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6 April 2015, 06:00
A man who "fraudulently exaggerated" his injuries from an accident at work can keep more than £130,000 compensation even though the amount is "far in excess" of his actual loss, the Court of Appeal has ruled.
Colin Hayward, from Newmarket, was awarded the money in a settlement after he was injured at the David S Smith packaging factory just outside the town in June 1998.
An appeal court judgment describes how Mr Hayward claimed his injury continued to cause him severe back pain.
As a consequence, he said, he had developed a depressive illness and his ability to work was seriously impaired. He claimed damages of more than £400,000.
His employers' defence was conducted by their insurers, Zurich, and they argued that, although he had suffered an injury to his back, his disability was not as great as he had described and he was capable of working full time, if not with heavy lifting.
Zurich produced video surveillance evidence which appeared to show him doing heavy work at home.
In October 2003 both sides reached an agreement that Mr Hayward should receive £134,973 "in full and final settlement" of his damages claim.
About two years later, Mr Hayward's neighbours approached his employers and said they believed his injury claim was dishonest and that he had entirely recovered from his injury at least a year before the settlement.
When the case and the fresh evidence came before Cambridge County Court in November 2012, a judge found that Mr Hayward had "dishonestly exaggerated the effects of his injury".
The judge ruled the settlement agreement should be set aside.
But appeal judges Lord Justice Underhill, Lord Justice Briggs and Lady Justice King have unanimously allowed Mr Hayward's appeal and ruled the settlement agreement remains binding.
Lord Justice Underhill said:
"The result is unattractive because it means that (Mr Hayward) retains the benefit of a settlement far in excess of his actual loss, though I dare say somewhat reduced by the incidence of cost in these protracted proceedings."
The judge added: "But there is a wider principle at stake that parties who settle claims with their eyes wide open should not be entitled to revive them only because better evidence comes along later."
Lord Justice Briggs said: "I would gladly have embraced any sound basis for upholding the trial judge's decision to strip (Mr Hayward) of the grossly inflated amount which he received upon settlement of his fraudulently exaggerated claim."
But the Zurich appeal was based on a wrong view of the law.
The judge said Zurich had alleged "from the outset" that Mr Hayward's claim was fraudulent, and all that had happened was better evidence of the fraud had emerged after the settlement.
Zurich made the contract with its eyes open and there was no reason why it should be able to walk away from it, he added, otherwise "it would become almost impossible to compromise a whole swathe of litigation if settlements were vulnerable to being set aside in this manner".