Fraud - December 2009
Widlake v BAA Ltd
The Court of Appeal decision in Widlake v
BAA Ltd (23.11.2009) has courted much comment and controversy in
recent weeks in relation to whether the judgement laid down is a
missed opportunity to have sent a strong and clear message that
deliberate exaggeration, and the pursuit of fraudulent claims, will
simply not be tolerated by the courts.
The facts
In July 2004 the claimant slipped on stairs at
Stansted Airport sustaining injury. Liability was never in issue.
Initially the Claimant contended that she had suffered permanent
and disabling damage to her back for the remainder of her working
life giving rise to a claim in special damages calculated in excess
of £160,000.00 although subsequently reduced, approximately 3 weeks
before trial, to £21,294.25 due in part to her own medical experts
reduction in the duration of her injury, having “discovered” the
Claimant had concealed a relevant pre-accident medical
condition.
The trial judge found that this case was an
attempt to manipulate the civil justice system, and to abuse the
court’s process, in a cynical and dishonest fashion to such an
extent that not withstanding she had beaten the payment into court,
and contrary to her recovering her costs as a result, she was
ordered to pay the costs of the Defendant.
On appeal by the Claimant
The Court of Appeal held that the trial Judge
was wrong to characterise the Claimant’s actions as an attempt to
manipulate the civil justice system on a grand scale and in doing
so had misdirected himself in finding that this case is “a rather
more serious case” than Molloy. The appeal was allowed.
The correct order in this instance should be no order as to
costs.
Key elements of the appeal
decision.
- The views of Laws L.J. in Molloy have been
doubted in Shah v Wassim Ul-Haq [2009] EWCA and henceforth
Molloy should be treated with considerable caution.
- The Claimant had been “successful” in
establishing a genuine claim, having suffered injury through the
admitted negligence of the Defendant.
- Her allegations of the extent of her injury
and subsequent loss were exaggerated and it was unreasonable
conduct (as defined by CPR 44.3(4)(a) and 44.3(5)(b)) on the part
of the Claimant to have pursued them.
- The causative effective of the Claimants
exaggeration had been incurrence of wasted costs as a result of
which the Claimant should recover nothing in respect of her reports
and anything arising from them. In contrast the Defendant should be
compensated for the wasted costs of having to consider those
reports and having to meet the case pleaded on the basis of the
reports.
- The Court considered that the Claimants lies
were short-lived as in reality, despite the case the Defendant
still had to meet and protect itself against pleaded in excess
£160,000 until 3 weeks before trial, the Defendant knew of the
pre-existing medical condition in January 2007 and was able to
protect itself by making a proper Part 36 offer then.
- Despite having beaten the payment in court
the Claimant had been guilty of gross exaggeration and her
misconduct (CPR 44.3(5)(d)) was sufficient to deviate from the
general rule and to deprive her of her costs by way of a punitive
sanction.
- Part 36 of the Civil Procedure Rules is the
“shield” by which a Defendant can protect themselves from instances
of exaggeration. As the Defendant had not made an effective part 36
offer in this instance there was no entitlement to their
costs.
Comment
While there is clear and appreciable reasoning
behind this decision it is understandable how certain of Lord
Justice Ward’s comments have given rise to discussion among
defendants, and particularly defence fraud lawyers, of whether or
not it is “right” that “lies told in litigation…..do not lead to a
penalty being imposed in respect of them” and that while defendants
may be “used to having to cope with false or exaggerated claims” it
should not detract from the clear message that intentional
exaggeration and outright fraud will not be tolerated at any
level.
At one extreme these comments may suggest the
courts are effectively condoning exaggerated and fraudulent claims
which would sit directly in conflict with legislation it is tasked
with implementing relating to actions for contempt, perverting the
course of justice and perjury.
An answer to the conundrum may be found within
the distinction drawn between this decision and established
authorities referred to of:
Molloy v Shell UK Ltd [2001]
EWCA,
Painting v University of Oxford
[2005] EWCA and
Shah v Wassim Ul-Haq [2009] EWCA,
namely the severity of the attempt at
dishonesty.
While Mr Molloy, in having been “spectacularly
dishonest” in claiming for lost earnings for a period of 3 years in
which he had been working and Mr Wassim Ul-Haq & Mrs
Parveen in supporting a phantom passenger claim, did warrant the
sanction of having to meet the Defendants costs, Mrs Widlake’s
(“obviously a person of reasonable intelligence”) conduct
describing her actions at having “deliberately concealed the
previous history of her back from Miss Porter and then from Mr
Macfarlane, in the hope of increasing the amount of compensation
which she would recover in respect of her injuries”, was only
sufficient to disallow her own entitlement to costs.
Is this a workable distinction upon which
whether or not a punitive sanction should be applied to reflect an
individual’s dishonesty can be based? I anticipate there will be
further litigation to more accurately define the degree to which
the court will tolerate dishonesty.
Dating as far back as the early principles of
equity, access to justice assumes a degree of honesty. The
requirement for an individual to come to court with “clean hands”
still holds true.
Taking that proposition into the present day
the natural conclusion must be that lies told in litigation should
not be tolerated and that if made deliberately to further a claim
or increase the level of compensation that may be awarded there
should be a clear and severe sanction in place to punish and deter
such dishonesty. Heed must of course be given to Smith L.J.’s
comments in her judgement in Shah v Wassim Ul-Haq
[2009] EWCA:
“Of course, not all exaggerated claims entail
dishonesty; sometimes exaggeration can be innocent, resulting from
a subconscious preoccupation, even obsession, with the injury.
Judges are always careful to take account of such effects when
assessing damages”
It has been said that disallowing the
Claimants entitlement costs, as in Widlake, does amount to such a
deterrent and punishment, but in reality does it? To have such an
effect it requires the Claimants own solicitor to take steps to
recover their costs from their client and in the present
environment with Claimant lawyers ever seeking to attract business
will they be prepared to risk attracting future business through
any negative publicity such a recovery may give rise to? Even
if a Claimant’s Solicitor would seek to recover their costs, as
they are entitled too in such circumstances, how far would they go?
Would they settle for extinguishing the Claimants damages award in
satisfaction of the debt or go further to seek a full recovery
utilising the armoury of sanctions available including
attachment of earnings, charging orders, warrants of execution,
delivery and possession and bankruptcy? I am aware that
numerous insurers and defence solicitors would do so in seeking a
full recovery of their outlay should the opportunity arise.
Only time will tell whether this decision does
have the punitive effect that was intended or whether in reality,
if unchallenged, it allows a dishonest Claimants to simply walk
away if unsuccessful in pursuing either an exaggerated or
fraudulent claim.
On a positive note the decision does again
emphasise the importance for Defendants to undertake the early
investigation of a claim and have in place defined and clear
procedures for detecting fraud and exaggeration in order to
determine the genuine element of risk and to act accordingly,
whether this is by way of repudiation in its entirety or though
part 36 in an attempt to settle the genuine claim.
Andrew Gillett is a partner in
Birmingham specialising in fraudulent casualty and property
claims.