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Suspended prison sentence dependent upon payment of contribution towards costs

ERS v Fearon
High Court 23/10/15
Before: Sir David Eady

An individual who brought a fraudulent claim, described as amateurish and bound to fail, was sentenced to six months in prison, suspended for two years, conditional upon the payment of £5,000 towards the Applicant’s costs. Raymond Fearon claimed to have been a passenger on a mini bus, when it was involved in an incident, but his claims were false and, even though he discontinued his claim, committal proceedings were brought against him. James Pinder comments upon this case in which DWF Senior Solicitor This email address is being protected from spambots. You need JavaScript enabled to view it. acted for ERS in the committal proceedings. James looks at the background to this ‘ghost passenger’ case and the proceedings that followed.

Background

ERS insured a mini bus that was used by a charity and members of the family who ran the organisation. On the evening of the 25th August 2013 the insured driver, his brother, wife and a family friend were using the mini bus for a family trip to the cinema, when the mini bus was unfortunately involved in a genuine incident with a third party vehicle. The driver of the minibus had stopped to refuel at a service station in Dartford, Kent and as he was attempting to merge back onto the main road, he failed to notice an oncoming Peugeot 206 and a minor collision occurred.

Following the incident, ERS received numerous claims from individuals claiming to have been occupants of either the mini bus or the Peugeot. In particular, three individuals, who were not known to the charity in any way, claimed to have been travelling in the mini bus at the time, including one Raymond Fearon. None of the genuine occupants of the mini bus pursued a claim.

Fearon produced a medical report in support of his claim, the report suggested that he had been travelling as a passenger in the mini bus when it was hit on the driver side. The report claimed that Fearon suffered an injury to his neck and shoulders, requiring a course of physiotherapy treatment to aid his recovery.

After liability was denied, Fearon went on to issue proceedings against the driver of the mini bus. A defence was entered pleading fraud and he was asked to provide specific information that would have only been known by those genuinely involved in the incident. Specifically, he was asked to describe the driver and the other passengers in the minibus at the time and confirm the purpose of their journey. He was also asked to describe the driver of the Peugeot, as well as some basic information regarding that vehicle and whether or not the emergency services attended the scene. It was inevitable that Fearon would be unable to respond to the request, and that proved to be the case. Following an application by ERS, an Unless Order was obtained, compelling the claimant to answer.

Fearon eventually discontinued his claim, leaving him liable to pay the Insurers costs and committal proceedings were then brought against him.

The committal proceedings

Upon receipt of service of the proceedings, Fearon instructed solicitors with a view to persuading ERS to abandon the case, in return for his cooperation into an investigation into those who facilitated his claim, alleging that the proceedings had been issued without his knowledge, an allegation later withdrawn. Whilst Fearon was encouraged to reveal as much as he knew about the attempt to defraud ERS, and cooperate with an investigation, the Insurers were not prepared to agree to discontinue the committal proceedings in return for that cooperation and he ultimately admitted his contempt and the case came before the High Court for sentencing.

In mitigation, Fearon played heavily on the fact that his attempt to claim was an amateurish one and bound to fail. He expressed his remorse, apologised to the Court, to ERS and to the insured and asked the Court to take into account his early admission and personal circumstances.

Prior to the hearing, Fearon had written personally to the judge outlining why an immediate custodial sentence would have a devastating effect on his family. The letter stated he was the primary carer for his two children (one of whom who has recently been diagnosed with epilepsy) and that a custodial sentence would result in his wife giving up her meaningful employment as a nanny to care for the children in his place. Before sentencing Fearon, Sir David Eady, sitting as a Judge of the High Court, began by emphasising the seriousness of these matters and that insurance fraud was not a victimless crime and that claims of this kind fundamentally undermine the system of justice.  

Held, that whilst the necessary threshold for a custodial sentence had been met, it was observed that the claimant had admitted his guilt and withdrawn his claim before it came to trial, having paid the fees of the solicitors who acted for him. A sentence of 6 months imprisonment, suspended for 2 years was imposed. A condition of the suspended sentence was for payment within that time of £5,000 towards the Applicant’s costs. In other words, if Fearon cannot, or will not pay within 2 years, he will have to serve his sentence in prison. 

Comment

The following points are worthy of note:

  • The importance of bringing these cases before the Courts and maintaining a continuing awareness is critical in defeating fraud. Fearon was clearly in awe of the Court and the deterrent effect of bringing committal proceedings cannot be underestimated.
  • Whilst the term of imprisonment in this case, at 6 months is largely in line with other reported cases in this context, the term of suspension, at 2 years is significantly longer than has been previously been reported and would be a welcome development if it were followed in other cases. This case confirms that a custodial sentence is practically inevitable.
  • As far as we know, this is the first occasion where a Court has ordered, not only the payment of £5,000 towards costs, but made payment a condition of the suspended sentence. If the claimant doesn’t pay that amount, he goes to prison. This would also be a welcome development if it were followed in other cases. Having to repay in costs, more than a claimant could hope to obtain in damages, had the fraud been successful, further emphasises the risks involved in attempting to defraud insurers.
  • Counsel for ERS was at pains to point out to the Judge that the Insurers’ brought the proceedings not to recoup their costs, but to highlight, the extent of such abuses of the claims system. Nonetheless, this case sends a very useful message, perhaps aimed at the organised fraudster who regards incarceration as an occupational hazard, that the penalties for committing insurance fraud, vastly outweigh the benefits.

Tina Whelan, UK Director of Operations and Business Services