In 2001, following an injury at work in 1998, the Plaintiff brought a claim against his employers alleging that he had suffered a spinal injury with continuing physical disabilities. and was fit for only light work. He also claimed that he was suffering from a depressive disorder of moderate severity. The schedule of loss claimed damages amounting to just under £420,000.
Liability was conceded on an agreed 80/20 split in the Plaintiff’s favour. The Defendant had however, relying on surveillance footage obtained of the Plaintiff, argued that the Plaintiff had “exaggerated his difficulties in recovery and current physical condition for financial gain". The Defendant paid £100,000 into court (net of CRU and previous interim payments) and subsequently settlement was agreed for just under £135,000 and was embodied in a Tomlin order in October 2003.
Following the settlement, in/around 2005 the Plaintiff’s neighbours informed the Defendant that they thought there was nothing wrong with him and he was only pretending there was. They explained the basis of their belief that he had acted dishonestly and described physical activities which they had seen him perform. They claimed to know that, from the time they knew him, the Plaintiff was capable of walking about quite easily and did so when at home; but he used two sticks when he went out because he was aware of the possibility of surveillance.
On foot of this evidence the Insurer for the Defendant commenced an action against the Plaintiff in early 2009, alleging that the settlement of the claim had been obtained by false representations as to words and conduct and that these had been made fraudulently. Specifically the Insurer claimed to have paid at least £72,000 more in damages than it would otherwise have done, had these false representations not been made and that costs had also been increased.
The Plaintiff denied that he had misled the Insurer by words or conduct and in any event the Insurer, in making the payment into court and settling the claim had voluntarily compromised all the issues of bad faith. The Plaintiff applied to strike out the claim, arguing that it was an abuse of process on the basis of estoppel by res judicata.
In March 2010 the lower courts held that the claim could proceed if it was recast as an application to set aside the Tomlin order on the grounds of fraud. On appeal, this decision was reversed. The Court recognised that there was a well-established principle that one party may bring a fresh action to have an earlier judgment set aside on the grounds of the fraud of the other party and this principle encompassed settlements and consent orders as well as judgments made after trial. The real issue in the present case was whether or not, when the Tomlin order was agreed, the Insurer had compromised the issue of fraud. The Judge held that the Insurer had put fraud in issue in the first action and the claimant had settled at a lower figure than originally claimed. The Insurer now thought that it had better evidence on which to rely but the Judge considered that that did not give it the right to have the issue reopened.
The Insurer appealed to the Court of Appeal against the strike out of their claim. The Court of Appeal, allowed the appeal, but the Judges reached this decision on slightly different grounds.
Lady Justice Smith found that so far as the creation of an estoppel was concerned she did not think there could logically be any difference between a consent order which is in ordinary form and one which is embodied in the form of a Tomlin order. Before an estoppel can arise:
(1) there must be clarity as to what was in fact compromised and
(2) the two allegations of fraud must be essentially the same.
Smith LJ held that it was not exactly clear what was compromised in the first action. The fact that the offer made by the Defendant was accepted inferred that both parties accepted that the disability was not in fact as great as the Plaintiff had claimed. But she did not think that meant that the parties had agreed on the extent of the Plaintiff’s exaggeration or whether it was in fact fraudulent at all. They had compromised the value of the claim; that was all. She found that the allegation of fraud raised in the present action was not the same as the defence of exaggeration pleaded in the first action. In addition, the second action was not an abuse of process as, on the facts of this case, the need to protect the administration of justice from the effects of fraud far outweighed the public interest for the finality of litigation. It was further noted that the burden was firmly on the Insurer to prove fraud.
Lord Justice Moore-Bick agreed that the Insurer’s action could proceed, but held that this was because a Tomlin order could not give rise to an estoppel by res judicata He went on to state however that a consent order could give rise to an estoppel by record.
Lord Justice Maurice Kay, remarked that the judgments of Smith LJ and Moore-Bick LJ were not entirely ad idem although they agreed that this is not a case of res judicata or estoppel. He chose not, however to “engage in further obiter analysis” on the matter and agreed that the Insurer’s case could proceed.