Keoghs Insight

Author

Christian Carr

Fairclough Homes Ltd v Summers

AWARE19/10/2012
Disease Aware Issue 1

Background

S was injured sustaining serious fractures. S’s schedule valued the claim at over £800,000. FHL disclosed surveillance evidence showing S had grossly exaggerated his disability and incapacity for work. S served further schedules reducing his valuation to £250,000. FHL argued that S’s claim should be struck out as dishonestly exaggerated, constituting an abuse of process.

The judge found there had been serious injury and a period of incapacity, but also S had deliberately lied about the extent of these. He made awards for the genuine elements at just over 10% of S’s original schedule. Two Court of Appeal (CoA) judgments from 2009, (Ul-Haq v Shah, and Widlake v BAA) applied. Both bound the trial court and CoA to conclude they could not strike out S’s case. FHL appealed.

Judgment

The court first considered whether, where a party has established liability and loss, courts have the power to strike out the entire claim as an abuse of process. It then considered the question of how to exercise that power. It found courts do have such power. It could only be exercised so as to decide cases, “justly,” and proportionately. To make a false claim and submit fraudulent evidence is an abuse and can be so serious that a party forfeits the right to have his claim determined. The power should be used extremely rarely however, where there was a, “massive,” attempt to deceive the court, “but the award of damages would be very small.”

FHL argued that the only way to deter dishonest exaggeration was to have such claims struck out. The court disagreed and recommended more conventional means for insurers to protect their interests (outlined later). S committed a serious abuse in making false statements of truth, but he did in fact suffer significant injury as a result of FHL’s negligence, so it was not proportionate or just to strike the entire claim out. The appeal was dismissed.

Comment

Insurers will be disappointed - particularly those who have been trying for years to use the law on strike out for abuse as an established means of combatting exaggeration. There is little new for defendants in the Court's guidance but the use of other procedural measures has now been endorsed at the highest judicial level. What can be gained from the decision?

  • There is value in certainty, even if it results in advising against the merits of applications to strike out claims. The Supreme Court has clearly signalled that save in truly extreme circumstances, where there is an underlying genuine claim, courts will not strike cases out for dishonest exaggeration.

The court described the strike out power as, “Draconian,” and, “always a last resort.”

Claimants will argue that any alternative means of dealing with exaggeration must be taken in preference to striking out. The court only refrained from saying the power should never be exercised because of the undesirability of binding courts in future in unforeseen circumstances. Applications on facts similar to but more extreme even than S’s may therefore fail. Significant extra or distinguishing features are likely to be required.

  • The intelligent use of Calderbank offers was encouraged. The Calderbank can say that any offer is for those aspects of the claim considered genuine and costs of dealing with the other aspects should be paid by the claimant. This is preferable to Part 36 offers as Part 36.10 does not accommodate such distinctions.

Other steps were expressly endorsed by Summers:

  • Inviting adverse inferences to be drawn by judges against dishonest parties both on their liability and quantum evidence
  • Requesting indemnity costs
  • Requesting reductions in interest
  • Proceedings for contempt of court (applications for which the trial judge should hear), and;
  • Criminal proceedings

Instead of looking to achieve deterrence through the threat of strike out, insurers should take advantage of the Court’s explicit endorsement of several other more conventional means of protecting and advancing their interests.

The court’s philosophy on the power to strike out for abuse is fairly summed up in its own words: “[it] is not a power to punish but to protect the court’s process.” The court dedicated considerable time to two particular suggestions: the Calderbank offers, and contempt proceedings. Insurers may find judges more open to their arguments on these. They are now insurers’ best options to deter exaggeration.