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Published 18 marzo 2016
The Jackson reforms and ensuing judgments including Mitchell v News Group Newspapers Limited and Denton v T H White have increased the risks litigants face when failing to comply with the Court timetables. But what is the position when fraud is suspected? Does the maxim "fraud unravels all" override the desire for litigation to be conducted expeditiously and for parties to comply with rules, practice directions and orders?
The Court of Appeal, in its judgment of 9 March 2016 in Gentry v Miller and UK Insurance Limited, was required to weigh the suspicion of fraud against delay in the context of an application to set aside a judgment obtained in default of acknowledgment of service.
Gentry pursued a claim for personal injuries, vehicle damage and credit hire following a collision between his Range Rover and Miller's car. On presentation of the claim through the Low Value Protocol's Portal, Miller's insurer admitted liability. However, when engineering evidence of the total loss of the vehicle and medical evidence of the injuries were served, the insurer did not make an offer, leading to the issue and service of proceedings. No acknowledgment of service or defence was served and Gentry's solicitors obtained default judgment with the claim being listed for a disposal hearing two months later.
The insurer did not attend the disposal hearing and Gentry was awarded £75,089 in damages. After the hearing, the insurer instructed solicitors who intimated than an application would be made to set aside judgment. Investigations into the claim were begun for the first time. A month after the hearing (and three months after the default judgment) the insurer's solicitors issued an application to set aside the judgment and two months later they made a second application to cease representing Miller and to add the insurer as second defendant, expressing concerns that Miller and Gentry knew one another before the accident and that the claim was fraudulent.
The District Judge refused the first application to set aside judgment, leading to a third application (made six months after the default judgment) which resulted in the judgment being set aside. The decision was, in part, based on the District Judge's opinion that the strictures of the CPR and the judgments in Mitchell and Denton should not apply where fraud is alleged.
Gentry appealed, and, after the Circuit Judge upheld the District Judge's decision, the claim was considered by the Court of Appeal. Whilst not disputed by the insurer, the Court of Appeal confirmed that an allegation of fraud does not exempt a case from the rules or the judgments and applied the test in Denton to the application to set aside judgment. The Court considered whether the default (in failing to acknowledge service or file a defence) was serious and significant, whether there was a good reason for the breach, and whether the circumstances of the case justified relief from sanction (i.e. the setting aside of the judgment).
As no evidence of fraud was adduced until six months after the default judgment had been entered and no explanation was offered for the delay, the Court found that the insurer had delayed inexcusably and had not made its application promptly.
Lord Justice Vos, noting that there must be finality to litigation (albeit that the insurer could bring a fresh action to recover its outlay based on fraud) and that rules must be obeyed, stated that "allegations of fraud may in some circumstances excuse an insurer from taking steps to protect itself, but here this insurer missed every opportunity to do so."
The speed and costs-saving of the Portal process may tempt an early admission of liability, but insurers should seek to ensure that claims admitted are genuine and, when proceedings are issued, should take steps to protect their position. Further motivation is provided by the expected increase in the court fee for issuing applications to set aside judgment (which are generally not recoverable) from £155 to £255 in the next few weeks.
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