In recent years, defendant insurers have been engaged in a pitched battle against a rising number of fraudulent claims. Zurich chose Mr Summers’s claim to test one weapon in its arsenal before the Supreme Court: the court’s power to strike out a claim which is substantially fraudulent.

The appeal arose out of a commonplace employer’s liability case. Mr Summers slipped on a defective step whilst descending from a stacker truck. He fell to the ground, thereby fracturing the scaphoid bone in his right hand as well as his left heel bone.

After a finding of liability in Mr Summer’s favour, a quantum hearing was held, at which Fairclough Homes Limited relied on video surveillance evidence. This evidence disclosed that Mr Summers, in the words of Ward LJ was “an out-and-out liar, who quite fraudulently exaggerated his claim to a vast extent”. One of the ways in which he attempted to mislead the court was in claiming future loss of earnings by stating that his injuries kept him from working as a kitchen fitter. However, the video evidence displayed the falsity of this assertion in all its Technicolor glory with scenes of Mr Summers driving a van, which advertised kitchen-fitting services along the side.

The trial judge determined that his genuine losses amounted to £88,000 – just over one tenth of the figure claimed in the first schedule of loss. Fairclough appealed on the grounds that the judge should have struck out Mr Summers’ claim in its entirety as an abuse of the court's process under CPR 3.4(2) or under the inherent jurisdiction of the court.

The Supreme Court concluded that the court does have jurisdiction to strike out statements of case under CPR r 3.4 (2) for abuse of process, even after the trial of an action, in circumstances where the court has been able to make a proper assessment of both liability and quantum, overruling the Court of Appeal decision in Ul-Haq v Shah [2010] 1 WLR 616. So far so good for defendant insurers, however the Court placed the important caveat that it should only do so in very exceptional circumstances ([33] and [41]-[43]).

This formulation raises the question: when would the court consider the circumstances so exceptional that it should exercise its jurisdiction? The answer appears to be, almost never. The Supreme Court approved the judgment of the Court of Appeal in which it was said that the court would only strike out a claim at the end of a trial if it were satisfied that the party's abuse of process was such that he had thereby forfeited the right to have his claim determined. The Court of Appeal stated that such circumstances were so rare that this was largely a theoretical possibility. The Supreme Court considered whether the possibility of using this power was so theoretical that it should be rejected outright. However, the existence of the power was, ultimately, accepted because “one should never say never” ([43]-[44]). The Court gave, as an example of circumstances in which strike out might be appropriate, “where there had been a massive attempt to deceive the court but the award of damages would be very small” ([49]). Unsurprisingly, applying this approach to the facts of the case, the Supreme Court concluded that it was not appropriate to strike out the action ([63]).

The Supreme Court recognised the difficulties which defendant insurers face in resisting dishonestly inflated claims (see the acknowledgment at [32]). The Court considered, however, that deterrence could be better achieved in other ways such as ensuring that the dishonesty does not increase the award of damages, making orders for costs, reducing interest, proceedings for contempt and criminal proceedings ([51]).

As to costs, the Court appreciated Fairclough’s argument that Part 36 does not provide sufficient protection as the defendant must pay the claimant’s costs under CPR 36.10 up to the relevant date. The Court suggested that in such situations a defendant might wish to make a Calderbank offer in which it offers to settle the genuine element of the claim but offers to settle costs on the basis that the claimant will pay its costs incurred in respect of dishonest aspects of the case on an indemnity basis ([54]).

With regards contempt proceedings, the Supreme Court encouraged defendants to consider making such applications in appropriate cases. Both the application for permission and, if permission is granted, the proceedings themselves could be heard by the trial judge ([59]).

Defendant insurers will undoubtedly be disappointed with the outcome of this appeal. However they may take some small cheer from two aspects of the case. First, the Court cautiously encouraged the use of contempt proceedings and second, it suggested that Calderbank offers may be used more shrewdly in personal injury proceedings to ensure that defendants are fully protected from the cost consequences of exaggerated claims.