Hit and miss

The case of Locke v Stuart and AXA [2011] EWHC 399 (QB), heard by Andrew Edis QC sitting in Liverpool, concerned a modest claim for £1,500 personal injury damages following an alleged road traffic accident. What was not so modest was the evidence '“ the court was provided with nearly 3,000 pages of written material contained in eight lever arch files.

The claimant, Locke, said he was a passenger in a car which was hit by Stuart as he pulled out without giving way. Stuart did not enter a defence or appear at the trial, but his insurer, AXA, was added as a party to the claim at its own request, alleging that the accident had been contrived. The firm's solicitor gave evidence (in writing and orally) regarding nine accidents, of which this claim was one, suggesting that, inter alia, there were various links between the persons said to be involved in each of them and that this was evidence to support the fact that they were all contrived.

The judge took the view that the considerable resource applied by AXA in the defence of this claim was justified on the basis of the fiscal consequences to the motor insurance industry of fraudulent claims, but he also made comments for the assistance of the legal profession regarding the volume and relevance of all of the documents before the court, many of which were not referred to. The average claimant would not be able to apply very substantial resource to supporting his claim.

Referral fees

The parliamentary cross-party transport committee received evidence from the police and insurers that staged accidents are on the increase. The solicitors for AXA in Locke gave evidence that the estimated cost of motor insurance fraud is £2bn every year and was probably an underestimate. Fraud is rarely ever proved in respect of claims whichare paid and these estimates, given in evidence, must be considered with some circumspection.

In the recent report from the transport select committee, it found that, among other reasons for the increase in motor insurance claims, there was a merry-go-round of referral payments, starting with payments made to insurers and others for claims being made by lawyers.

The judge in Locke referred to the evidence in the case, which 'revealed publically the scale of the inducement offered by the practice of referral fees to the promotion of false claims'. Part of the evidence in the case related to the links between the alleged accident and other accidents in the Wirral area. One of those accidents involved a minibus and a total of 19 people were in a position to claim damages, which, at the rate of £450 per referral, would have earned the referrer £8,550. The inducement is obvious.

Since the date of the alleged accident, the 2007 Solicitors Code of Conduct has come into force and solicitors are regulated in the form of rule 9 of the code, which requires transparency. A solicitor is required to disclose to his client the amount of any referral fee he has paid. Claims management companies are regulated by the Ministry of Justice. It is a requirement that they are registered as a condition of them being able to trade.

The judge found as a fact that all of the solicitors involved had at all times acted with propriety and, although he made no finding of fraud against the claims referrer in this case, he recognised as a link between the case he had to decide and the other accidents to which he was referred, the referrer AW Claims had participated actively in them.

Evidential issues

The judgment sets out the areas in which the insurers and those representing them had made investigations. They included:

(a) searches on Facebook;

(b) searches on Experian;

(c) other investigations on the internet; and

(d) instructing a private investigator to make a 'pretext' telephone call to theclaimant's household.

It was argued for the claimant that such evidence, especially the evidence of links between the claimant, his brother and parties involved in the other accidents on Facebook, were collateral issues going to credit only. They were therefore inadmissible as evidence of fact. The judge found that on the particular facts of the case (and, I submit, the issue of motivation will be an issue in all claims where allegations of fraud are made) the facts were capable of going to the central issue of motivation and, where such serious allegations are made, the evidence is not collateral.

It seems, therefore, in this type of case, the court is likely to allow in such evidence as evidence of fact and not simply collateral evidence going to the issue of credibility.

The significance of this evidential point is that if the judge had accepted the submission of counsel for the claimant, that the evidence went to credit only, there is not likely to have been sufficient evidence to enable the judge to make a finding of fraud. If the judge had not simply accepted the claimant's evidence, he might have come to the conclusion that the claim failed because the claimant had not proved his case.

However, that is a long way short of finding that the accident was contrived. Having decided that the investigative evidence could be admitted as evidence of fact, the judge reminded himself of the decision of the Court of Appeal in R (N) v Mental Health Review Tribunal (Northern Region) and others [2006] QB 468, and the authorities cited in Markel International Insurance Company Limited v Higgins [2009] EWCA Civ 790.

His approach to the case was that the allegations made by AXA are serious, as are the consequences of those allegations and therefore strong and cogent evidence is required to prove them on the balance of probabilities. He went on to find that the facts to be derived from the investigative evidence adduced by AXA did so prove, and he dismissed the claim.

Estoppel

Locke's brother, the driver, had previously won his own claim for damages. The questions of issue estoppel/res judicata arose and were shortly dealt with by the judge. He held that the principles did not apply because:

(a) If the earlier judgment had been obtained by fraud, then it was liable to be set aside.

(b) He was not privy to the evidence given to the district judge and was not bound therefore to follow the district judge's findings.

AXA was able to adduce investigative evidence showing seemingly innocuous facts to be untrue. They were able to show, for example, that it was unlikely that persons travelling in the same vehicle had a cogent reason to be travelling together. I doubt there are many claimant solicitors who would, in a claim of this size, think to question the claimant and others in response to an answer such as 'we were coming home from a party'. It is important to test all seemingly innocuous facts if there is any suspicion of any sort on the part of the claimant's solicitor.

Solicitor's letters of claim should be drafted with care so that they reflect accurately the claimant's claim. Seemingly insignificant facts should be considered and tested before the letter of claim is delivered. In this case, there was evidence that the occupants of the car in which L was a passenger had been part of a gathering at Locke's house where food was available. There was some evidence that Locke's brother intended to drop off another passenger to his home and thereafter to go to a takeaway pizza outlet. The judge found this scenario to be unlikely. If the claimant had been questioned by his representatives on this point, it certainly did not appear to be answered within his witness statement.

The claimant's brother had already recovered damages. Part of his case was that he did not play football for two to three months. This was according to his witness statement. He told the medical expert who reported in his case that he did not play football for this time (and this is what the judge found as a fact).

Through their investigations on the internet, AXA's solicitors were able to find that he had in fact played football and scored a hat trick on 9 December 2006, some two days after the accident. Active concealment of the facts may lead to a finding of fraud (as opposed to dishonest exaggeration). The inconsistency might have been obvious and should have been tested before trial.

The judge reiterated the now well-known rule that there should be credible evidence of fraud before such an allegation is raised by a defendant (and its lawyers). The facts of the other accidents alleged to be linked with Locke's claim were unsupported and not analysed within the proceedings. The judge cautioned that fraud allegations should be advanced with care and crucially should be based upon evidence and not assumption. In Locke's claim, the parties involved in the other 'linked' accidents had been named, a practice of which was strongly disapproved of by the judge.

Inconsistency in the evidence is not evidence of fraud. The inconsistency can be present for other reasons '“ for example, the passage of time and faded memories '“ and would not in itself have been sufficient to cause the court to make a finding of fraud. Inconsistency may amount to sufficient evidence to show that the claimant had failed to prove his case, but the threshold has to be passed by a defendant adducing further

evidence and it seems to me that the threshold is such that it is safe to say that, before the court will find fraud, there must be no other reasonable explanation for the inconsistency/lack of credibility.

The judge allowed in evidence the pretext telephone call, which enabled him to findthat there was more than a tenuous link to another of the alleged accident victims in one of the other accidents brought to his attention. There does not appear to have been any point taken about the admissibility of this evidence.

Both sides

The judge commented early in his judgment upon the volume of documents put before the court, and he came to the conclusion that far too much documentation was placed before it. Although he said that there were extenuating circumstances, in that this claim was once part of a series and the extensive documentation in the bundles may perhaps have been necessary to deal with all the claims, there was an opportunity to reduce the documentation which was not in fact taken.

He actively encouraged the use of Scott Schedules and short form précis documents which showed, for example, how entries on Facebook are created and what inferences may safely be drawn from them. In this way, he considered that it would have been possible for many of the facts to have been agreed, thus taking up much less than the significant time for which this claim occupied the court.

The parties had not complied with the directions given by the procedural judge for the preparation of a trial bundle. Instead, each party lodged its own documents. He stressed the importance of both sides jointly addressing the question of what documentation was really required to resolve the case.

In my experience, this is a common problem with cases ranging from the small claim to the catastrophic claim, and greater attention needs to be paid to it; in order that the volume of material unused is reduced to a minimum, the judge does not pre-read documents which are not relevant and the court's time is not wasted.

This decision should be welcomed as a demonstration of identifying and tackling fraudulent staged accidents. However, great care must always be taken where such a serious allegation is made.