Aside from the rule in insurance law under which an insured cannot recover in respect of any part of a claim in a case where the claim has been fraudulently exaggerated or where a genuine claim has been supported by dishonest devices, the general rule of law is that a person cannot be deprived of a judgment for damages to which he is otherwise entitled on the ground of abuse of process.  The Supreme Court has, however, made a decision contrary to this principle, citing that the court has power under the CPR and under its inherent jurisdiction to strike out a statement of case at any stage of the proceedings, provided that it is "just and proportionate" to do so. 

Background

The claimant, Mr Summers, was accidentally injured whilst working for the defendant, Fairclough Homes Limited.  Mr Summers claimed damages of £838,000 from his employer.  In 2010 the claim was found by Manchester County Court to be grossly exaggerated; £88,716 was awarded for the genuine part of Mr Summers' claim.  

The defendant appealed the claim to the Court of Appeal, seeking to strike out the claim in its entirety, citing an abuse of process under the CPR and/or the court's inherent jurisdiction.  The defendant's liability insurers, Zurich, were the driving force behind the appeal, stressing the prevalence of fraudulent claims of this kind, which ought to be struck out as an abuse of process.  The Court of Appeal dismissed the appeal and refused permission to appeal the decision to the Supreme Court.  Permission to appeal was later obtained from the Supreme Court. 

Supreme Court's Decision

The issue to be decided by the Supreme Court was whether a civil court has the power to strike out a statement of case as an abuse of process after a trial at which the court has held that the defendant is liable in damages to the claimant for an ascertained sum, and, if so, in what circumstances such a power should be exercised. 

The Supreme Court found that the court does have jurisdiction to strike out a statement of case under CPR 3.4(2) for abuse of process even after trial where the court has been able to make a proper assessment of both liability and quantum, but this should only be done in "very exceptional circumstances".   Whilst the Supreme Court thought this decision to be in the public interest, it stressed that in deciding whether to exercise the right, the court must examine the circumstances of the case "scrupulously" in order to ensure that the strike out is "a proportionate means of achieving the aim of controlling the process of the court" and "deciding cases justly", and ought always to be seen as a last resort. 

What does "just and proportionate" mean?

The Supreme Court did not give examples of when a decision to strike out of a statement of case would be reasonable, and said that it may include a case where there has been "a massive attempt to deceive the court but the award of damages would be very small".  The test in every case is to be "just and proportionate", and only in a "very exceptional case" would a strike out be appropriate.   The Supreme Court found that the case in hand was not an appropriate case to warrant a strike out, referring to the fact that the claimant had suffered "significant injury" as a result of the defendant's breach of duty. 

Deterring Dishonest Claims

The Supreme Court felt that there already exist ways in which dishonest claims can be deterred; that all proper inferences can be draw against the claimant, the claimant may be faced with a substantial order for indemnity costs, interest may be reduced and proceedings issued for contempt and criminal proceedings.  Attention was also drawn to the use of Calderbank offers made by a defendant to settle genuine parts of a claim. 

Considerations

Defendants the subject of what they consider to be fraudulent claims ought now to review these cases in light of this judgment.  Whilst the Court has not been prescriptive as to examples of what types of cases may be struck out, it seems that cases where there has been a large degree of fraudulent activity, accompanied by little if any actual damage, may fall within such a category. 

Defendants ought to consider putting claimants' solicitors on notice that they are of the view that fraud exists, citing this case, and drawing attention to the risk of pursuing the action if the claim is later found to be fraudulent; early Calderbank offers ought also to be considered.  What remains to be seen is whether the number of claims in which quantum sought by claimants is grossly inflated now reduces following this decision. 

Further reading: Fairclough Homes Limited v Summers [2012] UKSC 26

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 28/06/2012.