AXA Insurance UK Plc v Financial Claims Solutions Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Flaux,Sir Stephen Richards,Lady Justice Sharp |
| Judgment Date | 15 June 2018 |
| Neutral Citation | [2018] EWCA Civ 1330 |
| Docket Number | Case No: A2/2017/0637 |
| Court | Court of Appeal (Civil Division) |
| Date | 15 June 2018 |
[2018] EWCA Civ 1330
Lady Justice Sharp
(VICE PRESIDENT OF THE QUEEN'S BENCH DIVISION)
Lord Justice Flaux
and
Sir Stephen Richards
Case No: A2/2017/0637
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
WREXHAM DISTRICT REGISTRY
HIS HONOUR JUDGE KEYSER QC
(Sitting as a Deputy High court Judge)
B02YJ629
Royal Courts of Justice
Strand, London, WC2A 2LL
Brian McCluggage (instructed by DAC Beachcroft Claims Limited) for the Appellant
The Second Respondent in person
The First and Third Respondents did not appear and were not represented
Hearing date: 7 June 2018
Introduction
This case involves serious fraud committed against the appellant insurance company (to which I will refer as “Axa”) by the respondents in relation to two fictitious motor accidents alleged to involve insureds of Axa. The respondents pursued Court proceedings against in the first instance the insureds and then, when default judgments had been obtained against the insureds, further enforcement proceedings against Axa under section 151 of the Road Traffic Act 1988, which led to further default judgments against Axa. It was only through the diligence of Axa, its legal advisers and experts that the fraud was exposed. An injunction was obtained restraining the respondents from continuing with the proceedings and, accordingly, the respondents were thwarted in the attempt to enforce default judgments for a sum in the region of £85,000. As appears in more detail below, the fraud was sophisticated, well-planned and brazen and involved serious abuse of the process of the Court.
In the present Part 20 proceedings, Axa sought both compensatory and exemplary damages against the respondents for the torts of deceit and unlawful means conspiracy. On 10 March 2016, on the application of Axa, His Honour Judge Seys-Llewellyn QC struck out the claims in the two sets of proceedings against Axa and entered judgment against the first and second respondents in the Part 20 proceedings, with damages to be assessed. On 20 May 2016, District Judge Humphreys entered judgment against the third respondent with damages to be assessed.
The assessment of damages was carried out by His Honour Judge Keyser QC at a hearing on 17 February 2017. The judge awarded Axa compensatory damages in the total sum of £24,954.31, comprising the value of time expended by Axa staff in unravelling the effects of the fraud and disbursements to counsel, investigators and solicitors in unravelling the fraud and setting aside the judgments obtained by the respondents. However, the judge dismissed the claim for exemplary damages on the basis that the case did not fall within the principles laid down in the various authorities on the award of exemplary damages. Axa now appeals, pursuant to permission to appeal granted by me on 5 July 2017, against that dismissal of the claim for exemplary damages.
The factual background
In order to set the issue raised by the appeal as to whether exemplary damages should be awarded in context, it is necessary to examine the circumstances of the fraud in more detail. There were two fraudulent motor accidents. One was alleged to have taken place on 8 February 2014 in Lymm in Cheshire involving a “rear end shunt” by a vehicle driven by Axa's insured James Allcott into a BMW driven by Nasima Khatun in which Shazia Begum and Jamal Ahmed were passengers. The second accident was alleged to have occurred in Llandudno on 13 February 2014 and again was said to have involved a vehicle driven by Axa's insured, Zafar Ali, coming into collision with a Vauxhall Insignia driven by Halima Khatun in which Hamza Mahmood was a passenger. Axa avoided both policies shortly after notification of the relevant accident.
Claims on behalf of the drivers and passengers in the two vehicles were pursued by the first respondent, which traded as “Coelum Legal”. That entity was operated by the second and third respondents, the second respondent being a director. Its letterhead showed the name Coelum Legal underneath a logo of scales of justice and an address in Windermere Road, Middleton, Manchester. The letterhead also stated that the first respondent was regulated by the Ministry of Justice and gave a registration number with the Claims Management Regulator and a registered address in Flixton Road, Urmston, Manchester. Subsequent investigations at the Windermere Road and Flixton Road premises revealed both to be shuttered and unoccupied.
Axa nominated BLM LLP as its solicitors to accept service of proceedings on its behalf and on behalf of its insureds. Two sets of proceedings were commenced and prosecuted by the first respondent ostensibly on behalf of the five individuals said to have been in the other vehicles. Throughout those proceedings, the first respondent acted as if it were a firm of solicitors authorised to conduct litigation, which it was not, thereby committing a criminal offence under section 14 of the Legal Services Act 2007.
The proceedings were not served on Axa and the first occasion on which Axa became aware of any proceedings was when it was served with an Order of DJ Jones-Evans in the County Court at Conwy and Colwyn dated 31 October 2014, following a disposal hearing, which granted judgment in default against the insured in the second alleged accident for damages, interest and costs in the total sum of £47,335.28. BLM immediately sought copies of the proceedings and the agreement of the first respondent to the setting aside of the judgment. The first respondent's response in email and letter signed by Adam Khan who described himself as “Litigation Executive, Coelum Legal” was obstructive and unacceptably offensive. The first respondent refused to provide copies of the proceedings which were ultimately obtained from the Court. On 13 November 2014, Axa issued an application to set aside the judgment in default and to join Axa as a defendant.
The first respondent then issued enforcement proceedings under section 151 of the Road Traffic Act 1988 against Axa, which were purportedly served by registered post. The subsequent investigations carried out by BLM revealed that the letters purportedly serving these proceedings and the proceedings in relation to the first accident did not contain any court documents or correspondence about such proceedings but junk mail, which meant that post-room staff simply disposed of what was in the envelopes. Axa was not served with any enforcement proceedings. However, the first respondent fraudulently misrepresented to the Court that the enforcement proceedings had been served on Axa and, on 10 December 2014, judgment in default was entered against Axa.
In relation to the first accident, following a disposal hearing before DJ Crisp in the County Court at Altrincham on 27 November 2014, judgment in default was granted against Axa's insured for damages, interest and costs in the total sum of £36,123.64. The special damages totalled £16,834.28. This comprised two principal elements. First the cost of a replacement vehicle ostensibly hired on a credit hire basis from a hire company called EuropeCar in respect of which two hire agreements were produced by the first respondent for a total period of hire of 96 days, one for 89 days and the second for 7 days. As Mr McCluggage pointed out, this demonstrates that whoever drew up these agreements appreciated that hire agreements in excess of 90 days would fall foul of the Consumer Credit Act 1974. Subsequent investigations by enquiry agents at the premises for EuropeCar stated on the agreements showed no presence of such an entity at those premises, although an entity called “Coleum” did have a signboard there. It seems highly likely that there was no such entity as EuropeCar and these agreements were fictitious, using a name for the car hire company which closely resembled that of a well-known worldwide hire company.
The second element of the special damages was the personal injury claim for whiplash caused by the accident. The first respondent produced ostensible medical reports from a Dr Aman Mbarushimana of examinations of the various claimants, which purported to diagnose whiplash injury and which gave every appearance of being genuine expert medical reports, supported in each case by a statement of truth compliant with CPR Part 35. Subsequent investigation by enquiry agents revealed only one doctor on the register of the General Medical Council with that surname but his first name was Simon, and his qualifications and length of practice did not correspond with those given in the reports. It is tolerably clear that the medical reports are fakes. Furthermore, investigations with the landlord of the premises given as the home address of Ms Khatun and the other claimants revealed that no-one with those names had ever lived there. It may well be that the claimants themselves did not exist.
On 6 January 2015, the first respondent issued enforcement proceedings under section 151 against Axa in respect of the first accident, which again it claimed to have served by registered post, producing a Certificate of Service signed by Adam Khan, describing himself as a solicitor and partner. Subsequently, on 9 February 2015, default judgment was entered against Axa in those enforcement proceedings. Within days, the first respondent had obtained a writ of enforcement or control and bailiffs attended Axa's offices with a view to seizing computers in aid of enforcement. To avoid such enforcement, Axa had to pay the judgment sum into Court. However, on 6 March 2015 DDJ Buchan granted a stay of execution and of the release of any monies. DJ Jones-Evans had already made an order on 19...
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