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The case concerns whether a claimant, who substantially exaggerates an otherwise valid claim, should lose their right to damages.

The facts

Summers was injured in an accident at work. The defendant company admitted that its negligence was responsible for the accident but contended that Summers’ dishonesty in fraudulently exaggerating his claim was cause for the court to strike out the case in its entirety. At first instance, HH Judge Tetlow disagreed with this contention and awarded damages of £88,000 to the claimant reflecting his findings as to the true value of the claim. The Court of Appeal rejected the defendant’s appeal. The case was heard in April by the Supreme Court Justices Lord Hope, Lord Kerr, Lord Clarke, Lord Dyson and Lord Reed.

The law

The issue of whether a claimant with an otherwise valid claim who substantially exaggerates that claim should lose their right to damages was considered by the Court of Appeal in the cases of Shah v Ul-Haq (2009) and Widlake v BAA Ltd (2009). In both these cases the defence had asked the court to give weight to an obiter comment made by Laws LJ in the case of Molloy v Shell (2001) that the court should be able to dismiss a claim where there was dishonest exaggeration on a large scale.

In Shah two legitimate claimants had fraudulently claimed that a third party was involved in an accident in which they were injured. Smith LJ found that there was no general rule that dishonest exaggeration of a genuine claim was grounds for dismissal of the whole claim. Furthermore, in considering the court’s powers to strike out the claim as an abuse of process under CPR Rule 3.4(2) she ruled that this could only be done in cases in which it is either not possible to have a fair trial or where, without some corrupted evidence, which has to be disregarded, the claim cannot succeed. She explicitly stated that the comment in Molloy was no more than wishful thinking on the part of Laws LJ and that on closer scrutiny such a finding was not within the court’s powers.

In dismissing the appeal in Shah, Smith LJ highlighted the court’s ability, and indeed willingness, to show their disapproval of a party’s behaviour by way of an adverse costs order. A similar line was taken by Ward LJ in Widlake in which he emphasised that punishment in costs was the appropriate remedy in the case of a fraudulently exaggerated claim. It seems a well established legal principle that it is not for the court to mark its disapproval by depriving the claimant of that to which they are entitled.

The Court of Appeal’s ruling

The short Court of Appeal judgment in Summers made it clear that the defence had not done enough to convince the court that Shah and Widlake had been wrongly decided, and dismissed the appeal.

Issues before the Supreme Court

It is now for the Supreme Court to decide whether there is some legal foundation for the withholding of damages for the valid part of the claim. At the hearing, the close questioning of the advocates for both claimant and defendant suggested that there was an appetite for exploring potential sanctions against dishonesty, but highlighted the potential difficulties of such a finding. In particular the absence of a definition of ‘substantial fraud’ and the difficulty for a court weighing up the gravity of the conduct against the potential loss to the claimant made the court wary of opening up the possibility of interminable hearings in relation to findings of substantial fraudulent exaggeration.