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Fundamentally Dishonest Personal Injury Claims

About The Author

Georgia Mitchell (Writer)

Georgia is in her second year of Law at Newcastle University. She is currently pursuing a career as a commercial solicitor, and hopes to work abroad within the EU at some point in her future career. Outside of her studies, Georgia is an avid tennis fan.

The Government has recently introduced a new clause under the Criminal Justice and Courts Bill in an attempt to reduce the number of personal injury claims involving fundamental dishonesty. After much debate in the House of Lords, clause 49 (first introduced at clause 45) has now been agreed, although the bill itself remains in the committee stage. This action followed recent concern at the increase in the number of fraudulent and grossly exaggerated personal injury claims and the effect that this has on motor insurance premiums and the resources of local and public authorities and employers. The Government intends to take action to deter this dishonest behaviour and give a greater incentive to defendants and their insurers to investigate and challenge dubious claims for compensation.

Although precise levels of fraud are unknown, the Association of British Insurers recently published figures stating that 59,000 dishonest motor insurance claims were revealed in 2013, a significant increase of 34% compared to 2012, with an astonishing value of £811 million claimed.

Clause 49 of the Criminal Justice and Courts Act would require courts to dismiss claims in their entirety where the claimant had been ‘fundamentally dishonest’, unless this would cause substantial injustice. The Ministry of Justice said the change would ‘send a strong message to claimants that if they act in a fundamentally dishonest way, there is a greater probability that they will lose all compensation’.

The current law and Clause 45

The current law surrounding personal injury claims affords the court the power to completely strike out any claim where the claimant ‘grossly exaggerates’ the extent of his or her injury, which includes any award for a genuine injury. This was confirmed by the Supreme Court in the 2012 case of Summers v Fairclough Homes where the claimant was genuinely injured but considerably exaggerated the extent of his injury and attempted to claim £840k in damages. In judgment, Lord Clarke stated:

The court has power under the CPR [(the Civil Procedure Rules)] and under its inherent jurisdiction to strike out a statement of case at any stage of the proceedings, even when it has already determined that the claimant is in principle entitled to damages in an ascertained sum.

However, the court did also appreciate that the power should only be exercised when it is ‘just and proportionate to do so, which is likely to be only in very exceptional circumstances’. In Summers, the Supreme Court held the facts were not sufficiently exceptional to warrant a strike out and damages in the sum of £88k were awarded.

The judgment in this is fair when considering all of the surrounding circumstances. Although it was indisputably wrong for the claimant to dishonestly overstate his injuries, a complete strike out of the claim would have been too stringent. The claimant was still genuinely injured by sustaining a serious fracture to his heel at work and therefore should be compensated in some way.

However, unless fraudulent claims are struck out, dishonest claimants will not be deterred. With the courts only completely striking claims out in ‘very exceptional circumstances’, future claimants may not be effectively discouraged from claiming dishonestly. The Supreme Court considered that in most cases this could be sufficiently achieved by reaching a conclusion (based on the evidence and reasoning delivered) which is against the claimant by ensuring that the dishonesty does not increase the award of damages, and that orders can be made against the claimant for costs, reduced claimable interest, and, when circumstances dictate, bring proceedings for contempt of court.

Clause 45 states that in any personal injury claim where the claimant is found to be entitled to damages, but it is satisfied on the ‘balance of probabilities’ that the claimant has been fundamentally dishonest, the court must dismiss the claim entirely, unless it is satisfied that the claimant would suffer substantial injustice as a result. The wording will make it more likely for completely false or highly exaggerated claims to be dismissed in court. Insurers can draw some comfort from the proposal which has created a tougher line for litigants found to be in contempt of court.

Inducements to personal injury claims

One other issue surrounding personal injury claims are inducements coming from various law firms and other companies enticing claimants to claim for their sustained injury. Law firms have been known to encourage exaggerated or fraudulent personal injury claims by offering incentives to potential clients. There is evidence that numerous lawyers offer money or gifts to those who issue a claim regardless of its legal strength.

This inevitably encourages weak claims to be made which wastes time and money for the court and ironically, the claimant as well. The Government is also concerned about the impact such unnecessary claims may have on motor insurance premiums. Therefore, another suggestion to the current law on personal injury claims has been to ban solicitors and other legal service providers from presenting such inducements. Provisions in Part 3 of the Bill will define what is considered to be an inducement and require regulators to monitor and enforce the ban, as breaches of the ban will not be considered as a criminal offence.

This part of the clause does appear strict; law firms should be allowed to provide assistance to claimants once within the claims process.  Some firms give or lend electronic devices to claimants with intricate claims in order to keep in regular touch, keep a record of expenses, schedule medical appointments and other related activity.  It would surely be detrimental to some claimants if such practices were caught within a ban on inducements. Additionally, legitimate advances on anticipated damages where there is no dispute on liability and the claimant is unable to work and in financial need must similarly remain.

There are also potential issues around what might be considered ‘legitimate benefits’, but which are not advertised, such as discounted success fees and offering to fund disbursements, win or lose.  The Motor Accident Solicitors Society (MASS) are currently working with the Ministry of Justice on implementing a ‘workable ban’ on inducements and await with interest the publication of the detailed regulations.

Overall, the proposals are necessary in tackling the recent increase of litigation in claims that fundamentally involve lying and fraud. The modest narrowing of the existing discretion for judges is worthwhile for the discouragement the new provision will provide for those inclined or tempted to advance dishonest claims.

However, the limitation of discretion could have the potential to interfere with Article 1 Protocol 1 and Article 6 ECHR. Clause 49 could be incompatible with the right to peaceful enjoyment of possessions under Article 1 of Protocol 1 ECHR which includes the right that an individual should not to be deprived of property without compensation. The stricter approach from clause 49 would result in more claimants being awarded no compensation at all, even if they are still injured but simply overstated the extent of harm caused. The government accepts that the effect of the new rule will be to deprive the claimant of property, but it considers such deprivation to be ‘justified by the public policy in deterring fraudulent claims and therefore compatible with Article 1 Protocol 1’.

Furthermore, the proposed clause could interfere with the right to a fair trial under Article 6 ECHR. When the issue of Article 6 ECHR’s compatibility first arose, the government debated whether the standard of proof required in determining ‘fundamental dishonesty’ should be the civil or the criminal standard. The civil standard has been considered acceptable, as there is no quasi-criminal element to the proposal, which, in the government's view, ‘falls squarely on the civil side of the line’. Currently, if the claimant has proved to have been fundamentally dishonest on the ‘balance of probabilities’, the court will completely strike out the claim under clause 49. However, the Joint Select Committee has criticised this standard of proof and states:

In our view, the Bill's explicit recognition, in clause 49(7), of the need to avoid double punishment is strongly indicative of the quasi-criminal nature of the sanction imposed by the dismissal of the claim. The criminal standard of proof (beyond reasonable doubt), and not the civil standard (balance of probabilities), should therefore apply to the question of whether the claimant has been fundamentally dishonest and we recommend that the Bill be amended accordingly.

With the current standard of proof being on the ‘balance of probabilities’ the judge is awarded considerable discretion when deciding whether or not the claimant has been dishonest. A potential conflict with Article 6 could arise, as the lower standard of proof could, despite a claimant explaining their cause of action and other surrounding circumstances, result in a judge prematurely dismissing a claim by deciding that the claimant’s dishonesty is merely probable.

The Supreme Court's approach of only striking out claims in very exceptional circumstances does not provide a sufficiently strong disincentive to deter people from bringing grossly exaggerated and dishonest claims. The law should be strengthened, as proposed in clause 49, so that dismissal of grossly exaggerated or fraudulent claims becomes the default position in future cases. Moreover, the discretion provided under clause 49(2) not to dismiss the claim where this would cause substantial injustice to the claimant will hopefully ensure that the courts have the flexibility to apply the provisions fairly and proportionately in the particular circumstances of an individual case. Providing a mechanism that clearly provides for the guarantee of a fair trial demonstrates the importance of clause 49(2).

Conclusion

Although the principle behind clause 49 is essential, the proposal requires clarification and further amendment before being implemented. It must be questioned what it means to be ‘fundamentally dishonest’ and what the difference is between dishonesty and fundamental dishonesty. The clause could lead to an increase in satellite litigation, as there would be a plethora of disputes between lawyers over the meanings of such terms as ‘fundamental dishonesty’ and ‘substantial injustice’. There is also the potential for genuine claimants to underplay their injuries or fail to bring a case at all out of fear of being held dishonest by the courts. With clause 49 currently setting a more lenient standard of proof, giving the judge more discretion to dismiss claims if dishonesty is probable, bringing a claim forward may appear daunting for genuinely honest claimants, which would be an unintentional and unjust outcome from the clause.

Overall, however, the advantages of clause 49 undeniably outweigh the potential disadvantages. The deterrence of fraudulent claims is worth the risk of the deterrence of very few genuine claims. It will be clear to the judges when exercising their discretion whether a claimant deserves any type of compensation when considering the dramatic increase in fraudulent claims in recent years. It is essential to ensure such claims come to a stop to protect insurance companies and other vulnerable businesses. The clause serves a necessary purpose and should be welcomed by both claimants and defendants. In line with the spirit of the civil justice reforms, it protects the honest claimant by reducing the number of fraudulent or ‘fundamentally dishonest’ claims allowing genuine claimants to seek compensation through a more efficient civil justice system.

Further reading

Gov UK, Tackling unjustified personal injury claims

Nick Hilborne, Litigation Futures, New ‘fundamental dishonesty’ rule may act “as deterrent”

Gov UK, Dismissal of personal injury claims involving fundamental dishonesty

Fairclough Homes Limited v Summers [2012] UKSC 26

Sarah Milsted, UKSC Blog, Case comment: Fairclough Homes Limited v Summers [2012]

Nick Hilborne, Litigation Futures, Peers question new ‘fundamental dishonesty’ rule

Cilex Journal, Government bans PI ‘inducements’

Parliament Publications, Joint Select Committee, The Criminal Justice and Courts Bill

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Tagged: Justice, Personal Injury

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