Criminal Justice and Courts Bill

Lord Kennedy of Southwark Excerpts

Wednesday 22nd October 2014 Lords Chamber

[Lord Marks of Henley-on-Thames]

My Lords, in Committee I moved an amendment suggesting that the duty to dismiss personal injury claims tainted by fundamental dishonesty should be a discretionary power rather than a duty. In other words, courts should be entitled to dismiss such claims, but not bound to do so. I also suggested that there should be a power to reduce such claims in appropriate cases rather than to dismiss them altogether, which is a view that I have long held.

I recognise now, as I recognised then, that the Government are concerned to tackle the challenge posed by the proliferation of thoroughly dishonest, largely small, personal injury claims following accidents, particularly motor accidents. I agree that this is a serious problem that needs to be met head on. I was particularly impressed in Committee by the speech of my noble friend Lord Hunt of Wirral on the issue. He speaks of course with a wealth of experience of cases in this area and of the challenges faced by the insurance industry in dealing with them. He spoke then of the evil of the proliferation of whiplash claims. I agree with his Amendment 128 today that any claim included in a personal injury claim should be caught by the section. In answer to the point made by the noble and learned Lord, Lord Hope, I say the section as amended by my amendments—because the problem at the moment is that the whole claim has to be dismissed. That is one of the problems that is addressed by my amendments.

I have in this case modified my amendment substantially for Report in the light of the debate in Committee. My Amendment 128B draws a sharp distinction between smaller claims and more substantial ones. I recognise that the problem that the Government seek to address—the multiplication of fundamentally dishonest claims—arises mostly in the case of smaller claims. My new amendment today would effectively maintain the Government’s position in respect of any claim worth less than £25,000 overall.

However, I maintain my concerns in respect of more substantial personal injury claims. I have conducted over the years a great many claims in this category and I refer to my interest in the register as a practising barrister in this regard. Unfortunately, many of these substantial claims are also tainted by fundamental dishonesty. In Committee I gave the example, hypothetical but not untypical, of a very substantial claim for damages for personal injuries following a serious accident. Out of a total claim value of about £6 million, one element—or head of claim—was a claim for loss of earnings of about £500,000. That head of claim was fundamentally dishonest, because the claimant had suppressed a notice of redundancy given to him before the accident so that the substantial loss of earnings claimed would in fact have been sustained had the accident not occurred. It was therefore, of course, irrecoverable from the defendant.

Nevertheless, the claimant had a valid care claim—a different head of claim, untainted by dishonesty, to take the point of the noble and learned Lord, Lord Hope—worth about £4 million. That claim would have covered the cost of his full-time residential care, with carers, for the rest of his life. The nub of this point is that he himself would not suffer injustice if his whole care claim was dismissed because his care would be paid for by the state in any event. The exception in the clause covering the case—that the claimant would suffer substantial injustice—would therefore not bite.

However, it would certainly be wrong for his entire claim to be dismissed. The right course would be to reduce his claim. Obviously, his loss of earnings claim would be dismissed because that would fail in any event, but the court might also decide to reduce other elements of his damages as well—notably his personal award, which is not tied to specific loss, for general damages, pain, suffering and loss of amenity—to mark the dishonesty. However, without the discretion to reduce the claim instead of dismissing it altogether, the outcome would be that the entire claim would be dismissed—all its heads—and in this example that would cost the state a great deal of money that the negligent defender’s insurers ought to be paying.

I suggest that the clear way to resolve this difficulty is for there to be a power in larger cases either to dismiss a claim tainted by fundamental dishonesty or to reduce the award of damages in such a way as the court deems just. Judges have plenty of experience in dealing with dishonest claims. They can tell what is fundamental dishonesty and what is not, and they can tell what is just and what is not. As one might expect, judges generally dislike dishonest claims intensely and can be trusted to deal with them with appropriate toughness. I invite the Government to agree that mandating courts to dismiss small claims, unless to do so would cause the claimant substantial injustice, but leaving judges free to deal appropriately with larger cases, would be a sensible and proportionate way to approach this issue.

I hope that my noble friend might return at Third Reading, after considering this issue along the lines that I have mentioned, with a solution. I should say that I will not press Amendment 128F in respect of subsection (5), because a combination of the amendment in the name of the noble Lord, Lord Faulks, and the amendment moved by my noble friend Lord Hunt would meet the requirements of orders to cost. That said, I invite my noble friend and the Government to consider this further.

[Lord Kennedy of Southwark (Lab)]

My Lords, the noble Lord, Lord Hunt of Wirral, raised some very important issues, and mentioned claims management companies. Since I came to the House I have raised the issue many times; the more dubious end of the industry is a problem. I know that he mentioned it before, but the claims management regulation unit at the MoJ, run by Mr Kevin Roussell, does a good job on that. I pay tribute to the work that it does and say to the Government that if it had a few more resources it would be able to do an even better job. Pointless, vexatious claims waste our time and cost us money, and the more help we can give to that unit at the MoJ, the better.

[Lord Beecham (Lab)]

My Lords, I expect that other Members of your Lordships’ House will have had my experience of being called about accidents or insurance policies that I have never had, and I entirely sympathise with my noble friend’s last observations. Clearly, no one would wish dishonesty in the presentation of a claim to go without penalty. However, there are some questions to be asked about this provision. The first of those is, why should any change in the law, which we are now progressing, apply only to PI cases? The noble Lord, Lord Hunt, has broadened that somewhat, and is in a sense making my case for me, because he cited a case in which there is both an alleged personal injury and an accident. However, the driver who sues for a personal injury and is deemed to have been fundamentally dishonest will of course be penalised, and rightly so—although how the penalty is levied is perhaps debatable. However, if the claim is only for the damage to the vehicle, he will not be caught by the present clause, and nor, of course, would somebody fundamentally dishonest—whatever that means; that is perhaps another issue, but let us take it as a given at the moment—in a whole variety of other claims. Why should not somebody making a claim—for example, as regards breach of contract, professional negligence or any number of claims that have a monetary element in them for some breach of duty other than involving personal injury—also be brought within the framework? It seems odd to single out this group, albeit there clearly are cases where claims management companies and the like deliberately promote false claims.

Having listened to the noble Lord, Lord Marks, I am not entirely sure that this binary system of small claims and larger claims is appropriate. What might be a small claim to me and some other Members of your Lordships’ House is not necessarily a small claim to the individual claiming £25,000. One needs to have the same approach overall. However, there is then an issue about what constitutes substantial justice, and that is also unclear.

The major issue to which my amendment is addressed is why the courts should have to strike out a claim—an argument made, up to a point, by the noble Lord, Lord Marks—in its entirety on the balance of probabilities, as opposed to the criminal standard of proof. After all, we are talking about essentially criminal behaviour—it is essentially fraud. That is unsatisfactory, particularly if a claim is to be dismissed on that basis, hence my amendment. Of course, as I informed the House in Committee, in the case of Fairclough Homes v Summers in the Supreme Court, the noble and learned Lord, Lord Clarke, said:

“It is for the court, not for Parliament, to protect the court’s process. The power to strike out is not a power to punish but to protect the court’s process”.

He said that the existing power to strike out should,

“only be exercised where it is just and proportionate to do so, which is likely to be only in very exceptional circumstances”.

One has to take that judgment into account in determining how to apply the test. I invite the Minister to reconsider whether the balance of probabilities is not a safer and better test to apply before further draconian action—which must in part be justified by fraudulent behaviour—is taken.