“Decompromising” a claim: Fraud and Part 36 settlements

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“Decompromising” a claim: Fraud and Part 36 settlements

Published 22 February 2021

The recent judgment in Khalid Kasem v University College London Hospitals NHS Foundation Trust [2021] EWHC 136 (QB) saw the court addressing the issue of post-settlement discovered fraud and considering in detail the stringent requirements applicable where fraud is pleaded and the vulnerability of claims to dismissal where those requirements are not satisfied.

Background

Mr Khalid Kasem (“K”) brought a claim against the University College London Hospitals NHS Foundation Trust (“UCL”) alleging that surgery on his shoulder had been negligently performed and that he had not properly consented to the surgery. K alleged that he had been left with ongoing symptoms and serious problems with his shoulder. The sum claimed was in excess of £600,000 of which over £450,000 related to alleged ongoing loss of earnings.

Both quantum and liability were in issue but, recognising that there was an element of litigation risk, UCL made a Part 36 offer of £75,000. Exchanges between the parties followed with UCL fruitlessly seeking disclosure of documents relating to K’s finances, employment history and the extent of the alleged injury. UCL eventually threatened a specific disclosure application and, over 7 months after it had been made, K accepted the Part 36 offer.

As a result of information which it said had come to its attention after the Part 36 offer had been accepted, UCL did not pay the sum that had been accepted and, a little more than 4 months later issued new proceedings against K.

The new proceedings

Rather than, seeking to set aside the original compromise and seeking to have it struck out on the basis of fundamental dishonesty under s.57 of the Criminal Justice and Courts Act,UCL brought separate proceedings against K in which it asserted that it had been induced by K’s fraudulent representations to make the Part 36 offer which was accepted by K thereby compromising the claim. UCL relied on photographic evidence from social media which, it was said, were inconsistent with the claimed disability arising out of the alleged negligent surgery.

K applied to strike out UCL’s claim on the basis that the particulars of claim disclosed no reasonable grounds for bringing the claim and/or that the particulars of claim were an abuse. At first instance the application was unsuccessful and K appealed.

The appeal

On appeal the judge, the Honourable Mr Justice Saini set out the five matters that must be pleaded with sufficient particularity and proved in any common law deceit claim such as that commenced by UCL, namely:

1. A representation of fact made by words or by conduct and mere silence is not enough;
2.
The representation was made with knowledge that it was false, i.e. it was wilfully false or at least made in the absence of any genuine belief that it was true or made recklessly, i.e. without caring whether the representation was true or false;
3. The representation was made with the intention that it should be acted upon by the claimant, or by a class of persons which will include the claimant, in the manner which resulted in damage to him;
4. The claimant acted upon the false statements; and
5. The claimant has sustained damage by so doing.

The judge went on to consider what these principles required UCL to plead in the context of the allegations against K, reaching the conclusion that the Particulars of Claim should, at the least have included:

1. The precise representations made by K in the course of his civil claim and whether they were express or implied;
2. The precise respects in which they were factually false;
3. UCL’s knowledge when it made the Part 36 offer and how it relied upon the representations;
4. The material received by UCL after the part 36 offer had been accepted which showed that information provided by K had been false, setting out when that information had been received and how that information showed the representations to be false.
5. The facts that were relied upon which showed that K had knowingly made false representations or made representations being reckless as to whether they were true or not.

The appeal judge concluded that UCL’s claim in deceit was inadequately pleaded and should not have been allowed to proceed, saying “The case is vague in the extreme.” The judge also drew a very clear distinction between the tough requirements of bringing a claim for the tort of deceit and the way in which fundamental dishonesty under s.57 is pleaded saying “The case has been pleaded in the form of a complaint within section 57 of The Courts and Criminal Justice Act 2015 (which provides no cause of action in itself), as opposed to a deceit claim.”

Conclusions

The case demonstrates all too clearly the difficulties that can be encountered where proceedings for what could be termed “pure fraud” are commenced by a party that believes it has been deceived into settlement.

A forensic analysis of the available evidence is required before embarking on such proceedings in order to ensure that the pleading and evidential requirements can be satisfied. In the absence of the evidence to meet the pleading threshold the proceedings, as with those issued by UCL, are at risk of being struck out.

In the seemingly endless fight against fraud, picking the right cases to fight and the grounds upon which to do so are hugely important matters and the words of the American General George S. Paton could be taken as providing a useful part of the selection process, ”Wars are not won by fighting battles; wars are won by choosing battles.”

Authors

Catherine Burt

Catherine Burt

Newcastle

+44 (0)191 404 4042

Chloe Davies

Chloe Davies

Leeds

+44(0)113 251 4841

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