The dawn of a new era? Are we soon to see significant reforms? Michelle Reilly reviews developments in the fraud arena in the last 12 months.

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1 Newsletter Spring 2014 Welcome to the Spring edition of our Counter Fraud newsletter, which is a review of topical issues and cases of interest. This month for the first time, we are pleased to include contributions from some of our other specialist counter fraud teams. We hope you find it an interesting read. Topics The dawn of a new era? Are we soon to see significant reforms? Michelle Reilly reviews developments in the fraud arena in the last 12 months. The battle of the bulge; pre Jackson noise n claims and fraud. Are noise induced hearing loss claims the new whiplash? Paul Debney discusses the increasing volumes of these types of claims and how to identify them. Plana v First Capital East Ltd. Good news for insurers defending cases with a fraudulent element. Mark Bussey provides a commentary on this useful abuse of process case. No relief for dishonest claimants. Jeff Turton comments on how claimants can come unstuck when their apparent dishonesty has been uncovered. Successes. This section of our newsletter summarises a range of recent cases which have been defended successfully. We welcome your feedback on our newsletter. If you have any comments or would like to see us cover a particular topic in our next update, then please contact c Michelle Reilly on or michelle.reilly@weightmans.com

2 A new era for fraudulent motor claims? It has been an interesting year in the counter fraud arena. The long awaited Government proposals on whiplash were published, focussing on reducing fraud and the costs of whiplash claims, in addition to reducing insurance premiums. The results of the consultation have been widely publicised; the key proposals were the creation of an independent specialist medical panel using an accreditation system, standardised reporting, the use of baseline data on whiplash injuries and the suggestion that claimant solicitors should carry out more stringent know your client checks. In addition, The Law commission ahead of its 12 th programme of reform also invited comments. Many respondents suggested that a statutory definition of fraud would be required to avoid the courts having to deal with each case on its merits, and deciding issues such as when does exaggeration become fraud? The Supreme Court in the case of Summers v Fairclough Homes 2012 of course found that the power to strike out for exaggeration in a personal injury case should only be used in exceptional circumstances. The more recent decision of Plana v First Capital East resulted in a more favourable decision as far as fraud practitioners are concerned, and this case is dealt with in more detail by Mark Bussey in the article below. The Sentencing Council is in the process of reviewing the guidelines for insurance fraud at present, which is welcome news and should hopefully result in tougher sentences for those convicted. The Competition Commission enquiry has thrown a spot light on to the motor market, particularly in relation to the control of costs for vehicle repairs. However, it remains to be seen how some of the draft proposals would work in practice. Telematics is an area of continued growth for the industry and the use of telematics data is becoming an increasingly useful tool to defeat fraudulent motor claims. All of these developments come at the end of a year when the public has become much more aware of cash for crash scandals and the impact that these types of scams, and other fictitious claims can have on their insurance premiums. Could it be that we are about to enter a new era where it is no longer socially acceptable to submit a bogus claim because everybody else is doing it? Importantly, the press continue to take a keen interest in cases which involve innocent members of the public being both defrauded and put in danger, which further serves to highlight the issue. It is to be hoped that these initiatives will continue and lead to significant reform, with honest claimants being fairly compensated and fraudsters being appropriately punished. Weightmans will continue to monitor developments carefully in the coming months and provide regular updates. These can be accessed using the following link For advice in relation to any of these issues or other fraud related issues please contact michelle.reilly@weightmans.com

3 The battle of the bulge; pre Jackson noise claims and fraud Since April 2013 it has been unlawful for a Solicitor to pay a straight referral fee to a non solicitor and to buy in any type of claim, including a disease claim. Of course, Claims Management Companies (CMCs) knew for some time prior to the implementation of the rules that their traditional business model was due to end and unsurprisingly set about gathering together, signing up and selling on as many claims as possible prior to the April deadline. We know that the results of that sales campaign were startlingly effective; back in April the ATE insurers were saying that they had sold as many ATE policies to claimants in March as they had in the entire preceding year and since then the claims numbers have spoken for themselves: In 2013, Noise induced hearing loss (NIHL) claims will probably peak at more than 80,000 notifications across the market, equalling the previous high in 1993 which was caused by the implementation of the Iron Trades Deafness scheme. To further put things into perspective, in 2000, prior to the introduction of recoverable success fees (of 62.5%) and ATE premiums, NIHL claims were around 10,000 pa across the market, but very quickly rose following the legalisation of success fees and the increase in CMC numbers to the current levels. These Old World claims are potentially the most lucrative to CMCs and Claimant s solicitors alike as they do not have to go into the portal, costs are recovered on an hourly rate with a success fee and the ATE premium is recoverable and it will take some time yet for the industry to work its way through these claims. Are some of these claims fraudulent? Undoubtedly yes; Weightmans have seen evidence of the following: Duplicate claims by individuals who have already claimed for NIHL; Claims by individuals who worked in non noisy employments; Claims where the claimant denies the provision of hearing protection but where the same is evident from the contemporaneous records; Claims where the claimant has known for many years (certainly in excess of 3) that they are suffering from NIHL but deny that fact; Of course, the full extent of fraudulent claims is uncertain and also depends upon which definition of fraud your organisation uses but, if you adopt the Fraud Act definitions, as Weightmans does, then that includes deliberate and dishonest exaggeration which also captures the following behaviours: Alleging significant tinnitus where there is none; Claiming for hearing aids where the loss level is clearly far too low to justify the same; Claiming hearing aids on a full life basis where the medical evidence supports specifically only a limited acceleration of the necessity of aiding. There is a distinction between the claimant lawyer seeking to provide the best service by maximising damages and a claim promoted on false lines. Further direct evidence comes from Trial wins and also to an extent from discontinuances where the claimant pays our costs and also (to a lesser extent) from the nil settlement level in relation to these claims as a whole. It is perhaps no surprise that there is fraud given that a CMC usually has no interest in the eventual outcome of a claim, only in making a potential claim attractive enough to be bought by an (unsuspecting) firm of claimant lawyers, especially in the last few months before they closed shop. One only has to think back to The Accident Group (TAG) and the information which became available following its demise to see the flaws in this type of business model. TAG employees were largely bonus driven and there were numerous examples of manufactured claims; the success rate of the solicitors

4 on the TAG panel as a whole was so low that the ATE insurers refused to pay out on failed claims on the basis that the claimant lawyers could not properly have vetted them. TAG became unable to sell its claims and went bust, famously sacking its employees en masse by text. The detection of fraud and robust handling of the same with the utilisation of a full suite of sanctions and recoveries products is, in the view of the writer vital to the ongoing success of any Insurer, claims handling organisation or self insured business. These tail end old world claims probably require more scrutiny than ever before and the time to do so is now. Fraud detection is not an exact science in these claims, and usually a bespoke system works best, depending upon the profile of your book of work and the particular fraud definition which your Organisation wishes to or has adopted. We have significant experience in relation to detection, specialist claims handling and sanctions and recoveries in disease fraud claims and would be delighted to discuss matters further with you, either in relation to our market knowledge or to see how we might help you and if that is of interest please contact; Paul Debney, Partner, Head of Disease Counter Fraud at Paul.Debney@Weightmans.com or call Plana v First Capital East Ltd Central London County Court (15 August 2013) On 15 August 2013 his Honour Judge Collender QC laid down judgement in the above case which follows in the same vein of the principle has laid down in the case of Summers v Fairclough Holmes [2013] and the well-reported case of Fari v Mr Haringey [2012]. In the index case the defendant sought an Order pursuant to CPR 3.4(2) (b) striking out the claimant s claim on the basis that there was a clear abuse of process. Background The claim arose from an accident that the claimant allegedly sustained at work on 10 October The claimant claims that he was moving some signs within his workplace when he was caused to slip in someway sustaining a blow to the head. The claimant wasn t certain as to the precise mechanism of the accident but felt sure that he slipped upon a plastic sleeve. The claimant s claim was supported by medical evidence which outlined the claimant sustained mild traumatic brain injury and consequently blackouts of a certainly troubling disabling symptom. By consent (on 15 July 2010) judgement was entered in the claimant s favour on the basis that the claimant accepted 10% of the blame for the incident. Whilst the defendant did not secure its own medical evidence they instructed a firm to carryout surveillance footage that showed the claimant carrying out a whole manner of tasks which the medical experts stated were not possible. This included the claimant driving a vehicle for some significant time/distances, entering supermarkets and working/supervising at a carwash facility.

5 The footage was such that HHJ Collender summarised that a dispassionate viewing of that footage would demonstrate that there is no apparent indication of impairment within the claimant s normal working activities. Despite this, on 4 February 2013 the claimant served an updated schedule of loss upon the defendant claiming 637,308. In short summary the schedule indicated that the claimant claims he was virtually housebound owing to frequent blackouts, spells of dizziness and headaches. Mr Plana claimed that he required constant supervision, was unable to work (to such an extent that he has no residual earning capacity) and was unable to drive. The application and ruling In considering the application the HHJ Collender considered CPR 3.4(2) (b) which states that the court may strike out a statement of case if it appears to the court that the statement of case is an abuse of the courts processes or is otherwise likely to obstruct the just disposal of the proceedings. HHJ Collender also made reference to case of Summers, which confirmed that the court has jurisdiction to strike out a case at any stage of the proceedings. Furthermore HHJ Collender outlined that it is common ground that deliberately making a false claim and producing false evidence is an abuse of the courts process, resulting in an unfair Trial (owing to unnecessary expenditure investigated false and/or exaggerated assertions). Ultimately HHJ Collender took the view that whilst there was likely to have been a genuine incident that this was a fraudulent claim (with the genuine element of the claim representing a mere fraction of the presented claim value) which has been unmasked by the surveillance evidence obtained by the defendants. The claim was therefore dismissed. Wider application of this case in a fraud context In summary the case further strengthens insurers ability to defend potentially exaggerated claims even in instances where there is a genuine aspect to the claim. This stance is certainly reassuring and Weightmans LLP s dedicated casualty fraud team continue to successfully defend such cases with support of the vast amounts of supporting legislation. For further information please contact either adrian.lemonnier@weightmans.com or Mark.bussey@weightmans.com.

6 No relief for dishonest claimants Unless you have been living under a rock (or hiding under your desk, as the case may be) for the last 10 months or so, you will know that the Jackson reforms are now here and cases such as Andrew Mitchell MP v News Group Newspapers Ltd [2013] EWCA Civ 1537 and Durrant v Chief Constable of Avon and Somerset [2013] EWCA Civ 1624 have affirmed that the courts are, in particular, at applications for relief from sanctions, bound to apply the robust approach to procedural default, which was anticipated by those reforms. A quick online search will elicit an enormous number of articles and commentaries from practitioners, scrambling to make sense of, and adapt to, the litigation climate change which now requires courts to ensure priority is given to doing justice in the majority of cases, over individual cases. What is perhaps less well reported is how the reforms have been received by claimants suspected of fraud and how those claimants have, or have not, been adapting their approach to litigation to meet the challenges of the reforms. There are two cases referred to in the credit hire fraud recent successes section of this e-brief. The first is S v V and the second is S v S and they are both cases in which credit hire fraud was suspected. It is clear that in both cases the claimants found themselves in the same quandary. In response to the evidence of apparent fraud, they claimed that their problems arose, not as a result of fraud, but as a result of their inability to read English. They then attempted, after the date ordered by the court for exchange of statements, to change their evidence. Now, it may actually be true that they could not read English. It may also be true that the inconsistencies in their evidence flowed from those shortcomings. But that mattered not as, in attempting to address the evidence of apparent fraud, they cornered themselves into making concessions (or claims) that they had, at the least, conducted their cases in inefficient and non-compliant manners, for which there were no good reasons. And once they adopted those positions, they were unable to obtain relief and the writing was on the wall for their dubious claims, which were both stuck out. The cases illustrate that parties who rely upon apparent fraudulent misrepresentations in the preparation of their cases (or simply prepare their cases badly, thus giving the impression of fraud) are highly likely, in a post-jackson world, to become procedurally unstuck, once their apparent lies have been revealed. They also demonstrate that, for insurance fraud practitioners to achieve the best results for their clients, current awareness of civil procedure and associated case law and its application to claims involving suspected fraud, is now more important than ever. For further information or advice on credit hire and fraud matters please contact jeff.turton@weightmans.com.

7 Successes Harrison and Harrison v Blackhorse Ltd [2013] EWHC B28 (Costs) Royal Courts of Justice 20 August 2013 On 29 November 2013 Master Gordon-Saker laid down Judgment reaffirming the importance of compliance with directions and procedural requirements. In the index case the central issue was the Claimants failure to serve a Notice of Funding in relation to their Conditional Funding Agreement. Background The Claimants alleged that they had been mis-sold payment protection insurance. In 2008 the issued proceedings seeking recovery of the corresponding premiums paid. At first instance the Claimant s claim was dismissed. This decision was upheld upon appeals at the High Court and Court of Appeal. Permission to appeal the Court of Appeal s decision having been granted by the Supreme Court, the Defendant offered the Claimant a full refund of the premiums and interest thereon, totalling 33, The Claimant subsequently claimed costs in excess of 2.5 million, the Claimant having being funded by Conditional Fee Arrangements in relation to each stage of proceedings. When the Points of Dispute were filed the Defendant indicated that despite what is said in the Claimant s Bill, the Respondent received no Notice of Funding in relation to the High Court or Court of Appeal CFAs respectively. As such the Defendants contended that the Claimant was not entitled to recover any success fee on base costs or Counsel s fees (by operation of CPR 44.3B (1)). Relief from sanctions s The Claimant made an application seeking relief from sanctions some 3 months following the service of the Points of Dispute and following the implementation of the Jackson reforms in April The basis of the Claimant s case was that they had intended to serve the corresponding Notice of Funding and had in fact drafted the letter but could not say with any certainty that the corresponding letter had been placed within the DX service. Master Gordon-Saker applied the principles laid down in the Mitchell v- News Group Specifically he confirmed that if the breach was held to be trivial then provided the application for relief was made promptly (reference was made to the three month delay in this case) then relief would likely be provided. However in this instance Master Gordon-Saker held that the breach was not trivial (on the basis that if the Defendant had received full notice then they would have provided different advice) and as such the burden of proof is upon the applicant to show that there was a good reason for the breach. For further information, please contact either mark.bussey@weightmans.com or Adrian.lemonnier@weightmans.com

8 Fighting fraud rings Operations Dakota/ Nastase (A New Year update) Recap In October 2013, Weightmans Organised Fraud Unit (OFU) reported on the progress and savings achieved under Operations Nastase and Dakota, a network of 26 suspected staged/ contrived collisions involving the Co-operative Insurance as the target fault insurer. The operations have continued to keep OFU busy over the Christmas/ New Year period, but we are pleased to report further successes and savings for our insurer client. Out of 15 litigated matters only two remain ongoing. M v R and J v G - Heard together during consecutive trials in December M v R M and his three passengers alleged that R drove out of a junction and drove into the side of his vehicle. At Trial, HHJ Gregory criticised the M s responses under cross examination and called him an unreliable witness. He also found it a real curiosity that M s three alleged passengers were neither a party to the litigation, nor had they been called to provide evidence. M s claim was dismissed in full and M ordered to pay 12, in respect of costs. J v G G allegedly drove out of a junction into the side of the vehicle of J and her alleged four passengers. J and each of the passengers failed to attend the Trial. The hearing of J s claim was adjourned as she had presented medical evidence suggesting that she was incapable of attending Trial. The remainder of the claims were struck out immediately. J was given until January 2014 to confirm her intentions in respect of attending Trial, however she failed to do so, and her claim was also struck out. Weightmans are pursuing recovery of costs. Further discontinuances/ d iscontinuances/strike outs K v F K and his alleged four passengers discontinued their claims in the trial window following service of our Table of Evidence which showed K was in the business of car sharing with alleged fault drivers in the network. K v H K discontinued his claim following disclosure which revealed that both K and H had direct connections with addresses of other parties involved in the network. K v P K and her passenger s claims were struck out due to their failure to comply with directions after their solicitors came off record. Enquiries with the DVLA revealed that a vehicle of the make and registration number of the hire vehicle did not even exist. Our net operational savings to date exceed 1,490,000, a figure which reflects both the worrying truth of the real cost of organised fraud to the insurance industry and the economic importance of fighting fraud rings. For further information, please contact either Oliver.Farrell@weightmans.com; Laura.Duffy@weightmans.com or Catherine.Goodwin@weightmans.com.

9 C v A An insured hire vehicle was involved in a collision with the claimant s vehicle on the way to a night out in Manchester. The accident circumstances had all the hall marks of a staged accident and six claims for personal injury were presented from passengers in both vehicles. The Insurer client defended the claims robustly, with 5 claims being abandoned before limitation expired, however an alleged rear seat passenger in the hirer s vehicle issued proceedings directly against the insurer. During the course of the action, the Claimant provided extensive contradictory evidence, and was consistently late in complying with Court orders, with documents allegedly getting lost in the post on a number of occasions. At trial, the Claimant gave inconsistent and incongruous evidence. During cross examination he denied that his brother had been in the hirer s vehicle, but accepted that his brother had sent a letter of claim on the same day of his letter of claim, and using the same firm of solicitors. The Claimant stated that the only person he knew in the hirer s vehicle at the time of the accident was a man by the name of Mike, with an address, that upon investigation turned out to be the Claimant s previous address. The District Judge, unsurprisingly, dismissed the Claimant s claim. The judge awarded indemnity costs under CPR (8), and commented that improper conduct should be deemed more than the occasions when the Claimant throws a glass of water over the Judge. The judge considered that the Claimant s evidence at trial had indeed constituted improper conduct, and accordingly awarded the Defendant s costs in full, plus Counsel s full brief fee, with costs totalling 7, For further details please contact ben.allum@weightmans.com Credit hire fraud cases (please see commentary above) S v V First up is the case of S v V. It involved a genuine accident, following which, the claimant contended for damage occasioned to, and alleged losses arising from, his motorcycle. He issued proceedings for the recovery of hire charges relating to a replacement motorcycle and shortly before disposal, the court ordered him to provide full and accurate CPR compliant replies to part 18 requests, failing which, his claim would stand struck out. Before the deadline for compliance, the claimant purported to comply with that order by serving his replies. However, all was not well with those replies. For instance, the claimant claimed, in an apparent attempt to justify the period of hire, that his own motorcycle had been un-roadworthy for the entire credit hire period. The defendant s investigations, however, suggested that the motorcycle had passed an MOT around a month or so before the hire ended. This inaccuracy, and others, were put to the claimant, as was the contention he had not complied with the unless order. His solicitors failed to reply, so the defendant issued an application for a determination hearing, in response to which, the claimant sought to rely upon a statement which intimated that any apparent inaccuracies were explained by his inability to read English. At the hearing it was argued on the defendant s behalf that, not only were some of the replies plainly inaccurate, by virtue of the claimant s concession he was unable to read English, the replies were also not CPR compliant, as his statement of truth, which accompanied those replies, in breach of CPR 22 PD 3A, did not contain a certificate of an authorised person.

10 The court agreed that the claimant had failed to comply with the unless order, and, in addition to confirming that the claim stood struck out, the court ordered him to repay all interim payments and costs. An application for relief followed, but the court found, by reference, in particular, to the claimant s apparent dishonesty in the context of the overriding objective and new test for relief from sanctions, that he ought not to be granted relief. The application was therefore dismissed, as was the request for permission to appeal. S v S Following in the footsteps of S v V is the similar case of S v S S. It involved another genuine accident, in respect of which, the claimant contended for vehicle damage and significant hire and storage charges, the latter of which, conveniently, had been incurred whilst the vehicle was in storage at the claimant s own storage facility. Shortly before trial, the claimant served a statement in which he claimed to be impecunious, that he needed to hire a replacement vehicle to store his damaged vehicle and that he needed to do so until the defendant had paid the preaccident value of the damaged vehicle. However, the defendant s investigations showed that the claimant had repaired, MOT d and sold the vehicle, around six weeks before the storage and hire allegedly ended and that, for a significant period the vehicle was alleged to be in storage in Birkenhead, it had actually been in Namibia. In response, the defendant applied to have the claim struck out on the basis of various procedural breaches and/or its contention the claim represented an abuse of process. The application was heard on the morning of trial and, whilst the court indicated that it very nearly struck out the claim, seemingly driven to sympathy by a late disclosure by the claimant s counsel that the problems with the evidence were explained by the claimant s alleged reading difficulties, the court choose not to do so. Instead, it ordered the parties to try to agree directions, which involved the claimant trying to get his case, procedurally, in order. Around eight months later, the claimant served a supplementary witness statement, in which he attempted to change his evidence fundamentally and to disassociate himself from the original evidence on the basis of his contention he was unable to read it. He then applied, around two months later, to amend the address on his claim form (which, curiously, he had concluded, was the only step required to rectify the fine procedural mess in which he found himself). At the hearing of the claimant s application it was argued on behalf of the defendant that the application was wholly inadequate, as, amongst other matters, in breach of CPR 32.10, the claimant had served his original statement late and his supplementary statement (which was the actual statement upon which the claimant now wished to rely) extremely late. He was therefore required, if he wanted to give evidence on the matters set out in those statements, to apply for relief from sanctions and any application at such late stage, applying the Mitchell criteria, would be doomed to fail. Further, it was argued that, as all of the documents (including the particulars of claim) which he had verified by the claimant did not contain the certificates required by CPR 22 PD 3A, he had no evidence upon which he could rely to support his claim. The claimant s representatives argued that, in not striking out the claim at the earlier hearing, the court had effectively given the claimant relief. This argument was rejected by the court, which then, in acceding to the defendant s arguments, went on to dismiss the application and to strike out the claim in its entirety, with costs in favour of the defendant. For further details of both cases, please contact jeff.turton@weightmans.com

11 This update does not attempt to provide a full analysis of those matters with which it deals and is provided for general information purposes only and is not intended to constitute legal advice and should not be treated as a substitute for legal advice. Weightmans accepts no responsibility for any loss that may arise from reliance on the information in this update. The copyright in this update is owned by Weightmans LLP. Data Protection Act Pursuant to the Data Protection Act 1998, your name may be retained on our marketing database. The database enables us to select contacts to receive a variety of marketing materials including our legal update service, newsletters and invites to seminars and events. It details your name, address, telephone, fax, , website, mailing requirements and other comments if any. Please ensure you update our marketing team with any changes. You have the right to correct any data that relates to you. You should contact James Holman, our Data Protection Officer in writing, at 100 Old Hall Street Liverpool L3 9QJ.