ProtectionJul 1 2015

High Court rules against Fos final decisions in fraud case

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High Court rules against Fos final decisions in fraud case

The High Court has ruled against two Financial Ombudman Service final decisions which upheld fraudulent complaints against Cirencester Friendly Society.

The society proactively asked the court to set aside the two awards arising from Christopher Parkin’s complaints to the Fos and declare that the awards were not enforceable.

The rulings, made in May but with court documents only released this week, showed judge Richard Seymour decided that Mr Parkin, a former Cirencester Friendly member, acted fraudulently when applying for individual income protection insurance cover in 2007, when submitting his claim and when involving the Fos.

As a consequence, the High Court has stated that the £19,000 already paid by the society must be returned by Mr Parkin and that no payment be made regarding the second Fos award.

In Mr Parkin’s application for income protection, he answered ‘no’ to several medical questions, masking the fact that he had suffered from panic attacks, that he had consulted his doctor in relation to chest pains, and had been a “habitual user of cannabis”, the judgement read.

If he had answered the questions correctly, the application would be have been rejected, the judge said, however the application was accepted in July 2007.

In August 2007 Mr Parkin made a claim under the insurance, contending that he suffered from a chronic fatigue syndrome myalgic encephalopathy and was unable to perform his job from 29 August 2007.

That claim was rejected by Cirencester Friendly on 6 December 2007 for an unknown reason, but in January 2008 Mr Parkin complained to the Fos that they had wrongly rejected his claim for income protection and had “cancelled the contract from the start”.

On 10 September 2010 ombudsman Melissa Collett made a decision upholding Mr Parkin’s complaint, which judge Seymour said was “plainly based upon fraudulent assertions” made by Mr Parkin.

Cirencester Friendly accepted, at least initially, the decision and consequently on 22 July 2011 paid an amount of £19,096, including interest.

Mr Parkin then decided that he was going to make another claim, or rather he was going to claim in respect of another period, beginning on 21 March 2008.

He alleged to be suffering from chronic fatigue syndrome. That claim was again rejected by Cirencester and again there was a complaint to the Fos, which was again “deluded by the frauds of Mr Parkin”.

On 25 July 2012 the Fos’s Lindsey Wolosky upheld Mr Parkin’s, however Cirencester did not accept the decision and therefore did not make any payments.

The High Court held that Mr Parkin, who did not appear in court, had defrauded the society and the Fos, so the £19,000 already paid must be returned and that no payment be made regarding the second award.

An opinion was also obtained from a medical expert in chronic fatigue syndrome. During the court case, Mr Parkin failed to attend an examination with the expert and, as a consequence, his defence and counterclaim was struck out.

Court documents added that the society was right to say that due to fraud at the application, the contract should in accordance with legal principles be treated as if it had never existed.

The judge stated that “like so many people nowadays, in particular those who seem minded to seek to perpetrate frauds, he [Mr Parkin] seemed incapable of keeping off the internet and sharing the true nature of his activities through social media”.

It transpired that “far from being incapable of working”, Mr Parkin spent his time refurbishing a Noble sports car and driving and racing it principally in Cyprus, where it appears that he lives.

“I am satisfied that it is appropriate for me to rectify the injustices which have been perpetrated by the misleading of the ombudsman, resulting in the awards which I have mentioned on 10 September 2010 and 25 July 2012, by making these orders, which I do,” stated the judge.

Paul Hudson, chief executive at Cirencester Friendly, said the judge’s decision sends a clear message that fraud will not be tolerated. “The society is committed to supporting its members and the actions of Mr Parkin undermine genuine claimants when they need our help.

“We did not enter this action lightly and it has been a long and stressful process but thankfully the truth came out and justice was served.”

Helen Tilley, a partner at Kennedys Law who acted on behalf of the society, added: “Cogent evidence impressed the judge, and court proceedings was the appropriate forum through which to consider allegations of this nature.

“The judgment may see renewed confidence in insurers highlighting that the court is an alternative and appropriate forum to deal with serious fraud allegations.”

Due to legal reasons, the Financial Ombudsman Service could not comment.

peter.walker@ft.com