Shah v Ul-Haq & Ors

Factual and Procedural Background

The appeal arises from a second appeal following decisions made by a recorder in Birmingham County Court and subsequently by a High Court judge. The original claim concerned a road traffic accident in May 2006, where the Defendant negligently rear-ended a stationary vehicle driven by the Plaintiff. The vehicle sustained minor damage, and the Plaintiff and his wife claimed minor whiplash injuries. The Plaintiff's mother also claimed whiplash injuries, alleging she was a passenger in the vehicle.

The Defendant admitted liability for the collision but denied the mother's presence in the vehicle and disputed all personal injury claims. The Defendant alleged fraud, asserting that the Plaintiff and his wife conspired to support the mother's fraudulent claim. The recorder found that the mother was not in the car and that the Plaintiff and his wife had conspired in the fraud but held that the Plaintiff and his wife had genuine injuries. The recorder declined to strike out their claims under CPR 3.4(2) but ordered costs accordingly.

The Defendant appealed the refusal to strike out the Plaintiff and his wife's claims. The High Court judge affirmed the recorder’s decision, acknowledging the discretion under CPR 3.4(2) to strike out genuine claims associated with fraud but declined to exercise it. Permission to appeal to the Court of Appeal was granted due to the general importance of the legal question concerning the striking out of genuine claims linked to fraudulent conduct in associated claims.

Legal Issues Presented

1. Whether CPR 3.4(2) permits the court to strike out a genuine claim on the ground that the claimant has been involved in a fraud upon the court in respect of an associated claim.
2. Whether, as a matter of substantive law, a genuine claim should be dismissed or struck out due to the claimant’s dishonesty in supporting a fraudulent claim by another party in the same proceedings.
3. The scope and proper exercise of the court’s discretion under CPR 3.4(2) in cases involving fraudulent claims or abuse of process.

Arguments of the Parties

Defendant's Arguments

• The Defendant contended that the recorder was reluctant to recognise his discretion under CPR 3.4(2) to strike out genuine claims linked to fraudulent conduct, which affected his judgment.
• Having found the Plaintiff and his wife dishonest, the Defendant argued their claims should have been struck out rather than allowed to succeed.
• The Defendant emphasized the growing problem of fraudulent claims, particularly phantom passenger claims, and urged the court to use striking out as a means to mark disapproval and deter fraud.
• The Defendant relied on CPR 3.4(2) as the jurisdictional basis to strike out genuine claims associated with fraud, citing authorities such as Khan, Shah and Mayat v Hussein, Ashraf and the MIB and Arrow Nominees v Blackledge.

Claimants' Arguments

• The Claimants conceded that there may be a discretionary power under CPR 3.4(2) to strike out genuine claims associated with fraud but urged the court not to exercise it in this case.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the serious problem of fraudulent claims, particularly phantom passenger claims, which waste court time and resources and undermine genuine claims. However, the court emphasized that the established common law and procedural rules do not support striking out genuine claims merely because the claimant has been involved in a fraud related to another claim within the same proceedings.

Substantively, the court observed that there is no general legal rule permitting dismissal of a genuine claim on account of dishonesty or exaggeration, except in the limited context of insurance contracts governed by a duty of utmost good faith. The court rejected the notion that dishonest exaggeration or collusion to support a fraudulent claim by another party extinguishes the claimant’s own right to damages for genuine injuries.

Procedurally, the court examined CPR 3.4(2), which allows striking out a statement of case if it discloses no reasonable grounds, is an abuse of process, or there is a failure to comply with rules or orders. The court concluded that this power is primarily designed for summary disposal of hopeless or abusive claims before or at the outset of trial, not for striking out genuine claims after a full trial has been conducted and reliable findings made.

The court distinguished the cited authority of Arrow Nominees, noting that it concerned situations where dishonesty made a fair trial impossible, justifying striking out to prevent injustice. In contrast, in the present case, the trial was fair and reliable findings were reached on the genuine claims. Therefore, striking out genuine claims post-trial as a punishment for fraud in an associated claim was not a proper exercise of the court’s discretion.

The court recognized that costs orders and other sanctions remain appropriate tools to express disapproval and penalize dishonest conduct, but depriving claimants of proven damages for genuine injuries exceeded the court’s powers.

Finally, the court acknowledged the gravity of fraud and suggested that legislative change or criminal prosecutions might be appropriate responses, but declined to extend judicial powers to strike out genuine claims on these grounds.

Holding and Implications

The court DISMISSED the appeal, upholding the decision that the genuine claims of the Plaintiff and his wife should not be struck out despite their involvement in a fraud supporting a collateral claim.

The direct effect is that claimants with genuine causes of action retain their right to damages even if they have engaged in dishonest conduct related to other associated claims within the same proceedings. The court reaffirmed that striking out genuine claims post-trial as a sanction for fraud is not supported by substantive law or procedural rules.

No new legal precedent was established beyond clarifying the scope of CPR 3.4(2) and the substantive law relating to dishonest exaggeration and collateral fraud. The court emphasized that changes to this area of law, if any, lie within the remit of Parliament rather than judicial intervention.