Rachel Henry and Alistair Kinley: Fraudulent and dishonest claims getting off Scot-free

Rachel Henry is a Partner in Scotland with BLM.
Rachel Henry is a Partner in Scotland with BLM.
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One basic principle of personal injury compensation is the same throughout the UK. Whether a personal injury claim proceeds under the Scots law of delict or the law of tort in the rest of the UK, the injured person should be restored by the wrongdoer, so far as an award of money may allow, to the position that they would have been in had the accident not happened. This is the so-called ‘principle of 100 per cent compensation’, sometimes rendered in Latin as restitutio in integrum. There are several significant practical differences between Scotland and England & Wales in how this principle operates in practice. This article focuses on two.

Personal Injury Discount Rate (‘PIDR’) and Periodical Payment Orders (‘PPOs’)

As damages for lost future income (or care needs) are generally paid as a lump sum, account needs to be taken of the likely investment returns available in order to avoid over or under compensation. The PIDR does this. A lower PIDR means a higher lump sum, and vice versa. Both England and Scotland introduced new PIDRs last year under different laws. Scotland’s PIDR, fixed from 1 October 2019, is minus 0.75 per cent. This contrasts with a PIDR in England & Wales, set from 5 August 2019, of minus 0.25 per cent. Both rates are unlikely to be reviewed before 2024.

We modelled a hypothetical but realistic case of a 17-year-old needing medical care costing £150,000pa. The difference in rates would mean, all other things being equal, a higher payment of £2.6 million in Scotland. Although this example involves very serious injuries and significant future care, the different PIDR in Scotland potentially impacts any personal injury claim involving future losses. The extra cost for insurers in meeting these claims could lead to higher insurance premiums in Scotland than in England & Wales.

A related difference is that whereas in England & Wales the court can impose the payment of compensation in instalments or periodical payment orders (PPOs) – even when parties don’t agree – this has not yet happened in Scotland. Part of the Scottish legislation which governs the PIDR should bring this about, but no date has yet been set for implementation.

Dishonesty

Dishonesty by a personal injury claimant appears to be treated quite differently. In England & Wales, legislation from 2015 requires a court to dismiss the entire claim if the claimant has been “fundamentally dishonest”. The underlying approach is that fraud taints everything. A good example is the 2018 case LOCOG v Sinfield. The claimant was genuinely injured while volunteering at the 2012 Olympics. He fabricated evidence to support a claim for future gardening expenses of around £14,000. On appeal, this was held to be enough for his otherwise valid injury claim to be dismissed in its entirety.

In contrast, the complete dismissal of a pursuer’s case as an abuse of process is in theory possible under Scottish common law. In our experience, this rarely happens, as the Scottish courts consider it a draconian sanction. The 2018 case Grubb v Finlay illustrates this. Mr Grubb initially sought £500,000 in damages following a road accident. He reduced this to around £380,000 and then further to £180,000 after proof (evidential hearing). He was eventually awarded only £6,000 despite the judge finding “several areas where I was unable to accept the pursuer’s evidence as credible and reliable” and describing parts of the evidence as “less than convincing”. Unsurprisingly, perhaps, the defender tried to persuade the court to dismiss the claim as an abuse of process. That failed and, after an appeal, the £6,000 award was allowed to stand. The Inner House of the Court of Session held that the pursuer “did not make a fundamentally dishonest claim. He made a good, if exaggerated, claim”. The Inner House did not define a cut-off between exaggeration and fraud or “fundamental dishonesty” sufficient to justify dismissal of the case.

Had the case been run in England & Wales, there would seem to be little doubt that it would have been thrown out under the 2015 legislation. We are not aware of plans to legislate in Scotland to similar effect, but there would appear to be a fair case for doing so in order to deter outright fraudulent and dishonestly exaggerated claims.

Rachel Henry is a Partner in Scotland and Alistair Kinley Director of Policy and Government Affairs with BLM