Fraud - June 2010
A review of the Court of Appeal case of Hussain v Sarkar
Insurers will have been forgiven for feeling
slightly dishevelled given the recent Court of Appeal decisions in
the cases of Noble –v- Owens, in which it was said that evidence of
fraud had to be either admitted or incontrovertible so as to be
allowed on appeal, and Axa –v- Suleman, which followed the widely
publicised case of Ul Haq v Shah. These cases are all rather
unforgiving of Insurers attempting to, as is their right, defend
fraudulent claims in the best way that the law permits.
Amongst the rubble of these decisions however
some relief may be found by Insurers in the recent Court of Appeal
decision of Hussain & Anor –v- Sarkar and Anor.
This claim had all the tell tale signs of
fraud that Insurers have become so used to. Mr Sarkar had hired a
van for the day. Shortly afterwards the vehicle had been
involved in a collision with a car driven by Mr Hussain.
Suspicions on the part of the Defendant
Insurer, Brit, although unproveable at this stage were that; the
parties knew each other, that there was no reason for either party
to be at that specific location where the collision was said to
have occurred and that the First Claimants claim for what amounted
to £1800 a week for loss of income (a total of more than £90,000
per annum) was fraudulent.
As is often the case, at the stage of pleading
the Defence there was not sufficient evidence upon which Brit were
able to base a formal aversion of fraud against the parties.
As such the Claimants were put to proof without any firm evidence
of wrongdoing. Shortly prior to trial however, following the
exchange of witness evidence, having received responses to Part 18
requests, and carried out searches in respect of the Claimants
employer, Brit found themselves in a position where they were able
to make an application to amend the Defence.
The Recorder hearing the application from the
insurers said there was not sufficient evidence so as to materially
affect the case and to interfere with the trial date with the
application having been made at such a late stage, and having been
heard just 2 days prior to trial. Wishing to avoid “fishing
expeditions” that may “discourage legitimate Claimants” he
considered what “hard facts” as opposed to mere “suspicions” were
put before the Court. Accordingly the application was refused
and Brit were not permitted to raise at trial any assertion that
the collision may have been staged.
The trial proceeded some two days later, and,
while the Claimants credibility was put in question Counsel for
Brit was not permitted to suggest that the incident was
staged. The Judge found in favour of the Claimants awarding
Mr Hussain £33,204 and his passenger Claimant Mr Shah £3,155.
The grounds for appeal centred on the
recorders comments that there were “no hard facts” to support an
allegation of serious fraud. Brit asserted that the
application to amend the Defence was timely, on the basis that the
evidence they sought to adduce could not have been obtained any
earlier than it was. The witness evidence and Part 18
requests were accounted for within a Court order that was outside
the control of Brit, in addition renewed companies searches
revealed the company the first Claimant had alleged that he had
received payments of £1,800 per month from had in fact filed a
dormancy notice and was not in fact trading for the period.
On appeal it was stated that “the fundamental
objective of the Civil Procedure Rules…is to do justice” and the
Court referred to the comments of LJ Gibson in Cobbold v
London Borough of Greenwich to the effect that justice
ordinarily requires that issues which either party properly wishes
to be raised ought be heard. Two questions were
considered:-
1.On the material put forward (by Brit), was
there a substantial risk that it would suffer injustice…if it
should not be allowed to make the amendments? and;
2. If so, was it right that Brit should bear
that risk because of the lateness of the application?
LJ Toulson recites that the test should be
observed conscientiously by practitioners.
In this case the Lord Justice did not consider
that the expedition by Brit was simply fishing but that there were
“enough rum things for them to entertain a reasonable belief,
rather than a mere suspicion, that the accident was staged.”
On the basis the application was made once and
as soon as evidence became available to the Insurer that
provided them with a reasonable belief that the accident was
staged the Insurer could not be criticised for making its
application to put forward its formal case, in spite of the close
proximity of the case to trial . LJ Toulson sets out the position
more eloquently.
“The nature of a case built on circumstantial
evidence is that there will often be no simple hard fact
demonstrative of guilt; but in such cases the fact-finder is asked
to consider whether the assembly of facts points to the probability
of guilt. The fishing expedition metaphor much loved by
English lawyers, conjures up the picture of a person casting a hook
in the chance of catching something. Used in the present
content, it applies making an allegation for which there is
insufficient foundation in the hope of being able to strengthen it
through cross examination. I do not regard that as a fair
description of the insurer’s position, they submitted that on the
material which had emerged, there were enough rum things about the
claims to cause them to entertain a reasonable belief rather than
mere suspicion that the accident was staged”.
In short providing the Insurer can say that
they have acted diligently and pleaded a case in accordance with
evidence or information in which they have a reasonable belief, and
in a timely fashion, it is hoped that where such concerns are
sufficient they ought be permitted to plead them at trial.
Alex Rostron is a solicitor specialising in
Fraud at Weightmans’ Manchester office.