A Google search for “medical negligence claims” returned 2,200,000 results. Scrolling through these produces pages and pages of organisations all offering to help with your claim, many on a “no win no fee basis”. It is not surprising that, against that background, there seems to have been an increasing tendency for knowingly exaggerated or even entirely fraudulent claims. The National Audit Office has estimated that patient fraud costs the NHS £112m per year. The Association of British Insurers estimates that dishonest insurance claims cost £2bn per year.
In this article, we look at how the courts have viewed cases where a claimant has knowingly set out to present a false claim in order to defraud the defendant through legal proceedings. Many of the reported examples concern injuries allegedly sustained following a road traffic accident, although exaggeration and fraud are prevalent in medical malpractice claims also.
The case of Nield v Loveday  EWHC 2324 illustrates many of the issues which can arise.
Mr Loveday and his wife brought proceedings following a road traffic accident. Liability was admitted but quantum was in dispute. Mr Loveday complained of a painful soft tissue injury to his neck and lower back which prevented him from walking or driving; made him often reliant on a wheelchair; in need of 24 hour care from his wife; unable to go caravanning as previously.
Surveillance footage demonstrated all of these contentions to be a lie. It was evident that witness statements, with the requisite signed statements of truth, were not true. Furthermore, at the time of signing, both Mr and Mrs Loveday had been advised that the giving of a false statement was a contempt of court for which they could be prosecuted.
Insurers had made an earlier offer of settlement for the genuine element of the injury. This was accepted by Mr Loveday, out of time, on the basis that he would pay the insurers’ costs incurred after the offer on an indemnity basis. The costs claimed of £46,000 greatly exceeded the sum paid for the claim - £1,850.
The insurers brought committal proceedings against Mr and Mrs Loveday for contempt. Mrs Loveday admitted contempt – Mr Loveday continued to deny it. Mrs Loveday was given a six month sentence, suspended for 18 months. Mr Loveday received a nine month prison sentence.
Various points arise from the Loveday case.
Conflicting approaches by the Court
There has been criticism of an approach whereby the fraudulent claimant has nothing to lose from the fraud. In other words, if the fraudulent element of the claim is discovered, he still receives the genuine element of the claim. It has been said that the whole claim should fail.
In fact there have been conflicting approaches to such a scenario adopted by the courts in the past and the Court of Appeal seems to be divided on the issue. In Ul-Haq1, a 2009 decision, the Court of Appeal held that it had no jurisdiction to strike out a claim on the grounds that it contained a fraudulent element. Instead, provided it could separate out the legitimate claim, it should find in favour of the claimant for that element of the case. But in other Court of Appeal decisions in 2000 (Arrow Nominees2) and 2009 (Zahoor3), the Court of Appeal took a contrary view, saying that it was possible to strike out the entire claim.
The safer course for insurers, if a claim is believed to have a genuine element, is to make an early Part 36 offer for that part of the claim. This then gives costs protection, as in Loveday, if the fraudulent element can be shown to be such.
Prosecution for contempt
A more difficult decision is whether or not to prosecute for contempt. The case of South Wales Fire & Rescue v Smith  EWHC 1749 (Admin) set out the factors required for an order for committal to be made. These include
- Knowledge by the maker that the statement was false at the time when it was made.
- Strong evidence of that – to avoid vindictive claims.
- The false information must have been significant in the proceedings.
- The maker was aware of the effect of his statement.
But even if these factors are present, contempt proceedings may not be an attractive route for insurers to follow. The penalties for contempt can be quite light.
The most recent case to come before the courts is that of Mr Bashir and certain members of his family ( judgment February 20124). The contempt proceedings followed claims made out of a bogus collision. There were five individuals facing contempt proceedings. The case against one defendant was discontinued. The others admitted their fraud and took active steps to assist Insurers. The court took a lenient approach (in part because of the personal circumstances of the individuals concerned). They imposed sentences ranging from six weeks custody to a six week suspended sentence. Insurers were awarded costs, although the payment of these was deferred for two years and the reality is that there is little prospect of the individuals being in a position to pay.
The sentence will greatly depend on the nature of the fraud and the circumstances of the offenders. In Shikell5, a claimant who alleged that his semi-professional football career had come to an end, and his father, were both given 12 month custodial sentences. At the other extreme, Mrs Kirk6 who had made a grossly exaggerated claim (for £750,000 – actual award £25,000) was fined £2,500 and only ordered to pay 50% of the costs of the committal proceedings.
Committal proceedings certainly send a strong message to those who have engaged in fraud, but these will often be at insurers’ cost. An alternative may be to hit the fraudsters in the pocket by judicial use of Part 36 offers. Mr Loveday had already lost his job and his house because of the costs orders made against him in the civil proceedings.
It is however the case that civil proceedings will attract less publicity than those resulting in a committal to prison. It may be that the cost of such proceedings is justified as a deterrent to others, in order to lower the level of fraudulent claims.