Howard Cohen obtains multiple awards of damages against 16 fraud claimants

Howard Cohen was recently successful in obtaining awards of exemplary damages against 16 fraudulent Claimant car drivers and passengers involved in a “slam-on” fraud ring, following 9 separate collisions.

In Tasneem & Ors v (1) Morley & Ors (2) Direct Line Group, tried at Central London County Court on 30th September 2013 before Her Honour Judge May QC, the Court heard how the Claimants had been involved in 9 separate collisions between March and September 2010. Slowly and over time, it became clear to the Second Defendant insurance company that there were factors linking each collision including the slam-on nature of each, common accident management, hire, repair and storage companies, and most obviously, the same mobile telephone number provided to the innocent Defendant motorist at the scene of each crash. Given the geographical spread of the collisions and their high number, it was plainly more than merely a coincidence that the same mobile telephone number kept appearing.

The claims arising from the 9 separate collisions were case managed together, such that by the date of trial on 30th September 2013, each of the Claimant’s claims had been struck out, with Judgment awarded to each named Defendant in respect of their counter-claims. The purpose of the trial was for the court to assess the quantum of those counter-claims and to consider the Defendants’ claims for exemplary damages against each fraudulent Claimant.

Having heard submissions and considered the relevant case law on exemplary damages, Her Honour Judge May QC had no hesitation in concluding that claims arising out of fraudulent road traffic accidents fall within the categories set out in Rookes v Barnard [1964] AC 1129 in that they constitute outrageous behaviour and are clearly intended to generate profit. As such, she was satisfied that exemplary damages were appropriate.

Far more time was spent on the quantification of exemplary damages, as neither of the recent reported cases in this area provided much guidance (Axa Insurance PLC v Jensen [Lawtel, 18/2/09], Axa Insurance PLC v Shaikh [Lawtel, 15/6/10]) and no other authority could be found.

Counsel tried to persuade the Court that in view of the nature of the claims made, the wholesale nature of the fraud and the danger to which innocent motorists were put, it was wholly appropriate to award exemplary damages as a proportion (put at 100%) of the fraudulent claims made, rather than as a percentage of the successful counter-claims. By their very nature, the fraudulent claims were far more sizeable than the Defendant’s counter-claims for repairs and insurer’s outlay.

The Learned trial judge made the following observations:

1. Exemplary damages, when awarded, must create a deterrent. Low value road traffic fraud is a widespread and pernicious practice. It undermines the honesty which forms the basis of insurance generally;
2. The slam-on collisions that formed the basis of this litigation were intentionally caused and had the potential to be highly dangerous. This year, a fatality had been reported arising out of a similar “crash for cash” fraud;
3. The fraud section of the City of London Police had indicated that it was not interested in investigating this fraud ring any further for budgetary reasons. Thus, there was no risk of double jeopardy to the Claimants in being charged by the police as well as being ordered to pay exemplary damages;
4. Although the Learned Judge had heard no evidence from the Claimants as to their means, they had all had an opportunity to adduce evidence about this. She therefore refused to take that absence of evidence into account or use it as an excepting factor when determining the appropriate level of exemplary damages;
5. In accordance with paragraphs 127 and 128 of the Judgment of Lord Nicholls in Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29, she would make one single award of exemplary damages against all of the Claimants in each action. In other words, it was appropriate to make one exemplary damages award against all of the occupants of each of the offending vehicles;
6. Thus, although the drivers of each of the vehicles were perhaps more culpable than their passengers, the exemplary damages awarded had to take into account the claims brought by the passengers which in most cases, were fairly low. Although punitive, exemplary damages must not be excessive;
7. There should be uniformity in punishing fraudulent drivers and passengers, even though their claims for General Damages and Special Damages differed, widely in some cases.

Having considered all of these issues and bearing in mind the significant sums in costs that she had awarded against the Claimants in every action, the Learned Judge decided not to quantify exemplary damages as a percentage of the fraudulent claims made. However, rather than award a proportion of the Defendants’ successful counter-claims (per the previous reported cases dealing with exemplary damages following fraudulent claims), she instead awarded exemplary damages of £2,000 against each fraudulent driver and £1,000 against each fraudulent passenger. She made no award of exemplary damages in the first action (the lead case) because she had already awarded indemnity costs of over £44,000. In the circumstances, an award of exemplary damages would have been overly punitive.

Finally, having heard evidence from an employee of Direct Line Group as to the additional costs involved in investigating and challenging fraudulent claims (including the cost of setting up 4 offices nationwide specifically with the task of combating fraudulent claims), the Learned Judge awarded investigation costs of £1,000 against each Claimant. This was an increase on the £750 cost of investigation awarded in the reported case of Liverpool Victoria v Ghadhda & Anr (Central London County Court, 30/6/10).

Comment

This is a significant next-step for Defendants and Defendant insurance companies in the ongoing fight against fraudulent motor insurance claims. As well as highlighting once again that exemplary damages are a useful tool in claims of this type, it may be the start of a tariff-style system of awards which is capable of refinement and modification to meet the requirements of each individual case. This seems far preferable to a system based upon the value of the counter-claim brought (particularly where that is low or very low) which may result in random results that bear no relation to the fraudulent Claimant’s conduct.

The awards in this case were relatively low both because the size of the lowest value counter-claims continued to be a factor, but also because, apart from their involvement in the collisions themselves, there was no evidence that the Claimants had had a great deal to do with their fraudulent claims. They had not signed witness statements, nor were their signatures to be found on the pleadings. Their only known involvement had been to visit medico-legal experts for the purposes of examination. The fraud-ring had clearly been orchestrated and run by other, unidentified parties. In these circumstances, it was not felt right to punish the Claimants any further.

However, should it be proven in future that dishonest drivers and passengers have played an active and ongoing role in the fraudulent litigation itself, then I see no reason why the exemplary damages tariffs of £2,000 for a driver and £1,000 for a passenger, should not rise. The Claimants’ means may mitigate any significant rises but they would have to prove their means to the Court’s satisfaction.

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Author: Howard Cohen Farrars (chambers@farrarsbuilding.co.uk)

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