Civil fraud UpdateMatthew Smith
Following Matthew Smith’s recent seminar ‘Fraud Update’, the following is a summary of the changes over the past 12 months which practitioners in the field of civil fraud are likely to find useful.
Defences and Ahmed v Lalik & Co-op  EWHC 651
This case confirmed that the earlier Court of Appeal decision of Kearsley v Klarfeld  EWCA Civ 1510 was sound i.e. as long as a defence complied with CPR 16.5, fraud did not have to be pleaded. It also confirmed that Hussain v Amin  EWCA Civ 1456 did not overrule Kearsley especially as the remarks of Davis LJ were obiter.
The Fixed Recoverable Costs (‘FRC’) regime
In his civil fraud update, Matthew considered the question: Do FRC apply to CCMCs thereby obviating the need for a CCMC? On one interpretation of the rules, the answer seems to be yes.
Also, CPR 45.29F (10): Where, in a case to which this section applies, any of the exceptions to qualified one way cost shifting in rules 44.15 and 44.16 is established, the court will assess the defendant’s costs without reference to this rule.
Therefore, if you have a QOCS case under the FRC regime and you invoke 44.15 or 44.16 you can have your costs assessed on the old basis of reasonable and proportionate.
One further point of practice is whether a claim under the FRC with more than one claimant entitles the winning claimants to £2665 + vat x 20% damages x no. of claimants. It is felt that it does especially given that the rules expressly state only one advocate’s fee for the trial and are silent on profit costs.
The QOCS exemptions
CPR 44.15(1) provides as follows:
Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that-
the claimant has disclosed no reasonable grounds for bringing the proceedings;
the proceedings are an abuse of the court’s process; or
the conduct of –
the claimant; or
a person acting on the claimant’s behalf …
is likely to obstruct the just disposal of the proceedings.
There are only 2 main QOCS cases. The first instance decision of HHJ Maloney QC in Gosling v Hailo and Screwfix (2014) Lawtel. That case considered the definition of fundamental dishonesty and the procedure for such a finding (see below). It did not consider CPR 44.15. Similarly, the Court of Appeal decision in Wagenaar v Ski Weekend  EWCA Civ 1105 did not consider CPR 44.15, but the broad issue of the legality of the QOCS rules in the first place.
There is no guidance provided in the Jackson Reforms as to the interpretation of CPR 44.15 and, in particular, CPR 44.15(1)(c). This has lead to problems e.g. claim struck out at trial for failure to comply with an order; strict proof defence; trial judge refuses to have a hearing on the issue of fundamental dishonesty; Parties dispute the applicability of CPR 44.15(1)(c).
CPR 44.15(1)(c) needs to be interpreted purposively and contextually. The court can and should be able to direct and order the enforcement of a costs order under CPR 44.15(1)(c) if there is or is likely to be a dispute as to its applicability. If the court did not have such discretion, then the parties would be left in limbo in the event they disagreed on the applicability of CPR 44.15(1)(a), (b) or (c). An application from the receiving party would be inevitable, costly and utilise yet more of the court’s resources. In his civil fraud update seminar, Matthew advised practitioners that a recital in the order at the very least should be sought.
CPR 44.16(1) provides as follows:
Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim in sound on the balance of probabilities to be fundamentally dishonest.
The only proper guidance is the case of Gosling (supra.).
The following test is discerned:
- Fundamental dishonesty includes dishonesty that went to the root of either the whole claim or part of the claim.
- It does not include some collateral matter or some minor, self-contained head of damage.
- As to whether there should be an oral hearing to determine this, it depends on all of the circumstances and proportionality. It can be determined on the papers if it is just and proper to do so, eg surveillance evidence.
Section 57 of The Criminal Justice and Courts Act 2015
(1) This section applies where, in proceedings on a claim for damages in respect of personal injuries (“the primary claim”)-
(a) the court finds that the claimant is entitled to damages in respect of the claim, but
(b) on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.
(2) The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.
This seemingly formalises Summers v Fairclough Homes  UKSC 26 into statute.
However, again there is no definition or guidance as to the meaning of fundamentally dishonest or substantial injustice. The Court of Appeal are going to be busy.
This section came into force on 13th April 2015 and is not retrospective. It applies to all PI claims issued after this date.
There are two recent cases into which Matthew provided an insight in his civil fraud update:
- Zurich Insurance v Umerji  EWCA Civ 357: this principally dealt with a procedural issue regarding a debarring order on the issue of impecuniosity. However, the obiter of Underhill LJ has sparked some interest and following. At paragraphs 41-3 of the judgment reference is made to the argument that a claimant’s duty to mitigate includes using any available courtesy car on the particular claimant’s own insurance. Underhill LJ expressed this was an interesting and important point, but not one for consideration on that particular appeal. This is being used as a green light for argument at trials. It is understood there is an intention to have a specific ruling on this point by the Court of Appeal.
- Stevens v Equity  EWCA Civ 93: sets out the proper approach in determining the sum attributable to the daily basic hire rate from the total charge incurred under a credit hire agreement.
Matthew Smith is a highly regarded member of our civil fraud team, which he co-founded. He is often praised for his effective and thorough cross-examination in civil-fraud-related cases [Legal 500, 2014]. To book Matthew, please speak to Francine Kirk on 0113 202 8605.