SETTLEMENTS: FRAUD UNRAVELS ALL
the Supreme Court unanimously allowed Zurich’s appeal and set aside the settlement agreement on the basis of fraudulent misrepresentation by the claimant, holding that Zurich had been induced by the claimant’s fraud to enter into the agreement and had settled for a much greater sum than it would have but for that fraud.
It thus restored the decision of the First Instance Judge.
Encouraging settlement was of considerable importance, but not sufficient to allow a claimant to retain monies obtained by fraud.
The fact that Zurich suspected fraud did not preclude inducement and it was not necessary to show deceit to prove inducement. In a disputed claim in litigation what mattered was the chance that the claimant would be believed at trial.
It was difficult to envisage a situation where a mere suspicion of fraud would preclude unravelling a settlement when fraud was subsequently established.
The statement in its defence that the claimant had exaggerated his difficulties in recovery and current physical condition for financial gain did not preclude the defendant from unravelling the settlement when fraud was subsequently established.
That represented a suspicion of fraud, which was subsequently proven.
The Supreme Court quoted, with approval, from other cases that fraud:-
“is a thing apart” and
“unravels all” and
“vitiates judgments, contracts and all transactions whatsoever”.
Note that in any personal injury case issued on or after 13 April 2015 the whole claim must be dismissed if the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to any part of the claim.
Nothing in the Supreme Court’s decision affects the Court of Appeal’s finding that exaggeration for financial gain equals fraud. What the Supreme Court said was that that was an allegation of, and a suspicion of, fraud which was proven after settlement after information was received from Mr Hayward’s neighbours.
Consequently although the decision of the Court of Appeal has been overturned the significance of the Court of Appeal’s finding, for the purposes of fundamental dishonesty, that exaggeration for financial gain equals fraud has not been affected.
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