Vikki Melville takes a look at the problem of fraudulent conduct in civil cases and the shortcomings of the bill intended to remedy it.

Fundamental dishonesty is now a well-known phrase in civil litigation claims in England. The introduction of Section 57 of the Criminal Justice in Courts Act 2015 made significant changes in fraudulent personal injury claims, allowing the court in England to dismiss a case in full for fraudulent conduct. That conduct can be a number of things such as exaggerating an injury, taking part in a staged or induced accident, and bogus passenger claims.

Since the introduction of the concept of fundamental dishonesty in England, there have been some notable well-publicised decisions handed down by the courts in that jurisdiction. The English courts have struck out pursuers’ cases in their entirety after the defenders were able to establish fraudulent conduct on the part of the pursuer.

So what about the approach to fraudulent conduct in civil cases by the courts in Scotland? The UK insurance industry is increasingly concerned with the apparent rise in fraudulent claims in Scotland. This rise goes hand in hand with an increase in the presence of accident claims management companies operating north of the border. These companies are permitted to refer information and claims for a cost, whereas in England, since 2013, referral fees have been banned. Of course the large majority of claims farmed out of the network of claims management companies are genuine but there are instances where such claims are not genuine or, at their most extreme, arise out of activity by criminal gangs.

To date, the position adopted by the Scottish courts is quite distinct. There have been a number of attempts to have a case “struck out” on the basis that a pursuer has been dishonest about part of the claim. However, unlike in England, there is no legislative basis to enable a Scottish court to dismiss an action in full even in circumstances where the opposing party has been able to establish that in part, the pursuer has been untruthful or lied in court.

To compound matters, there is a concern that legislative changes currently being proposed by the Scottish government will create the perfect storm for an increase in fraudulent claims. The Scottish government has published the Civil Litigation (Expenses in Group Proceedings) (Scotland) bill and it is presently at the stage of the Justice Committee call for evidence. This bill seeks to introduce Qualified One Way Costs Shifting (QOCS) which means that in personal injury claims, a pursuer who loses their case will no longer, in general, be liable for the defenders’ legal expenses. Arguably, this removes any disincentive against making a dishonest or fraudulent claim because there is no risk to the pursuer of being found liable for costs if they are unsuccessful.

The bill does set out circumstances in which a pursuer would lose the benefit of QOCS and there is a concern about the present lack of detail around the definition of fraudulent and inappropriate behaviour as designed in the draft bill. Safeguards need to be introduced whereby the benefit of QOCS is withdrawn from a pursuer in circumstances where there is fundamental dishonesty on the part of the pursuer – that would mirror the approach taken by the courts in England and Wales, particularly in view of the fact that the test of fundamental dishonesty is already firmly established there.

The perfect storm continues to gather by the lack of any provision in the bill which deals with the regulation of claims management companies. This lack of regulation, combined with the allowance of referral fees, is likely to increase the numbers of these companies operating in Scotland. The concern here is that this will see an increase in cold calling, and other unpalatable advertising tactics, to generate more claims.

Nobody wants to be at the receiving end of a fraudulent claim nor should such bogus claims be allowed to take up valuable court time and expense. Unfortunately, the present regime, together with what is being proposed in the future, suggests that Scotland is going to become a hotspot for increased fraudulent behaviour and exaggerated personal injury claims. Further action to address this, in order to make individuals think twice about such claims in Scotland, is urgently needed.