefore allowed.

In the case of Singh & Ors V (1) Habib (2) AIG [2011] EWCA Civ 599, the Court of Appeal allowed an appeal against the trial Judge’s decision not to admit fresh evidence of fraud after trial. The court found that CPR r.52.11(2) gave the court a wide discretion as to when it would admit fresh evidence, but Ladd v Marshall continued to influence the way in which the courts should proceed. The court would be particularly acute to consider questions of admitting fresh evidence when the public interest in the prevention, so far as possible, of fraudulent road traffic claims came before it. In the instant case it was in the public interest to admit the evidence. Modest additional evidence indicating that the result might have been wrong was admissible and persuasive and in the particular context, the case would be reinvestigated in a new trial.

Guidance on the case management of fraud issues in personal injury cases was given in the case of Locke (1) Stuart (2) v Axa Corporate Solutions Services Ltd [2011] EWHC 399 (QB). The instant case involved an allegation that there had been a conspiracy to claim compensation following staged road traffic accidents. The case of the second defendant insurer was that the accident had been staged. It sought to adduce evidence showing the common features in this and eight other accidents. The guidance given was as follows; First, it should be possible to prepare a document which accurately and fairly summarised the evidence so far as the primary facts were concerned. It could identify, in the manner of a Scott schedule, which primary facts were in dispute, so that the necessary material could be adduced to deal with that. It might also identify which inferences were agreed and which were not. Further, a document could be devised which set out in a short form how entries on Facebook were created and what inferences might safely be drawn from them; that document could be used in any case where this class of evidence was adduced. Moreover, insurers making allegations of this kind had to do so with care. Their legal advisers had obligations which required them to advance such allegations only on proper grounds. It would be inappropriate for trial bundles to contain the names and personal details of people with the suggestion that they had been guilty of fraud unless there were proper grounds evidentially for that assertion.

Given the increasing amount of cases in which fraud is alleged, it is likely that the appellate courts will be busy dealing with further cases in the near future. Practitioners may be well advised to watch out for developments.

Adam Gadd

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