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Damian Ward

Damian Ward

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Gentry and Hayward - a tale of policy, procedure and pragmatism

AWARE27/10/2016
Fraud Aware 5

In 2016, two cases decided within four months of each other at the Court of Appeal and the Supreme Court, reached opposing conclusions in cases where fraud was the central pillar and delay was a feature. Damian Ward examines whether the Court of Appeal got it wrong and what this means for defendants who find themselves at procedural disadvantage in cases where fraud features.

In Gentry v Miller & UKI Limited [2016] EWCA Civ 141, Armstrongs acted for the claimant in a RTA claim, writing several letters to UKI following their admission of liability (and as credit hire charges continued to accrue). UKI investigated the quantum claim but did not respond to Armstrongs while their investigations were ongoing. The claimant, therefore, issued proceedings against Mr Miller alone, securing a default judgment and later proceeding to a disposal hearing where they obtained a judgment in excess of £75,000. UKI were unaware of these judgments, although the letters sent should have indicated that proceedings would be issued.

Armstrongs then progressed the claim to an assessment of damages hearing, securing judgment without the knowledge of UKI. By this time the insurer had paid the pre-accident value and chased Armstrongs for medical evidence. Faced with a request for payment of the judgment sums obtained against Mr Miller, UKI instructed Keoghs to challenge the judgment on quantum. During the course of investigations, it was discovered that the claimant and insured were friends prior to the accident, scotching Mr Gentry’s assertion that they only became friends later. This led to the conclusion that that the ‘accident’ was fiction and a fraud, with UKI applying to set aside the judgment.  Twice at first instance the court held that UKI were entitled to set aside the judgment of £75,098 for damages and £12,945 for costs (secured at the disposal hearing where only Armstrongs were present).  However, Mr Gentry appealed these decisions.

The Court of Appeal then held that, for applications to set aside judgment brought under CPR 13.3, the 3-stage test in Denton should apply. Led by Vos LJ, it stated that, as ‘professional litigants’, unexplained and unreasonable delay by an insurer is fatal to overcoming the promptness test set out in the second part of CPR 13.3.  This delay could either be seven months from the date of the admission of liability (where it was held that UKI must have known of the risk of proceedings but did not instruct solicitors), or two months from the point of instructing solicitors (where the application was delayed whilst investigations were concluded).

In this case there was little explanation for the delay, although the claimant knew that if proceedings were sent to Mr Miller alone, they would not be responded to, thus securing him a procedural advantage. Although the two month delay was not held to be fatal, falling as it did over the Christmas period, the seven month delay was.  The appeal was allowed and the judgment stood, despite the Court of Appeal accepting there was strong evidence of fraud.


Contrasting this decision, the Supreme Court in Hayward (Respondent) v Zurich Insurance Company plc (Appellant) was faced with a period of some 15 years, and yet concluded that fraud (and, by implication, not time) was central to the question of whether earlier agreements could be picked.

Hayward involved a work accident in 1998 in which Mr Hayward suffered injury and the employer, insured by Zurich, was liable. Despite considerable concern over the bona fide nature of Mr Hayward’s claim, Zurich agreed to compromise it with him in October 2003 to the sum of £174,973.11.

Two years later, Zurich were made aware that neighbours of Mr Hayward had expressed concern about the level of disability alleged, suggesting that he had fully recovered before the agreement with Zurich was reached.  It was not until February 2009 that Zurich commenced an action against Mr Hayward for damages in Deceit, which went to trial in November 2012 following an unsuccessful first instance appeal in 2011.

Zurich won and a retrial of quantum was ordered, taking place in September 2013, some ten years after the original compromise. This resulted in Mr Hayward being awarded significantly reduced damages of £14,720, a decision which was appealed by the claimant.  

The Court of Appeal upheld this appeal, not on the basis of delay, but rather on the grounds that Zurich had settled the case with knowledge that it was dishonest and were therefore bound by the original agreement. To overturn the appeal the insurer would have needed to illustrate that they were ‘induced’ into making payment by false representations and that such a deceit was unsuspected at the time of payment.  

Zurich then appealed to the Supreme Court who unanimously agreed to uphold Zurich’s appeal. Nowhere in the judgment of Their Lordships is there any criticism of the delay in investigating the case, acting on the tip-off, or bringing the Deceit action against Mr Hayward.  Indeed, the central pillar was to establish whether the ‘bad bargain’ made by Zurich in September 2003 could be unpicked, even ten years after it was made, on the basis that the agreement was founded on a fraud.  The Supreme Court held that it could.

How can these two decisions be reconciled?


Although the appeals relate to different issues, the central message about the effect of the delay on unpicking a judgment or agreement built on fraud could not be more different.  On the one hand the Supreme Court held that a timeline of 10 plus years is not the material factor in its decision and that fraud essentially unravels all.  On the other, the Court of Appeal in Gentry was overly influenced by the compliance of court process and rules, losing sight of the fact that UKI held new evidence of fraud which should have been enough to set aside the settlement.  

This is surely a policy decision which cannot be defended given the court then stayed the judgment it had upheld, allowing UKI to commence separate proceedings to establish the fraud in a Deceit action.  This is policy over logic and ironically disproportionate given that the Court of Appeal drove two sets of proceedings instead of allowing the issues to be resolved in one. The decision is particularly perplexing as the stay of the judgment and permission for the Deceit action was also granted by Vos LJ.

So where does this leave us?


Well, fraudsters who try to steal a march by giving insurers the barest details of a claim, issuing proceedings (especially in those non-injury cases which do not need to commence on the Portal) have been given the green light by the Court of Appeal to continue as before. Provided they can put enough clear blue water between some letters of claim and the final judgment in terms of timescale, the judgment will stand.  However, it is inevitable that the absurd and perverse policy decision in Gentry will be appealed and that we will return to a world where it is the truth of the matter, and not the speed with which it is conducted, which ultimately will out.

To conclude, there is a wonderful quote referred to by Lord Clarke in the leading judgment in Hayward, taken from the 19th century case of Betjemann v Betjemann [1895] 2 CH 474:  “What is the duty of a man to enquire?  To whom does he owe that duty?  Certainly not to the person who committed the concealed fraud”. If only the Court of Appeal had considered that in Gentry