Supreme Court Rules On Striking Out Fraudulent Claims

Aside from the rule in insurance law under which an insured cannot recover in respect of any part of a claim in a case where the claim has been fraudulently exaggerated or where a genuine claim has been supported by dishonest devices, the general rule of law is that a person cannot be deprived of a judgment for damages to which he is otherwise entitled on the ground of abuse of process. The Supreme Court has, however, made a decision contrary to this principle, citing that the court has power under the CPR and under its inherent jurisdiction to strike out a statement of case at any stage of the proceedings, provided that it is "just and proportionate" to do so.

Background

The claimant, Mr Summers, was accidentally injured whilst working for the defendant, Fairclough Homes Limited. Mr Summers claimed damages of £838,000 from his employer. In 2010 the claim was found by Manchester County Court to be grossly exaggerated; £88,716 was awarded for the genuine part of Mr Summers' claim. The defendant appealed the claim to the Court of Appeal, seeking to strike out the claim in its entirety, citing an abuse of process under the CPR and/or the court's inherent jurisdiction. The defendant's liability insurers, Zurich, were the driving force behind the appeal, stressing the prevalence of fraudulent claims of this kind, which ought to be struck out as an abuse of process. The Court of Appeal dismissed the appeal and refused permission to appeal the decision to the Supreme Court. Permission to appeal was later obtained from the Supreme Court.

Supreme Court's Decision

The issue to be decided by the Supreme Court was whether a civil court has the power to strike out a statement of case as an abuse of process after a trial at which the court has held that the defendant is liable in damages to the claimant for an ascertained sum, and, if so, in what circumstances such a power should be exercised. The Supreme Court found that the court does have jurisdiction to strike out a statement of case under CPR 3.4(2) for abuse of process even after trial where the court has been able to make a proper assessment of both liability and quantum, but this should only be done in "very exceptional circumstances". Whilst the Supreme Court thought this decision to be in the public interest, it stressed that in deciding whether to exercise the right, the court must examine the circumstances of the case "scrupulously" in order to ensure that the strike out is "a proportionate...