UK: Fraudulent Claims: The Difference North And South Of The Border

Last Updated: 12 September 2018
Article by Kate Donachie and Lynn Livesey

All too commonly courts hear cases in which the claimant alleges, through exaggeration or lies, that they suffered severe injuries as a result of a harmless accident. But legislating to prevent dishonest claims such as these is fraught with difficulty because there is a risk that borderline, yet meritorious, cases will be discouraged from appearing in the courtrooms. The Scottish legal system has diverged from the English and Welsh system in trying to tackle the difficult issues presented by fraudulent claims. Two recent cases, one North and one South of the border put the consequences of those different approaches into sharp focus.

Fraud in personal injury claims can range from mild exaggeration to flat-out falsehood. The court has the difficult task of deciding where to draw the line. In England, the treatment of fraudulent cases is set out in statute, in Scotland the Courts are bound to interpret and apply the common law.

The position in England

In England and Wales, Section 57 of the Criminal Justice and Courts Act 2015 requires the court to dismiss, in its entirety, any claim in which the claimant is held to have acted with 'fundamental dishonesty'. The operation of this provision was seen in full effect in the case of Pinkus v Direct Line [2018] EWHC 1671 (QB), handed down in July 2018. In Pinkus, the claimant's presentation was found to be exaggerated and dishonest and although the judge found in favour of the claimant, to a limited extent, for pain, suffering and loss of amenity; the Judge dismissed the entire claim at the end of proceedings on the basis that the claimant had been 'fundamentally dishonest'.

In deciding what constituted fundamental dishonesty, the judge approved the Sinfield test, as set out in LOCOG v Sinfield [2018] EWHC 51 (QB) In terms of that test, fundamental dishonesty is established if the claimant's dishonesty "substantially affected the presentation of his case... in a way which potentially adversely affected the defendant in a significant way." In Sinfield the claimant had fabricated a claim for gardening costs. Other elements of his claim were accepted as genuine.

Pinkus made a considerable claim against the defender, largely in relation to loss of earnings. Pinkus tried to establish his claims through - in the opinion of the judge - massively exaggerated courtroom performances, dishonest testimony to doctors, and numerous lies in peripheral matters. Combining these factors, the judge held that Pinkus had been dishonest, and that the dishonesty was sufficiently serious to pass the Sinfield test so as to become 'fundamentally dishonest'. Consequently, the claim was struck out in full, the effect of which was to wipe out the validly established part of his claim, measured at £4,250.

The position in Scotland

In Grant Grubb v John Finlay [2018] CSIH 29 the claimant claimed to have suffered neck injuries when the defender reversed into the claimant's stationary car at 4mph. The Court accepted that the claimant had lied in a number of significant areas. Notwithstanding the claimant's widespread and frequent dishonesty, the court found - on the balance of probabilities - that the accident had caused the claimant pain, suffering and loss of amenity. To establish this, the court relied upon the limited areas of crossover in the medical reports that were provided as evidence.

Crucially, it was considered that, while the claimant had been dishonest about his personal life and psychiatric history to doctors, his testimony about his physical condition did at least accord with the doctors' professional opinion. On that basis, Lord Kinclaven, the judge at first instance, felt able to issue a small award to the claimant for pain, suffering and loss of amenity, but for no more beyond that.

Lord Kinclaven refused to dismiss the case on the basis of the claimant's dishonesty. The claim was appealed to the Inner House, the Scottish Court of Appeal, where it was confirmed that the claimant should be compensated for the genuine part of his claim.

The differences between the two jurisdictions

In Grubb the defenders sought to have the case dismissed during proceedings on the basis that the claimant had been fundamentally dishonest; they argued that the court should strike the case out in a manner akin to Section 57. The Inner House held that Grubb had made a "good, if exaggerated, claim" and that therefore dismissal along the lines of Section 57 could not be entertained; in other words; the claimant had not been fundamentally dishonest because he had a genuine claim which had been fraudulently exaggerated.

In Scotland, although what constitutes fundamental dishonesty remains "dependent upon the particular facts and circumstances" of the case, the Court seems to have been of the view that a claim can never be "fundamentally dishonest" if a modest but genuine claim has been significantly exaggerated. This can be contrasted with the position in England where s57(3) obliges the Court to dismiss all of the claim, even the parts in respect of which the claimant has not been dishonest.

In Grubb the Court was concerned about the injustice were the claimant to be deprived of damages to which he was entitled and were the defender to be relieved of the duty to pay those damages. The English legislation reflects a similar concern, whereby (s57(2)) the Court is not obliged to dismiss the claim if it is "satisfied that the claimant would suffer substantial injustice if the claim were dismissed." However standing the provision at s57(3), the mere fact that a genuine claim would be dismissed cannot be enough to justify a finding of injustice. Indeed this was the conclusion reached by the High Court in Sinfield where the original judge had refused to dismiss the case. He found that to do so would bring about substantial injustice because the claimant would lose some damages to which he was entitled. The High Court noted that the default position was that a claimant would lose some damages to which he was properly entitled and that therefore this fact alone could not satisfy the test for substantial injustice.

Although it should be noted that in Grubb, the Judge had reservations about the defender's arguments in relation to the claimant's dishonesty and did not agree that the claimant had been entirely dishonest, the Inner House decision does appear to disclose a view that any genuine element to a claim will preclude a finding of fundamental dishonesty. In that regard the Scottish approach differs significantly to that taken in England and Wales and it may well be that had Grubb's claim been raised in England, it would have been dismissed as a result of his dishonesty.

Costs and fraudulent representation

Though the Scottish court refused to make a finding akin to 'fundamental dishonesty' in Grubb, it nevertheless took account of the claimant's "significant lack of candour" when deciding who would be found liable for the costs of the action. Grubb was not awarded any costs and was instead found liable for two-thirds of the defender's costs.

At present in Scotland, if the claimant fails, he is liable for the defender's costs. With the aim of increasing access to justice, the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 will introduce a regime of 'qualified one-way cost shifting' (QOCS) for Scottish personal injury claims, meaning that (save for in certain limited circumstances) an unsuccessful claimant will not be liable for the defender's costs.

Notwithstanding the general rule, the claimant must "conduct the proceedings in an appropriate manner" - s8(1)(b). If it is found, on the balance of probabilities, that the claimant has made a "fraudulent representation or otherwise acts fraudulently in connection with the claim or proceedings" then the court retains the discretion to make the claimant liable for the defender's costs. Despite being suggested during scrutiny of the legislation, the words "fundamental dishonesty", do not appear in the Scottish legislation.

It remains to be seen how the 2018 Act will be interpreted and whether or not the Courts will require proof of fundamental dishonesty as described by the Inner House in Grubb before QOCS can be avoided.

Conclusions

Recent cases and the wording of the 2018 Act demonstrate that the treatment of potentially fraudulent claims in Scotland differs to that in England and Wales. The Scottish courts appear unwilling to dismiss fraudulent claims where there remains a genuine element at the core of the claim. Although the Scottish Courts have previously been willing to impose significant sanctions in costs on dishonest claimants; the system is about to change with the introduction of QOCS and we do not know how the fraud exception to QOCS will be applied. It is likely that we will see argument on this point in the future.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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