The Insurance Fraud Bureau (an organisation set up by Insurers to tackle the problem of insurance crime in the UK) estimates that undetected general insurance fraud costs £2.1 billion a year, which adds an average of £50 to the cost of an individual policy. What is perhaps even more remarkable are the results of a survey conducted by the Association of British Insurers which found that of 3,000 adults questioned 16% would “not rule out” making an exaggerated insurance claim and that 44% consider it acceptable or borderline behaviour to increase the value of an item when making a claim against a policy.

Against this background it is hardly surprising that when a fraud is detected the Courts are keen to be seen to punish the wrongdoers. As Moses L.J said in South Wales Fire and Rescue Service v Smith [2011] EWHC 1749:

“False claims undermine a system whereby those who are injured as a result of the fault of their employer or a defendant can receive just compensation. They undermine that system in a number of serious ways. They impose upon those liable for such claims the burden of analysis, the burden of searching out those claims which are justified and those claims which are unjustified ...

...Those who make such claims in court should expect to go to prison. There is no other way to deter those who may be tempted to make such claims and there is no other way to improve the administration of justice.”

The comments of Moses L.J were cited with approval recently in Fairclough Homes v Summers [2012] UKSC 26 (as to which see the article of Frances McClenaghan, below) and by Rafferty L.J when she came to sentence three Defendants for their part in bringing a fraudulent personal injury action in The Queen on the Application of London Borough of Havering v Bowyer, Jones and Bowyer [2012] EWHC 2237 (Admin).

When considering the appropriate tariff Rafferty L.J considered Nield and Acromas Insurance v Loveday [2011] EWHC 2324 which was a claim “inflated by grossly exaggerated injuries. Loveday’s wife admitted her contempt. Loveday contested the contempt and was sentence[d] to 9 months’ imprisonment, Mrs Loveday to 6 months’ imprisonment, the term suspended for 18 months”.

On the facts of Havering the three Defendants were sentenced to terms of imprisonment ranging from one to four months.

The (perhaps belated) judicial realisation of the scale and degree of fraud is certainly welcome. However the problem for those who find themselves having successfully defended a claim on grounds of fraud is taking the next step. In order to secure a conviction as happened in Havering it is necessary to bring committal proceedings for contempt of court; that contempt most usually being making, or causing to be made, a false statement in a document signed by a statement of truth (as per CPR r. 32.14). Such proceedings involve yet more time and expense, when by and large successful Defendants and Insurers probably just want to forget the whole business, notwithstanding the deterrent effect of committal proceedings on other organised fraudsters.

What is even more antagonistic to the principles set out by Moses L.J above is that, currently at any rate, where the contempt is committed in the County Court (where the vast majority of fraudulent personal injury claims are to be found) any committal proceedings must be heard by the Divisional Court and not by a single judge of the High Court. The implications for Court time are obvious and have been subject to judicial comment in Brighton & Hove Bus & Coach Company Ltd v Brooks [2011] EWGC 806 (Admin), where LJ Toulson observed:

“The inconvenience of a committal application having to proceed before two judges sitting in the Divisional Court rather than before a single judge of the High Court, who could hear it wherever it should sensibly be heard, is selfevident. If such proceedings are going to become more common, as there is some evidence to suggest, they are likely to place a considerable and unnecessary burden on the court to the detriment of other litigants.”

It is hoped that a change in the rules is therefore imminent. Until such time I would suggest that HHJ Moloney QC has shown Defendant Insurers the way. In Ramaraj v Ahmed (LTL 7/6/2012) the learned judge directed that a transcript of his judgment should be prepared at public expense and delivered to the Metropolitan Police to consider a prosecution of the fraudulent Claimant for conspiracy to pervert the course of justice and benefit fraud, avoiding the need for the successful Defendant having to seek committal proceedings in order to obtain the appropriate deterrent effect to other would-be fraudsters.