Legal update - motor fraud: Paying the cost


Pursuing a non-party for costs should not be taken lightly, but it could prove a powerful deterrent when fighting fraudsters. Craig Nunn explains.

The judgment handed down in a recent motor case brings welcome news for insurers, who increasingly deal with fraudulent and exaggerated claims, yet are often unable to recover the costs spent in repudiating them.

The case of Imtiaz Ahmed v Steven Elliot and Road Range Accident Assistance (Nelson, Lancashire), saw the judge award a non-party costs order against Road Range, an accident management company, which instigated a false claim and effectively pursued litigation on the behalf of the claimant.

This case arose out of a minor road traffic accident on 17 July 2004 in which the defendant's vehicle collided into the rear of the claimant's vehicle, a black cab. The claimant, Imtiaz Ahmed, pursued a claim for personal injury and associated losses — including a claim for vehicle repairs at £957.63 and hire charges of £1645.

Steven Elliot, the original defendant, and RBS Insurance, the parent company of his insurer, had concerns over the veracity of this claim — including the identity of the claimant's passenger, said to be a white male aged between 40 and 50. This did not match the description of Mr Rashid, whom the claimant contended was his passenger. Mr Rashid, a friend and fellow taxi driver who had contemplated a claim by instructing the same firm of solicitors as the claimant and obtaining a medical report, later abandoned his claim and, ultimately, limitation expired.

The key aspect of this case was the claimant's hire claim. The claimant allegedly hired a replacement black cab vehicle from Road Range, to replace his own, allegedly damaged in the accident. The claimant contended that he had been absent from work for two weeks following the accident owing to his injuries, but this same two-week period coincided with the hire claim.

Extensive investigations
Following extensive investigations, including evidence from the true owner of the purported hire vehicle, it became apparent that Road Range did not own the 'black cab' allegedly hired. The plot thickened. The claimant's procedural failures led to his solicitors successfully applying to be removed from the court record. The claimant, then acting as a litigant in person, attended a following hearing and — in an unusual turn of events — told the judge that he had never hired a car from the accident management company, Road Range, despite the fact that he agreed to having signed the relevant documents, including a hire agreement. The hire claim was consequently struck out, but the personal injury claim continued until this was later struck out for procedural failures on the part of the claimant.

Although RBSI already had an entitlement to costs from the claimant, the evidence available suggested that the hire was instigated by a non-party and that the non-party should be liable for the associated costs. Accordingly, an application for a non-party costs order was made which led to extensive case management and, ultimately, a three-day hearing.

During substantial cross-examination of both the claimant, Imtiaz Ahmed, and Zaheer Ahmed, the sole proprietor of accident management company Road Range, the claimant insisted that he had never read any of the documents he signed, nor any of the letters that he received from his solicitors. Conversely, he contended that he simply gave them to Zaheer Ahmed to deal with, whom he saw as his own 'solicitor', supported to some extent by the fact English is not the claimant's first language. While the judge did not accept the whole of the claimant's evidence, he did agree that the claimant "put the whole thing in the hands of Zaheer Ahmed".

Zaheer Ahmed maintained that the claimant did hire a replacement vehicle and stuck by his later contention that the hire vehicle was actually a private hire vehicle and not a public hire one (a 'black cab'). The reference to this within the hire documentation was contended to be erroneous. However, the judge found the evidence of Zaheer Ahmed to be wholly unconvincing, concluding that the hire and repair documents were false documents prepared by him and that the claimant relied on him in dealing with these documents, which he signed at the behest of Zaheer Ahmed.

On the balance of probabilities, the judge found that no vehicle was ever hired out to the claimant and that the claim for hire charges was false. Further, Road Range was a party to the instigation of that false claim. He then went further — on the basis of the cogent documentary evidence and the thoroughly unconvincing explanations of Zaheer Ahmed — to make a finding of fraud. The next issue was who would be liable for the first defendant's costs associated with the hire claim.

In deciding whether or not to exercise the discretion to order Road Range to pay Mr Elliot's costs of investigating and defending the hire claim, the judge referred to the case of Symphony Group v Hodgson, in which the Court of Appeal considered the power and circumstances under which it might be appropriate to order costs against a non-party.

First, he noted that the hire charges were claimed for the benefit of Road Range and, as such, the accident management company was to benefit from the claim and was in fact the real party interested in the case. Second, he found that there was bad faith on the part of Road Range and its reprehensible conduct. A non-party costs order was, therefore, awarded against the third defendant who has now paid £26 000 in costs — a considerable expense considering the case began with the claimant, Imtiaz Ahmed seeking damages of little more than £2600.

Pursuing a non-party
This is an important decision for insurers who regularly face suspected bogus claims often initiated by accident management companies in the name of the individual claimants. Pursuing a non-party for costs is not a matter that should be taken lightly. However, where the principles of Symphony Group v Hodgson can be met, with good evidence, this should at least be considered.

The decision of RBSI to pursue this action ultimately sends out the message that the insurance industry will not tolerate fraud nor will it allow fraudulent claims to pass without punishment, irrespective of the monetary value of the fraud. This was undoubtedly a low-value claim — but it proved to be a costly decision for the perpetrator of the fraud, who has now been forced to pay his costs.

The outcome of this case illustrates the potential severity of the consequences to those who make exaggerated or false claims, and shows how seriously such cases are taken by both members of the judiciary and insurers.

Craig Nunn is an associate at Berrymans Lace Mawer, which acted for RBS Insurance, the parent company of the underwriter of Steven Elliot's insurer in this case.

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