Fundamental dishonesty — recent case law and practice

Articles | Fri 26th Mar, 2021

PI & Clinical Negligence analysis: David Thomson, barrister at 1 Chancery Lane, examines how fundamental dishonesty operates in practice by considering recent case law and developments.

Any consideration of Fundamental dishonesty (FD) requires a brief review of the statute and the CPR.

Statute

Section 57 of the Criminal Justice and Courts Act 2015 (CJCA 2015) sets out what constitutes cases of fundamental dishonesty in personal injury claims (emphasis added):

‘(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.

…(8) In this section –

“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.’

The CPR

The costs sanction for FD is CPR 44.16 (Exceptions to qualified one-way cost shifting where permission required). It states:

‘(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.’

So the protection from a costs order of the defendant’s costs against a claimant is put aside.

Fundamental dishonesty

Prior to 2015, there were a number of decided cases where the court attempted to do justice where a claimant had been dishonest: see Hunter v Butler [1995] Lexis Citation 4352, Cottrell v Redbridge Healthcare NHS Trust [2001] All ER (D) 174 (Apr), Newman v Folkes [2001] All ER (D) 340 (May); [2002] EWCA Civ 591, Kanu v Kashif [2002] EWCA Civ 1620 and, in particular, Gosling v Hailo [2014] Lexis Citation 316.

The judgment in Gosling was particularly prescient and ahead of the term ‘fundamental dishonesty’ in statute. Judge Maloney QC, at Cambridge County Court in his judgment at paras 44–45, stated:

‘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.

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.’

So, as Lord Faulks in Parliament explained:

‘We are not talking about a schedule that contains some slight exaggerations or minor inaccuracies, but about fundamental dishonesty…claims that involved, frankly, lying and fraud… it should be imposed only where it goes to the heart of a claim.’

Therefore, enactment of CJCA 2015, s 57 (Personal injury claims: cases of fundamental dishonesty).

Practically, a useful starting point for FD is where there is a fundamental dispute of fact, to consider carefully and at an early stage, why is there this dispute? If the court is going to reject the claimant’s account, were they just wrong or is dishonesty the better explanation for the discrepancy? See: Razumas v Ministry of Justice [2018] EWHC 215 (QB).

As to the conduct of the proceedings, there is a requirement to cross examine on dishonesty. There is no requirement to use words such as ‘dishonest’, ‘fraud’ or ‘lying’. What matters is that a witness is given ‘fair notice of a challenge to their honesty and an opportunity to deal with it’. The fact that a defendant had not alleged fraud in their pleading might not preclude them from suggesting to a witness in cross-examination that they were lying.

The pleading has to give the appellant sufficient notice of the points the defendant intends to raise at trial, and the possibility that the judge would conclude as he did. The appellant could not fairly suggest that she had been ambushed.

There are many cases after CJCA 2015: Thompson v Go North East (not reported by LexisNexis®), Barber v Liverpool City Council (not reported by LexisNexis®), Ivey v Genting Casinos [2017] UKSC 67, Howlett v Davies [2017] EWCA Civ 1696, London Organising Committee of the Olympic and Paralympic Games (in liquidation) v Sinfield [2018] EWHC 51 QB, Wright v Satellite Information Services Ltd [2018] EWHC 812 (QB), McDaid v Walsall MBC (not reported by LexisNexis®), Spencer Smith v Ashwell Maintenance Ltd [2019] Lexis Citation 14, Haider v DSM Demolition Ltd [2019] EWHC 2712 (QB), Roberts v Kesson [2020] EWHC 521 (QB), Craig v Webb (not reported by LexisNexis®), West v Olakanpo (not reported by LexisNexis®), Kasem v University College London Hospitals NHS Foundation Trust [2021] EWHC 136 (QB), Brint v Barking Havering and Redbridge University Hospital NHS Trust [2021] EWHC 290 (QB), and Iddon v Warner [2021] Lexis Citation 39.

Howlett and the recent cases of Kassem, Brint and Iddon mandate close attention.

In Howlett, the court explained that what matters is that a witness is given ‘fair notice of a challenge to their honesty and an opportunity to deal with it’. There is a ‘requirement’ to cross examine on dishonesty, but no requirement to use words such as ‘dishonest’, ‘fraud’ or ‘lying’—(see: Kearsley v Klarfeld [2005 EWCA Civ 1510]. But the defendant does have to set out ‘the facts from which they would be inviting the judge to draw the inference that the claimant had not in fact suffered the injuries he asserted’. Rather, what matters is that a witness is given ‘fair notice of a challenge to their honesty and an opportunity to deal with it’. That said, the fact that the defendant had not alleged fraud in the pleading would not preclude him from suggesting to a witness in cross-examination that the claimant was lying.

The pleading had given the appellant sufficient notice of the points the insurer intended to raise at trial, and the possibility that the judge would conclude as he did. The appellant could not fairly suggest that she had been ambushed.

Kasem was a claim for shoulder injury at work and fraudulent representations by K. In the judgment, Kasem’s counsel relied on Lipkin Gorman v Karpnale Ltd [1989] 1 WLR 1340 (CA), where May LJ stated (emphasis added):

‘…where fraud or dishonesty is material this must be clearly pleaded, if not explicitly, then in such terms that the reader of the pleading can be left in no reasonable doubt that this is being alleged. …where an element in the alleged fraud or dishonesty relied on is the other party’s knowledge of a given fact or state of affairs, this must be explicitly pleaded.’

Kasem was not a FD case, but the court explained that, as held in Three Rivers District Council v Governor and Company of the Bank of England (No 3) [2003] 2AC1(HL):

‘It is well established that fraud or dishonesty…must be distinctly proved; that it must be sufficiently particularised…The function of pleadings is to give the party opposite sufficient notice of the case which is being made against him… this involves knowing not only that he is alleged to have acted dishonestly but also the primary facts which will be relied on at trial to justify the inference…this is only partly a matter of pleading. It is also a matter of substance.’

The court went onto explain the very important point that if it is a case alleging fraud or deceit (or other intention) which rests upon the drawing of inferences about a defendant’s state of mind from other facts, those other facts must be clearly pleaded and must be such as could support the finding (so allow the court to draw the inference) for which the defendant contends.

Kasem was an unusual appeal whereby the University College London Hospitals NHS Foundation Trust was seeking return of a Part 36 payment from Kasem once dishonesty, as to abilities/disabilities as clarified by extensive social media footage of sporting and other abilities very inconsistent with the claimed disabilities throughout the proceedings, was later found. Importantly, the takeaway importance of the judgment is that practitioners should understand:

• •nothing in Howlett seeks to undermine the well-established principles about pleading fraud
• applying these principles, a defendant’s defence should contain at least the following:
  • the precise representations made by the claimant in the course of their civil claim (and whether they were express or implied)
  • the precise respects in which representations made by the claimant were factually false
  • the state of knowledge of the Trust at the particular point and how the Trust relied upon the representations made by the claimant
  • the facts, clearly pleaded, such as could support the finding (so allow the court to draw the inference) for which the defendant contends

As an aside, note that surveillance evidence may be deployed more than in the past. It is often useful but has its limitations. The issue is often whether there is an exaggerated claim(s) for present condition or future deterioration or disability. So, importantly, does the surveillance show a claimant doing something of which they have specifically complained of being incapable either in witness evidence or, for example, in consultations with healthcare professionals or experts in the proceedings?

Brint v Barking Havering and Redbridge University Hospitals NHS Trust [2021] EWHC 290 (QB), is important and is a nuanced judgment. The court differentiates between adducing ‘wholly unreliable’ evidence and evidence that is not ‘fundamentally dishonest’.

Evidence adduced shortly before trial that the claimant had been FD in her evidence of events at the time of medical investigations, surrounding her benefits claims and an account of her long-standing multiple prior health conditions both in her witness statement and to the experts.

The QBD judge found no breach of duty, so the claim was dismissed, but QOCS appeared to apply. The defendant sought to recover its costs by disapplication of QOCS protection pursuant to CPR 44.16(1).  The court rejected the claim that FD arose. Despite the overall unreliability of the claimant’s evidence, on the whole and judged by the standards of ‘ordinary decent people’, the court was not persuaded that the claimant met the threshold of dishonesty, detailed in Ivey, where Lord Hughes held (emphasis added):

‘When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held.

When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder (ie the court) by applying the (objective) standards of ordinary decent people.’

All in all, in Brint, the claimant’s evidence was deemed ‘wholly unreliable’ and was therefore not accepted. However, it did not amount to ‘dishonesty’ according to HHJ Platts, who was satisfied that the claimant genuinely believed in the truth of the evidence that she gave. Therefore, QOCS was not circumvented.

As to the issue of how FD and QOCS is actually functioning in practice, Brint does not appear to have carried through the sanction expected of ordinary decent people for the claimant. However, it probably is an illustration of the challenges of fashioning a judgment that reflects the evidence given before the court and the assertion that she did not intend dishonesty. Perhaps it is challenge of determining an objective standard.

However, compare Brint with Iddon where issue of ‘substantial injustice’ had to be assessed.

In Iddon, the court was facing a more complex evidential challenge. The claimant alleged and served evidence that she was substantially incapacitated in her range of former arduous sporting activities, including long distance swimming. In fact, the claimant was still taking part in strenuous sporting activities. The defendant discovered this by way of internet searches. She attempted to explain these matters and give evidence in response. Her allegedly supportive witnesses did not give evidence. The court did not accept her evidence. She was found to be fundamentally dishonest.

The court was not persuaded by her that she would suffer substantial injustice if her claim was dismissed. She did not suffer substantial injustice merely because she would not have the funds to seek the therapies she alleged. She used interim payments to purchase her current home and if her claim was dismissed, she would have to sell it. The fact that the claimant had used the interim payments to buy a house did not amount to substantial injustice. The court did not believe that the claimant would suffer substantial injustice if dismissing the claim was likely to result in the court ordering her to repay the interim payment.

The court found that she would have received damages of £70,050.32. This was set off against the claimant’s costs liability to the defendant. The claimant had received £105,000 on account of damages and £100,000 on account of costs. The court ordered that these be repaid.

The court cited the judgment in South Wales Fire and Rescue Service v Smith [2011] EWHC 1749 (Admin), which stated, in plain terms that:

‘For many years the courts have sought to underline how serious false and lying claims are to the administration of justice. False claims undermine a system whereby those who are injured as a result of the fault of their employer or a defendant can receive just compensation.

They undermine that system in a number of serious ways. They impose upon those liable for such claims the burden of analysis, the burden of searching out those claims which are justified and those claims which are unjustified. They impose a burden upon honest claimants and honest claims, when in response to those claims, understandably those who are liable are required to discern those which are deserving and those which are not.

Quite apart from that effect on those involved in such litigation is the effect upon the court. Our system of adversarial justice depends upon openness, upon transparency and above all upon honesty. The system is seriously damaged by lying claims. It is in those circumstances that the courts have on numerous occasions       sought to emphasise how serious it is for someone to make a false claim, either in relation to liability or in relation to claims for compensation as a result of liability…. section 57 of the Criminal Justice and Courts Act 2015 is frankly punitive in character. A claimant who is fundamentally dishonest is penalised  by having his claim dismissed.’

In Iddon the objective evidence of behaviour that was clearly inconsistent with the claimant’s alleged disability was more likely found as good evidence of FD than assessment of the claimant’s state of mind.

It cannot be over emphasised that the defendant has to gather evidence that will address the requirement for proving dishonesty in Kasem, Brint and Iddon. As such, this should ideally not be a retrospective analysis and attempts to fit the evidence to accord with the requirements of CJCA 2015 which is the circumstance when FD emerges late, but a more considered and proactive analysis at the earliest stage of the claim, not just when proceedings are afoot.

The possible finding and effect of FD is now clearly relatively common. There is scope for early consideration and investigation in proceedings other than the road traffic collisions. However, the decided cases directing defendants to the evidence and inferences must be understood.

This article was first published by Lexis Nexis on 24^th March 2021.