New law – fundamental dishonesty in PI claims

News | Tue 21st Apr, 2015

The government brought into force last week a new law preventing claimants from recovering damages for personal injury when they have been fundamentally dishonest, unless it would cause substantial injustice.

In the case of Summers v Fairclough Homes Ltd  [2012] UKSC 26 the claimant was injured in an accident at work and claimed more than £800,000 from his employer. Surveillance revealed him to have grossly exaggerated the effect of his injuries. At trial he was found to have fraudulently misstated the extent of his claim but the judge declined to strike out his claim and awarded £88,716. The defendant appealed and the Supreme Court held that it had jurisdiction to strike out the claimant’s statement of case but that it would only be done in exceptional circumstances, not least as the judgment on liability amounted to a possession for the purposes of the ECHR. The claim was not struck out.

Section 57 of the Criminal Justice and Courts Act 2015 looks as though it would have changed the outcome of Summers dramatically. Here are some of the ingredients and likely problems:

• ‘fundamental dishonesty’ – the defendant has to prove on the balance of probabilities that the claimant has been ‘fundamentally dishonest’  – a concept which the courts have been grappling with since its introduction in CPR Part 44.16(1) as an exception to the rules on qualified one way costs shifting. Considerable uncertainty remains as to the difference between ‘dishonesty’ and ‘fundamental dishonesty’.
• ‘primary claim or a related claim’ – the fundamental dishonesty must be ‘in relation to the primary claim or a related claim’. It will be interesting to see how far the courts will go in construing ‘a related claim’ which is defined at s.57(8) as “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.”
• ‘application by the defendant’ – the court cannot dismiss the claim under s.57 unless an application is made by the defendant for its dismissal.
• ‘substantial injustice’ – the court ‘must dismiss the primary claim’ unless satisfied the claimant would suffer ‘substantial injustice’ if it were dismissed. Again, it is not clear what the difference is between ‘injustice’ and ‘substantial injustice’. How is a judge to decide? Would the depriving a claimant of £88,716 amount to a substantial injustice? It is likely that the courts will want to give very careful thought to the needs of the injured claimant (care, economic etc) and consider how well they will be met in the event that the money is not paid over. What will happen to claims for gratuitous care which a claimant is supposed to hold on trust for the providers of that care? They may have nothing to do with the claimant’s dishonesty and yet might find themselves deprived of thousands of pounds for the hours they have given. I anticipate that a large body of case law will quickly grow up around this section.
• Recording damages – the court must record the amount of damages it would have awarded the claimant and then deduct them from the amount it would otherwise have awarded the defendant in costs.
• The dismissal of the claim under s.57 must be taken into account in a sentence handed down in any subsequent criminal proceedings
• S.57 only applies to claims issued after 13^th April 2015.

Mr Summers may well have been £88,716 poorer had this section been enacted prior to the issue of his proceedings. It will be interesting to see how often section 57 is pleaded and what the courts make of the concepts of ‘fundamental dishonesty’, ‘substantial injustice’ and ‘related claims’.