Scottish law has to avoid becoming a soft touch for the fraudsters - Val Pitt

In this column a year ago, my colleague Steven Smart considered fraudulent claims and queried whether limited deterrents to claimants who fabricate or grossly exaggerate allegations were sufficient to avoid Scotland becoming a “soft touch for fraudsters”.

Val Pitt is a Senior Associate, Horwich Farrelly

The Scottish Courts tend to mark disapproval of such behaviour by awarding expenses against the claimant. While it is debatable whether this goes far enough or dissuades litigants from raising actions, those who suffer as a result of the deception can try to recover some of the unnecessary cost they have had to incur. The recent case of Keenan v EUI, however, involved circumstances which may leave those subjected to such claims wondering what they can do.

The pursuer sought damages of £1,250,000 for injuries sustained in a road traffic accident, including the alleged development of fibromyalgia which she said rendered her unfit for work. In October 2017, the defenders offered a sum in settlement of the claim. The offer was declined and litigation ensued in July 2018. The defenders subsequently produced video footage from 2016, 2018 and 2019 which showed the claimant carrying out activities clearly inconsistent with the disabilities alleged. The pre-litigation offer of £43,500 for what was believed to be genuine injuries sustained was repeated and accepted before any hearing on the evidence.

The defenders sought an award of expenses in their favour on the basis that the pursuer had fabricated or grossly exaggerated her symptoms, causing substantial unnecessary cost. They relied upon several factors, including the disparity between her valuation of the claim and the sum accepted and the observation of a medical expert, who concluded upon review of the footage that the pursuer had acted deceptively in an attempt to secure higher compensation. The expert also highlighted the notable contrast between the pursuer’s description of her physical condition (both in the court case and applications to the Department for Work and Pensions for disability benefits) and the surveillance footage. The pursuer disputed that she had deliberately exaggerated her claim.

The court held that it was unable to conclude that the pursuer had been dishonest, as the action had settled without the hearing of evidence. Therefore, the material which the defenders argued demonstrated dishonesty had not been scrutinised or tested. The court felt that it was unable to reach a firm conclusion that the pursuer was dishonest or that her conduct seen in the surveillance footage was indicative of deliberate exaggeration. The judge went further, stating that it was only in rare cases that a factual finding of dishonesty could properly be made without a full hearing of the evidence. The pursuer was not only awarded full legal expenses of the action, but on the Court of Session scale, despite the sum accepted falling well within Sheriff Court limits.

In 2012, the now President of the Supreme Court, Lord Reed, urged the Scottish Courts not to be “unduly reluctant” to dismiss cases before trial where it appeared that a litigant was seeking to “subvert the adjudicative process by fraudulent means”, particularly where there is objective evidence allowing a determination to be made. However, the Scottish Courts have stated in Grubb v Finlay that such an application should not be made during or after an evidential hearing, while Keenan states that without proceeding to a hearing, such a finding can rarely be made.

It might be thought that video evidence showing the allegations of injury to be untrue would provide a reasonable basis for such an inference to be made in the context of determining expenses. At present, it seems that is not the case. The dilemma currently faced for a defender is whether to make a formal offer of damages, which must include an offer to pay expenses, and argue to disapply normal expenses rules, or incur the full costs of proceeding to trial.

However, new legislation anticipated before the end of the year will require the Scottish Courts to consider during the course of an action whether there has been a fraudulent representation in pursuing a claim. If so, costs protection for the claimant will be removed. In light of the current position, it is inevitable further case law will follow.

Val Pitt is a Senior Associate, Horwich Farrelly