Double edged sword: Aggravated damages awarded against insurer following unjustified claim that a Plaintiff knowingly gave misleading evidence

Written by
Ed Kelly on
06 May 2020

A recent High Court case saw an insurance company hit with a €10,000 award for aggravated damages following an unjustified application under s.26 of the Civil Liability and Courts Act 2004 to have a personal injuries claim dismissed for evidence of a misleading nature being adduced to Court.

Under s.26 of the 2004 Act where a Plaintiff in a personal injuries action can be shown to have knowingly given evidence to Court that is materially misleading or fraudulent, or a false affidavit of verification sworn, the Court is obliged to dismiss the Plaintiff’s action unless an injustice would result from doing so. In those circumstances costs would also ‘follow the event’ and would be awarded against the unsuccessful party.

In Margaret Keating v Martin Mulligan ([2020] IEHC 47), the Plaintiff was a passenger on the Luas when near Heuston Station the taxi of the defendant collided with the Luas tram causing the plaintiff to sustain personal injuries. Liability for the accident was not denied by the Defendant. When the case came to hearing the Defendant’s legal representatives, at the conclusion of the plaintiff’s case, applied to have the case dismissed pursuant to the provisions of s. 26 of the 2004 Act. The Plaintiff’s legal representatives took issue with the manner in which the application was made by the Defendant, and in turn claimed aggravated damages.

Aggravated Damages

Under Irish law aggravated damages are awarded as compensatory damages where a claimant’s injuries have been increased by exceptionally bad conduct of a defendant. Mr Justice Cross was presiding over the case and in considering the s.26 application, having reference to the law as stated by the Court of Appeal in Nolan v O’Neill & Or ([2016] IECA 298), he held the Defendant had failed to establish any intention on behalf of the Plaintiff or her legal representatives to mislead the Court or that she adduced evidence or caused to be adduced evidence including the replies to particulars that was misleading in a “material respect”.

Cross J did not accept that any evidence incorrectly stated within the pleadings was substantial or significant in the context of the personal injuries claim to the extent that it could be said to render the claim itself fraudulent. Accordingly, Cross J held that the Defendant’s application under s. 26 must fail as it was not supported by any evidence. He agreed with an application by the Plaintiff’s barrister that in addition to her damages for her injuries she was entitled to aggravated damages.

The Plaintiff was awarded general damages, for pain and suffering from the injuries, to date of €60,000 and general damages into the future of €10,000. In addition to that, Cross J awarded a sum of €10,000 for aggravated damages, resulting in a total award of €80,000.

Double Edged Sword

Under the 2004 Act various measures were introduced, including s.26 applications, as tools for insurance companies to combat exaggerated and/or fraudulent cases. The Courts have said s.26 is intended to be penal in its nature and that it statutorily qualifies the plaintiff’s common law entitlement to compensation for personal injuries when negligence has been proven. This means a s.26 defence is available to Defendants in all cases, whether liability is an issue or not.

Where a claimant in a personal injuries action  is proven to have breached  the 2004 Act they are liable to be reported to the DPP for an offence under s.29 that carries penalties including fines up to €100,000 and/or imprisonment for a term not exceeding ten years.

Since its introduction s.26 applications have been used with some success by Defendants, with examples including a claim being dismissed where injuries were shown to be exaggerated (Folan v O’Corrain [2011] IEHC 487) and another being a claim dismissed for misleading evidence from a Plaintiff about post-accident earnings (Higgins v Caldark [2010] IEHC 527).

In reality there is a high onus of proof on Defendants as the statements in question must be false or misleading and the falsehoods must be, in the eyes of the Court, material in its nature. Most importantly for an application to succeed the actions of the Plaintiff, in submitting misleading/fraudulent evidence to court, must be shown to be intentional (Nolan v O’Neill [2016] IECA 298).  Even then, the judge still retains discretion to refuse to dismiss the case if it would result in injustice.

However a Defendant needs to exercise caution when using a plea under s.26 as a sword. In Lackey v Kavanagh ([2013] IEHC 341), Mr Justice Cross (coincidently!) sounded a clear warning that a Defendant who brings a s.26 application where it is unreasonable to do so, will be exposed to an award of aggravated damages, although he did not award aggravated damages in that case despite the s.26 application failing. In his judgement Judge Cross said aggravated or exemplary damages should “always be in the mind of a court” when a Defendant makes a s.26 application as such damages are the only deterrent to an irresponsible or overenthusiastic invocation of a s.26 plea, which may result in unjust damage to the reputation of a Plaintiff.

Impact of the decision

The decision of the High Court in Keating certainly gives food for thought to Defendants in deciding whether to make a s.26 application for dismissal. Despite insurance companies citing false or exaggerated claims as the main reason insurance premiums are so high in Ireland, the prevalence of the use of these applications have not matched up. 

In July 2019 representatives from FBD, AXA and Allianz, who together make up around half of Ireland’s insurance industry, told an Oireachtas Finance Committee that they estimated that 20% of personal injury claims they receive are fraudulent or exaggerated. However these figures were queried with some vigour within the Oireachtas and by many commentators thereafter. Clear arguments to dispute these estimates included the fact the number of s.26 application to dismiss and complaints to Gardai about fraudulent cases fell significantly below the 20% of claims level.

Indeed Mark Tottenham BL, in an opinion piece printed in Law Ireland in February 2019, found a review of superior court decisions did not tally with the prevalence of fraudulent claims suggested by insurance companies. He cited the fact that while exact numbers of cases dismissed for false or misleading evidence were not readily available, in 8,000 written judgements delivered since January 2011 available to the Decisis online reporting service, only 20 cases involved s.26 applications to dismiss. Of those 20 cases only 11 cases were in fact dismissed for false or misleading evidence being submitted to Court.

While it may be argued use of s.26 application for dismissal by a Defendant is most effective for promoting out of court settlements, it is clear the Courts will not allow it be used as a weapon for a Defendant to avoid a just liability to a Plaintiff for compensation.

 

*In contentious business, a solicitor may not calculate fees or other charges as a percentage or proportion of any award or settlement

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