Wednesday, February 21, 2007

Tainted by fraud

Following on from the post last week as to whether fraud should unravel everything. Here are a few other thoughts. Tell us what you think in the comments section below.

When someone lies or exaggerates over any part of an insurance claim, the whole of any claim under that contract can be dismissed, even if most of it is essentially ‘genuine’. This position, which comes from the operation of the doctrine of utmost good faith contrasts with the general position of claims in tort which on the whole result in a Claimant being compensated for that part of his claim which is genuine even if he has exaggerated or even made up another part of it.

Certainly, in a a claim against a tortfeasor there is no contract and no such duty of utmost good faith. For the most part, the penalty tends only to be in costs unless the Defendant can use any inconsistencies to undermine the Claimant's credibility generally. However, this general position is now being challenged in a growing number of cases. One case which may find itself being resurrected is the old Privy Council authority of Hip Foong Hong v H Neotia and Company [1918] AC 889 in which Lord Buckmaster comments on the issue of tainting in the following way:

"A Judgment that is tainted and effected by fraudulent conduct is tainted throughout and the whole must fail …"

However, that case dealt with the opium trade and was an appeal from a decision in the Shanghai Supreme Court and arguments along these lines are probably unlikely to find favour at first instance in English law by themselves. However, it will be interesting to see how it develops particularly when you throw in other issues of public policy such as illegality and abuse of process.

1 comment:

david giacalone said...

The U.S. Supreme Court decided this week that a bankruptcy petitioner lost an important right (to convert to Chapter 13, which would let him keep some property and pay debts over time), when he fraudulently concealed a vacation home. The decision was 5 - 4, which suggests that finding the appropriate response to fraud is not an easy issue for the courts. See a Law.com article on the case - http://www.law.com/jsp/article.jsp?id=1172052180604 ,