As always in a period of great change, much has happened since our last edition of fraud watch.
Increase in court fees Civil court fees increased from 21 March 2016. The fee for general applications with notice increased from 155 to 255 and the fee for applications by consent/without notice increased from 50 to 100.
CMC regulation In March 2016 Carol Brady submitted her final report with findings and proposals for reform in relation to the regulation of claims management companies (CMCs). The report emphasises that tighter regulation is required in relation to the organisation, authorisation, rules, procedures and records of CMCs, and recommends that better enforcement measures are required. George Osborne announced in the March 2016 budget that CMC regulation will move to the Financial Conduct Authority (FCA) as recommended by Carol Brady in her report. This is expected to take place in 2018.
Call for evidence on MedCo On 24 March 2016 the MoJ finally published its response to the call for evidence on the MedCo framework consultation which took place in July 2015. The response confirmed the new proposals that should come into effect in summer 2016, which include: There will be a new definition of medical reporting organisation (MRO). The MedCo offer will be changed to show two Tier 1 MROs and 10 Tier 2
MROs. Minimum service standards will apply to all MROs. The declaration of financial links will cover the past three years rather than
just the past 12 months.
MedCo MRO definition There was a short consultation in relation to the definition of a MRO and we responded to the survey with further comments and an expansion to the current proposed definition. The responses were due by 15 April 2016 and the outcome is awaited.
Costs budgeting New rules on costs budgeting came into force on 6 April 2016. Effectively, costs budgets in claims under 50,000 must be filed with the directions questionnaire and the length of the precedent H form is curtailed. The relevant CPR rules are CPR 3.12, CPR 3.13 and CPR PD 3E. See also CPR 47 for further costs budgeting changes.
Third Parties (Rights against Insurers) Act 2010 On 28 April 2016 the Third Parties (Rights against Insurers) Act 2010 (Commencement) Order 2016 was passed. This will come into effect from 1 August 2016 and will see the introduction of a simpler procedure for claiming directly against the insurer of an insolvent defendant.
The Enterprise Act 2016 This received Royal Assent on 4 May 2016. It inserts a new section into the Insurance Act 2015, which will apply from 4 May 2017. This will give policyholders the right to claim damages from insurers for late payment of claims for the first time in English law. The new rules will apply to both commercial and consumer insurance contracts and a term will be implied into every insurance contract that insurers must pay claims within a reasonable time. A claim must be brought within one year from the date the insurer pays the claim or within six years from the date of the breach of the implied term (whichever period ends first).
>>> continues on page 2
Operation Utah Page 4
Fraud case study Page 6
Fundamental dishonesty: a reminder
>>> continued from page 1
Welcome to the summer 2016 edition of the Hill Dickinson counter fraud group's quarterly newsletter, fraud watch. We hope you will find this edition to be both informative and enjoyable. Our cover story reviews the latest developments in insurance law and personal injury reform and case law with a look ahead to developments likely to occur further down the road. It has indeed been a very eventful few months since our last edition. Stratos Gatzouris takes a look at Operation UTAH and the telematics data that is proving extremely helpful in the fight against fraud. He also provides an update on fundamental dishonesty and explores the attitude the court has towards it and the different approaches defendants can take. We also hear from Nathan Jones about his experiences as legal director, managing our counter fraud litigation team. We provide a selection of fraud case successes showing the importance of challenging claims which may initially appear to be legitimate, but following proper investigation are anything but. We end with our usual (relatively light-hearted) feature of fraud news. We do hope that you enjoy this latest edition of our newsletter. If you would like any more information about the areas covered, would like to discuss any more of the issues featured in more detail, or make suggestions for what you would like to see in future editions, please do not hesitate to get in touch with any one of the team.
Best wishes, Peter Oakes
Lord Faulks' speech at the APIL conference The APIL conference took place on 4 May 2016 with former Minister for Justice Lord Faulks as a key speaker. It is clear that there will need to be further clarification from the new minister as to whether previous announcements can be relied upon. He confirmed that the MoJ will press ahead with the proposals to remove general damages for whiplash claims and raise the small claims limit to 5,000 for all personal injury claims. He stated that the Government is fully committed to these reforms and that the consultation should come out after the referendum. He also explained that the Government supports the principle of extending fixed recoverable costs and `is now considering the way forward, including how best to deal with differences between different types of civil litigation'. Again, we will need further clarification of this from the new minister now that Lord Faulks has stepped down. Insurance fraud taskforce (IFT) The Government (Lord Faulks) responded to the final report of the IFT which was published on 18 January 2016. Effectively, each of the recommendations has been accepted and the Government will set out what it proposes to do in order to implement them. Of course, now that a new minister has been appointed we may hear further on this subject. Consultation on McKenzie Friends There has been a recent consultation entitled `Reforming the courts' approach to McKenzie Friends'. This looks at the possibility of reform in this area and the possibility of rules of court or updated practice guidance being provided. It is proposed that the phrase `McKenzie Friend' could be replaced by the term `court supporter'. The consultation closed on 19 May 2016 and we provided our responses.
MedCo accreditation The final deadline for accreditation was 1 June 2016. By this time all medical experts completing their first reports for low value soft tissue injuries had to be accredited by MedCo and if they failed to achieve accreditation they were suspended from the system. It is also noted that MedCo has suspended 20 authorised users from the system who seemed to have intentionally manipulated the search function. Appeals to the Court of Appeal: proposed amendments to CPR and PD This consultation was carried out by the Civil Procedure Rule Committee between 19 May 2016 and 24 June 2016. There have been a number of issues raised regarding the delays at the Court of Appeal and the huge increase in its workload. Report on court fees A report has been released from the Justice Committee regarding the recent and proposed changes to court fees (see March section). In this report it is suggested that a pilot scheme should be set up with a graduated or sequential system of fee payments whenever there are substantial fees payable in total in respect of a case in the civil or family courts or tribunals. Brexit We cannot fail to mention the outcome of the recent referendum that caused turbulence across the UK. On 23 June 2016 Britain voted to exit the European Union, also known as Brexit. The exit itself will take a number of years to implement and, in the meantime, we will keep an eye on the legal challenges ahead. In particular, we will follow closely the effect that this may have on the Data Protection Regulations, the decision in Vnuk, passporting and jurisdictional issues. Hill Dickinson conference On 28 June 2016 we held a conference at the Old Library at Lloyd's in London. The speakers were Ruth Lawrence, head of our insurance business group, Stratos Gatzouris, a partner in our counter fraud team, Lord Edward Faulks QC, barrister and former minister for justice and Professor Richard Susskind OBE, independent author, speaker, and adviser to international law firms, national governments and in-house legal departments, IT adviser to the Lord Chief Justice of England and Wales, chair of the Advisory Board of the Oxford Internet Institute, and president of the Society for Computers and Law. The event concluded with a panel debate chaired by Ruth Lawrence. The panel consisted of Professor Susskind, head of legal at Aviva Howard Grand, and solicitor, mediator and portal director, Tim Wallis. The conference considered the rollercoaster of reform of civil litigation and insurance law over the past three years and looked forward to the future where are we going and how should we, insurers, corporates and lawyers, be positioning ourselves to take full advantage of future anticipated reforms and technological advances? In short, the world is changing and we must change with it.
fraud watch summer 2016
Removing barriers to competition The consultation on `removing barriers to competition' as part of reforms to open the legal services market to new business, ran from 7 July 2016 until 3 August 2016. The proposals seek to facilitate the formation of and ease some of the regulatory barriers on ABS's.
So, what's next...?
Credit hire cases: Clayton -vEUI Ltd and McBride -v- UK Insurance Ltd
The Court of Appeal will hear appeals for both cases on 21 and 22 February 2017. They are based on rates evidence and the approach that a court should take in the event that the rates evidence does not reflect the claimant's case.
Insurance law changes
As stated above the Third Parties (Rights Against Insurers) Act 2010 will come into force from 1 August 2016. The Insurance Act 2015 will come into force on 12 August 2016 and the details of this were reported in the previous edition of fraud watch. There was a consultation on insurable interest in 2015 and another short consultation exercise took place on a draft bill, which closed on 20 May 2016. There is expected to be a report on this in autumn 2016. Damages for late payments in the Enterprise Act 2016 will take effect from 4 May 2017.
The proposed changes to the MedCo regime (outlined in the March 2016 section) are expected to come into force in summer 2016.
Review of Jackson reforms
The Ministry of Justice's post implementation review of the Jackson reforms is due in early 2018. The Civil Justice Council (CJC) has set up a working group to consider topics relating to civil litigation, chaired by Professor Rachael Mulheron of Queen Mary University of London.
Fixed costs extension
The Civil Justice Council had its first meeting on 11 March 2016 to discuss the extension of fixed costs in claims worth up to 250,000. The details of the meeting are expected soon, although this may be delayed by the recent referendum result. In January the Department of Health (DH) stated that a fixed costs regime would be introduced from 1 October 2016 in clinical negligence claims. However, at the end of May 2016 the Association of Personal Injury Lawyers stated that it had confirmation from Ben Gummer, the parliamentary under-secretary of state for health, that the introduction of fixed costs would not be implemented on 1 October 2016 due to the delay in publication of the consultation. The DH has confirmed that a consultation will be published `later this year'.
Consultation on autumn statement
The proposals in the autumn statement were to remove the right to general damages in low value whiplash claims and increase the small claims limit to 5,000 for personal injury claims. It was expected that the consultation report would be submitted in July 2016, but this is likely to be delayed in light of the outcome of the referendum vote. The subsequent reforms were expected to take place in April or October 2017, but could now be delayed.
As stated in the March 2016 section, it is expected that CMC regulation will move to the Financial Conduct Authority (FCA) in 2018.
The Modern Transport Bill
The Queen's 2016 speech confirmed that the Modern Transport Bill will help Britain to become a leader in driverless vehicle technology. This legislation will be the framework to encourage innovation in transport technology, and will encourage investment in and ensure appropriate insurance provision for autonomous and driverless vehicles. Volvo has already announced that it will begin testing 100 driverless cars in London within the next two years. The roads minister, Andrew Jones, has confirmed that the Government intends to introduce the world's first driverless car insurance legislation. The Department for Transport issued its driverless car consultation paper on 11 July 2016. It is important to mention that there is an investigation underway in the US into the death of a driver using the autopilot feature of a Tesla Model S. This is the first fatality that has occurred in a driverless vehicle and suggests that a `more haste, less speed' approach must be taken with advancements in technology. There are many challenges ahead and it is hoped that the Modern Transport Bill will help to pave the way through the obstacles.
Stratos Gatzouris firstname.lastname@example.org
The Supreme Court has handed down judgment in two key fraud cases:
Versloot Dredging v- HDI Gerling Industrie Versicherung AG, dealing with fraudulent devices. Read our e-update at (http://www. hilldickinson.com/publications/ insurance/2016/july/Collateral_lies_ are_okay_bad.aspx)
Hayward v- Zurich Insurance Company Plc, considering an insurer's attempt to set aside a personal injury settlement when the claimant's fraudulent exaggeration of his injury came to light. Read our e-update at http://www.hilldickinson.com/ publications/counter_fraud/2016/ july/Its_never_too_late.aspx
Also: Lord Justice Briggs published the `Civil Courts Structure Review: Final Report' on 27 July 2016. The review makes recommendations for court modernisation and different aspects of the civil justice system. Further information will be provided on our website in the near future.
fraud watch summer 2016
Operation Utah telematics data provides ground-breaking evidence
Working with Insure the Box (ITB), a highly complex fraud ring involving 31 claims was identified and successfully defeated.
How was this done?
This is the first case to have considered such an extensive set of telematics data and to have recognised the validity of such data with complete acceptance of the expert evidence that was used to analyse its accuracy. Stratos discusses the case.
This case involved seven accidents, spanning five months and implicating five individual ITB customers. We utilised an independent telematics expert who the trial judge described as a `paradigm expert witness' and his evidence supported the telematics data. This indicated that a number of collisions either did not occur or did not occur where and when they were claimed to have happened.
Essentially, our expert's evidence was resolute and effectively un-challenged, despite some extensive crossexamination. He analysed the data from a black box and an alert sensor (which transmits data if there is a significant acceleration event such as a collision) fitted to the insured vehicles. The box contains: A receiver which receives GPS signals; A set of three accelerometers which
measure acceleration to the lateral, longitudinal and vertical plains; and; An ignition sensor which detects whether the engine is switched on or off.
The combination of all these readings helped to establish whether the vehicles in question were operating where they said they were and whether they had any accidents. On the surface the 31 claims appeared to be unconnected, but detailed investigation and analysis of both the telematics box data and also general insurance analytics helped to uncover a wider fraud ring involving ITB customers and various others. A common link was the direct and indirect involvement of two accident management companies in East London / Kent and various linked
ITB customers of Slovakian origin. A strong feature of these links was the fact that all the insured vehicles had attended the vicinity of the accident management companies both before and after the alleged accidents. During the course of the investigation, ITB linked some of the policyholders via social networking searches. Once linked, the respective data sets were overlaid using Google Earth (see below). Each of the seven incidents also had its own individual inconsistencies, requiring engineering and general intelligence evidence to supplement the strong telematics data. We served evidence from our engineering expert, intelligence analyst, external investigators, ITB's handler and internal telematics analyst. Our preparation was extensive, with a detailed fraud ring schedule as well as a series of conferences with counsel and the expert witnesses.
By the time of the trial, four of the sets of claims had been struck out/discontinued or withdrawn, leaving three remaining. The trial was scheduled to last 10 days but it was over after five days as each claim collapsed. A notice of discontinuance was not accepted in respect of one of these cases which resulted in a written judgment and a finding of fraud.
Whilst considerable savings were made from the 31 failed claims, the court also made interim and final costs orders which are presently being recovered and enforced.
Stratos Gatzouris email@example.com
This snapshot demonstrates how the policyholders had visited the same addresses.
This snapshot was used to demonstrate a journey in convoy to Slovakia undertaken by the policyholders. This demonstrated an undeniable link between these individuals.
Who's who at Hill Dickinson
Find out more about our team and put faces to names.
Nathan Jones is a legal director in our litigation team and is based in our Manchester office. Here, we find out a bit more about what he does on a daily basis and what he loves (and hates!) about his job...
What is your role in the Hill Dickinson fraud general litigation department?
I manage the litigation team in our Manchester office and my role is varied. I am responsible for the day-to-day management of the team, ensuring that collectively we provide excellent client service and achieve good results. As part of the senior management team I assist the partners with client management and business development.
How did you get into counter-fraud work?
After qualifying as a solicitor I spent a year on the other side of the fence in a claimant practice before moving to work for a defendant insurance practice (poacher turned gamekeeper). I specialised in defending motor, employers' liability and public liability claims, some of which were clearly not genuine claims. I therefore made the transition into the relatively new area of counter-fraud work. I have worked in the counter-fraud arena for over 13 years and in that time I have seen significant development and change in fraud investigation/detection.
What do you enjoy most about your job?
I enjoy working with new and existing clients to develop counter-fraud products. Good counter-fraud strategy/solution involves a collaborative approach between lawyers and our insurance clients. I have always enjoyed the challenge of working with both existing and new clients to develop strategies that add value. The satisfaction of getting a good result for the client has always been a key driver for me. Personally, I enjoy those cases where we achieve a finding of fraud and make a recovery against the fraudster. On a team level, watching lawyers in my team develop and progress in their careers has to be one of the most satisfying things about my current role.
What do you enjoy least about your job?
Like most of my colleagues, it would have to be settling those claims (albeit at a reduced level) that you know aren't genuine but that you have insufficient evidence to successfully defend. We all have those cases that look good on paper but without the assistance of the insured driver ultimately we cannot proceed to trial. Very frustrating.
What do you think you would have done for a career had you not been a solicitor?
In my dreams I would have been a professional football player. But the harsh reality is, like most, I do not possess the natural ability or some may say any ability! If I had not pursued a career as a solicitor I would probably have become a teacher as my family all work in academia.
What are your interests outside work?
I have two young children; a daughter aged three and a son just eight months old. As you can imagine they take up a lot of my time but they are a great escape from work. Away from the family I enjoy football both as a participant and spectator. On a personal note I turn 40 this year so mid-life crisis to follow...
What are your biggest achievements, both personally and professionally?
Personally, I would have to say my two children who are a joy to be around. There is an argument that my wife deserves most of the credit, but that is a debate for another day. Professionally (although many years ago) it would have to be qualifying as a solicitor, the first step on my legal career.
HDCFG solicitor nominated at the Insurance Fraud Awards
We are delighted that HDCFG senior litigator, Anthony Hitchmough, has been nominated for the Young Investigator of the Year award at the Insurance Fraud Awards. Having joined us in 2012 with no fraud experience Anthony has worked
hard to rise through our ranks and become one of our most inspirational success stories. His ability to deliver outstanding results regularly sees him praised by both colleagues and clients alike.
The award winner will be announced on 6 October we are sure you will join us in keeping our fingers crossed for Anthony!
fraud watch summer 2016
Fraud case update
Now incorporated into our quarterly newsletter, our fraud case update includes our usual variety of case highlights including strike outs, savings and costs recoveries.
Case study 1 Our reference: 12000138.908 Our client: Co-op Insurance File handler: Jackie Gudgeon
This matter relates to a road traffic accident said to have occurred on 21 May 2013. Investigations led us to believe that the accident had been contrived. The three claimants stated in their particulars of claim that the first claimant was the driver of a Vauxhall Corsa, in which the additional claimants were passengers. The first defendant, the alleged driver of a Ford Focus, claimed to have emerged from a give way junction and collided with the nearside front wing of the first claimant's vehicle.
All of the claimants sought damages for personal injury and physiotherapy charges, together with miscellaneous expenses. The first claimant had also intimated a claim for vehicle damage, hire, storage and recovery.
Despite our enquiries we were unable to trace the defendant, who had allegedly been involved in another accident on 1 April 2014 while driving the same vehicle. We requested numerous documents by way of specific disclosure, including the first claimant's mobile phone records from the date of the alleged accident.
According to his witness evidence, the first claimant had telephoned a recovery company and a taxi firm just
after the accident occurred. However, the telephone number listed on his mobile phone records did not connect with the recovery company or a taxi firm. We therefore ran the telephone number through our intelligence database and found that it was held there and had been provided through a company called Independent Accident Investigations. We contacted that company and were advised that it was the telephone number belonging to another passenger (whom they had contacted to interview). The number had been provided by the claimant's solicitors. In addition, the witness evidence provided by the claimants was contradictory in relation to the aftermath of the accident. This confirmed our suspicion that the accident had been contrived. The matter proceeded to a multi-track trial on 14 March 2016 at Romford County Court. On the morning of trial the claimants' barrister approached our counsel and offered to discontinue the case with no order as to costs. We agreed this on the basis that the claimants had no funds with which to reimburse our client's costs in the event that fundamental dishonesty was agreed by the court there would be a finding of. We achieved a saving of 68,400 for our insurer client.
Case study 2 Our reference: 12003930.157 Our client: Europcar File handler: Vicki Oakes
This matter relates to a road traffic accident said to have occurred on 24 August 2012, involving four claimants. Investigations led us to believe that the accident had been contrived. It was alleged that the first defendant emerged from a side road and collided with the nearside of the first claimant's vehicle.
We had major concerns with the damages claims. Examples of issues with the first claimant include:
He had been involved in numerous accidents that he failed to disclose to the medical expert. We obtained evidence of an overlap in injuries.
He blamed the medical expert for the inconsistencies and stated that he was bombarded with questions (which the medical expert denied within part 35 replies).
Due to the overlap of injuries we never had a definite prognosis.
The claimant was dishonest regarding his earnings in support of his claim for hire.
The claim had a 100% uplift attached as it was a pre-qualified one way costs shifting (QOCS) case; our offer of 40,000 (inclusive of costs) was rejected. The claimant sought 30,000
plus costs, which our client rejected. We counter offered 50,000, inclusive of costs. This was again rejected and the matter proceeded to trial. The first claimant was said to have performed very badly when under cross-examination, providing unsatisfactory and inconsistent evidence. Specifically, he could not provide an explanation as to why he did not disclose previous accidents or on-going symptoms to the medical expert. The judge found that the claimant was unable to prove his case on liability or quantum and that his story did not stand up to crossexamination. The judge found that the claimant could not be a credible or truthful witness and found him to be claiming damages in a dishonest way. The claim was therefore dismissed and costs were awarded to the defendant in the sum of 13,338.60. Costs of 1250 previously awarded to the defendant were also outstanding at trial. All costs have now been recovered in full.
Case study 3 Our reference: 985532.713 Our client: Cova File handler: Nasreen Rehman
This matter relates to a road traffic accident said to have occurred on 27 January 2012, involving the first defendant's Ford Transit van and two other vehicles. Investigations led us to believe that the accident had been contrived and was part of a larger fraud ring. It was alleged that a BMW had been waiting to turn right when the first defendant's Ford Transit van collided with the rear of it and shunted it into the opposite carriageway where it collided with a Peugeot.
Proceedings were issued by the occupants of the Peugeot against the driver of the Ford Transit van (first defendant). The claim stated that the first defendant failed to maintain a safe braking distance. The defence denied that the accident took place and alleged that it was staged or contrived as part of a wider conspiracy to defraud.
The occupants of the BMW were invited by the defendant to issue proceedings, but failed to do so. The second defendant, Cova, made a tactical application seeking permission for an additional claim to be brought against the driver of the BMW. This resulted in the occupants of the BMW
issuing proceedings against the first defendant a few days before the application hearing. At the hearing an order was made for both claims to be transferred to Manchester County Court and case managed/consolidated. Cova was awarded its costs of the application because it had pushed the occupants of the BMW to issue proceedings rather than awaiting the outcome of the ongoing proceedings. Further intense investigations led to the discovery of engineering evidence which showed that the damage to the three vehicles was inconsistent. As this claim was part of a larger fraud ring involving other insurers, we engaged in dialogue with other defendant solicitors and agencies in order to gather further evidence/ intel to bolster our pleading of fraud. With our assistance, the other defendant solicitors were able to achieve the consolidated case management of their cases alongside this case. Upon the hearing of an application by the defendant for an unless order, the claims by the occupants of the Peugeot were struck out. The occupants of the BMW discontinued their claims, where the matter drew to a conclusion.
fraud watch summer 2016
Case study 4 Our reference: 12006641.30 Our client: Quicksure File handler: Mick Lawless
This matter relates to a road traffic accident said to have occurred on 12 December 2015. Investigations led us to believe that the accident had been contrived. It is alleged that the first defendant's vehicle collided with the rear of the claimant's vehicle whilst they were in traffic.
The second defendant, Quicksure, made an early pre action admission of liability before we were instructed. This admission was based on the claimant's account of events and in the absence of cooperation from the first defendant.
Once we were instructed we carried out thorough investigations. We searched the NETFOIL Intelligence Database and found that we had previously defeated a claim by the same claimant, by identifying it as a staged accident.
The following concerns were raised by our review of the papers and investigations by Quicksure and their investigator:
The claimant failed to disclose involvement in the previous accident that we had dealt with. He only reported one previous accident, but we knew his claims history to be significant.
The claimant's sister was involved in a similar incident which was defeated by the agent at Focus Validation Services, who was the client's appointed investigator.
The first defendant's vehicle was in poor condition pre accident and was likely to need significant repair work to keep it serviceable.
The first defendant had owned the vehicle for some time before obtaining insurance for it.
The vehicle damage to the first defendant's vehicle was inconsistent. The magnitude of the damage did not accurately reflect the minor damage to the claimant's vehicle.
The insurance policy was cancelled 18 days post-accident but the accident was not reported to Quicksure.
The first defendant was sentenced for possession with intent to supply a class B drug and given a 12 month rehabilitation order.
The first defendant failed to cooperate for some considerable time and it was only through the perseverance of the investigators that they were able to speak with him.
In light of the many concerns, the case was robustly defended. Our defence set out the hurdles that the claimant would have to overcome and included clear indicators that we believed it to be a staged accident. We made an application to resile from the admission of liability using information already held in NETFOIL. We addressed the medical expert with Part 35 questions and it was confirmed that the claimant had been asked about previous accidents, but he failed to disclose them all. Quicksure's appointed investigators made every effort to arrange a meeting with the first defendant and when he finally co-operated his evidence was not persuasive. Following the defence the claimant made a drop hands offer to discontinue the claim, providing we did not seek costs. An agreement was reached on the following terms: the claimant would discontinue with no costs exposure and consent to
our application to resile from the pre action admission. An assessment of the claimant's financial position has indicated that he is unlikely to be able to meet any costs order. The outcome here has highlighted the benefit of having NETFOIL.
Case study 5 Our reference: 1014450.282 File handler: Andrew London Client: Stagecoach
This matter relates to a road traffic accident said to have occurred on 25 March 2014. Our investigations led us to believe the accident may have been staged. It is alleged that a Stagecoach bus collided with a London taxi. The taxi was driven by Harvey Cunningham and owned by Mr Muhammed Masood. There were claims submitted for hire, repair, storage and personal injury. A claim for personal injury was submitted on behalf of Mr Cunningham. The hire claim was made by Ali Commercials Ltd for 15,249 for a taxi vehicle. It appeared that the hire documents were fake as they had been tampered with (photocopied with amendments).
The vehicle had been inspected by Hindle & Co at 3 Mentor Street, Levenshulme. This address was also used on the repair invoice and the engineers report was commissioned for Mr Masood at the same address. The repairs were allegedly completed at MQ Autos, Unit 4, Levenshulme Trading Estate. However, there was also a repair invoice submitted from Sunny Autos for 490. There were further issues with handwriting on the repair, storage and recovery documents. Our investigations confirmed that the taxi firm, Ali Commercials, rented the taxi to Mr Cunningham. It seemed that the taxi firm had forged a number of documents and sent them to their solicitors, Soloman Law. The solicitors then presented these false documents to the second defendant and also included the genuine repair invoice from Sunny Autos. An interview took place with Mr Cunningham at the premises of the solicitors and he confirmed that the only claim he had was for personal injury and repairs to his vehicle. He did not have a claim for hire, storage or
recovery. He confirmed that he had continued to pay the 150 hire fee for the taxi and continued to use it and never had a hire vehicle. The claims for personal injury, associated costs and repairs were paid by our client. The remainder was repudiated in full. Following this, Soloman Law wrote to our client directly on a few occasions, but this stopped after Stagecoach threatened to complain to the SRA and invited Soloman Law to issue the claim.
If you have any questions relating to the points raised in this edition, or for more information on our fraud services in general, please do get in touch or visit hilldickinson.com/ fraud.
Fundamental dishonesty: a reminder
Stratos Gatzouris, a partner from our counter-fraud team, provides a follow up to his previous article entitled `Fundamental dishonesty; new rules from 13 April 2015'. This article will explore the attitude the court has towards fundamental dishonesty and the different approaches defendants can take.
The concept of fundamental dishonesty was included as an exception to qualified one-way costs shifting (QOCS) when it was introduced into the civil procedure rules (CPR) on 1 April 2013. Now that three years has passed, almost all personal injury cases issued at court will benefit from QOCS protection (these cases generally have a threeyear limitation). It is therefore especially important at this time to bear in mind those cases where an exception applies.
The courts could initially use their own discretion in every case to decide under CPR 44.16(1) whether to strike out the case and to determine costs. However, a finding under s.57 CJCA will force the court to strike out the claim and to make an order for costs against the claimant in a specific way. In the most recent cases it is clear that high costs orders are being made and that there may also be criminal sanctions applied in some cases.
The different procedures
From 13 April 2015 defendants would have to decide whether to make an application for strike out under s.57 CJCA or to make an application under CPR 44.16(1).
Under the s.57 CJCA procedure, where fundamental dishonesty is found, the courts are now under a duty to strike out the claim, unless doing so would cause substantial injustice. There is no definition of substantial injustice provided and this will continue to develop in common law. Under CPR 44.16 (1) there is no obligation for the court to strike out the claim, although this can be ordered at the discretion of the court.
The costs consequences are different for each defendant route. The calculation of costs is at the discretion of the court when it comes to the case of CPR 44.16(1) and may be awarded for only part of the case. In some cases the costs will be awarded for the whole of the case, but this will be decided as the court sees fit.
Under the s.57 CJCA procedure the costs are calculated using a notional assessment of the damages that would have been awarded for the genuine part of the claim, had it not been struck out. The court must award full costs for the defendant as the claim is struck out, but the full amount of costs is deducted from the notional damages amount. This could then leave the defendant with a low amount of costs. It is yet to be seen what will happen when the notional damages exceed the costs awarded. Presumably, this will simply extinguish the costs and there will be no damages award to the claimant.
Recent case law
There are a number of recent cases that show the way this area of law is developing. The courts are clearly taking a strict approach towards fundamental dishonesty and the below cases highlight the different procedures and the consequences that flow from these.
Burnett -v- Aviva (2016)
This case demonstrates how a finding of fundamental dishonesty can result in criminal prosecution. This was the first prosecution carried out directly by the Attorney General for contempt of court as a result of insurance fraud, following a referral by a judge.
In 2015 it was ruled that there was fundamental dishonesty by the claimant under CPR 44.16. The claimant, a professional footballer, was involved in a minor road traffic accident at a drive-through restaurant. There were no injuries reported at the scene and only minor damage to both vehicles. The claimant submitted a personal injury claim for 2,000 in which he stated that he had been unable to play for Cheshirebased Northwich Victoria for a month.
The defendant was able to prove that Mr
Burnett had played a football match the day after the incident and tweeted about this. There was further evidence that he had continued to play throughout the prognosis period. It was held that this was fundamental dishonesty and it was ordered that the claimant should pay the defendant 11,000 in costs.
The claimant was also recently given a four-month suspended prison sentence for contempt of court.
Diamanttek v- James (2016)
This is reported to be the first finding of fundamental dishonesty in a noiseinduced hearing loss (NIHL) case. The case involved a factory worker who suffered NIHL and it rested on the use of protective ear equipment throughout the period of exposure. The claimant was found to be fundamentally dishonest under CPR 44.16. The appeal judgment was recently released in May 2016, although the hearing took place on 8 February 2016.
The case was initially heard on 26 June 2015 before District Judge Kilbane. The claim failed and was dismissed. The judge made reference to the claimant being dishonest, but there was no final conclusion of fundamental dishonesty. The defendant made an application to enforce the costs order on the basis of fundamental dishonesty under CPR 44.16. The application was rejected and the judge confirmed that there had been no finding of fundamental dishonesty.
This decision was reversed at appeal in the Coventry Combined Court on 8 February 2016 by His Honour Judge Gregory. It was held that the factory worker's claim for noise-induced hearing loss was fundamentally dishonest under CPR 44.16 and that costs should be awarded accordingly.
The judge referred to the findings and errors of the previous judge:
It had already been found that the claimant had not been honest about the supply and use of protective ear equipment at the factory due to a number of contradictions and inconsistencies in his evidence.
fraud watch summer 2016
The previous judge had incorrectly refused to make a finding of fundamental dishonesty, despite her conclusions pointing to a case of fundamental dishonesty.
CPR 44.16 had not been applied correctly.
Hughes, Kindon and Jones -vKGM (2016)
This case is claimed to be the first finding at trial of fundamental dishonesty under s.57 CJCA, although strictly speaking the mechanics of s.57 CJCA were not applied. The trial took place on 1 April 2016 at Taunton County Court.
The third claimant had his claim struck out for failing to provide witness evidence and costs were awarded to KGM. The remaining two claimants later had their claims struck out at trial after a finding of fundamental dishonesty due to exaggeration of their injuries. Deputy District Judge Eaton-Hart stated that the claimants `presented a deliberate inaccurate position to the medical expert for financial gain'.
QOCS protection was removed and the claimants were ordered to pay 6,100 to the defendant in costs. Permission to appeal was refused.
Nesham -v- Sunrich Clothing Ltd (2016)
This case looks at the way overenthusiastic defendants can seek to incorrectly apply fundamental dishonesty without justification. His Honour Judge Freedman refused to grant an appeal made by the defendant against a costs decision where there was no finding of fundamental dishonesty.
At the first hearing District Judge Carnock-Neal dismissed the claim as he found in favour of the defendant. The defendant then alleged that there must be fundamental dishonesty if the claimant's version of events was not preferred. The defendant applied for costs under CPR 44.16 and the removal of QOCS. The judge refused this application for costs and confirmed that there had been no finding of fundamental dishonesty.
The defendant then lodged an appeal and this was refused. His Honour Judge Freedman made some very strong statements in this case. He stated that, `merely because an account of an accident has been rejected does not, to my mind, equate to fundamental dishonesty.' He went on to say, `Up and down the county on a daily basis, judges are being asked to decide whose account of a road traffic accident is more reliable. And it is the experience of everybody who litigates in this field that drivers involved in accidents will give different and contrary view of accidents... which may not constitute dishonesty, far less fundamental dishonesty.
Clamping down on fundamentally dishonest claimants
It is clear that there is a no-nonsense approach taken by the courts towards fundamental dishonesty. Although judges are clamping down on dishonest claimants, they are unlikely to make such a finding without good reason. We have looked at cases where there have been findings of fundamental dishonesty and the penalties that apply. We have also looked at a case where the defendant has been criticised for an unwarranted accusation of fundamental dishonesty. Where there is a deliberate attempt to mislead the court such claimants will be dealt with in a tough manner.
In line with the courts' disdain for dishonesty, contempt of court has been used for many years to counteract disobedient and disrespectful behaviour towards the courts and judges. This, coupled with awards of exemplary damages in the tort of deceit and convictions for criminal behaviour, exhibit and reflect the disdain of the courts for fraudulent behaviour, which has been on the increase in recent years. Since the introduction of fundamental dishonesty, there have been more and more findings coming to light and the sanctions being applied have become harsher as time goes on. The case of Burnett -v- Aviva is a reminder of the criminal sanctions that can apply. The case of Diamanttek -v- James underlines the fact that fundamental dishonesty can be applied to NIHL claims as well as other personal injury claims.
How should defendants be prepared?
Recent case law serves to highlight that all parties and the courts are now only too aware of the likely repercussions arising from fraudulent or grossly exaggerated claims. Defendants should be aware of how to target fundamental dishonesty in a strategic way and should be proactive in their approach. However, defendants will also need to be careful not to seek or expect a finding of fundamental dishonesty simply because the claimant has failed to prove his or her case or where the defendant's version of events is merely preferred to that of the claimant. There are likely to be further developments and cases emerging around the implementation and effect of s.57 CJCA.
Stratos Gatzouris firstname.lastname@example.org
If you would like to view Stratos previous article entitled `Fundamental dishonesty: new rules from 13 April 2015' please visit http://www. hilldickinson.com/publications/ counter_fraud/2015/march/ fundamental_dishonesty_new_ru.aspx
fraud watch summer 2016
There is an upwards trend in the number of fake travel websites scamming British holidaymakers out of money. There was 11.5 million lost to fake travel websites in 2015 compared to 2.2 million lost in 2014, which is a five-fold increase. The Association of British Travel Agents (ABTA) has launched a campaign to protect travellers who make online bookings. Holidaymakers should beware of those `too good to be true' online deals as they could be just that!
Police need civil help
The City of London police are starting a two-year scheme using law firms and private investigators to recover assets for fraud victims through civil litigation. There is a lower standard of proof required for civil recovery than criminal recovery under the Proceeds of Crime Act 2002, which should enable the police to seize assets from criminals more quickly. A working group has been set up and the scheme will initially be funded by the Home Office's police innovation fund.
Time to upgrade
According to a recent report by AXA, one third of Britons have committed insurance fraud. There is a lack of trust between consumers and insurance companies and the view that insurance fraud is a victimless crime. Whiplash claims are higher than ever and `cash for crash' scams are costing almost half a billion pounds a year. There has been a big rise in mobile phone `upgrade' fraud, when a customer claims their phone was lost or stolen just in time for the release of a new model.
False car insurance
Renan Gomes has been given a 16month suspended sentence and ordered to carry out 200 hours of unpaid work after he defrauded victims and Liberty Insurance out of 89,000. He set up 133 fake insurance policies, registering false details to get lower premiums and leaving the customers uncovered.
Expensive empty baggage
An aircraft engineer has been jailed for two years after making fake claims for lost baggage that was never lost. He claimed 240,000 for the loss of belongings from his baggage, including a claim for 189,000 worth of specialist camera equipment. IFED detectives found scanner images of the baggage showing that the four bags were all empty. There was also confirmation from the airport that he arrived at that two of the bags had arrived there.
Ice cream fraudster!
An ice cream van was used to stage fake accidents across the country. The van has been linked to three separate fraudulent insurance claims which could have cost insurers 100,000. The man driving the van has pleaded guilty to conspiracy to defraud and fraud by false representation.
No courtesy for courtesy car owners
A Lancashire man used multiple fake identities to make hire car bookings and to take out fake motor insurance policies and then steal those vehicles. He carried out a number of staged crashes before disposing of the hire vehicles. The hire companies had no way of tracing the fraudster when over 200k worth of cars disappeared in a nine-month period. The anti-motor fraud specialist APU finally caught him and he was convicted of conspiracy to make false insurance claims and steal courtesy cars and sentenced to two years in prison.
Liverpool Manchester London Sheffield Piraeus Singapore Monaco Hong Kong
Hill Dickinson has a team of over 70 experienced counter-fraud lawyers and analysts. Supported by Netfoil, Hill Dickinson's market-leading counter -fraud database, they are able to provide advice to insurers and corporate clients to assist in defeating fraudulent claims, to implement fraud prevention and detection initiatives and, where appropriate to recover assets and payments made to fraudsters. If you would like to know more about us, or any other services we provide please visit our website or contact: Peter Oakes Partner, Head of Fraud email@example.com Lisa Kelly Partner, Head of Fraud Operations firstname.lastname@example.org Stratos Gatzouris Partner email@example.com
About Hill Dickinson The Hill Dickinson Group offers a comprehensive range of legal services from offices in Liverpool, Manchester, London, Sheffield, Piraeus, Singapore, Monaco and Hong Kong. Collectively the firms have more than 1150 people including 190 partners and legal directors.
The information and any commentary contained in this newsletter are for general purposes only and do not constitute legal or any other type of professional advice. We do not accept and, to the extent permitted by law, exclude liability to any person for any loss which may arise from relying upon or otherwise using the information contained in this newsletter. Whilst every effort has been made when producing this newsletter, no liability is accepted for any error or omission. If you have a particular query or issue, we would strongly advise you to contact a member of the counter fraud group, who will be happy to provide specific advice, rather than relying on the information or comments in this newsletter.