Ul-Haq v Shah

The Court of Appeal dismissed the appellant's challenge to the judge's refusal to strike out genuine personal injury claims after a full trial where the claimants had been complicit in a fraudulent associated claim. The court held that there is no general substantive rule permitting a claimant to be deprived of damages for a valid cause of action because he or she has dishonestly exaggerated a claim or supported another person's fraudulent claim, save for the special insurance-law rule. The court further held that CPR 3.4(2) (power to strike out a statement of case as an abuse of process) is principally a case-management power aimed at summary disposal or avoiding unfair trials; it is not generally a basis for striking out a genuine claim at the end of a fair trial unless the dishonest conduct has rendered a fair and safe determination impossible.

This appeal concerned the consequences, at civil trial and on appeal, of claimants' dishonesty in relation to an associated 'phantom passenger' claim. The underlying action arose from a minor road collision in May 2006. The defendant admitted liability for the collision. The driver (first claimant) and his wife (third claimant) claimed minor whiplash injuries and supported a claim by the driver's mother (second claimant) that she had been a passenger and had suffered injury. The defendant denied the mother's presence and alleged that the claimants conspired to advance a fraudulent claim.

The procedural path was: trial before Recorder Parkes QC (Birmingham County Court, 4 February 2008) where the recorder found the mother had not been present and dismissed her claim, found the driver and his wife had been complicit in that fraud but had genuine minor injuries, and declined to strike out the genuine claims although he expressed doubts about the existence of the power to do so under CPR 3.4(2). Walker J (Birmingham District Registry, 31 July 2008) heard the first appeal and concluded there was a discretion under CPR 3.4(2) to strike out a genuine claim, applied a balancing test endorsed in earlier county court authorities and declined to strike out the claims. This second appeal to the Court of Appeal followed.

Nature of the application: the appellant sought to strike out the genuine claims of the driver and his wife under CPR 3.4(2) on the ground of their involvement in a fraud upon the court in support of the mother's false claim.

Issues framed by the court:

• Whether, as a matter of substantive law, a claimant who has dishonestly exaggerated his own claim or supported another's fraudulent claim can be deprived of damages for the genuine part of his cause of action.
• Whether CPR 3.4(2) provides a case-management power to strike out a genuine claim at the end of a full and fair trial because the claimant was involved in collateral dishonesty.

Court’s reasoning and conclusion:

• On substantive law the court held there is no general rule outside the special context of insurance contracts that permits deprivation of a claimant's entitlement to damages for proven loss because of dishonest exaggeration or collateral dishonesty. The insurance exception is well established and limited to claims under contracts of insurance.
• On CPR 3.4(2) the court analysed the rule as a case-management power designed to allow summary disposal of hopeless or abusive pleadings and to prevent unfair trials (for example, where forged or withheld documents make a fair trial impossible). The rule is principally apt to strike out statements of case before or at the outset of a trial or during a hearing where fairness is compromised. Where a full trial has been conducted and the judge has been able to reach reliable findings, the proper course is to give judgment on those findings rather than to use CPR 3.4(2) to deprive claimants of proven entitlements, unless the dishonest conduct has rendered a fair and safe determination impossible.
• The court therefore dismissed the appeal and upheld the award of modest damages and the costs orders made below; it noted that misconduct can be punished by costs or by criminal prosecution but that a change to the substantive law would be a matter for Parliament.

Appeal dismissed. The court held that (1) there is no general common-law rule (outside the special insurance context) that a claimant who has dishonestly exaggerated a claim or supported another's fraudulent claim can be deprived of damages for a genuine cause of action; and (2) CPR 3.4(2) is primarily a case-management power to strike out hopeless or abusive pleadings or to avoid unfair trials and does not generally authorise striking out a genuine claim at the end of a fair trial unless the dishonest conduct has made a fair and safe determination impossible.

Trial before Recorder Richard Parkes QC, Birmingham County Court (4 February 2008). Appeal to Walker J, Birmingham District Registry (dismissed 31 July 2008). Second appeal to Court of Appeal ([2009] EWCA Civ 542) dismissed 9 June 2009.