When is a crime not a crime? In Scotland, one might ponder whether an example is when fraud is committed during a civil claim. In personal injury claims, the F word is still a dirty one. To paraphrase Verbal Kint, the greatest trick the Scottish fraudster ever pulled was convincing the courts he didn’t exist. Coincidentally, those with experience in the field may question whether the final scene of The Usual Suspects was inspired by a fraudulent claimant leaving a medical examination.
Lie about your income to HMRC, fabricate injuries to obtain benefit payments or provide a false account of an incident to the police and you will likely face criminal charges and prosecution. Do the same under oath in a civil action, however, and the chances of significant repercussions following are far more remote.
Opposing views prevail regarding whether remedies to deter fraud are sufficient. Some may point to the case of Grubb v Finlay (2017) to argue the contrary to the statements above. As a result of a minor bump between two vehicles on a petrol station forecourt, the pursuer was found to have sustained injuries and was awarded damages. The sum initially claimed was £500,000. A valuation produced shortly before the trial totalled just under £380,000. Damages of £6,000 plus interest were awarded.
Numerous losses claimed as a result of alleged injuries sustained were not established. Evidence was produced to show the pursuer had grossly exaggerated or fabricated assertions in support of those losses. Due to his “lack of candour” when advancing elements of the claim, he was found liable to meet two-thirds of the defender’s legal expenses.
The length and complexity of the action meant those expenses were substantial. Isn’t that enough of a deterrent?
More often than not, a claimant will have a funding agreement in place. If the funder meets the expenses, what deterrent is there to the claimant? If the funder refuses to pay on the grounds that the claim was fraudulent after all, which is an increasingly common argument even when a specific finding of dishonesty is not made in court (as happened in Grubb), the expenses will often not be capable of being recovered from the claimant. The cost of the litigation is borne by the innocent defender, their insurer and ultimately policyholders, local authorities and public bodies. How can that be said to be delivering justice?
Ten years ago, the position in England and Wales was similar. However, legislation since introduced would have resulted in Grubb’s entire claim being dismissed for fundamental dishonesty. There may also have been a prosecution for contempt of court and a potential prison sentence. In cases where unscrupulous claims management companies and solicitors cajole more vulnerable individuals to proceed with a claim, remedies can be sought against them. Anyone who has watched Claimed and Shamed will appreciate why that is appropriate.
In Scotland, such options are not available. Furthermore, new rules to be introduced in 2020 will result in pursuers being protected from awards of expenses being made against them in personal injury claims. Is there a level playing field for those against whom a dishonest claim is made?
Scotland’s most senior judge, Lord Reed, wrote a paper in 2012 in which he said the era of a person being automatically entitled to their “day in court” was no more, particularly for those who seek to abuse the process by advancing fraudulent claims. He encouraged the Scottish courts to take a firmer stance and dismiss such actions.
Despite his cogent and persuasive reasoning, the impact of that encouragement has yet to manifest. As reforms down south make Scotland an increasingly attractive market for fraudsters, for how long can this continue to be the case?
The new rules will contain an exception removing costs protection from pursuers who make a fraudulent representation in a claim. Horwich Farrelly recently successfully defended a trial in Glasgow for an innocent driver insured by Aviva. The Sheriff identified significant concerns about the pursuer’s credibility. Would she have held that the pursuer made a fraudulent representation, allowing the innocent driver to recover the costs of defending the claim?
Measures introduced down south have redressed the balance of justice and hit dishonest claimants and organisations hard. If Scotland is to avoid becoming a soft touch for fraudsters, there needs to be similar fortitude in repelling dishonest claims moving forward.
Steven Smart is Partner & Head of Glasgow Office at Horwich Farrelly