Lloyd's Maritime and Commercial Law Quarterly
ENGLISH INSURANCE LAW
Margaret Hemsworth*
CASES
81. Axa Insurance UK Plc v Financial Claims Solutions Ltd1
Fraud—exemplary damages
The RTA2 insurer sought to recover exemplary damages against a number of respondents who had pursued the insurer by way of enforcement of judgments fraudulently obtained on a number of faked road traffic accidents. The sum sought to be obtained through this fraud was in the region of £85,000. The respondents had additionally sought to abuse the civil process by fraudulently claiming to have served enforcement proceedings on the insurer, though no such notification had been given. The insurer had managed through its own efforts to unravel the fraud before any sums had been transferred to the respondents, but that had been at a cost of £25,000. The insurer sought to obtain an award of exemplary damages, which claim had failed at first instance. The insurer appealed.
Decision: Appeal allowed. Exemplary damages of £20,000 awarded against each respondent.
Held: The respondents’ conduct fell squarely within the second category of exceptional cases justifying an award of exemplary damages as outlined by Lord Devlin in Rookes v Barnard:3 conduct which the respondent calculated might make a profit which might well exceed the compensation payable under normal principles. In this context the “calculation” refers to the guilty knowledge and the motivation: that the chances of economic advantage outweigh the chances of economic or possibly physical penalty.4
Exemplary damages are anomalous and are an exception to the compensatory basis of damages. Such an award is not justified simply by the fact of fraud (the civil law is not a substitute for the criminal law). The analysis requires consideration of the position as at the time when the tort is committed, ie, before it can be known whether the tortfeasor’s scheme will succeed. The object in this case was to obtain a far larger sum of money than would be awarded on the compensatory basis. The fact that the fraud was discovered before the sums sought had been paid did not justify limiting exemplary damages to the compensatory level. The existence of criminal proceedings or contempt proceedings was
* Senior Lecturer, University of Exeter.
1. [2018] EWCA Civ 1330 (CA: Sharp, Flaux LJ, Sir Stephen Richards); rvsg [2017] EWHC 3803 (Wrexham District Registry: HHJ Keyser QC sitting as a High Court Judge).
2. Road Traffic Act 1988.
3. [1964] UKHL 1; [1964] AC 1129, 1226–1227 and 1228.
4. Broome v Cassell [1972] UKHL 3; [1972] AC 1027.
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