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What can be done about exaggerated claims?

The long-awaited Supreme Court judgment in Fairclough Homes Ltd v Summers [2012] was finally delivered on 27 June. The facts of the case can be summarised briefly: the claimant suffered a genuine injury but grossly exaggerated his ongoing disability, reflected in the fact that his pleaded claim originally exceeded £800,000 (excluding general damages and interest) but he was awarded only £88,717 (excluding interest). Barely, therefore, ten per cent of his original claim.

The appellants, Fairclough Homes, who were the original defendants, contended before the trial judge that:

  • The claim should be struck out for being tainted with fraud as an abuse of the process under 3.4(2) and/or under the courts’ inherent jurisdiction;
  • The claimant should be denied interest from June 2007 (the trial judge having made a finding of fact that the claimant was fit for work from that date);
  • The claimant should pay the defendant’s costs post the (earlier) liability judgment or there should be no order as to costs;
  • Permission should be given for contempt of court proceedings.

Contempt of court

The trial judge was bound by precedent (Ul-Haq v Shah [2009] and Widlake v BAA [2009]) and could not strike out the claim, but gave permission to appeal and awarded interest for the full period. He ordered the defendant to pay the claimant’s costs to February 2008 and the claimant to pay the defendant’s costs of obtaining surveillance evidence prior to that date, but there was no order as to costs from March 2008 (the original judgment was handed down in February 2010). He also declined to give permission for contempt of court proceedings.  There was no appeal in relation to interest, costs or the refusal of permission for the contempt proceedings.

It is right to say that the defendants had, seemingly from a very early stage, decided to pursue an application to strike out, if they successfully established at trial that the claimant had grossly exaggerated his claim (which they did). However, in adopting this strategy, they declined any attempt to settle the claimant’s claim by not making any offers and refusing an invitation to a joint settlement meeting, in the face of several – admittedly too high – offers from the claimant. This approach did not find favour with the trial judge (nor, implicitly, with the Supreme Court) and lay behind his decisions in relation to interest and costs.

Striking out a claim

In relation to the application to strike out the claim after judgment, the Supreme Court, while acknowledging that the power existed, declined to exercise it, finding that it was not just and proportionate on the facts, and said that this power would only be exercised “in very exceptional circumstances.” The Supreme Court also restated that the correct way to deal with such cases was by ensuring the dishonesty did not increase damages, through costs, by reducing interest, proceedings for contempt and criminal proceedings.

One cannot but admire the resolve of the appellant/defendant in taking the course of action that they did and the decision brings clarity to the approach that should taken in the face of an exaggerated claim. As outlined above, it is through the award of damages, costs and interest that immediate condemnation should be expressed, and subsequently through proceedings for contempt and (less likely) criminal proceedings.

Part 36 offer

It is also clear that repugnance in relation to an exaggerated claim should not preclude offers being made to reflect the ‘true value’ of the claim; it is equally clear that failure to do so may remove a defendant from the moral high ground. On the subject of offers, it is interesting to note that in cases such as these, the Supreme Court supports the use of Calderbank offers rather than Part 36, contrary to what we have been hearing from the Court of Appeal in recent months and in particular from Lord Justice Jackson.  This allows much greater flexibility and is to be welcomed.

Finally, the Supreme Court has left open the question of whether an earlier application (i.e. before trial) to strike out would have been more successful, because it would have avoided the high cost of the trial. One hesitates to recommend such a course of action in relation to exaggerated claims and case law would seem to be against such a tactic.

Posted on Jul 12th, 2012 by Lyons Davidson