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fraudulent credit hire claims

Court of Appeal case: Gentry v Miller & UKI [2016] EWCA Civ 141

The Case

This Claim concerns an alleged road traffic accident on 17th March 2013 when UKI’s insured, Mr Miller, is alleged to have negligently driven into Mr Gentry causing him  personal injuries and losses. UKI received no co-operation from Mr Miller, but in February 2014 discovered that he knows Mr Gentry. This then formed the basis of an allegation of a fraudulent collusion and the desire for UKI to put and argue this allegation of fraud at Trial.

However, before they could do this they had to set judgments aside as on 17th October 2013 Mr Gentry obtained judgment for £75 089 together with costs of £12,945 following judgment in default at a disposal hearing where only his representatives (Messrs Armstrongs) attended.

Court of Appeal

Last week the Court of Appeal handed down their unanimous decision to the effect that the decisions of the Judges below, DJ Henthorn and HHJ Gregory, should be overturned meaning that the original default judgment and disposal judgment should stand.

The driving force behind the decision was delay.  The leading judgment from Vos LJ         considered the 3-stage test of Denton and found as follows:

  • There had been a serious and significant breach.  This was conceded on Appeal.
  • There was little explanation.  This does not seem to have been argued with much force on Appeal, save for the contention that the fault lay at the door of the insured rather than the insurer for a large part of the delay.
  • All the circumstances dictated finality in litigation and compliance.  This was the deciding factor and the Court of Appeal came to the conclusion that whichever way the delay was analysed (either 7 months of 2 months depending on the start date), the application was not prompt.  In particular, the Court of Appeal were persuaded by the fact that UKI knew of the case at an early stage, admitted liability, made payments and could and should have done more to investigate the claim before they did, namely February 2014, after an admission almost 1 year earlier in April 2013.
UKI advanced various arguments one of which was the fact that there might not be finality in the litigation as UKI could always bring its own claim for fraud.  Whilst this was mentioned at paragraph 27 of the judgment, it does not seem to have been particularly grappled with by Vos LJ.
Instead, the Court of Appeal found that they were entitled to deal with this case   afresh given the problems identified by the 2 decisions below and were entitled to apply the Denton test as they did.  Given the clear delay and lack of reason for it, such an outcome was always possible and within their generous band of reasonable decisions.
Where the decision can be criticised is the failure to properly balance the fact that  UKI can bring a claim for fraud (and thereby not bring finality) against the more  effective and less costly route of allowing this Claim to proceed on the fraud Defence proposed.

Future Cases

This is perhaps a point to focus on in future cases, albeit the delay here was  significant and without explanation.  The potential fraud could and should have been ascertained much sooner.
It is also worth remembering the Court of Appeal decision in Hussain v Sarkar [2010] EWCA Civ 301 which probably applies to the majority of insurer defences – namely defending on ‘put to proof’ terms can be acceptable whilst the insurer assimilates it’s evidence for the important step of amending to plead fraud.  Thus, if insurers ‘smell a rat’ it is acceptable to defend without a formal allegation of fraud to wait and see how the evidence unravels.
The case of Gentry, of course, was the exception rather than the norm and not an example of the latter, but just an example of unfortunate and unexplained delay.

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.

To book Matthew, please contact his clerks Francine Kirk  and Talia Webster on 0113 245 9763.