Courts show zero tolerance in fraud cases

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Dishonesty does not pay. So found Mr Bowyer Snr, whose son brought a fraudulent personal injury action. On 2 August 2012 the Court found that Mr Bowyer Snr had known that the claim was fraudulent, but had taken steps to support it dishonestly, lying in both his affidavit and in oral evidence before the Court. He was found guilty of contempt.

This decision in Havering London Borough Council v (1) Mark Bowyer (2) James Jones (3) Richard Bowyer (2012) adds further weight to the insurance world’s fight against fraud.

After a night out, the first and second defendants (B and J) were walking home through a park owned by the local authority. B fell from a wall, fracturing his leg and ankle. J called the ambulance, informing the operator that B had fallen from a wall. This account was repeated to the ambulance crew and the A&E staff. By the time a personal injury claim was presented, however, B’s account had "transformed" to a trip over a pothole in the park, and he alleged that he had sustained injury as a result of the local authority’s negligence or breach of statutory duty.

Based on B’s account, the local authority admitted liability. However, when medical records were subsequently reviewed the discrepancy in how B’s injuries occurred came to light. The local authority withdrew its admission of liability.

Proceedings, signed with a statement of truth, were issued by B for personal injury caused by a trip over a pothole. Witness Statements were subsequently served by B, J and the third defendant (R), again all signed with statements of truth, stating that B had fallen in the pothole.

Faced with the weight of the medical evidence against him, B discontinued his claim. The local authority issued proceedings against B, J and R for contempt of Court in making false statements, signed with a statement of truth, without an honest belief in their truth. B and J largely admitted their contempt, however R opposed the local authority’s application for committal.

In Court, R submitted that his statement was not knowingly untrue, based as it was on what he had been told by his son, rather than first hand knowledge. The Court did not find R to be a credible witness. They concluded that he had known B’s personal injury claim to be fraudulent and had taken active steps to support it dishonestly. The local authority had proved to the criminal standard that R had committed the alleged contempt, and he was accordingly found guilty.

This case is illustration that claims for committal for contempt of Court are not "one offs" by insurers pursued to "prove a point". They are, on the contrary, a realistic consequence of providing fraudulent statements of truth and should serve as a stern warning that dishonesty not only does not pay, but may well also end in criminal sanctions.

This case follows closely in the wake of Fairclough Homes Limited (Appellant) v Summers (Respondent) [2012] UKSC 26, a long fought and phenomenally expensive battle by Zurich over an exaggerated insurance claim. In that case the upshot was that the Court does have the power under Court rules to strike out a Claimant’s case in its entirety, even when it has been established that part of the Claimant’s case is genuine and they would be entitled in principle to damages. This marks a major change in previous case law, and a win on legal principle for insurers.

Fairclough also serves as a reminder that there are a number of ways in which insurers and businesses can deter fraudulent claims of this nature, such as asking the Court to draw adverse inferences against a dishonest Claimant, seeking adverse costs awards, denying interest for periods where fraud is found, and bringing contempt of Court proceedings which could result in criminal sanctions, including imprisonment.

The welcome news is that Courts are willing to prosecute Claimants who act dishonestly, demonstrating their zero tolerance approach towards fraud and ensuring that the integrity of the justice system is preserved.