Mr Ul-Haq and Mrs Parveen were involved in a genuine accident when the Defendant, Mrs Shah drove into the rear of their stationary car at traffic lights. They claimed for minor whiplash injuries. However, a whiplash claim was also brought by Mrs Khatoon (Mr Ul-Haq's mother) who fraudulently claimed to have been in the car at the time as well. Mrs Khatoon's claim was supported by both Mr Ul-Haq and Mrs Parveen. At first instance the Judge held that Mrs Khatoon had not been in the car at the time of the accident. In light of this the Defendant sought to have all three claims struck out, notwithstanding that two of them were genuine, on the grounds that there was clearly a fraud by Mr Ul-Haq and Mrs Parveen in supporting the dishonest claim of Mrs Khatoon, and further the Court had discretion to strike out a genuine claim under inherent case management powers under CPR 3.4(2) even at the end of the hearing. The Defendant failed at first instance and also subsequently on appeal before the Circuit Judge, before the Defendant appealed to the Court of Appeal.
Held: The Court of Appeal rejected the appeal. Lady Justice Smith said "it is well established that a claimant will not be deprived of damages to which he is entitled because he has fraudulently attempted to obtain more than his entitlement. Should the position be different where the claimant's attempted fraud consists of lying to support the claim of another person rather than lying to enhance the claimant's own claim? I can see no logical justification for suggesting that a claimant who lies about another person's claim should be treated more severely than the claimant who lies about his own claim."
Comment: Fraudulent claims are costing the insurance industry millions of pounds each year. In order to combat this, it has been trying to strike out fraudulent third party claims using the courts' inherent case management powers.
To some degree the industry may have been encouraged by a throwaway comment by Lord Justice Laws in the case of Molloy v Shell UK Ltd [2001], who said "For my part I entertain considerable qualms as to whether, faced with manipulation of the civil justice system on so grand a scale, the court should, once it knows the facts, entertain the case at all save to make the dishonest claimant pay the defendant's costs." There may also have been a merging in some peoples' minds of the concept used in first party insurance claims which are covered by the duty of utmost good faith between the parties. However the crucial difference, which must be remembered, is that in third party cases there is no such duty of utmost good faith as there is no contract between the third party and the insurers.
This case however was also different since Mrs Khatoon's claim was not an exaggerated one but a totally fraudulent one. The other two genuine claimants had not exaggerated their own claims, but had conspired to attempt to deceive the Defendant's insurers by supporting Mrs Khatoon's fraudulent claim.
The Court of Appeal has sought to kerb the practice which has been gathering steam to strike out genuine third party claims under case management powers, especially where the trial Judge had been able to deal with the proceedings fairly, thereby distinguishing the scenario in Arrow Nominees v Blackledge [2000].
The Court of Appeal acknowledged that "everyone knows that fraud is a scourge of our time", but said that the appropriate way to change the law to solve the problems for insurance companies in dealing with fraudulently exaggerated third party claims was a matter for Parliament, rather than judicial intervention.
The only good thing to arise from the case for insurers was that the two genuine Claimants were penalised in costs, since the matter would not have been taken to trial had they not sought to deceive the insurers and the Court. The fraudulent Claimant failed and had to pay costs in the usual way. It is not known whether the insurers sought to involve the police in relation to the criminal offences that were clearly committed by all three Claimants.
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