‘Fundamental dishonesty’ (“FD”) is a prominent and controversial feature of modern personal injury litigation, though still developing and oft-misunderstood. It is ultimately a procedural tool; one of the exceptions to the QOCS regime found in CPR 44.16. Where a defendant can satisfy a judge on the balance of probabilities that the claim was FD, that defendant can enforce a costs order in its favour against the claimant.
By Richard Collier, barrister, 1 Chancery Lane
The term also appears in Section 57 of the Criminal Justice and Courts Act 2015 (“Section 57”) which bites where a claimant has a genuine claim and is entitled to damages, though has been fundamentally dishonest ‘in relation to’ their primary (or related) claim. For example a wronged, genuinely injured claimant who dishonestly fabricates a (not minor) head of loss. In this scenario the claim is dismissed and the defendant can enforce its costs, unless to do so would cause the claimant to suffer ‘substantial injustice’. However the value of the genuine part of the claim – i.e. what it would be worth but for the dishonest element – is deducted from the defendant’s costs sum.
There is a raft of relevant authorities, helpfully summarised by Ritchie J in the recent case of Cojanu v Essex Partnership University NHS Trust [2022] EWHC 197 (QB) at paragraphs 39 to 53.
A finding of FD is especially impactful because it can lead to consequential criminal proceedings, though which is outside the scope of this article.
Jenkinson v Robertson [2022] EWHC 756 (Admin)
Issue
What constitutes procedurally fair “adequate warning” of an allegation of FD.
Brief facts
The first instance Judge found the Claimant, a litigant in person allegedly injured in a road traffic accident in 2013, to have been FD with the effect of engaging Section 57.
The Defendant raised FD for the first time at trial, not having previously given express notice of its intention to do so. Its pleaded case merely put the Claimant to proof on the injuries and symptoms, however in correspondence the Defendant had asserted that the claim was “exaggerated” and “unreasonable”.
As a matter of procedural fairness, and following decisions like Howlett & anor v Davies & anor [2018] 1 WLR 948 and Mustard v Flower & ors [2021] EWHC 846 (QB), claimants must be given “adequate warning” of the Defendant’s intention to allege FD. The first instance Judge in the index case considered that such notice had been satisfactorily provided by the Defendant.
This decision was overturned on appeal by Mr Justice Choudhury.
Key points
- Choudhury J considered Master Davison’s commentary in Mustard:
“I emphasise that nothing in the foregoing is intended to detract from the modern “cards on the table” approach. Where the Defendant does have a proper basis for a plea of fundamental dishonesty and intends to apply under section 57 , then, subject to the direction of the judge dealing with case management or the trial judge, that should ordinarily be set out in a statement of case or a written application and that should be done at the earliest reasonable opportunity. What I am intending to discourage are pleas of fundamental dishonesty which are merely speculative or contingent.” (my emphasis)
- The fact that the Claimant is a litigant in person is a factor to be taken into account in assessing adequacy of notice
- Choudhury J gave the following useful guidance on approaching Section 57 cases:
“It is clear from these authorities that in an application under s.57 of the 2015 Act:
- The burden is on the defendant to establish on the balance of probabilities that the claimant has been fundamentally dishonest;
- An act is fundamentally dishonest if it goes to the heart of or the root of the claim or a substantial part of the claim;
- To be fundamentally dishonest, the dishonesty must be such as to have a substantial effect on the presentation of the claim in a way which potentially adversely affects the defendant in a significant way
- Honesty is to be assessed by reference to the two-stage test established by the Supreme Court in Genting;
- An allegation of fundamental dishonesty does not necessarily have to be pleaded, the key question being whether the claimant had been given adequate warning of the matters being relied upon in support of the allegation and a proper opportunity to address those matters.
- The s.57 defence can be raised at a late stage, even as late as in closing submissions. However, where the claimant is a litigant in person, the Court will ordinarily seek to ensure that the allegation is clearly understood (usually by requiring it to be set out in writing) and that adequate time is afforded to the litigant in person to consider the defence.”
- Correspondence asserting that the claim was “exaggerated” and “unreasonable” and referring to s.57 does not constitute sufficient notice. A claim that is unreasonable is not necessarily dishonest; it may simply be misconceived. A claim that is exaggerated may be so because of the inclusion of losses that are wrongly believed to arise out of the accident in question.
- At trial Defendant counsel put to the Claimant in cross-examination that he had not been suffering from the pain alleged at the points in time that he claimed he was. On appeal counsel submitted that, taken in context with the other evidence in the case, including the lack of contemporaneous medical evidence in support of the claims, that is enough to put the Claimant on notice of an allegation of dishonesty. However the Judge disagreed: “there is a world of difference between putting to the Claimant that he was not in fact suffering the pain he now alleges and an allegation that he is fabricating or exaggerating the entire story about pain. There could be a number of reasons as to why the Claimant was not in pain (at all or to the extent claimed) at the relevant time without being dishonest, including that he was mistaken in his recollection, or that he has, over time, filled the gaps in memory with a sequence of events that he now believes to be true.”
- “A vague and deliberately unparticularised allusion to the possibility of a s.57 application” did not suffice.
Steven Lee Woodger v Reece Hallas [2022] EWHC 1561 (QB)
Issue
Meaning of “substantial injustice” in section 57 CJCA 2015
Brief facts
The Claimant was seriously injured in a road traffic accident in 2014 and suffered genuine losses. The first instance Judge found that despite the genuine parts of his claim, he had dishonestly exaggerated the functional effect of his injury and concealed past earnings, thereby engaging Section 57. The Defendant sought that the claim be dismissed, as per the operation of Section 57(2) which directs: “The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.”. The Judge however declined to do so on the basis of the “substantial injustice” the Claimant would suffer. He would lose the considerable genuine part of his claim, assessed at just under £50k, and the third parties who had provided him with care would miss out on recompense.
This decision was overturned on appeal by Mr Justice Julian Knowles.
Key points
- Neither of the Judge’s reasons for finding substantial injustice could stand
- “Substantial injustice” had to mean more than the claimant losing damages to which they were genuinely entitled.
- Sinfield and Iddon London Organising Committee of the Olympic and Paralympic Games (In Liquidation) v Sinfield [2018] EWHC 51 (QB), and Iddon v Warner [2021] EWHC 587 (QB).
- The care provided by third parties should not feature in the assessment because section 57(2) makes clear that it has to be the Claimant personally who would suffer the injustice.
- There was no authority which defined “substantial injustice”, but in Iddon the Judge approached the matter by balancing the nature and extent of the claimant’s dishonesty against the injustice that would be caused by dismissing the whole claim.
Shaw v Wilde [2022] 5 WLUK 514
Issue
How to resolve costs following the liability hearing in a split trial case in which there is a live FD allegation
Basics facts
The claim arose out of a road traffic accident in 2018, and in due course a split trial was ordered. Liability was determined wholly in the Claimant’s favour and he sought an order that the Defendant paid his costs of the liability issue. The Defendant argued for these costs to be reserved until the conclusion of the case. Its pleaded case included an allegation of FD on the basis of exaggerated disability and symptoms, the Defendant having obtained surveillance evidence. This allegation was not relevant to the liability evidence but would be explored during the quantum hearing.
Mr David Allan QC ordered the costs to be reserved to the Judge determining quantum, on the basis that unless there was no real prospect of a finding of FD or that there was bound to be a finding of substantial injustice then it would be premature to make a costs order at this stage.
Key points
The determinative test was whether there was a “real prospect” of an FD finding, and Claimant counsel had conceded as much in a skeleton argument. Moreover the Judge was “not in a position to conclude that the Claimant will establish the substantial injustice provision”.
Richard Collier, barrister, 1 Chancery Lane