Fraud: keeping it in the family?

UK Supreme Court final

Members of the same family colluding in the presentation and pursuit of speculative and/or fraudulent personal injury claims is, regrettably, hardly an uncommon circumstance. This week, however, the Supreme Court is examining the impact of fraud by one spouse on another.

The so-called ‘phantom passenger’ claim Shah v Ul Haq is a typical example of this sort of collusion. In another, Shaun Summers chose to have his wife drive him to a medico-legal appointment in order to further his fraudulent claim against Fairclough Homes. That came undone because of compelling surveillance evidence and his claim ultimately ended up in the Supreme Court in 2012.

The law was strengthened, post-Summers, by section 57 of the Criminal Justice and Courts Act 2015. It compels judges to dismiss – meaning to make no award whatsoever for any head of loss – personal injury claims which are found to be “fundamentally dishonest”. Dismissal under the section also applies to “related claims”. Thus, not only does the phantom passenger get nothing, but in addition the member of the family who colluded in the phantom claim will see his or her own claim – “the primary claim” – completely thrown out. [A “related claim” is defined in s57 as “made in connection with the same incident … and by a person other than the person who made the primary claim.”]

Less frequent, perhaps, would be members of a family attempting to defraud each other in making personal injury claims. In financial provision claims in family law, however, attempts to conceal assets and issues from a separating spouse are probably far more common. On 8 – 10 June 2015, in Sharland v Sharland, the Supreme Court is considering fraud in precisely this context.

After a hearing, Mrs Sharland agreed a settlement for financial provision in her favour. She subsequently discovered that her husband had, contrary to his evidence in court, been arranging a substantial and successful IPO of his company. She sought to re-open her financial settlement, arguing that it had been reached on the basis of fraudulent non-disclosure (of the proposed IPO). The Supreme Court summarised the three key questions in the case as follows:

1. What is the impact of fraud on:-

  • an agreement to compromise ancillary relief proceedings; and/or
  • a consent order made following such agreement?
  • Is it different from, or the same as, it would be in other civil proceedings?

2. In proceedings for ancillary relief, does fraud give rise to separate remedies to those available in other instances of non-disclosure?

3. Where either fraud and/or material non-disclosure is established, does the refusal by the court to rescind the order (and so reinstate the trial process) wrongly derogate from the victim’s right to a fair trial?

 

The reference at 1(iii) to “other civil proceedings” is both noteworthy and topical. In March 2015, in Zurich Insurance v Hayward, the Court of Appeal refused to allow the insurer to re-open a settlement of an injury claim. The settlement had been made following an allegation of fraud. The claimant was subsequently ‘grassed up’ by the evidence of his neighbours, who told the insurer that the claimant’s recovery was a great deal quicker than even the insurer might have suspected. Adopting a contractual analysis, Underhill LJ did not allow the settlement to be re-opened. He concluded, however, that:

“The result is unattractive because it means that the Appellant retains the benefit of a settlement far in excess of the value of his actual loss, though I dare say somewhat reduced by the incidence of costs in these protracted proceedings. But there is a wider principle at stake, that parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later.”

Mrs Sharland’s eyes, it would seem, were not “wide open” in reaching the settlement of her claim. It will be interesting to see (i) to what extent the eventual decision of the Supreme Court in one area of the law, in Sharland, might affect claims in other areas, such as Hayward and (ii) whether Hayward itself is taken to the Supreme Court.


About the Author

akAlistair Kinley is BLM’s Director of Policy & Government Affairs.

Alistair is responsible for BLM’s engagement with government departments and regulators on policy and public affairs issues and consultations affecting the firm and its customers. He coordinated BLM’s market-facing activities in connection with the Insurance Act 2015 and the consultations which preceded its publication and introduction in Parliament.

He is a member of the Civil Justice Council (CJC), a regular speaker and experienced commentator on legal and procedural reforms and was a contributing editor to the Law Society’s Litigation Funding Handbook (September 2014).

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