Kerry Underwood

FUNDAMENTAL DISHONESTY: THE MEGA-BLOG

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This blog runs to 40 pages and brings together many of my other writings on the issues of Fundamental Dishonesty, and is up to date as at Tuesday 11 June 2019.

These principles, and the whole issue of Qualified One-Way Costs Shifting, is dealt with in my book – Qualified One-Way Costs Shifting, Section 57 and Set-Off – Available from me here for £15.

Kerry Underwood offers consultancy services in relation to this and other matters and details are here.

 

Fundamental Dishonesty

CPR 44.16(1) reads:

“(1) Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.”

There has been extensive case law on the meaning of fundamental dishonesty, but cases are inevitably fact sensitive and not a lot can be drawn from them.

CPR 44.16(1) applies where a claimant has lost the case, and a costs order is made in the usual way, and what a finding of fundamental dishonesty does is to allow the defendant, with the permission of the court, to enforce that costs order.

By definition, it will be the court which has made the ruling of fundamental dishonesty, and therefore it can be assumed that a court will always give permission to enforce the costs order in those circumstances.

Quite separately, section 57 of the Criminal Justice and Courts Act 2015 applies to a claimant who would otherwise have won, but is found to be fundamentally dishonest in relation to any part of the claim or a related claim.

In those circumstances the win is overturned and the claimant is ordered to pay the defendant’s costs, but subject to a reduction from those costs of the damages that the claimant would have been awarded on the genuine part of the claim.

Thus the concept of fundamental dishonesty under section 57 comes into play when the claimant has won, and the concept of fundamental dishonesty under CPR 44.16(1) comes into play when the claimant has lost.

As set out above, little can be drawn from the individual cases, save that, unsurprisingly, the courts are interpreting fundamental dishonesty in the same way under section 57 as under CPR 44.16(1).

 

Section 57 of the Criminal Justice and Courts Act 2015

Section 57

There is a very obvious overlap between Qualified One Way Costs Shifting and Section 57 of the Criminal Justice and Courts Act 2015 in that fundamental dishonesty defeats QOCS protection and also means that the whole of a personal injury claim must be dismissed, even if liability is admitted.

Thus fundamental dishonesty causes an otherwise successful claim to be lost; it also causes the claimant in an unsuccessful claim to lose the protection of QOCS.

Section 57 of the Criminal Justice and Courts Act 2015 came into force on 13 April 2015 by virtue of The Criminal Justice and Courts Act 2015 (Commencement No. 1, Saving and Transitional Provisions) Order 2015 (SI 2015 no. 778).

The key provision is Section 57(1)(b) which requires a court to dismiss the whole of a personal injury claim if it is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

Commencement

Under section 57(9) this section does not apply to proceedings started by the issue of a claim form before the date on which this section comes into force. As we have seen it came into force on 13 April 2015 and therefore if proceedings were issued on or before 12 April 2015 the Act does not apply.

Note that issuing proceedings is defined as “proceedings started by the issue of a claim form” and therefore the matter being in the portal prior to 13 April 2015 does not succeed in avoiding the new sanctions. In that sense the provisions are retrospective in that they apply to causes of action arising before the Act came into force, if proceedings were not issued prior to 13 April 2015.

Thus any unissued personal injury claim and any personal injury claim issued on or after 13 April 2015 is caught by the Act. The date of service of the proceedings is irrelevant. Thus a claim issued in, say, March 2015 but not served until say, May 2015 is not affected by the Act.

Effect

Sections 57(1) and (2) require a court to dismiss a personal injury claim where the claimant is entitled to damages in respect of the claim if the court is satisfied, on the balance of probabilities, that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

Section 57(1)(b) says “on an application by the defendant…” However if the court suspects fundamental dishonesty it could invite the defendant to make such an application, or exercise its power to dismiss the claim as an abuse of process. A court which may have felt reluctant in the past to utilize such a draconian power may feel empowered, or even required, by section 57 to take such a course of action.

Section 57(3) makes it clear that this “includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.”

Thus fundamental dishonesty in relation to, for example, an aspect of future special damages means that the whole case, including the general damages claim, is lost. Likewise an exaggeration of symptoms, if that is held to be fundamental dishonesty, means that a client loses the whole claim including the claim for his written-off vehicle caused by the other party’s negligence.

Related claim

A related claim is a claim for personal injury which is made in connection with the same incident or series of incidents in connection with which the primary claim is made and by a person other than the person who made the primary claim (section 57(8)).

Substantial injustice

Dismissal of the whole claim is mandatory unless the court is satisfied “that the claimant would suffer substantial injustice if the claim were [sic] dismissed.” Thus the claim is lost completely; it is not won but with a reduction or complete removal of damages, or a penalty in costs. “Substantial injustice” is not defined.

Costs

If the court dismisses the claim it must record the amount of damages that it would have awarded to the claimant in respect of the primary claim, but for the dismissal of the claim (section 57(4)).

When assessing costs the court must then deduct the notional amount of damages from the amount which it would otherwise have ordered the claimant to pay in respect of the defendant’s costs (section 57(5)).

Thus if the defendant’s costs are £30,000.00 and the damages would have been £20,000.00, then the claimant pays the balance of £10,000.00 to the defendant.

Given that by definition there has been a finding of fundamental dishonesty it follows that an order for costs will almost certainly be on the indemnity basis.

The Act applies to Fixed Recoverable Costs cases as well as all other personal injury cases.

It also applies to small claims track matters, which will be significant when the personal injury small claims limit goes up from £1,000.00 to £5,000.00 in RTA matters, and £2,000 in other cases, on 6 April 2020.

Definitions

Section 57(8) is the definition section and reads as follows:-

“(8)        In this section—

“claim” includes a counter-claim and, accordingly, “claimant” includes a counter-claimant and “defendant” includes a defendant to a counter-claim;

“personal injury” includes any disease and any other impairment of a person’s physical or mental condition;

“related claim” means a claim for damages in respect of personal injury which is made—

(a) in connection with the same incident or series of incidents in connection with which the primary claim is made, and

(b) by a person other than the person who made the primary claim.”

Thus it will be seen that the key terms, that is “fundamental dishonesty” and “substantial injustice” are not defined.

The Oxford English Dictionary defines “dishonest” as “now, fraudulent, thievish, knavish.”

Criminal Proceedings

Section 57(6) and (7) are curious provisions which read:-

“(6)  If a claim is dismissed under this section, subsection (7) applies to—

(a) any subsequent criminal proceedings against the claimant in respect of the fundamental dishonesty mentioned in subsection (1)(b), and

(b) any subsequent proceedings for contempt of court against the claimant in respect of that dishonesty.

(7) If the court in those proceedings finds the claimant guilty of an offence or of contempt of court, it must have regard to the dismissal of the primary claim under this section when sentencing the claimant or otherwise disposing of the proceedings.”

I take this to mean that the fact that the claimant has lost her or his damages, and paid costs, is a mitigating factor in the criminal proceedings which the sentencing court must take into account.

Problem Areas

1.Uncertainty as to how courts will interpret “fundamental dishonesty” – see “Fundamental Dishonesty”- for an analysis of the case law so far in the context of QOCS disqualification.

2.Uncertainty as to how courts will interpret “substantial injustice” – see below.

3.Proportionate or issue-based costs orders – does the claimant have to pay the defendant’s costs, even if say 90% of those costs were incurred in fighting the allegations of negligence or causation or whatever on which the claimant won without being fundamentally dishonest where the fundamental dishonesty is in relation to say a small part of special damages which took up only a small amount of court and lawyer time?

4.Split trials – claimant wins on liability but there is a finding of fundamental dishonesty. There then has to be another full trial on quantum, even though the claimant has lost, in order to determine the amount that the claimant would have got had he or she won, that is but for Section 57, so that that sum can be knocked off of the costs payable to the defendant as required by Section 57(5).

5.Interplay with Part 36 and QOCS.

Risk Assessment

Section 57 imposes a significant extra risk upon those acting for claimants. A case previously unlosable on liability, for example a person injured whilst travelling as a passenger, will now be lost if the claimant is fundamentally dishonest in relation to any part of the claim.

As we have seen there is no definition of fundamental dishonesty, but in a different context the Court of Appeal in

Hayward v Zurich Insurance Company Plc [2015] EWCA Civ 327

suggested that exaggeration amounts to fraud, and on the basis that fraud is at least as difficult a threshold to overcome as fundamental dishonesty, then exaggeration amounts to fundamental dishonesty, causing the previously unlosable claim to be lost.

I deal with Hayward in detail in Fundamental Dishonesty below. It is being appealed to the Supreme Court. The case reference is UKSC 2015/0099. At the time of writing it has not been listed.

A good solicitor should be able to spot liability and causation issues and take the case on with her or his eyes open, but spotting what might just be mild exaggeration is impossible.

Success Fee and Charge to Client

Section 57 alone justifies a 100% success fee in every case, something unconsidered and not drawn to the Court of Appeal’s attention in the recent case of Herbert v HH Law Ltd [2019] EWCA 527, and solicitors may now take the view that 35% or 40% of damages is the appropriate fee from the client, rather than the more usual 25%, especially if self-insuring in relation to adverse costs.

Note that it is only the success fee, not the overall solicitor and own client costs, that is limited to 25% of damages.

After-the-Event Insurance

Section 57 causes major problems in relation to after-the-event insurance. A case where there was no liability risk, but rather just a Part 36 risk, will now have a liability risk. A case where a liability has been admitted can now be lost on liability at a quantum hearing if the court finds that there has been fundamental dishonesty in relation to any part of the claim.

Thus all quantum hearings are potentially liability hearing replays.

A claim is brought. Liability is admitted. Past special damages are agreed and paid at £40,000.00. General damages are agreed and paid at £30,000.00. There is a dispute about future loss of earnings and that issue goes to court and the judge finds that the claimant had an unrealistic view of her or his future career prospects and has been fundamentally dishonest in the future loss of earnings claim.

Bang goes the whole award and the claimant must refund the £70,000.00, although will be given credit for it in relation to adverse costs.

Admissions in personal injury cases are now meaningless.

After-the-event insurance policies are bound to exclude liability where a client is found to have been fundamentally dishonest.

Self-Insurance

Solicitors are allowed to agree with clients to cover the risk of adverse costs, that is to satisfy any costs order made against their client – see Sibthorpe and Morris v Southwark London Borough Council (Law Society intervening) [2011] EWCA Civ 25.

Such a benefit to the client entitles solicitors to charge a higher rate but this must not be a direct insurance premium. Thus solicitors may charge an increased hourly rate and cap all charges to the client, at say 30%, 35% or 40% or whatever of damages rather than the more usual 25%.

There is a duty not to exploit one’s client and there is of course the market.

Solicitors need to take care in the wording of the retainer and in the funding agreement to ensure that they are not liable if the client is found to be fundamentally dishonest in either a section 57 context or a QOCS context.

Bad enough that the solicitor will receive no fee from the other side in what was apparently a dead cert case but to be liable for the other side’s costs due to one’s own client’s fundamental dishonesty is a step too far.

Client Care Letter Wording

Irrespective of the insurance arrangements clients must be warned in very clear terms of the consequences of exaggerating any aspect of the claim.

Here is the suggested wording:-

Add to “Your Responsibilities”:-

“You will not exaggerate any part of your claim.”

Below that I advise the following in bold:-

“Please note that in a personal injury claim any inaccuracy or exaggeration by you or on your behalf in relation to any part of the claim will lead to the whole claim being thrown out with you being ordered to pay the other side’s costs. This will happen even if you have already won your claim. For example if the court finds that the accident was the other party’s fault but you exaggerate your injuries or the amount that you have spent then your claim would be lost. You will then be responsible for my firm’s costs as well as the other side’s costs. Such conduct on your behalf will invalidate any insurance policy.”

This statement has a readability score of 61.7 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

I advise that all clients be seen by a senior lawyer at least for the purposes of explaining the effect and meaning of fundamental dishonesty and also for discussing funding. Obviously a careful attendance note should be made.

Although the client has to sign a Statement of Truth in relation to their statement I suggest a following separate statement to be signed by the client in the following terms:-

“I have read and understood the statement that I have made. I have had any parts that I was unsure about explained to me and I confirm that the statement is true and correct in every respect. I understand that anything wrong in my statement may lead to my whole claim being thrown out and me being ordered to pay the other side’s costs as well as my own solicitor’s costs and expenses.”

This statement has a readability score of 63 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

In relation to the Schedule of Special Damages I suggest the following be signed separately by the client:-

“I have read and understood my Schedule of Special Damages. I understand that these are expenses that I have actually paid or am liable for. I have had any parts that I was unsure about explained to me. I confirm that the Schedule of Special Damages is true and accurate in every respect. I understand that any inaccuracy in my Schedule of Special Damages may lead to my whole claim being thrown out and me being ordered to pay the other side’s costs as well as my own solicitor’s costs and expenses.”

This statement has a readability score of 64.5 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

The above statement can be adapted for a Schedule of Future Loss.

In relation to medical evidence I advise the following:-

“I have read and understood my Medical Report. I have had any parts that I was unsure about explained to me. I confirm that the report is true and accurate in every respect. In particular I have been supplied with an explanation of the medical terms and I understand all of them. I understand that any inaccuracy in the Medical Report may lead to my whole claim being thrown out and me being ordered to pay the other side’s costs as well as my own solicitor’s costs and expenses.”

This statement has a readability score of 61 on the Flesch-Kincaid readability scale meaning that it is easily understood by 13 to 15 year olds.

The above wording can be adapted for any other reports obtained.

Solicitors may wish to have the client care statements in any Conditional Fee Agreement.

Substantial Injustice

Dismissal of the whole claim is mandatory unless the court is satisfied “that the claimant would suffer substantial injustice if the claim were dismissed.” (section 57(2)).

It appears that this is an all or nothing provision, that is that the court must either dismiss the whole of the claim on the ground of fundamental dishonesty or, if the substantial injustice exception is made out, treat the claim as though section 57 did not exist.

In other words there appears to be no power to disallow say half of the claim. The wording of section 57(2) is:-

“(2) The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.”

Had Parliament intended the courts to have power to reduce the award but not extinguish it altogether one would have expected Parliament to say so, for example with wording such as:-

“The court must dismiss the whole of the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim was dismissed, in which case it shall make such order as it thinks fit, including awarding the claimant a percentage of what would have been awarded absent fundamental dishonesty.” Or whatever.

Level of Burden of Proof re Substantial Injustice

In relation to fundamental dishonesty the court has to be “satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.” (Section 57(1)(b)).

The level of burden of proof is not specified in relation to substantial injustice:

“(2) The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.”

This causes problems. One would expect the burden of proof to be on the balance of probabilities as the proceedings in question are civil proceedings. The counter argument is that in relation to fundamental dishonesty the Act specifically states that the burden of proof is that of the balance of probabilities, whereas here it is not so specified.

The counter counter-argument is that Parliament needed to make it clear that in relation to fundamental dishonesty – essentially a criminal concept – the civil, not criminal burden of proof applies. The criminal burden of proof is generally expressed as proving beyond reasonable doubt, a much higher burden than the civil one of the balance of probabilities.

As the name suggests the Criminal Justice and Courts Act 2015 is largely a criminal statute. Nevertheless section 57 is headed:-

Civil proceedings relating to personal injury”

and is dealing primarily with civil proceedings, although section 57(7) does deal with criminal proceedings.

On balance, but not beyond reasonable doubt, my view is that the balance of probabilities is the appropriate test in relation to substantial injustice.

What might be covered?

It was pointed out in the debate in the House of Lords on 23 July 2014 that the whole section is designed to do substantial injustice, that is a claimant with a good claim has the whole claim dismissed because of “fundamental dishonesty” in relation to one part of the claim.

Lord Marks said: –

“…the subsection works against the interests of justice, or certainly risks doing so, in two ways. The first is by imposing a presumption in favour of dismissal, subject to a modest saving provision that, frankly, is difficult to understand.”

“…the saving subsection, “unless it is satisfied that the claimant would suffer substantial injustice, if the claim were dismissed”,

is very difficult to understand. On one view of justice, and the view of justice which appears to be intended by the proponents of the clause, if there is dishonesty, it is not unjust for the whole claim to go. If that is the meaning, how does the saving provision come in at all? If, on the other hand, it means that the interests of justice seem broadly to require the claimant still to get some of his damages, does that amount to a duty to dismiss or is it merely a power to dismiss, which is what my amendments are directed to?

“The second area where I believe there is a risk that justice will not be done is that the clause as it stands allows for no middle course—no way of allowing a judge to reduce the damages rather than dismiss the claim, where a reduction in damages is really what is required to do justice between the parties.”

This supports my view set out above, that it is all or nothing once a finding of fundamental dishonesty is made.

Lord Marks also asked the question as to whether, for example, claiming five bus fares when only one was incurred requires the whole claim to be disallowed in what could be a very serious injury case.

No example was given in Parliament of what might amount to substantial injustice.

Children’s cases

If a litigation friend exaggerates on behalf of a child claimant a court might find fundamental dishonesty but also that to dismiss the claim would cause substantial injustice to the innocent child claimant.

Claimants lacking capacity

A court might take the same view in relation to fundamental dishonesty by a litigation friend acting for an innocent claimant lacking capacity.

Loss of huge award

It remains to be seen whether fundamental dishonesty in relation to a minor part of a claim, triggering a loss of millions of pounds to a catastrophically injured claimant would indeed mean that claimant gets nothing or whether the court would find that such a disproportionate penalty would indeed cause substantial injustice to the claimant.

Cost to state

It was also pointed out that in cases of catastrophic injury – which is where the point is most likely to be taken by the defendant’s insurance companies – the losing party is likely to be the tax-payer who will have to pay for the care of a seriously injured person where the injuries have been caused by a defendant tortfeasor which has got off scot-free, or rather has its insurance company.

 

Fundamental Dishonesty and Costs Proceedings

It is trite law that costs belong to the client and that assessment proceedings, although almost invariably in personal injury claims for the benefit of the lawyers only, are in the names of the parties.

Does that mean that fundamental dishonesty during the assessment proceedings can lead to the dismissal of the whole claim? On the face of it that is the case. However that may be one of the instances where a court would find that it would cause substantial injustice to deprive a claimant of all of her or his damages, no doubt already paid to the client, due to the solicitor’s fundamental dishonesty in claiming costs.

In the unlikely scenario that the client is involved in the fundamental dishonesty in claiming costs then it is likely that the client would indeed lose all of their damages.

An unanswered question is whether fundamental dishonesty in a bill of costs gives the court the power to disallow all of the claimant’s costs. Arguably the court has that power anyway under its very wide discretion in relation to costs but section 57 undoubtedly strengthens that discretionary hand of the court if there is any fundamental dishonesty in relation to the bill of costs.

It should be noted with care by those putting forward bills of costs that the Hayward case, discussed above, equates exaggeration with fraud and therefore fundamental dishonesty.

Many paying parties would contend that virtually every claimants’ bill of costs is exaggerated and therefore is fundamentally dishonest.

 

CPR 44.16(1)

Fundamental Dishonesty

The term fundamentally dishonest is used in section 57 of the Criminal Justice and Courts Act 2015 and in relation to QOCS in CPR 44.16(1) and is extensively referred to in Practice Direction 44 in relation to QOCS but is nowhere defined in the Act, Explanatory Notes, the Civil Procedure Rules or the Practice Direction. This is in spite of the fact that section 57(8) of the Criminal Justice and Courts Act 2015 is a definition section but chooses not to define this term, which is by far the most important one.

CPR 44.16(1) reads:

“(1) Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.”

In fact the term originated in CPR 44.16(1) which became law in April 2013,before Parliament  enacted section 57 of the Criminal Justice and Courts Act 2015.

Under CPR 44.16(1) the burden of proof is that of the balance of probabilities, just as it is in section 57(1)(b) of the Criminal Justice and Courts Act 2015.

Note also that even though the disqualification from QOCS under CPR 44.16(1) requires there to be a finding that the claim is fundamentally dishonest it remains within the discretion of the court as to whether to allow enforcement of the costs order as it is dependent upon “the permission of the court”.

Under section 57 the court has no such discretion; dismissal of the claim is mandatory unless the substantial injustice exception is found.

Having said that it is hard to conceive of a situation where the court has found fundamental dishonesty and makes a costs order as it is bound to do, but then refuses permission for the successful defendant to enforce that order.

Indeed it is hard to envisage circumstances where the court will not also order those costs to be paid and enforced on the indemnity basis. Practice Direction 44, section II, dealing with Qualified One Way Costs Shifting covers fundamental dishonesty at paragraph 12.4 in these terms: –

12.4

In a case to which rule 44.16(1) applies (fundamentally dishonest claims) –

(a) the court will normally direct that issues arising out of an allegation that the claim is fundamentally dishonest be determined at the trial;

(b) where the proceedings have been settled, the court will not, save in exceptional circumstances, order that issues arising out of an allegation that the claim was fundamentally dishonest be determined in those proceedings;

(c) where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;

(d) the court may, as it thinks fair and just, determine the costs attributable to the claim having been found to be fundamentally dishonest.”

That Practice Direction is not without its problems. Paragraph 12.4 (d) suggests that the court may deny QOCS protection in relation just to the costs attributable to the claim having been found to be fundamentally dishonest, but that is a discretion so the court, which has to make a full costs order in any event, may order the unsuccessful claimant to pay all of the defendant’s costs.

Thus fundamental dishonesty has a different effect on different types of case:

The claimant wins

If the claimant wins but is found to be fundamentally dishonest in relation to any part of the claim, or a related claim, then that win is overturned and the claimant is ordered to pay the defendant’s costs, but subject to a reduction from those costs of the damages that the claimant would have been awarded on the genuine part of the claim.

The claimant loses

The court makes an order in the successful defendant’s favour as in any other type of case but then has a discretion as to whether to allow enforcement of that order at all, and if so whether in full or in part.

In both scenarios, that is a win or a loss, the court has a discretion as to whether to order costs on the standard basis or on the indemnity basis, but given that by definition there has been a finding of fundamental dishonesty it is hard to see any reason not to award costs on the indemnity basis.

 

In

Summers v Fairclough Homes Ltd [2012] UKSC 26

the Supreme Court held that a court had the power to strike out a claim in its entirety in the event of fraud, but that that power should only be exercised in very exceptional circumstances. It has rarely been used.

Under the principles of this case a claimant would generally receive the genuine element of a claim even if a court found that s/he had dishonestly claimed other losses. This case is in a sense a forerunner of Section 57 of the Criminal Justice and Courts Act 2015. Here the Supreme Court said, at paragraph 1:-

“The principal issues in this appeal are whether a civil court (“the court”) has power to strike out a statement of case as an abuse of process after a trial at which the court has held that the defendant is liable in damages to the claimant in an ascertained sum and, if so, in what circumstances such a power should be exercised.”

There was no doubt that the claimant had had an accident which was the defendant’s fault but the trial judge found that he had exaggerated his symptoms to the extent of being fraudulent and had deliberately lied to those preparing medical reports.

At paragraph 33 of its judgment the Supreme Court said:-

“33. We have reached the conclusion that, notwithstanding the decision and clear reasoning of the Court of Appeal in Ul-Haq, the court does have jurisdiction to strike out a statement of case under CPR 3.4(2) for abuse of process even after the trial of an action in circumstances where the court has been able to make a proper assessment of both liability and quantum. However, we further conclude, for many of the reasons given by the Court of Appeal, that, as a matter of principle, it should only do so in very exceptional circumstances.”

Interestingly at paragraph 45 the Supreme Court said:-

“It was submitted that an ascertained claim for damages could only be removed by Parliament and not by the courts. We are unable to accept that submission. It is for the court, not for Parliament, to protect the court’s process. The power to strike out is not a power to punish but to protect the court’s process.”

Parliament has clearly taken a different view from the Supreme Court in passing Section 57.

Most interestingly of all the Supreme Court considered the role of the European Convention on  Human Rights in the context. Specifically the Supreme Court accepted that a judgment is a possession within the meaning of Article 1 Protocol 1 of the European Convention on Human Rights and that the effect of striking out a claim for damages would be to deprive someone of that possession, which would only be permissible if “in the public interest and subject to the conditions provided for by law…”

The Supreme Court said that the State has a wide margin of appreciation in deciding what is in the public interest but that is subject to the principle of proportionality – Pressos Compania Naviera SA v Belgium (1995) 21 EHRR 301 Paras 31 to 39.

“48. It is in the public interest that there should be a power to strike out a statement of case for abuse of process, both under the inherent jurisdiction of the court and under the CPR, but the Court accepts the submission that in deciding whether or not to exercise the power the court must examine the circumstances of the case scrupulously in order to ensure that to strike out the claim is a proportionate means of achieving the aim of controlling the process of the court and deciding cases justly.”

The court then went on to say, at paragraph 49:-

“The draconian step of striking a claim out is always a last resort, a fortiori where to do so would deprive the claimant of a substantive right to which the court had held that he was entitled after a fair trial. It is very difficult indeed to think of circumstances in which such a conclusion would be proportionate. Such circumstances might, however, include a case where there had been a massive attempt to deceive the court but the award of damages would be very small.” (My italics)

In

Akhtar and Khan v Ball, Walsall County Court, Unreported, 10 July 2015, Claim number A23YJ132

the two claimants were found to be fundamentally dishonest and the claims were dismissed, QOCS was dis-applied and the claimants were ordered to pay the defendants £3,000.00 exemplary damages on the defendant’s counterclaim for deceit and costs on the indemnity basis.

The court found the claimants to be “complicit in a criminal conspiracy to defraud” Royal and Sun Alliance Insurance plc.

The dismissal of the claims was because they were not made out, rather than under section 57 of the Criminal Justice and Courts Act 2015.

Husband and wife Parveen Akhtar and Mohammed Khan sought damages for personal injury following a road traffic accident when Rebecca Ball, a teacher insured by Royal and Sun Alliance, collided with the rear of a vehicle being driven by Mrs Akhtar.

It was alleged that Mr Khan was a front seat passenger.

The court dismissed both claims, finding that there had been no passenger and that the collision was at such a low speed that it could not have caused the injuries alleged.

The judge added:

“Even if I felt that there had been an accident which had actually caused Mrs Akhtar some injury, I would consider it appropriate to adopt the approach approved as acceptable in some cases by the Supreme Court in Summers v Fairclough Homes Ltd [2012] UKSC 26 as permitting a court to dismiss or strike-out an otherwise bona fide substantive claim because of the fraud in which that claimant has engaged in the course of the litigation to pursue another false claim.” (Paragraph 36).

Other cases

In Gosling v Screwfix and Another, Cambridge County Court, 29 March 2014, unreported, HHJ Moloney QC found the claimant to be exaggerating both his ongoing pain and the limitations to his mobility following an anthroplasty operation to his knee. This followed a “frankly devastating surveillance video.”

In considering whether this amounted to fundamental dishonesty the judge said that:-

“a claimant should not be exposed to costs liability merely because he is shown to have been dishonest as to some collateral matter or perhaps as to some minor, self-contained head of damage. If, on the other hand, the dishonesty went to the root of either the whole claim or a substantial part of his claim, then it appears to me that it would be a fundamentally dishonest claim: a claim which depended as to a substantial or important part of itself upon dishonesty.” (Paragraph 45).

The judge rejected the contention that fundamental dishonesty could only be found where “the dishonesty went to the root either of liability as a whole or damages in their entirety.” (Paragraph 49).

Here the claimant was found to be fundamentally dishonest as the dishonesty related to a “very substantial element of his claim” both in respect of general damages and damages for future care.

In Creech v Severn Valley Railway, 25 March 2015, Telford County Court, Unreported, District Judge Rodgers made a finding of fundamental dishonesty and thus denied the claimant the protection of Qualified One-Way Costs Shifting and ordered the claimant to pay defence costs of over £11,000.00.

The claimant was a security guard who fractured his shoulder and brought a personal injury claim on the ground that he had tripped on matting left behind after an ice-rink had been removed from a railway station in Worcester where the defendant company had installed it to entertain families while the railway was closed.

The judge accepted evidence from the defendant company that the ice-rink was still on the concourse at the time that the accident was alleged to have happened and had not been dismantled and therefore the claimant could not have been telling the truth. The judge rejected a suggestion that the claimant had simply made a mistake in his evidence.

In September 2014 District Judge Dudley, sitting at Southend County Court, said that he had “absolutely no doubt whatever in my mind” that the claimant had been fundamentally dishonest in giving evidence and thus he deprived the claimant of the protection of Qualified One-Way Costs Shifting and ordered the claimant to pay costs of £6,000.00 in addition to the £1,000.00 costs of the application by the defendant for a ruling that the claimant had been fundamentally dishonest.

The defendant was insured with Admiral and its insured was accused of driving into the back of the claimant’s car after the claimant performed an emergency stop to avoid a collision with a motorbike. The claimant alleged that he had suffered neck and back whiplash injuries which persisted for months and obtained GP reports for himself and his passenger.

The court held that in fact there had been no contact at all between the two vehicles.

In

Alpha Rocks Solicitors v Alade [2015] EWCA Civ 685

the Court of Appeal overturned a decision of the judge striking out the claim by solicitors to recover their costs; the judge had found that the bills were fraudulently exaggerated and mis-stated.

The strike out was on the basis of an abuse of the process of the court – CPR 3.4(2)(b) under the inherent jurisdiction of the court.

No oral evidence was called and the decision was made on the basis of written evidence and the documents.

The court quoted from Summers v Fairclough Homes [2012] 1 WLR 2004 where the Supreme Court approved the decision in Masood v Zahoor (Practice Note) [2009] EWCA Civ 650 and where they had refused to strike out, after a trial on Quantum, a massively overstated personal injury claim.

Here the Court of Appeal found that the judge had, in spite of repeated warnings to himself, conducted a mini fraud trial without hearing any witnesses. He decided that the solicitor was lying and that other witnesses were untruthful without them being cross-examined. The Court of Appeal found that to be a most unsatisfactory state of affairs.

Comment

This, and other similar decisions, suggest that the Court of Appeal and the Supreme Court will not be comfortable with Section 57 of the Criminal Justice and Courts Act 2015 which requires a court to strike the matter out even after judgment has been given in the Claimant’s favour if there is fundamental dishonesty.

Paragraph 704(C) of the Code of Conduct of Barristers states that a barrister should not draft a document containing any allegation of fraud “unless he has clear instructions to make such an allegation and has before him reasonably credible material which as it stands establishes a prima facie case of fraud”.

In

Medcalf v Mardell the House of Lords said:-

“…the requirement is not that counsel should necessarily have before him evidence in admissible form but that he should have material of such character as to lead responsible counsel to conclude that serious allegations should properly be based upon it.”

It will be interesting to see if guidance is given to counsel on raising fundamental dishonesty, either in the context of section 57 or Qualified One-Way Costs Shifting.

 

Fundamental Dishonesty: No Need for Damages Hearing

In

Patel v Arriva Midlands Ltd & Anor [2019] EWHC 1216 (QB) (14 May 2019)

the High Court dismissed a claimant’s personal injury claim on the ground of fundamental dishonesty, without the matter going to a quantum hearing, that is a hearing to decide the level of damages.

Here, the claimant was involved in a collision with a bus in January 2013 and then had a heart attack and his condition apparently deteriorated to the point where he was significantly disabled.

The claimant won the claim with a finding of 40% contributory negligence and the defendant’s insurers then applied to dismiss the claim before it went to a damages hearing, on the ground that it was fundamentally dishonest, as required by section 57 of the Criminal Justice and Courts Act 2015.

Experts had found the claimant in bed, mute and unresponsive and unable to move his hands, arms or legs, but with no apparent neurological reason, and they concluded that he was either feigning his disability, or had a subconscious conversion disorder.

However, the defendant secretly recorded the claimant over several days, showing him walking unaided, talking and engaging with what was going on.

One expert changed his view and said that the disability was feigned and that the claimant’s son, acting a Litigation Friend, had been deceitful, and the Judge accepted this evidence and said that even if the claimant’s condition changed from day to day, this should still have allowed him to correct the untrue information in the reports of the expert.

The claimant submitted that it was impossible for the court to find fundamental dishonesty without hearing all of the evidence, and that it should wait until after the damages hearing, a contention rejected by the judge:

“The claimant’s dishonesty has substantially affected the presentation of his case which potentially adversely affected the defendant in a significant way, and so that the claimant has been fundamentally dishonest.”

 

Comment

Spot on. However, we need to extend the fundamental dishonesty provisions to defendants in personal injury cases.

It is very simple – here is the draft of a new Section 57A:

“In any personal injury claim where the court finds the defendant to have been fundamentally dishonest, the court shall increase by 100% the total damages and costs awarded to the claimant.”

Indeed, there is a compelling case to extend the fundamental dishonesty provisions to all civil and employment cases, for both parties.

Interestingly the same Judge – Her Honour Judge Melissa Clarke sitting as a judge of the High Court on 14 May 2019, held in

ATB Sales Ltd v Rich Energy Ltd & Anor [2019] EWHC 1207 (IPEC)

that it was not necessary to plead fraud or dishonesty, provided that the facts upon which an inference of dishonesty may be based are pleaded.

For all intents and purposes the courts now treat dishonesty, fundamental dishonesty and fraud as meaning the same thing, which must be right.

 

QOCS, Discontinuance And Strike-Out

In

Shaw v Medtronic Corevalve LLC & Others [2017] EWHC 1397 (QB)

the Queen’s Bench Division of the High Court refused to set aside a Notice of Discontinuance and refused to give permission to Defendants to enforce a Costs Order in a Qualified One-Way Costs Shifting case.

The discontinuance did not amount to an abuse of process and although there were elements of the claim outside the ambit of QOCS protection, they were either not pleaded, or were de minimis and would not have added to the costs of the action.

Previously the court had set aside permission to the Claimant to serve the First and Third Defendants out of the jurisdiction and the claim against the Fourth Defendant was struck out and the Claimant then discontinued against the Fifth Defendant.

Now, the Claimant sought permission to amend the Particulars of Claim against the Second Defendant, who was the one remaining Defendant.

The First, Third and Fifth Defendants applied for leave to enforce the Costs Orders made against the Claimant.

The judge refused permission to the Claimant to amend against the Second Defendant and then struck out the claim against that Defendant.

Thus the position in relation to claim was:

First Defendant:             Service set aside

Second Defendant:         Struck out

Third Defendant:            Service set aside

Fourth Defendant:          Struck out

Fifth Defendant:             Discontinued.

 

CPR 44.15 reads:

Exceptions to Qualified One-Way Costs Shifting where permission not required

44.15 Orders for costs made against the claimant may be enforced to the full extent of such orders without the permission of the court where the proceedings have been struck out on the grounds that –

(a) the claimant has disclosed no reasonable grounds for bringing the proceedings;

(b) the proceedings are an abuse of the court’s process; or

(c) the conduct of –

(i) the claimant; or

(ii) a person acting on the claimant’s behalf and with the claimant’s knowledge of such conduct,

is likely to obstruct the just disposal of the proceedings.”

In relation to the First and Third Defendants, the claim had not been struck out, even though the judge held that the Claimant had disclosed no reasonable grounds for bringing the proceedings and had said that had the Claim Form been served within the jurisdiction, he would have struck the claims out as having no reasonable grounds.

However, as the claim was served outside the jurisdiction the appropriate remedy was to set aside service.

Neither had the claim been struck out against the Fifth Defendant – it had been discontinued.

Thus CPR 44.15(1)(a), relating to strike-out, could not apply in relation to any of these three Defendants.

Setting aside discontinuance   

The Fifth Defendant sought an order setting aside the Notice of Discontinuance, so as to allow the court to consider striking out the claim on the basis that the Claimant had no reasonable grounds for bringing the proceedings.

That would have the effect of bringing the matter back within the CPR 44.15(1)(a) exception to QOCS.

The judge refused, saying that:

“… the Claimant had a right to discontinue under CPR rule 38.2. It was a proper use of that power, and to be encouraged, for the Claimant to recognise … that her claim against the Fifth Defendant was not sustainable and to discontinue that claim (Paragraph 53).”

The court recognised that it had power under CPR 38.4 to set aside a Notice of Discontinuance and the authorities suggested that that should only be done if there had been an abuse of process in serving the Notice of Discontinuance.

The rule itself is silent as to when the power should be exercised.

The judge held that the facts here were not an abuse of process “or anything sufficient to justify setting aside the Notice of Discontinuance (Paragraph 58).”

The court left open the possibility that servicing Notice of Discontinuance to avoid the claim being struck out on the no reasonable grounds basis, and thus triggering disqualification from QOCS protection, could be an abuse of process justifying the setting aside of the Notice of Discontinuance, but that was not the position here.

 

Case Law

Fundamental Dishonesty: Supreme Court Indicates Hard Line: Versloot Considered

In

Versloot Dredging BV and another v HDI Gerling Industrie Versicherung AG and others [2016] UKSC 45   

the Supreme Court has held that where an insured lies in support of a claim but those lies do not affect the right of the insured’s recovery under the insurance policy, then the insurance company must pay out.

This decision has been widely misunderstood in relation to its application to the concept of fundamental dishonesty in personal injury claims, presumably by people who have not got as far as reading paragraphs 94 to 96 of the 55 page judgment.

Far from indicating a lax approach to fundamental dishonesty the case strongly suggests a very tough line indeed, that is that any dishonest exaggeration for financial gain, however small, amounts to fraud and therefore fundamental dishonesty, and therefore brings Section 57 of the Criminal Justice and Courts Act 2015 into play to overturn the whole award.

At paragraph 95 the Supreme Court points out, but does not seek to define, the “substantial injustice” exception.

Here the Supreme Court termed lies which made no difference “collateral lies” and held, by a 4 – 1 majority, that the fraudulent devices rule, which allows insurers to reject fraudulent claims, does not apply to such collateral lies.

Thus such a claim is not a fraudulent claim entitling the insurer to avoid it.

In relation to contracts of insurance concluded after 12 August 2016 the rule has been restated, and its other consequences defined, in Section 12 of the Insurance Act 2015. This ruling applies to that Act as that Act does not attempt to define what makes a claim fraudulent.

Contracts between insurers and their insured are contracts of utmost good faith. That principle does not apply to negligence actions against another party which is indemnified by insurance.

Here the insurers were seeking to avoid the claim, not the contract, and therefore the Supreme Court was not considering the issue of utmost good faith in its entirety.

It was accepted that even where a party is claiming against its own insurer the utmost good faith condition is modified in relation to the bringing of a claim, as compared with the entering into of the contract in the first place.

This case involved a cargo ship which ran into difficulty after its engine room was flooded. The owners deliberately lied in saying that the crew did not investigate an alarm call as the ship was rolling in heavy seas.

In fact the accident was caused during the voyage by sea water entering the engine room and was thus covered by the insurance policy, which remained valid, and so the lie was irrelevant.

The insured had made this false statement in the belief that it would fortify the claim and accelerate payment, as he was frustrated by the insurer’s delay.

The false statement was made once in one email to the insurer’s solicitors and was not persisted in at the trial.

The High Court sitting at first instance found as a fact that the lie was irrelevant to the merits of the claim but that the insurers were nevertheless entitled to repudiate the claim.

The Court of Appeal agreed but the Supreme Court overturned that finding, with Lord Clarke saying:-

“The critical point is that, in the case of a collateral lie… the insured is trying to  obtain  no  more  than  the  law  regards  as  his entitlement and the lie is irrelevant to the existence or amount of that entitlement. Such a lie is thus immaterial to the claim. As Lord Sumption puts it, the lie is dishonest but the claim is not.” (Paragraph 40).

Lord Sumption said that for a claim to be fraudulently exaggerated the insured’s dishonesty must be calculated to get him something to which he is not entitled.

The position is different where the insured is trying to obtain no more in law than his entitlement and the lie is irrelevant to that entitlement.

Here the lie was dishonest, but the claim was not. A policy of deterrence did not justify the application of the fraudulent claims rule in such a situation.

Note that if the lie had been a relevant one, for example a small exaggeration of the amount, then one email would have been enough to lose the whole claim. Personal injury lawyers take very careful note.

The obiter comments of Lord Mance in the Court of Appeal in

Agapitos v Agnew (The Aegeon) [2002] EWCA Civ 247;

that insurers could reject a claim because of collateral lies were rejected.

In fact even exaggerated claims against another person’s insurance company have traditionally been allowed by the courts in circumstances where they would have failed against the person’s own insurance company.

On the face of it that remains the law; any exaggerated claim against one’s own insurer would still be disallowed as a material lie is not a collateral lie, but a claim against someone else’s insurance company would be allowed to the extent of the true validity of the claim.

In other words you can “try it on” against someone else’s insurer and still win, but not your own insurer.

The Supreme Court recognized this, saying at paragraph 9:-

9. What matters for present purposes is the rationale of the rule, on which there is a broad consensus in the authorities. It is the deterrence of fraud. As Lord Hobhouse observed in

The “STAR SEA” [Manifest Shipping Co Ltd v Uni-Polari Insurance Company Ltd (The “STAR SEA”) [2003] 1 AC469] at paragraph 62,

“The logic is simple.  The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.”

The Supreme Court also recognized that this rule did not apply where the contract was not one of insurance, for example a negligence action in personal injury.

“10. Fraudulent insurance claims are a serious problem, the cost of which ultimately falls on the general body of policyholders in the form of increased premiums. But it was submitted to us that a forfeiture rule was not the answer to that problem. There was, it was said, little empirical evidence that the common law rule was an effective deterrent to fraud, and no reason to think that the problem was peculiar to claims on insurers as opposed to, say, claims in tort for personal injuries, the cost of which also falls ultimately on insurers and policyholders without there being any equivalent common law rule. Informational asymmetry is not a peculiarity of insurance, and in modern conditions may not even be as true of insurance as it once was. These points have some force. But I doubt whether they are relevant. Courts are rarely in a position to assess empirically the wider behavioural consequences of legal rules. The formation of legal policy in this as in other areas depends mainly on the vindication of collective moral values and on judicial instincts about the motivation of rational beings, not on the scientific anthropology of fraud or underwriting. As applied to dishonestly exaggerated claims, the fraudulent claims rule is well established and, as I have said, will shortly become statutory.”

Curiously the law has always been that any duty of good faith in the presentation of a claim ended with the commencement of proceedings even as between an insured and its own insurer.

Returning to the difference between a fraudulently exaggerated claim and a justified claim supported by collateral lies the Supreme Court had this to say:-

“25. In this context, there is an obvious and important difference between a fraudulently exaggerated claim and a justified claim supported by collateral lies. Where a claim has been fraudulently exaggerated, the insured’s dishonesty is calculated to get him something to which he is not entitled. The reason why the insured cannot recover even the honest part of the claim is that the law declines to sever it from the invented part. The policy of deterring fraudulent claims goes to the honesty of the claim, and both are parts of a single claim: Galloway v Guardian Royal Exchange (UK) Ltd[1999] Lloyd’s Rep IR 209, 213-214 (CA); Direct Line Insurance v Khan[2002] 1 Lloyd’s Rep IR 364; AXA General Insurance Ltd v Gottlieb [2005] 1 All ER (Comm) 445 (CA), para 31. The principle is the same as that which applies in the law of illegality. The courts will not sever an agreement affected by illegality into its legal and illegal parts unless it accords with public policy to do so, even if each part is capable of standing on its own: Kuenigl v Donnersmarck [1955] 1 QB 515, 537 (McNair J); Royal Boskalis Westminster NV v Mountain [1999] QB 674, 693 (Stuart-Smith LJ), 704 (Pill LJ).

26. The position is different where the insured is trying to obtain no more than the law regards as his entitlement and the lie is irrelevant to the existence or amount of that entitlement. In this case the lie is dishonest, but the claim is not. The immateriality of the lie to the claim makes it not just possible but appropriate to distinguish between them. I do not accept that a policy of deterrence justifies the application of the fraudulent claim rule in this situation. The law deprecates fraud in all circumstances, but the fraudulent claim rule is peculiar to contracts of insurance. It reflects, as I have pointed out, the law’s traditional concern with the informational asymmetry of the contractual relationship, and the consequent vulnerability of insurers. It is therefore right to ask in a case of collateral lies uttered in support of a valid claim, against what should the insurer be protected by the application of the fraudulent claims rule? It would, as it seems to me, serve only to protect him from the obligation to pay, or to pay earlier, an indemnity for which he has been liable in law ever since the loss was suffered. It is not an answer to this to say, as Christopher Clarke LJ did in the Court of Appeal, that the insurer may have been “put off relevant inquiries or … driven to irrelevant ones”. Wasted effort of this kind is no part of the mischief against which the fraudulent claims rule is directed, and even if it were the avoidance of the claim would be a wholly disproportionate response. The rule, moreover, applies irrespective of whether or not the lie set a hare running in the insurer’s claims department. Nor is it an answer to say, as the courts have often said of fraudulently inflated claims, that the insured should not be allowed a one-way bet: he makes an illegitimate gain if the lie persuades, and loses nothing if it does not. This observation, which is true of fraudulently inflated claims, cannot readily be transposed to a situation in which the claim is wholly justified. In that case, the insured gains nothing from the lie which he was not entitled to have anyway. Conversely, the underwriter loses nothing if he meets a liability that he had anyway.”

Although the Supreme Court recognized the difference between claims against one’s own insurance company and claims against another party who is insured it said that “the two species of fraud clearly exhibit shared features” and “an unacceptably high level of fictitious and dishonestly inflated claims thus formed part of the background against which the proper ambit of the fraudulent claims rule falls to be considered.” (Paragraph 56).

Thus the Supreme Court clearly had in mind application of its judgment to so-called third party claims, that is a claim by one party against another party, rather than its own insured.

Fundamental Dishonesty, Section 57 and Qualified One-Way Costs Shifting

The Supreme Court set out three possible scenarios: –

  1. The whole claim is fabricated.
  1. There is a genuine claim, the amount of which has been dishonestly exaggerated.
  1. The entire claim is justified, but the information given in support of it has been dishonestly embellished, either because the insured was unaware of the strength of the case or with a view to obtaining payment faster and with less hassle.

 

Scenario 1: The whole claim is fabricated

 

In scenario 1 the insurer will win on liability and no special rules need apply.

Section 57

 

Section 57 of the Criminal Justice and Courts Act 2015 will not apply as that only comes into effect if the claimant wins on liability.

Qualified One-Way Costs Shifting

 

The starting point is that a losing claimant pays costs.

In personal injury cases that rule is abrogated in certain circumstances by CPR 44.13 – 44.17 of the Civil Procedure Rules dealing with Qualified One-Way Costs Shifting whereby a winning personal injury claimant recovers costs, but a losing claimant does not pay them.

However QOCS does not apply to a fundamentally dishonest claim, which obviously a fabricated claim would be.

This disapplication of QOCS in a lost, fundamentally dishonest claim simply restores the normal, default position,  that is that the losing claimant pays.

As scenario one is the only instance in which the case is lost it is the only one to which QOCS applies.
Thus this decision makes no difference whatsoever to the application of Qualified One-Way Costs Shifting.

 

Scenario 2: There is a genuine claim, the amount of which has been dishonestly exaggerated

 

Qualified One-Way Costs Shifting

 

The claim is genuine, but exaggerated and so is won and therefore QOCS does not apply.

Section 57

 

This is a classic scenario for Section 57 to apply. The claim is won on liability but has been dishonestly exaggerated.

Thus the win is overturned in a personal injury case, as Section 57 only applies to personal injury claims.

Nothing in this decision softens that approach. On the contrary the Supreme Court reinforces the view that any dishonest exaggeration of the amount claimed, however small, allows the insurer to avoid the claim.

Although the law relating to insurer and insured does not apply directly to claims against someone else’s insurance company it is inconceivable that the court would apply a different principle in personal injury claims where Parliament has enacted that if the claimant has been fundamentally dishonest then the whole claim is lost.

The only issue in relation to fundamental dishonesty is how the courts will interpret Parliament’s use of the word “fundamental”.

Clearly the slightest exaggeration, even of a few pounds in a £1 million claim, is dishonest. It remains unclear as to whether in such circumstances a court could rule that such an exaggeration was dishonest, but nevertheless not fundamentally dishonest, or strictly, as the law requires, whether the claimant was fundamentally dishonest.

On the face of it even a collateral lie involves the claimant in being dishonest, but maybe the courts will hold that such an irrelevant lie does not satisfy the “fundamentally” dishonest test and that the significance or otherwise of the lie goes to its fundamental nature.

Here, in a different context, the Supreme Court held that any such exaggeration of the amount of a claim is indeed fraudulent. 

It seems unlikely that “fundamentally dishonest” requires a higher threshold than “fraudulent”. Thus it is likely that the courts will take a hard line on any exaggeration of any kind, however small, if that exaggeration is for financial gain.


Section 57 is indeed likely to apply to an exaggeration of a very small part of the claim.

 

Scenario 3: Dishonesty which makes no difference to the claim.

Qualified One-Way Costs Shifting

 

QOCS does not apply as the case is won and QOCS only applies to cases that are lost or where there is a failure to beat a Part 36 offer.

Section 57

 

The Supreme Court has held that such exaggeration which makes no difference to the claim is not fraudulent, even though it is dishonest. The court said that the lie is dishonest but the claim is not.

Given that the test in Section 57 is whether the claimant is fundamentally dishonest, rather than the claim, it could be argued that Section 57 still applies in such a scenario and therefore the win would be overturned.

This part of the decision is the most important as far as Section 57 is concerned.

It leaves open the ability of the court to find that such dishonesty, which does not affect the amount of claim, is indeed dishonest but not fundamentally dishonest, thus leaving the claim intact, valid and won.

It is possible, but in my view unlikely, that even in such circumstances, where a non-personal injury claim would succeed even against one’s own insurers, the courts could hold that the claimant him or herself was being fundamentally dishonest even though the claim was not.

If that is the view that the courts take then the win is overturned.

Those who take the view that requiring the claimant to be fundamentally dishonest, rather than the claim, involves a higher threshold of dishonesty before the claim can be overturned, are, to adapt a phrase, fundamentally wrong.

 

Summary

Qualified One-Way Costs Shifting

 

There is no doubt that as far as QOCS is concerned the decision is of no relevance whatsoever. 

Section 57

 

  1. An entirely fabricated claim is lost anyway and thus Section 57 does not apply.
  1. A claim exaggerated for financial gain is fraudulent and therefore is likely to be held to be made by the claimant being fundamentally dishonest and be disallowed in full under Section 57, however small the exaggerated amount is and however low a percentage it is of the genuine element of the claim.
  1. Exaggeration which does not affect the validity, nor the amount of the claim, while dishonest, is likely to be held not to mean that the claimant is fundamentally dishonest and therefore the claim will not be overturned under Section 57. However for the reasons set out above this is not certain.

Dishonest exaggerations that do not affect a claim

 

Examples may include: –

  • The speed of the other vehicle;
  • an untrue statement that the other party had admitted liability;
  • an untrue statement that the other driver’s breath smelled of alcohol or that the other driver was aggressive, or whatever;
  • lying about who the driver was in the mistaken belief that the actual driver was not insured – see the Australian case of

Tiep Thi Ho v  Australian Associated Insurance Ltd [2001] VSCA 48;

  • causing further damage to an already damaged door before photographing it and sending it to the insurers in a claim for theft consequent upon a forcible entry – see the Australian case of

GRE Insurance Ltd v Ormsby [1982] 29SASR 498 ;

  • a genuinely burgled householder unquestionably absent at the time lying about where he was to avoid domestic embarrassment (see paragraph 90 of the judgment);
  • fabricating an invoice for the genuine value of a stolen item where the original had been lost.

Anything other than a hard, bright line where there has been dishonesty seeking financial advantage would be almost impossible to apply.

Would a £5,000.00 exaggeration be okay on a £1 million claim but not a £10,000.00 claim?

Is there to be a permissible fraudulent percentage, that is it is okay to lie to the extent of say 10% of the value of the claim, but nothing more?

One analysis of Section 57 is that effectively it applies the insurer/own insured test to claims between parties where the claimant is not seeking recovery from its own insurer, but rather the other party, normally the other party’s insurance company.

It is hard to argue with the logic of the rule being the same in both cases.

It may be that the rule is too severe under Section 57, but if that is the case it is strongly arguable that it is also too severe between an insured and its own insurance company but that argument has been comprehensively rejected by the Supreme Court here, and indeed by all courts over a very long period of time.

Specific reference to Section 57

At paragraphs 94 and 95 of the judgment here the Supreme Court refers to Section 57 in the context of a scenario 2 cliam, that is one where the claim is genuine but there is dishonest exaggeration for financial gain.

At paragraph 94 the court said:-

“94. There is no  doubt  that  the  purpose  of  the  fraudulent  claims  rule  is  to discourage  fraud,  having  regard  to  the  particular  vulnerability  of  insurers. This rationale has frequently been reiterated. In Galloway v Guardian Royal Exchange (UK) Ltd [1990] Lloyd’s Rep IR 209, 214, it was expressed thus by Millett LJ at 214: “The making of dishonest insurance claims has become all too common. There seems to be a widespread belief that insurance companies are fair game, and that defrauding them is not morally reprehensible. The rule which we are asked to enforce today may appear to some to be harsh, but it is in my opinion a necessary and salutary rule which deserves to be better known by the public. I for my part would be most unwilling to dilute it in any way.” And in The Star Sea Lord Hobhouse said this at para 62: “The logic is simple.  The fraudulent insured must not be allowed to think: if the fraud is successful, then I will gain; if it is unsuccessful, I will lose nothing.” This latter formulation of the justification for the rule, which has often been repeated, gives rise to the commonly used shorthand that the fraudulent insured must not be allowed a “one-way bet”. It was the principal argument relied upon by the insurers in The Aegeon and in the present case for the inclusion of collateral lies within the rule.”

The Supreme Court then links this “own insurer” rule,  that is that any dishonesty of any kind which affects the value of the claim leads to the whole claim being forfeited, to Section 57:

“95. The need for such a rule, severe as it is, has in no sense diminished over the years. On the contrary, Parliament has only recently legislated to apply a version of it to the allied social problem of fraudulent third party personal injuries claims. Section 57 of the Criminal Justice and Courts Act 2015 provides that in a case where such a claim has been exaggerated by a “fundamentally dishonest” claimant, the court  is  to  dismiss  the  claim  altogether,  including  any  unexaggerated  part,  unless satisfied that substantial injustice would thereby be done to him. Parliament has thus gone further than this court was able to do in Summers v Fairclough Homes.”

Thus the Supreme Court seems to leave open as the only possible difference being the “substantial injustice” exception.

In paragraph 96, which follows that link the Supreme Court said:-

“96. Severe as the rule is, these considerations demonstrate that there is no occasion to depart from its very long-established status in relation to fraudulent claims, properly so called. It is plain that it applies as explained by Mance LJ in The Aegeon at paras 15 – 18. In particular, it must encompass the case of the claimant insured who at the outset of the claim acts honestly, but who maintains the claim after he knows that it is fraudulent in whole or in part. The insured who originally thought he had lost valuable jewellery in a theft, but afterwards finds it in a drawer yet maintains the now fraudulent assertion that it was stolen, is plainly within the rule. Likewise, the rule plainly encompasses fraud going to a potential defence to the claim. Nor can there be any room for the rule being in some way limited by consideration of how dishonest the fraud was, if it was material in the sense explained above; that would leave the rule hopelessly vague.” (My emphasis)

The Supreme Court’s assertion that any consideration of the extent of the dishonesty would leave the rule “hopelessly vague” must also apply to any attempt to interpret Section 57 in that way.

Contrary to what many assume, this decision undoubtedly envisages a clear, bright, and some would say hard, line in relation to the interpretation of fundamental dishonesty, or rather a fundamentally dishonest claimant, under Section 57.

 

Hard Line Taken in Three Cases

There have been three recent and important High Court decisions in relation to how the fundamental dishonesty test under section 57 of the Criminal Justice and Courts Act 2015 should be applied.

That section requires a court to dismiss an otherwise valid personal injury claim if the claimant has been fundamentally dishonest in relation to the claim unless the claimant would suffer substantial injustice if the claim was dismissed.

It only applies to cases issued on or after 13 April 2015 and covers counterclaims as well.

The full text of section 57 and the Explanatory Notes are set out at the end of this piece.

In

Ivey v Genting Casinos Limited (trading as Crockfords Club) [2017] 3 WLR 1212

the Supreme Court restated the common law test for dishonesty, holding that while dishonesty is a subjective state of mind, the standard by which the law determines whether that state of mind is dishonest is an objective one, and that if by ordinary standards a defendant’s mental state is dishonest, it is irrelevant that the defendant judges by a different standard.

In

Razumas v Ministry of Justice [2018] EWHC 215 (QB)

the Queen’s Bench Division of the High Court dismissed a personal injury claim under section 57 of the Criminal Justice and Courts Act 2015.

The claimant brought a clinical negligence claim against the Ministry of Justice concerning treatment whilst he was a prisoner, maintaining that there had been a failure to diagnose a tumour leading to his leg being amputated.

The claimant lied about seeking treatment, which raised the issue of whether the claim should be dismissed under the fundamental dishonesty provisions of section 57.

However, there is an exception if the claimant would suffer “substantial injustice” if the claim was dismissed.

The claimant submitted that his dishonesty fell short of being fundamental, as the lies were barely significant in the context of the case and also that he would suffer substantial injustice because of the gross disproportion between the lies and the effect of depriving him of the award of damages.

The High Court held that fundamental dishonesty was made out as the admitted dishonesty was part of the potential success of the claim and had substantially affected presentation of his case.

The High Court also held that something more than the loss of damages was required before there could be substantial injustice, as the whole point of section 57 was to remove damages and any other result would “cut across what [section 57] is trying to achieve.”

The court here referred to

Howlett v Davies and Ageas Insurance Ltd [2017] EWCA Civ 1696

where the Court of Appeal approved the following passage of the County Court judgment in

Gosling v Hailo 29 April 2014

“44. It appears to me that this phrase in the rules has to be interpreted purposively and contextually in the light of the context. This is, of course, the determination of whether the claimant is ‘deserving’, as Jackson LJ put it, of the protection (from the costs liability that would otherwise fall on him) extended, for reasons of social policy, by the QOCS rules. It appears to me that when one looks at the matter in that way, one sees that what the rules are doing is distinguishing between two levels of dishonesty: dishonesty in relation to the claim which is not fundamental so as to expose such a claimant to costs liability, and dishonesty which is fundamental, so as to give rise to costs liability.

45. The corollary term to ‘fundamental’ would be a word with some such meaning as ‘incidental’ or ‘collateral’. Thus, a claimant should not be exposed to costs liability merely because he is shown to have been dishonest as to some collateral matter or perhaps as to some minor, self-contained head of damage. If, on the other hand, the dishonesty went to the root of either the whole of his claim or a substantial part of his claim, then it appears to me that it would be a fundamentally dishonest claim: a claim which depended as to a substantial or important part of itself upon dishonesty.”

The court here also considered

London Organising Committee of the Olympic and Paralympic Games v Haydn Sinfield [2018] EWHC 51 (QB)

in which Mr Sinfield suffered an injury for which the Organising Committee was liable but where he dishonestly claimed gardening expenses, supported by fake invoices.

There the court dismissed the whole of the claim, relying on section 57 and said

“62. In my judgment, a claimant should be found to be fundamentally dishonest within the meaning of s 57(1)(b) if the defendant proves on a balance of probabilities that the claimant has acted dishonestly in relation to the primary claim and/or a related claim (as defined in s 57(8) ), and that he has thus substantially affected the presentation of his case, either in respects of liability or quantum, in a way which potentially adversely affected the defendant in a significant way, judged in the context of the particular facts and circumstances of the litigation. Dishonesty is to be judged according to the test set out by the Supreme Court in Ivey v Genting Casinos Limited (t/a Crockfords Club) , supra.

63. By using the formulation ‘substantially affects’ I am intending to convey the same idea as the expressions ‘going to the root’ or ‘going to the heart’ of the claim. By potentially affecting the defendant’s liability in a significant way ‘in the context of the particular facts and circumstances of the litigation’ I mean (for example) that a dishonest claim for special damages of £9000 in a claim worth £10 000 in its entirety should be judged to significantly affect the defendant’s interests, notwithstanding that the defendant may be a multi-billion pound insurer to whom £9000 is a trivial sum.”

Here the court concluded:

“212. I gratefully adopt the test set out by Julian Knowles J and ask myself first: Did Mr Razumas act dishonestly in relation to the primary claim and/or a related claim? To this the answer must be yes. He has one main claim, and the dishonesty went to one route to succeed on it in full. Has he thus substantially affected the presentation of his case, either in respect of liability or quantum, in a way which potentially adversely affected the defendant in a significant way? Again the answer must be yes. The argument which he advanced went to an entire factual section and pleaded occasion which would have entitled relief on the main claim. Thus the first part, fundamental dishonesty is made out.

213. I do not consider that there could be any way out for Mr Razumasvia the argument on substantial injustice. It cannot in my judgement be right to say that substantial injustice would result in disallowing the claim where a claimant has advanced dishonestly a claim which if established would result in full compensation. That would be to cut across what the section is trying to achieve.

214. In the Sinfield case Julian Knowles J had no difficulty in dismissing this argument in the context of a dishonesty which went only to part of the quantum claimed. At [89] he stated that it was plain from section 57(3):

“….something more is required than the mere loss of damages to which the claimant is entitled to establish substantial injustice. Parliament has provided that the default position is that a fundamentally dishonest claimant should lose his damages in their entirety, even though ex hypothesi, by s 57(1), he is properly entitled to some damages. It would render superfluous s 57(3) if the mere loss of genuine damages could constitute substantial injustice.”

215. This, it seems to me, must be right. Something more is required. That something more is not made out here and so, if there were a claim it would fail at this stage.”

In

London Organising Committee of the Olympic and Paralympic Games (In Liquidation) v Sinfield [2018] EWHC 51 (QB)

the Queen’s Bench Division of the High Court overturned the County Court’s award of damages and dismissed the claimant’s personal injury claim due to fundamental dishonesty under section 57 of the Criminal Justice and Courts Act 2015 in exaggerating the costs of gardening following his injury.

The claimant was injured whilst working as a volunteer at the 2012 Olympic Games and the defendant admitted liability.

The High Court said that the fact that the greater part of the claim was genuine is “neither here nor there.”

If something has “substantially affected the presentation of his case, either in respects of liability or quantum, in a way which potentially adversely affected the defendant in a significant way” then it amounts to fundamental dishonesty requiring the whole claim to be dismissed.

The claimant falsely claimed that he had spent thousands of pounds employing a gardener to manage his two acre garden after the accident.

The trial judge had said that he needed “evidence of weight” before finding dishonesty and held that the proper inference was that the claimant was “muddled, confused and careless” about the gardening claim, but that that did not contaminate the entire claim.

Here the High Court overturned that finding.

The gardening claim represented about 28% of the overall damages claim, but the false element was around 11% of the claim.

The trial judge had found that the claimant was not fundamentally dishonest within the meaning of section 57, but if he was wrong about that “it would be substantially unjust for the entire claim to be dismissed when the dishonesty relates to a peripheral part of the claim and the remainder of the claim was honest and genuine.”

Here the High Court said

“65. Given the infinite variety of circumstances which might arise, I prefer not to try and be prescriptive as to what sort of facts might satisfy the test of substantial injustice. However, it seems to me plain that substantial injustice must mean more than the mere fact that the claimant will lose his damages for those heads of claim that are not tainted with dishonesty. That must be so because of s 57(3). Parliament plainly intended that sub-section to be punitive and to operate as a deterrent. It was enacted so that claimants who are tempted to dishonestly exaggerate their claims know that if they do, and they are discovered, the default position is that they will lose their entire damages. It seems to me that it would effectively neuter the effect of s 57(3) if dishonest claimants were able to retain their ‘honest’ damages by pleading substantial injustice on the basis of the loss of those damages per se. What will generally be required is some substantial injustice arising as a consequence of the loss of those damages.”

Section 57 Criminal Justice and Courts Act 2015

“57 Personal injury claims: cases of fundamental dishonesty

(1) This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”)—

(a) the court finds that the claimant is entitled to damages in respect of the claim, but

(b) on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

(2) The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.

(3) The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.

(4) The court’s order dismissing the claim must record the amount of damages that the court would have awarded to the claimant in respect of the primary claim but for the dismissal of the claim.

(5) When assessing costs in the proceedings, a court which dismisses a claim under this section must deduct the amount recorded in accordance with subsection (4) from the amount which it would otherwise order the claimant to pay in respect of costs incurred by the defendant.

(6) If a claim is dismissed under this section, subsection (7) applies to—

(a) any subsequent criminal proceedings against the claimant in respect of the fundamental dishonesty mentioned in subsection (1)(b), and

(b) any subsequent proceedings for contempt of court against the claimant in respect of that dishonesty.

(7) If the court in those proceedings finds the claimant guilty of an offence or of contempt of court, it must have regard to the dismissal of the primary claim under this section when sentencing the claimant or otherwise disposing of the proceedings.

(8) In this section—

  • “claim” includes a counter-claim and, accordingly, “claimant” includes a counter-claimant and “defendant” includes a defendant to a counter-claim;
  • “personal injury” includes any disease and any other impairment of a person’s physical or mental condition;
  • “related claim” means a claim for damages in respect of personal injury which is made—

(a)

in connection with the same incident or series of incidents in connection with which the primary claim is made, and

(b)

by a person other than the person who made the primary claim.

(9) This section does not apply to proceedings started by the issue of a claim form before the day on which this section comes into force.”

Section 57: Personal injury claims: cases of fundamental dishonesty

“502. Section 57 provides that in any personal injury claim where the court finds that the claimant is entitled to damages, but on an application by the defendant for dismissal is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to either the claim itself (the primary claim) or a related claim, it must dismiss the primary claim entirely unless it is satisfied that the claimant would suffer substantial injustice as a result. A related claim is defined in subsection (8)as one which is made by another person in connection with the same incident or series of incidents in connection with which the primary claim is made. Subsection (3)makes clear that the requirement to dismiss the claim includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.

503. Subsection (4) requires the court to record in the order for dismissal the amount of damages that it would otherwise have awarded. This will be relevant in the event of an appeal and in determining what the claimant should pay the defendant in costs. It will also be relevant for the purposes of any criminal proceedings or proceedings for contempt of court which may be brought against the claimant in relation to the same behaviour.

504. Subsection (5) provides that when assessing costs in the proceedings, a court which dismisses a claim under this section must deduct the amount recorded in the order under subsection (4) from the amount which it would otherwise order the claimant to pay in respect of costs incurred by the defendant. For example, if the amount of damages which the court records that it would have awarded but for the dismissal of the claim were £50,000, and the amount that the court would otherwise order the claimant to pay in respect of the defendant’s costs was £100,000, the claimant could not be ordered to pay the defendant more than £50,000 in total.

505.Subsections (6) and (7) deal with the relationship between an order dismissing the claim and any subsequent proceedings against the claimant for contempt of court or criminal prosecution, and provide for the court hearing the latter proceedings to have regard to the order dismissing the claim when sentencing the claimant or otherwise disposing of the proceedings. It is intended that this will enable the court to ensure that any punishment imposed in those proceedings is proportionate.

506. In addition to defining a related claim, subsection (8) defines “personal injury” for the purposes of the section as including any disease and any other impairment of a person’s physical or mental condition, and provides for the definition of “claim” and related terms to cover counter-claims.

507. Subsection (9) provides that the section does not apply to proceedings started by the issue of a claim form before the date on which the section comes into force.”

 

Fundamental Dishonesty and Section 57

In

Molodi v Cambridge Vibration Maintenance Service (1) and Aviva Insurance Limited (2) [2018] EWHC 1288 (QB)

the High Court allowed the defendant’s appeal and held that the claim be dismissed on the ground that the claimant had been fundamentally dishonest within the meaning of Section 57 of the Criminal Justice and Courts Act 2015.

This was a road traffic accident and there was no doubt that the defendant was responsible for the accident – see paragraph 4 of the appeal judgment.

However, the claimant lied about various matters, including stating that he had only one previous claim, whereas he had had between five and seven previous claims, the duration of his symptoms, the cost of repairs to his vehicle, the need for physiotherapy sessions and the length of time off work.

The trial judge, in finding for the claimant, appears to have been influenced by the poor quality of legal staff involved in such cases:

“I have hardly seen a Claim Notification Form in the last number of years where the detail of the accident as I found it on the evidence, often on objective evidence, is properly recorded in the Claim Notification Form. The process itself is often, because of its nature, littered with inaccuracy, partly because the forms are filled out by relatively lowly junior people in the office who are not qualified, partly because they do not take sufficient care over setting out the details and sometimes as they type it up they make mistakes. I see it in almost every case. The fact that there is no mention made of the right hand does not of itself concern me. The other injuries are broadly referred to.”

The fact that fraud had not been pleaded did not prevent the court from making a finding of fundamental dishonesty – see

Kearsley v Klarfeld [2005] EWCA Civ 1510:

“There is no substantive obligation on the Defendant to plead fraud so long as his reasons for resisting the claim are clearly stated in accordance with CPR 16.5.”

The High Court also quoted from the Court of Appeal’s decision in

Howlett v Davies[2017] EWCA Civ 1696

31. Statements of case are, of course, crucial to the identification of the issues between the parties and what falls to be decided by the court. However, the mere fact that the opposing party has not alleged dishonesty in its pleadings will not necessarily bar a judge from finding a witness to have been lying: in fact, judges must regularly characterise witnesses to have been deliberately untruthful even where there has been no plea of fraud. On top of that, its seems to me that where an insurer in a case such as the present one, following the guidance given in Kearsley v Klarfeld, has denied a claim without putting forward a substantive case of fraud but setting out ‘the facts from which they would be inviting the judge to draw the inference that the plaintiff had not in fact suffered the injuries he asserted’, it must be open to the trial judge, assuming that the relevant points had been adequately explored during the oral evidence, to state in his judgment not just that the claimant has not proved his case but that, having regard to matters pleaded in the defence, he has concluded (say) that the alleged accident did not happen or that the claimant was not present. The key question in such a case would be whether the claimant has been given adequate warning of, and a proper opportunity to deal with, the possibility of such a conclusion and the matters leading the judge to it rather than whether the insurer had positively alleged fraud in its defence.”

Here the High Court was clearly influenced by “the problem that fraudulent or exaggerated whiplash claims have presented for the insurance industry and the courts.”(Paragraph 44).

The High Court set out detailed guidance as to what courts should expect to see in genuine whiplash claims:

44. Before considering the particular issues in this case, it is also pertinent to recognise the problem that fraudulent or exaggerated whiplash claims have presented for the insurance industry and the courts. This was recognised in March 2018 when the Ministry of Justice published a Civil Liability Bill which aims to tackle insurance fraud in the UK through tougher measures on fraudulent whiplash claims, proposing new, fixed caps on claims and banning the practise of seeking or offering to settle whiplash claims without medical evidence. The problem of fraudulent and exaggerated whiplash claims is well recognised and should, in my judgment, cause judges in the County Court to approach such claims with a degree of caution, if not suspicion. Of course, where a vehicle is shunted from the rear at a sufficient speed to cause the heads of those in the motorcar to move forwards and backwards in such a way as to be liable to cause “whiplash” injury, then genuine claimants should recover for genuine injuries sustained. The court would normally expect such claimants to have sought medical assistance from their GP or by attending A & E, to have returned in the event of non-recovery, to have sought appropriate treatment in the form of physiotherapy (without the prompting or intervention of solicitors) and to have given relatively consistent accounts of their injuries, the progression of symptoms and the timescale of recovery when questioned about it for the purposes of litigation, whether to their own solicitors or to an examining medical expert or for the purposes of witness statements. Of course, I recognise that claimants will sometimes make errors or forget relevant matters and that 100% consistency and recall cannot reasonably be expected. However, the courts are entitled to expect a measure of consistency and certainly, in any case where a claimant can be demonstrated to have been untruthful or where a claimant’s account has been so hopelessly inconsistent or contradictory or demonstrably untrue that their evidence cannot be promoted as having been reliable, the court should be reluctant to accept that the claim is genuine or, at least, deserving of an award of damages.”

In overturning the trial judge’s finding, the High Court said that the judge had “adopted a much too benevolent approach to evidence from a claimant which could be demonstrated to be inconsistent, unreliable and, on occasions, simply untruthful.”

The High Court also stressed the importance of the accuracy of the medical report in whiplash cases:

46. The medical evidence is at the heart of claims for whiplash injuries. Given the proliferation of claims that are either dishonest or exaggerated, for a medical report to be reliable, it is essential that the history given to the medical expert is as accurate as possible. This includes the history in relation to previous accidents as this goes to fundamental questions of causation: whether, if there are ongoing symptoms, those are attributable to the index accident or to previous accidents or to some idiopathic condition of the claimant. Furthermore, the knowledge that a claimant has been involved in many previous accidents might cause a medical expert to look rather more closely at what is being alleged on the incident occasion to see whether the claimant is being consistent and whether his reported injuries are in accordance with the reported circumstances of the accident. Once, as here, the Claimant could be shown to have been dishonest in respect of a fundamental matter and then to have maintained that dishonesty through his witness statement and into his evidence before the Court, it is difficult to see how the Learned Judge could have accepted any other part of the Claimant’s evidence or the medical report itself – and, without these, there was nothing left.”

The High Court upheld the defendant’s submission that the claimant had been fundamentally dishonest and that the claim should therefore be dismissed.

It went further and said that the trial judge should have dismissed the claim on the basis that the claimant had failed to prove his case that any injury occurred, even though the defendant admitted primary liability for the accident.

 

Section 57 Fundamental Dishonesty Appeal

In

Wright v Satellite Information Services Ltd [2018] EWHC 812 (QB)

the Queen’s Bench Division of the High Court was hearing an appeal against the decision of a Circuit Judge awarding the claimant in a personal injury action damages of £119,165.02.

The defendant appealed on the basis that the claim should have been dismissed under section 57 of the Criminal Justice and Courts Act 2015 on the basis that the claimant had been fundamentally dishonest.

The defendant did not dispute any of the findings of fact made by the trial judge but stated that:

the Learned Judge, having found that the Claimant’s claim for the cost of care was not established, was wrong as a matter of law not to find that he had therefore been dishonest in his presentation of this element of the claim and that such dishonesty was ‘fundamental’ to the integrity of the claim within the meaning of section 57 of the Criminal Justice and Courts Act 2015.”

Here liability had been admitted but quantum remained in issue and fell to be determined by the court.

It was the defendant’s case that covert video surveillance demonstrated that the claimant was far less disabled than he claimed and that he had deliberately and dishonestly exaggerated his claim.

The judge held that the claimant was not guilty of dishonesty, still less dishonesty of a fundamental nature.

The judge went on to say that had he found that the claimant had been fundamentally dishonest then he would have held under section 57(2) that the claimant would not have suffered substantial injustice if the claim was dismissed.

That conclusion was not challenged by the claimant and therefore the only issue on the appeal was whether the judge was wrong to find, on the balance of probabilities, that claimant had not been fundamentally dishonest.

Here claim for future care had been pleaded in excess of £73,000.00, but the trial judge allowed just £2,100.00 to cover the provision of some care following future surgery.

The trial judge, whose reasoning the High Court upheld, found that the claimant’s evidence was not untruthful, but rather a proper interpretation of the evidence did not support the assessment of the care expert.

The High Court held that this was essentially a challenge to the trial judge’s findings of fact.

Here the High Court then gave some useful guidance on the court’s task in dealing with an application under section 57.

38. The first stage for the court when considering an application under section 57 is to decide whether, on a balance of probabilities, the defendant has established that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim. The judge was not satisfied that this was the case. On the facts and the evidence presented to him, it cannot be said that this was not a decision open to him. The issue of dishonesty is akin to a jury question. In the case of a civil trial before a judge alone, it is a matter for the trial judge who has seen and heard all the evidence unless some material flaw in approach or his analysis can be identified.”

 

The relevant part of section 57 of the Criminal Justice and Courts Act 2015 reads:

 

“(1) This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”) –

(a)   the court finds that the claimant is entitled to damages in respect of the claim, but

(b)  on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

(2)  The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.

(3) The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.”

 

Comment

The guilty party in this case was clearly the expert, as recognised by the court.

Nevertheless, lawyers must be increasingly wary of simply putting forward expert evidence without any real analysis of the truth of that evidence.

This has been a long standing problem, but the introduction section 57 makes it a much more serious issue.

Clearly here the High Court was right not to interfere with the findings of fact of the trial judge, but one may consider that the claimant was a little fortunate at first instance.

 

QOCS, Fundamental Dishonesty and Discontinuance

In

Alpha Insurance A/S v Roche and Roche [2018] EWHC 1342 (QB)

the Queen’s Bench Division of the High Court held that the Circuit Judge should have allowed the defendant’s allegation of fundamental dishonesty to be heard in circumstances where the claimants had discontinued the day before trial.

The starting point on discontinuance in a QOCS case is no different from a claimant losing the case –  there is a costs order in the defendant’s favour in the usual way, but generally it cannot be enforced unless certain circumstances set out in CPR 44.13 to CPR 44.17, dealing with QOCS, applies.

The Practice Direction accompanying CPR 44  provides at 12.4 that:

“(c) where the claimant has served a notice of discontinuance, the court may direct that issues arising out of an allegation that the claim was fundamentally dishonest be determined notwithstanding that the notice has not been set aside pursuant to rule 38.4;”

The Circuit Judge refused the defendant’s application on the ground that a further hearing would involve “a disproportionate use of limited and precious court resources, given the amount of time and court resources that have already been devoted to the pursuit of this case”.

The Circuit Judge went on to find that “there is nothing…which suggests that there is any particular exceptional quality about this particular case that should cause me to give further directions and to set aside further court time to allow this particular isolated issue of dishonesty to be ventilated.”

The High Court found that that constituted an error of law as there is no requirement in the Practice Direction of exceptionality.

The High Court pointed out that if a case is settled, rather than discontinued, then the Practice Direction does specifically require that there be exceptional circumstances before there is a hearing in relation to alleged fundamental dishonesty.

The Circuit Judge appears to have exercised his discretion on the failure to understand the law, and consequently had erred in law, allowing the High Court to set the decision aside.

On discontinuance the court has an unfettered discretion which requires it to weigh all relevant considerations in accordance with the overriding objective and there is no presumption either way, that is that the court will generally direct determination of the issue of fundamental dishonesty, nor that it will generally not make such a direction.

The High Court had this to say:

“18. The provision has been introduced expressly to allow issues of fundamental dishonesty to be determined after discontinuance. Inevitably, this involves the allocation of further court resources to a case in which the claim is no longer being pursued. It will not be uncommon for such cases to involve relatively modest costs. However, in considering proportionality, it does need to be recognised that there is a public interest in identifying false claims and in claimants who pursue such claims being required to meet the costs of the litigation.”

Two factors which weighed heavily in the balance for the High Court were the very late stage at which the claim was discontinued and the complete absence of any explanation from the claimants, in a case where the defendant had admitted negligence but had alleged that the second claimant’s claim was fraudulent.

Thus this would have brought Section 57 of the Criminal Justice and Courts Act 2015 into play had the matter gone to a contested hearing.

As the case was discontinued, that ceased to be an issue, as the claimants lost the case in any event, and the issue here was fundamental dishonesty for the purpose of depriving the claimants of the protection of QOCS.

The High Court said:

However, where liability is not disputed save for the allegation of fundamental dishonesty and where the matter is close to trial, I believe some explanation can reasonably be expected.”

Written by kerryunderwood

June 11, 2019 at 8:03 am

Posted in Uncategorized

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