Wednesday 27 January 2016

Middlesbrough CII SeminarFraud, Fundamentally & QOCS in Practice Paul Hughes & Chris Smith

Fraud in Numbers

• 119,000 fraudulent claims detected in 2013• Worth £1.3 billion• Estimated 381 fraudulent claims per day/2670 per week• Increases annual individual premium by £50

'Crash for Cash'• 69,500 claims arising from suspected staged accidents • £392 million – the cost of 'crash for cash'• Average value of each staged accident claim is £30,000

Current Issues in Fraud

• A changing judicial attitude to fraud?

• Telematics & CCTV/ Dashcams

• QOCS provisions encourage weak and opportunistic claims with poor quality handling by claimant solicitors

• Use of the new fraud framework in tackling fraudulent and weak claims, including recovering costs

Fraud Rings - Adam Herbert & First Bus

• Driver Adam Herbert deliberately crashed his bus into Vauxhall Zafira in Sheffield on 17 June 2011

• 25 passengers on board pursued whiplash claims• CCTV footage of the passenger cab showed that despite the

minor nature of the collision, passengers flung themselves to the floor and one man ran forwards into the windscreen

• Driver, aged 26, was jailed for 20 months • First's data revealed that there had been considerably more

passengers than usual on the bus that day• One genuine passenger reported that she was handed a

collision report form before the collision took place

Fraud Rings - Ben Carberry, Liam Gray and Kevin Hamilton

• These three men were jailed after hiring a coach to take 30 passengers to Belle Vue greyhound stadium in Manchester from a pub in Bootle, Liverpool, on December 9, 2011

• En route, the driver was asked to pull over by passengers who said there had been a collision with a Renault Megane, even though the driver had felt no impact

• There was superficial damage to both vehicles • All 30 passengers lodged whiplash claims having given the

driver their details and informing him they were injured, before running across the motorway to a pub over the road

Telematics Data

• Tom McHugh, 29, from Doncaster, crashed his BMW into the back of a Ford Transit driven by Daniel Fletcher, 30, south of Doncaster on 14 April 2013.

• A few days after the accident, Fletcher made a £10,000 claim for damage to his Ford Transit and alleged he was suffering whiplash.

• The telematics data showed that the parties were friends even though they denied knowing each other; McHugh had visited Fletcher 50 times in the previous 6 months

• It also showed McHugh had an accident the day before which was unreported

• Court made a finding of fundamental dishonesty and awarded costs of £14,000

Dashcams

• Footage from dashboard cameras can also be used to detect fraud

• Relatively cheap• May provide crucial evidence determinative of liability and

fraud, allowing for improved fraud detection and quicker settlement of genuine claims

• Retailers' research indicates that concerns about fraud are driving sales of these devices

• In September 2015 it was estimated that 3% of UK drivers use dashcams but that 40% are considering buying one, suggesting these devices are catching on and will be increasingly used as a source of evidence

The New Fraud FrameworkSetting Aside QOCS

• In personal injury claims issued after 1 April 2013, a losing claimant will not have to pay a successful defendant's costs

• Qualified One-way Costs Shifting (QOCS)• This usual rule in relation to costs can be set aside under

CPR 44.16 'where the claim is found on the balance of probabilities to be fundamentally dishonest'

• Permission of the judge is required to enforce such costs orders, so an express finding of fundamental dishonesty is required

• Such costs orders may commonly go unsatisfied where claimants do not have the means to meet them

• How are Courts interpreting "fundamental dishonesty"?

'Fundamental Dishonesty' – Lessons & CluesMpoznu Hussein Sheikh v London General Transport Services Ltd

• Low velocity impact• C was the driver of a bus, the rear corner of which was hit by

the nearside wing-mirror of another bus, simply causing the mirror to fold inwards

• C claimed for a 12 month whiplash and physio as a result, though admitted in court he had recovered after 3 months and not had physiotherapy

• Heard by DJ Manners at Clerkenwell & Shoreditch County Court, 30 April 2015 –

- "it is completely incredible that such damage could have caused any injury to the Claimant as he says it did…this was a minor collision and I do not find it credible in any shape or form that this accident could have caused any injury to the Claimant."

Mpoznu Hussein Sheikh v London General Transport Services LtdLow Velocity Impact Claims

• Finding of fundamental dishonesty made, claim dismissed and Defendant awarded indemnity costs with permission to enforce the costs order

• Two points worthy of note-• No complex engineering evidence was required. D relied

on CCTV footage, telematics, witness evidence from its driver, Part 18 questions to the Claimant to highlight exaggeration and questions to the expert

• Judge had no hesitation in finding fundamental dishonesty despite D not having gone quite that far in its own pleadings. Following introduction of s57 CJCA 2015 the whole of the claim must be dismissed in such an eventuality

'Fundamental Dishonesty' – Lessons & CluesGary Burnett

• Minimal collision at McDonalds drive through

• Burnett, a semi-professional footballer, claimed injuries to his neck and back, that prevented him playing football for several weeks

• Enquiries showed he played football the day after the accident and several times during the period he claimed he was incapacitated

• Claim discontinued when evidence disclosed

• Insurers sought order removing QOCS protection: C failed to attend, and was ordered to pay £11,028

The New Fraud Framework S57 Criminal Justice & Courts Acts 2015

• Where the court is 'satisfied on the balance of probabilities that the claimant has been fundamentally dishonest' through exaggerating an otherwise honest claim, advancing a fraudulent head of loss (such as a credit hire claim) or supporting the fraudulent claim of another, then:-

The court is required to dismiss the entirety of the claim unless to do so would cause substantial injustice to the claimant

Costs may be enforced against the Claimant, less the amount that he would have been awarded in damages in respect of the genuine element of the claim

Late Notified, Historic & Opportunistic Claims

• Abolition of success fees mean that claimant solicitors need more claims to keep their businesses going

• Consequently claimant solicitors are running historic and/or weaker claims that may previously have been discarded, often with less qualified staff who are cheaper

• The advent of QOCS, which provides that claimants will not usually be faced with their opponents' costs, means that claimant solicitors are incentivised to issue claims and run them to the doors of court, even if they have no intention of going to trial

• The net effect of this for clients is likely to be a higher volume of claims with a far longer lifespan

Tackling historic & opportunistic claims

• Stand firm – both the claimant and their solicitor will be expecting an easy ride. A drawn out claim and the prospect of being cross examined is not what the majority of claimants sign up for, and impacts on profitability for claimant solicitors

• Aggressively seek to disapply QOCS – is there evidence of fundamental dishonesty/poor conduct of the claim?

• Focus on the evidence which addresses the claimant's credibility:

1. In late notified claims, what is the justification for the delay, especially where you have dealt with other aspects of the claim?

2. Inconsistencies & exaggeration

Case Study: Neil Harland & Kieran Belford Date Event

17 October 2012 Accident

14 May 2014 CFA with Amanda Cunliffe

9 July 2014 CNF submitted

9 April 2015 Harland claim dismissed at trial for failure to establish causation. No finding of fraud

2 June 2015 Belford invited to discontinue once GP records undermine claim even further

14 July 2015 Statement in the Claimant's name but signed by LF served by Amanda Cunliffe

4 August 2015 D applied to strike out

30 September 2015 Belford discontinued day before trial

Case Study: Neil Harland & Kieran Belford

• Harland's claim dismissed but no finding of fraud, even though he admitted to only bringing the claim once he was called by solicitors and confirmed there were no injuries on 24 Oct 2012

• Amanda Cunliffe Solicitors (ACS) had amended Harland's evidence by stapling his original signature on the back of an amended statement that Harland had never seen (they served both!)

• ACS included an invoice for physiotherapy that Harland had never received and had no intention of receiving

• ACS served a statement in the name of an 8 year old boy but signed by his litigation friend. GP records had already undermined pleaded case

• ACS ignored D's application to strike out for almost 2 months and discontinued day before trial

How do we deal with this?

• Apply to set aside Notice of Discontinuance under CPR 38.4(1)

• Strike out the claim under CPR 44.15 on the grounds that:1. C disclosed no reasonable grounds for bringing claim2. Proceedings are an abuse of process3. Conduct of C, his litigation friend or solicitors is likely to

obstruct just disposal of proceedings • Strike out under CPR 3.4(2)(C) if there has been a failure to

comply with rule, practice direction or court order• Continue to seek a finding that the claim is fundamentally

dishonest (Trial not required – see Gosling v Screwfix 2014)• Seek wasted costs against solicitors under s51(6) Senior

Courts Act 1981 and CPR 46.8

Exemplary Damages

• Where denying claims on the grounds that a claim is fraudulent you may consider a counterclaim in the tort of deceit, which requires you to establish:

1. That C has made express or implied representations that are false (such as about being injured);

2. C knew those representations to be dishonest; and 3. C's purpose for making those representations was to make

a financial gain for themselves

Making a claim for exemplary damages should be considered where you are advised that a finding of fundamental dishonesty is a strong possibility

Contempt Proceedings Churchill Insurance v Dunn & Others

• May 2011- Staged rear-end collision, both vehicles with high occupancy

• Churchill obtained a statement from the 'at fault' driver's wife, from whom he had recently separated, alleging it was a scam

• This evidence was disclosed pre-litigation. Proceedings were issued and fraud was fully pleaded in the defence

• Despite being faced with robust evidence the claimants' solicitors, who represented all 6 claimants from both vehicles, ran the case to the 'doors of court' with estimated costs of £70,000, before discontinuing the day before trial

• Churchill sought permission to bring proceedings for contempt of court under CPR 31.14 and CPR 81.17

Contempt of CourtChurchill Insurance v Dunn & Others 2015

• CPR 32.14 provides that proceedings for contempt of court may be brought against a person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.

• Applications must be made to the High Court to begin the process

• If successful, fraudulent claimants are liable to a fine, imprisonment or both

QOCS & Part 20 Claims

• Let's say you have a passenger claiming against you, but you do not think they were injured and you hold the driver of another vehicle responsible for the accident in any event; should we bring a Part 20 Claim against that other driver in the passenger's proceedings?

• Wagenaar v Weekend Travel 2014• QOCS does not apply to Part 20 Claims • If C does lose their claim then, whether or not they get the

benefit of QOCS, you would be liable for the costs of the Part 20 D

• It is sensible to let proceedings run their course and consider afterwards whether there is a claim for indemnity or contribution from a third party under the Civil Liability (Contribution) Act 1978

QOCS Protection Despite pre April 2013 CFA

• Casseldine v Diocese of Llandaff Board for Social responsibility: 3 July 2015 (Cardiff County Court)

• C brought claim funded by a pre April 2013 CFA• C changed solicitors 30.1.13• New CFA entered into August 2013, proceedings December

2013. Claim failed on liability• D argued that QOCS should not apply due to the earlier CFA• Court found that no "proceedings" had been commenced

under the initial CFA. The proceedings were issued under the second CFA, so the QOCS rules applied