FUNDAMENTAL DISHONESTY ESTABLISHED ON APPEAL: WHEN A CLAIMANT DIGS A BIG HOLE FOR THEMSELVES THE COURT SHOULD NOT STRUGGLE TO EXTRACT THEM

In  London Organising Committee of the Olympic And Paralympic Games (LOCOG) v Sinfield [2018] EWHC 51 (QB) Mr Justice Julian Knowles overturned a decision whereby a claimant was allowed damages.  The claimant had been fundamentally dishonest in making a claim for damages to which he was not entitled. Documents had been forged in support of that claim. The “substantial injustice” exception could not be applied.  This judgment will serve as a useful template for determining issues in relation to fundamental dishonesty.

“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”

THE CASE

The claimant was injured whilst working as a volunteer in the Olympic Games. Liability was admitted. He issued proceedings.

THE CLAIM FOR GARDENING

General damages were agreed. The claimant’s claim included a claim for gardening expenses.

THE EVIDENCE IN RELATION TO THE GARDENING CLAIM

The claimant made a substantial claim for the additional costs of gardening.

1. 1. At para 5 the Preliminary Schedule stated:

“5. Gardener

The Claimant has a 2 acre garden. Prior to the accident the Claimant looked after the garden himself with his wife. Post accident his wife continues to do some of the gardening but they had to employ a gardener for 2-4 hours per week at a cost of £13 per hour. Throughout the Winter months the gardener tends to do only 2 hours per week and during the Spring/Summer months this increases to 4 hours per week.”

1. 1. For the period from 9 September 2012 to the date of the schedule a figure of £4992 plus £79.87 interest was served, making a total of £5071.87.

   2. At para 8 the Preliminary Schedule stated:

“8. Gardening

The Claimant would probably at some point have required assistance with gardening and employed a gardener in any event whilst continuing to do some work himself. Presuming the Claimant’s ability to carry out gardening would have reduced as he got older, perhaps managing 2 hours per week initially future gardening is claimed at one hour per week.”

1. 1. Damages under this head for future gardening losses were claimed at £13 per week, ie £677.86 per year, with an appropriate multiplier of 13.22, producing a figure of £8961.31.

   2. The total value of the claim for gardening was therefore £13953.31 (£4992 + £8961.31), excluding interest. The total value of the special damages claimed was £33 340.86, meaning that the gardening claim represented some 41.9% of the total special damages claim as presented on this Schedule.

   3. In due course, liability was admitted and damages for pain, suffering and loss of amenity were agreed at £16 000. Thus, the gardening claim represented about 28% of the damages claim overall.

   4. In January 2016 LOCOG served its Defence. On 25 August 2016 Mr Sinfield served his List of Documents. That stated:

“I certify that I understand the duty of disclosure and to the best of my knowledge I have carried out that duty. I further certify that the list of documents set out in or attached to this form, is a complete list of all documents which are or have been in my control and which I am obliged under the order to disclose.

I understand that I must inform the court and the other parties immediately if any further document required to be disclosed by Rule 31.6 comes into my control at any time before the conclusion of the case.”

1. 1. Items 14 – 15 on the List were described as ‘Invoices Mervyn Price – Gardener’ for the periods October – November 2012 and March – November 2013 respectively. Items 16 – 20 were described as ‘Invoices Dan Hardy – Gardener’ for the periods March – November 2014, March – November 2015, March – May 2016, June 2016 and July 2016, respectively.

   2. These invoices thus purported to be from the gardeners who tended Mr Sinfield’s garden. To take one of the invoices with Mr Price’s name on it as an example, it purports to be an invoice for July 2013 from ‘Mervyn Price, 29 Finsbury Road, Luton, Beds’ in the sum of £208.

   3. In September 2016 a further Schedule of Damages was served by Mr Sinfield maintaining (with adjustments due to the date) the claims for past and future gardening losses. The figure claimed for gardening on this Schedule was £14 785.31, exclusive of interest.

   4. On 17 October 2016 Mr Sinfield served his first Witness Statement. Paragraph 30 was as follows:

“30. Pre-accident Christine and I did all the gardening. We have a 2 acre garden which needs a lot of upkeep. Christine still does some of the garden but it is impossible for her to do it alone and so we now employ a gardener. Over the winter months the gardener only does a couple of hours per week but in the summer months this increases to 4 hours per week.”

THE EVIDENCE FROM THE GARDENER

The defendants were not asleep. They took a witness statement from the gardener. His evidence contradicted that of the claimant.

1. 1. In light of the disclosure provided LOCOG made enquiries and located and approached Mr Price, the gardener. A witness statement was taken from him dated 29 September 2016 and he gave evidence at the trial. He said that he had worked for Mr Sinfield and his wife since May 2005. He said that the invoices which Mr Sinfield had produced had not been issued by him. Among other things, at para 4 of his witness statement he pointed out that the address on them was incorrect. He said that between May 2005 and March 2014, when he retired, he worked four hours per week, eleven months of the year, excluding January, at £13 per hour. His work did not change after Mr Sinfield’s accident. At para 14 of his witness statement he said:

“14. I do not know why Mr Sinfield says that prior to his accident in September 2012 he and his wife looked after the garden themselves but following the accident he had to employ a gardener. This is just not true and I felt that it was important to provide this statement to set out the correct position.”

THE DEFENDANT PLEADS FUNDAMENTAL DISHONESTY

The defendant then pleaded fundamental dishonesty.

THE CLAIMANT’S SUPPLEMENTARY STATEMENT (DIGGING DEEPER HOLES?)

1. 1. In March 2017 Mr Sinfield provided a Supplementary Witness Statement. He agreed that Mr Price had been employed  by him since 2005 and that he worked 16 hours a month except in January. He accepted that para 30 of his first Witness Statement had been wrong. He said that he had worded it ‘badly’. However, he said that he and his wife had done a lot of the gardening, and that after the accident he was unable to do any of it. He also admitted preparing the Price invoices himself. Paragraphs 13 – 16 of the Supplementary Witness Statement were as follows:

“13. I fully accept that paragraph 30 of my witness statement dated 19 October 2016 is incorrect. Pre-accident Christine and I did not do all the gardening and I have worded my statement badly. However, together, we did a lot of gardening. Whilst we did employ a gardener before my accident and continued to do so after the accident, Christine and I also worked on the garden. Mr Price was only there for four hours per week so would have been unaware what Christine and I did during the week. If you have a large house and garden there is always something that needs to be done.

14. Post-accident I was completely prevented from doing any gardening, lifting, DIY and so on because of my injury. Therefore, the basis of my gardening claim was to claim the cost of something I was unable to continue myself albeit that I did employ someone already. I felt like the choice been taken away from me so although I had been paying someone to do the garden I now had no choice in the matter. This is reflected by the fact that I did not claim for the full 16 hours per month that I paid Mr Price. I claimed 8 hours per month March and April, 16 hours per month May to October, 8 hours for November and nothing for December to February. Conscious of the fact we did have a gardener I did not think it was appropriate to claim the full amounts that I paid Mr Price. I included a claim for a reasonable sum to reflect that I was now no longer able to carry out any gardening at all. In hindsight I agree was wrong for me to do that and the correct thing would have been for me to claim the extra work that Christine now had to do in the a garden because I was unable to help.

15. Post-accident I did not increase Mr Price’s hours although on occasion I asked him to do additional jobs for me, without increasing his hours. For example, I asked him to leave mowing the lawn to do other jobs I was incapable of doing.

16. I did prepare the invoices in respect of Mr Price’s work myself. I always paid Mr Price by cheque but he never gave me an invoice or receipt. My solicitor asked me to provide proof of the sums paid for gardening. In my business, if we pay someone by cheque but they don’t raise an invoice we prepare the invoice for the same amount. This is known as self billing. As far as I was concerned I was only trying to show what I had paid Mr Price. I therefore saw nothing wrong in doing the same here.”

1. 1. A further Schedule of Damages was served on 15 March 2017 by Mr Sinfield. That said at para 5:

“The claimant had a 2 acre garden (the Claimant sold the property in December 2017) (sic) and downsized.

Prior to the accident the Claimant employed a gardener for four hours per week but in addition, because it was such a large garden the Claimant and his wife did a great deal of work in the garden. Post accident, the claimant was unable to carry out any gardening and his wife took over his share of gardening. As per the medical report of Mr Rupert Eckersley dated 20 April 2016, the Claimant accepts that he probably would have required assistance in the garden in any event within three years of the date of the accident.

Prior to the accident the claimant and his wife would carry out additional 2 to 4 hours per week of gardening depending on the time of year; on average three hours per week. The claim for gratuitous gardening services is limited to 3 years at £7, based on one and a half hours per week.”

1. The figure claimed for gardening on this version of the Schedule was £1657.96 (£1643.99 plus £13.97 interest.)

THE JUDGMENT AT FIRST INSTANCE

The trial judge found that the claimant had knowingly made false statements in support of his claim and that he was “with a dishonest state of mind” making statements to justify what was said in an earlier schedule.

The judge found the claimant not to be fundamentally dishonest. Alternatively he found that it would be unjust for the claim to be dismissed for dishonesty relating to a peripheral part of the claim.

THE JUDGMENT ON APPEAL

The judgment of the trial judge was overturned on appeal. The claimant was found to be fundamentally dishonest.

1. 1. Before turning to the grounds of appeal, it is useful to set out the background to s 57 of the 2015 Act and to offer some observations on its application.

   2. Prior to the coming into force of s 57 a remedy open to a defendant to a personal injuries claim who suspected that the claim was fraudulent was to have the claim struck out as an abuse of process under CPR r 3.4(2)(b) or under the court’s inherent jurisdiction. However, such applications faced a number of difficulties. In Summers v Fairclough Homes Ltd [2012] 1 WLR 2004 the Supreme Court held that although a court had the power to strike out a dishonestly exaggerated claim as an abuse of process at any stage in the proceedings, the power was only to be exercised in very exceptional circumstances. Lord Clarke said;

“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.

50. It was submitted on behalf of the defendant that it is necessary to use the power to strike out the claim in circumstances of this kind in order to deter fraudulent claims of the type made by the claimant in the instant case because they are all too prevalent. We accept that all reasonable steps should be taken to deter them. However, there is a balance to be struck. To date the balance has been struck by assessing both liability and quantum and, provided that those assessments can be carried out fairly, to give judgment in the ordinary way. The reasons for that approach are explained by the Court of Appeal in both Masood v Zahoor [2010] 1 WLR 746 and Ul-Haq v Shah [2010] 1 WLR 616.

51. We accept that such an approach will be correct in the vast majority of cases. Moreover, we do not accept the submission that, unless such claims are struck out, dishonest claimants will not be deterred. There are many ways in which deterrence can be achieved. They include ensuring that the dishonesty does not increase the award of damages, making orders for costs, reducing interest, proceedings for contempt and criminal proceedings.”

1. 1. In light of this approach the Supreme Court found for the claimant, notwithstanding that he had ‘persistently maintained his claim on a basis or bases which he knew to be false, both before he was found out and thereafter at the trial’ (para 63). However, at para 57 the Supreme Court approved what Moses LJ said in South Wales Fire and Rescue Service v Smith [2011] EWHC 1749 (Admin), paras 2 – 7, about how serious false and lying claims are to the administration of justice, and how they undermine a system whereby those who are injured as a result of someone else’s fault can receive just compensation. There, he pointed out that 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. He also said that the system of adversarial justice depends upon openness, upon transparency and, above all, upon honesty, and that the system is seriously damaged by lying claims.

   2. From 13 April 2015, s 57 has provided defendants with the means of having a personal injury claim dismissed or struck out on the basis of ‘fundamental dishonesty’. It therefore represents a Parliamentary response to the problems caused by fraudulent claims which were identified by Moses LJ. Although in Summers, supra, at para 61 Lord Clarke said that it is in principle more appropriate to penalise a fraudulent claimant as a contemnor than to relieve the defendant of what the court has held to be a substantive liability, by enacting s 57, Parliament has taken a different view. In Versloot Dredging BV v HDI Gerling Industrie Versicherung AG [2017] AC 1, paras 95 – 96, Lord Hughes said referring to the ‘fraudulent claims rule’, ie, the rule that a genuine insurance claim supported by fraudulent evidence should fail even if valid in law, said:

“[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.

[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.”

1. 1. The concept of fundamental dishonesty was introduced by CPR r 44.16(1) as an exception to qualified one-way costs shifting (QOCS) in personal injury claims contained in CPR r 44.14, introduced following Jackson LJ’s Review of Civil Litigation Costs: Final Report (2009). A claimant will not benefit from QOCS if, on application by the defendant, the claimant is found to have been fundamentally dishonest. In such circumstances, an order for costs may be enforced against the claimant: see Howlett v Davies [2017] EWCA Civ 1696.

   2. The meaning of fundamental dishonesty in CPR r 44.16(1) was considered in Howlett v Davies, supra, at para 16. Newey LJ said:

“16.     As noted above, one-way costs shifting can be displaced if a claim is found to be “fundamentally dishonest”. The meaning of this expression was considered by His Honour Judge Moloney QC, sitting in the County Court at Cambridge, in Gosling v Hailo (29 April 2014). He said this in his judgment:

’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.’

17.     In the present case, neither counsel sought to challenge Judge Moloney QC’s approach. Mr Bartlett spoke of it being common sense. I agree.”

1. 1. There are a number of other decisions at the County Court level on CPR r 44.16(1). In Meadows v La Tasca Restaurants, Unreported, HHJ Hodge QC at Manchester County Court, said at para 18:

“18. It may perhaps be appropriate to draw an analogy with the court’s approach to lies told by a party to litigation. If a lie is told merely to bolster an honest claim or defence, then that will not necessarily tell against the liar. But if the lie goes to the whole root of the claim or defence, then it may well indicate that the claim or defence (as the case may be) is itself fundamentally dishonest.”

1. 1. In Rayner v Raymond Brown Group, Unreported, HHJ Harris QC at Oxford County Court, the judge said at para 10 that he would direct himself:

“… that fundamental dishonesty within the meaning of CPR 44 means a substantial and material dishonesty going to the heart of the claim – either liability or quantum or both – rather than peripheral exaggerations or embroidery, and it will be a question of fact and degree in each case … Was there substantial material dishonesty which went to the heart of the quantum of this claim ?”

1. 1. In Menary v Darnton, Unreported, HHJ Hughes QC at Portsmouth County Court, the judge said at paras 9 to 11:

“9. In terms of ordinary language, the word ‘fundamental’ was given its classic definition for forensic purposes by Lord Upjohn in the well-known Suisse Atlantique case [Suisse Atlantique Société D’Armement Maritime SA v nv Rotterdamsche Kolen Centrale [1967] 1 AC 361]. I quote so far as is necessary for present purposes (at p421-422):

‘… there is no magic in the words “fundamental breach”, this expression is no more than a convenient shorthand expression for saying that a particular breach or breaches of contract by one party is or are such as to go to the root of the contract which entitles the other party to treat such breach or breaches as a repudiation of the whole contract. Whether such breach or breaches do constitute a fundamental breach depends on the construction of the contract and on all the facts and circumstances of the case … A fundamental term of a contract is a stipulation which the parties have agreed either expressly or by necessary implication or which the general law regards as a condition which goes to the root of the contract so that any breach of that term may at once and without further reference to the facts and circumstances be regarded by the innocent party as a fundamental breach …

10. Although in that case Lord Upjohn was contrasting the meaning of the phrase ‘fundamental breach’ with that of ‘fundamental term’, the sense in which the word ‘fundamental’ is applied is broadly the same in each case, namely it is some characteristic that inevitably goes to the root of the matter. In the present appeal, that matter would not be fundamental in this sense. CPR 44.16(1) only requires the defendant to establish fundamental dishonesty on the balance of probabilities, the civil standard of proof. I think it unhelpful therefore to focus on the meaning of dishonesty as described in the criminal courts, such as in the case of R v Ghosh … or as defined by criminal statute, such as the Theft Act 1968.

11. The use of the word ‘dishonesty’ in the present context necessarily imports well understood and ordinary concepts of deceit, falsity and deception. In essence, it is the advancing of a claim without an honest and genuine belief in its truth. Although I would not presume to give a definition of a phrase that neither Lord Justice Jackson nor the Editorial Board of the Civil Procedure Rules thought appropriate to provide, for present purposes, fundamental dishonesty may be taken to be some deceit that goes to the root of the claim. The purpose of the phrase is twofold: first, to distinguish any dishonesty from the exaggerations, concealments and the like that accompany personal injury claims from time to time. Such exaggerations, concealment and so forth may be dishonest, but they cannot sensibly be said to be fundamentally dishonest; they do not go to the root of the claim. Second, the fundamental dishonesty is related to the claim not to the claimant. This must be deliberate on the part of those who drafted the Civil Procedure Rules. It is the claim the defendant has been obliged to meet, and if that claim has been tainted by fundamental dishonesty, then in fairness, and in justice and in accordance with the overriding objective, the defendant should be able to recover the costs incurred in meeting an action that was proved, on balance, to be fundamentally dishonest.”

1. 1. Picking up on a point made by the judge in Menary, the drafter of s 57 sought to draw several distinctions from CPR r 44.16: it is the claimant who the court must find dishonest, rather than the claim. Further, rather than permitting the defendant to recover all of his costs, the court is required to assess the claimant’s ‘genuine’ damages and deduct that figure from the defendant’s costs. As to the first point, however, it will be rare for a claim to be fundamentally dishonest without the claimant also being fundamentally dishonest, although that might be a theoretical possibility, at least.

   2. Mr James’ Skeleton Argument referred me to what Lord Faulks QC, the Minister of State for Justice, said at the Committee stage of the passage of the Criminal Justice and Courts Bill in the House of Lords (Hansard, 23 July 2014, cols 1267 – 1268):

“I am grateful for some of the constructive suggestions that have been made about how the clause ought best to have been drafted. At the moment, it requires the court to dismiss in its entirety any personal injury claim when it is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest, unless it would cause substantial injustice to the claimant to do so. That is of particular relevance when the claimant has grossly exaggerated his claim, and in cases where the claimant has colluded with another person in a fraudulent claim relating to the same incident—also, sadly, a far too common feature of the whole claims industry at the moment.

This is part of a series of measures taken by the Government to discourage fraudulent and exaggerated claims, which arise often in motor accident cases and so-called “trips and slips” claims. Such claims cause substantial harm to society as a whole, not least in increasing the insurance premiums that motorists have to pay …

Under the current law, the courts have discretion to dismiss a claim in cases of dishonesty, but will do so only in very exceptional circumstances, and will generally still award the claimant compensation in relation to the “genuine” element of the claim. The Government simply do not believe that people who behave in a fundamentally dishonest way—and I will come to address the adverb in a moment—by grossly exaggerating their own claim or colluding should be allowed to benefit by getting compensation in spite of their deceit. Clause 45 seeks to strengthen the law so that dismissal of the entire claim should become the norm in such cases. However, at the same time, it recognises that the dismissal of the claim will not always be appropriate and gives the court the discretion not to do so where it would cause substantial injustice to the claimant. To that extent, some of the remarks of my noble friend Lord Marks were entirely apposite. The clause gives the court some flexibility to ensure that the provision is applied fairly and proportionately.

…

I assure the Committee that the way that the clause is drafted should not result in the courts using the measures lightly. Civil courts do not make findings of dishonesty lightly in any event; clear evidence is required. The sanction imposed by the clause—the denial of compensation to which the claimant would otherwise be entitled—is a serious one and will be imposed only where the dishonesty is fundamental; that is, where it goes to the heart of the claim. That was very much what my noble friend said about what it was aimed at.

Of course, “fundamental” has an echo in the Civil Procedure Rules and the qualified, one-way costs shifting. An adverb to qualify a concept such as dishonesty is not linguistically attractive, but if we ask a jury to decide a question such as dishonesty, or ask a judge to decide whether someone has been fundamentally dishonest, it is well within the capacity of any judge. They will know exactly what the clause is aimed at—not the minor inaccuracy about bus fares or the like, but something that goes to the heart. I do not suggest that it wins many prizes for elegance, but it sends the right message to the judge.”

1. 1. 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.

   2. 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.

   3. Where an application is made by a defendant for the dismissal of a claim under s 57 the court should:

a. Firstly, consider whether the claimant is entitled to damages in respect of the claim. If he concludes that the claimant is not so entitled, that is the end of the matter, although the judge may have to go on to consider whether to disapply QOCS pursuant to CPR r 44.16.

b. If the judge concludes that the claimant is entitled to damages, the judge must determine whether the defendant has proved to the civil standard that the claimant has been fundamentally dishonest in relation to the primary claim and/or a related claim in the sense that I have explained;

c. If the judge is so satisfied then the judge must dismiss the claim including, by virtue of s 57(3), any element of the primary claim in respect of which the claimant has not been dishonest unless, in accordance with s 57(2), the judge is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.

1. 1. 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.

   2. With that introduction, I turn to the issues arising on the appeal.

Grounds of appeal

Ground 1: the judge’s finding in respect of paras 5 and 8 of the Preliminary Schedule

The approach of an appellate court to findings of fact

1. 1. The first ground of appeal challenges the judge’s finding in relation to paras 5 and 8 of the Preliminary Schedule. As I have explained, the judge found they were the product of muddle and confusion and were statements by Mr Sinfield that after the accident he had to employ a gardener as a matter of necessity, whereas before the accident he had done so through choice. The judge did not find that they were dishonest statements by Mr Sinfield that he and his wife had done all the gardening prior to the accident, but then had to employ a gardener after the accident, and so incurred recoverable losses as a consequence.

   2. Because I am being asked to overturn a finding of fact, it is necessary to set out the proper approach of an appellate court in this context.

   3. The appeal before me is by way of review: CPR r 52.21(1). I must allow an appeal if I conclude that the decision of the lower court was (a) wrong; or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court: CPR r 52.21(3).

   4. The approach to be adopted by an appellate court to a judge’s findings of fact following a trial is set out Assicurazioni Generali SpA v Arab Insurance Group (BSC) [2003] 1 WLR 577, para 14 – 17, per Clarke LJ, approved by the Supreme Court in Datec Electronics Holdings Ltd v United Parcels Service Ltd [2007] 1 WLR 1325, para 46:

“14. The approach of the court to any particular case will depend upon the nature of the issues kind of case determined by the judge. This has been recognised recently in, for example, Todd v Adams & Chope (trading as Trelawney Fishing Co) [2002] 2 Lloyd’s Rep 293 and Bessant v South Cone Inc [2002] EWCA Civ 763. In some cases the trial judge will have reached conclusions of primary fact based almost entirely upon the view which he formed of the oral evidence of the witnesses. In most cases, however, the position is more complex. In many such cases the judge will have reached his conclusions of primary fact as a result partly of the view he formed of the oral evidence and partly from an analysis of the documents. In other such cases, the judge will have made findings of primary fact based entirely or almost entirely on the documents. Some findings of primary fact will be the result of direct evidence, whereas others will depend upon inference from direct evidence of such facts.

15. In appeals against conclusions of primary fact the approach of an appellate court will depend upon the weight to be attached to the findings of the judge and that weight will depend upon the extent to which, as the trial judge, the judge has an advantage over the appellate court; the greater that advantage the more reluctant the appellate court should be to interfere. As I see it, that was the approach of the Court of Appeal on a “rehearing” under the Rules of the Supreme Court and should be its approach on a “review” under the Civil Procedure Rules 1998.

16. Some conclusions of fact are, however, not conclusions of primary fact of the kind to which I have just referred. They involve an assessment of a number of different factors which have to be weighed against each other. This is sometimes called an evaluation of the facts and is often a matter of degree upon which different judges can legitimately differ. Such cases may be closely analogous to the exercise of a discretion and, in my opinion, appellate courts should approach them in a similar way.

17. In Todd’s case [2002] 2 Lloyd’s Rep 293, where the question was whether a contract of service existed, Mance LJ drew a distinction between challenges to conclusions of primary fact or inferences from those facts and an evaluation of those facts, as follows, at p 319–320, para 129:

“With regard to an appeal to this court (which would never have involved a complete rehearing in that sense), the language of ‘review’ may be said to fit most easily into the context of an appeal against the exercise of a discretion, or an appeal where the court of appeal is essentially concerned with the correctness of an exercise of evaluation or judgment—such as a decision by a lower court whether, weighing all relevant factors, a contract of service existed. However, the references in rule 52.11(3)(4) to the power of an appellate court to allow an appeal where the decision below was ‘wrong’ and to ‘draw any inference of fact which it considers justified on the evidence’ indicate that there are other contexts in which the court of appeal must, as previously, make up its own mind as to the correctness or otherwise of a decision, even on matters of fact, by a lower court. Where the correctness of a finding of primary fact or of inference is in issue, it cannot be a matter of simple discretion how an appellate court approaches the matter. Once the appellant has shown a real prospect (justifying permission to appeal) that a finding or inference is wrong, the role of an appellate court is to determine whether or not this is so, giving full weight of course to the advantages enjoyed by any judge of first instance who has heard oral evidence. In the present case, therefore, I consider that (a) it is for us if necessary to make up our own mind about the correctness or otherwise of any findings of primary fact or inferences from primary fact that the judge made or drew and the claimants challenge, while (b) reminding ourselves that, so far as the appeal raises issues of judgment on unchallenged primary findings and inferences, this court ought not to interfere unless it is satisfied that the judge’s conclusion lay outside the bounds within which reasonable disagreement is possible. In relation to (a) we must, as stated, bear in mind the important and well – recognised reluctance of this court to interfere with a trial judge on any finding of primary fact based on the credibility or reliability of oral evidence. In the present case, however, while there was oral evidence, its content was largely uncontentious.”

In the same case Neuberger J stressed, at pp 305–306, paras 61–64, that the question whether there was a contract of service on the facts involved the weighing up of a series of factors. Thorpe LJ agreed with both judgments.”

1. 1. I also bear in mind, as Mr James reminded me, that where a party has been acquitted of fraud the decision in his favour should not be displaced except on the clearest grounds: Akerheim v De Mare [1959] AC 789, 806; Glasier v Rolb (1889) 42 Ch D 436. I also bear in mind, that although there is a single civil standard of proof, the more serious the allegation, then the stronger the evidence required to prove it: R(N) v. Mental Health Review Tribunal (Northern Region) [2006] QB 468, para 62; In re D [2008] 1 WLR 1499, 1509.

Analysis

1. 1. In this case, the judge’s decision depended on the meaning of paras 5 and 8 of the Preliminary Schedule and upon what Mr Sinfield said about them. It seems to me, therefore, that this case is the kind of case referred to in para 14 of Assicurazioni Generali SpA, namely, where the judge’s decision depends upon documents and the inferences to be drawn from them, as well as a witness’s evidence. Whilst having regard to the general approach that I have set out I am entitled, in accordance with CPR r 52.21(4), to draw any inference of fact which I consider justified on the evidence. This provision is not, as Mr James submitted, only concerned with fresh evidence: see Assicurazioni Generali SpA, supra, para 13.

   2. Because LOCOG alleges that Mr Sinfield was dishonest in respect of the Preliminary Schedule, Ivey, supra, para 74, provides the starting point:

“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 by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.”

1. 1. In his statement of truth on the Preliminary Schedule Mr Sinfield said: ‘I believe that the facts stated in this schedule are true‘. But what were those facts so far as paras 5 and 8 were concerned? In order to determine whether he was dishonest in relation to what was said, I consider that the question to be considered is: What were the facts stated in paras 5 and 8, and did Mr Sinfield have a genuine belief in their truth?

   2. It seems to me that the only reasonable meaning to be attached to paras 5 and 8 is that what Mr Sinfield was saying was that before the accident the gardening was done solely by him and his wife, whereas his accident had – for the first time – necessitated the employment of a gardener, thus generating the recoverable losses which were then set out in the tables under each paragraph. The phrase in para 8 ‘The Claimant would probably at some point have required assistance with gardening …’ referred to the mere probability of an event (the employment of a gardener) which was, in fact, the actuality, long before the accident. It was therefore obviously a misleading statement.

   3. Although in his Skeleton Argument at para 16 Mr James breaks down the paragraphs and analyses them sentence by sentence, taking each sentence in isolation, I do not consider that to be the correct approach. The two paragraphs need to be read as a whole and they have to be read together. For example, I take the point that in para 5 the second sentence about Mr Sinfield and his wife looking after the garden was factually true, albeit it omitted words such as ‘with the assistance of a gardener’. But when that is read with the next sentence, ‘Post-accident his wife continues to do some of the gardening but they had to employ a gardener for 2-4 hours per week at a cost of £13 per hour’, what is plainly being conveyed is that a gardener has had to be employed in substitution for Mr Sinfield. But that was not the case. Further, when the first sentence is considered together with the sentence in para 8 (emphasis added), ‘The Claimant would probably at some point have required assistance with gardening and employed a gardener in any event whilst continuing to do some work himself’, again the only reasonable conclusion is that what Mr Sinfield was intending to convey was that at the date of the accident, it was solely him and his wife who did the garden, and nobody else.

   4. Given that this is the only reasonable meaning to be ascribed to paras 5 and 8, and that that state of affairs was not true and obviously known by Mr Sinfield not be true, and that the statements were being made in support of a claim for damages, it follows that the judge should have found that paras 5 and 8 were dishonest misrepresentations. He should have found that Mr Sinfield was falsely asserting that before the accident only he and his wife had done the gardening, but that the accident had required the employment of a gardener, in respect of which recoverable losses had been incurred. The judge never considered the question: What do the two paragraphs mean, and could Mr Sinfield have genuinely believed that meaning? Because the judge never asked himself the right question, he came to the wrong answer.

   5. As a subsidiary point, as Mr Laughland pointed out, on any view Mr Sinfield knew that para 5 at least was untrue because Mr Price worked four hours per week, every week, apart from January, and did not work two hours a week in the winter, as claimed on the Preliminary Schedule.

   6. None of the reasons put forward by the judge for finding that these paragraphs were not a dishonest misrepresentation seem to me to be of much weight. True it is, for example, that Mr Sinfield did not claim for the full number of hours gardening actually worked. But that in my view was not of sufficient weight to displace the clear meaning of the words in the Preliminary Schedule. And, as Mr Laughland submits, the evidence from Mr Sinfield’s first witness statement was that he was not able to quantify a claim for loss of earnings. Thus, the judge was wrong to conclude that there could have been such a claim, and that the absence of one somehow undermined a conclusion of dishonesty.

   7. In coming to this conclusion I have borne in mind, as I am required to do, that the judge heard Mr Sinfield give evidence and be cross-examined, whereas I have not. I have given appropriate weight to his findings. I have also borne in mind that I do not have a transcript of the evidence and so my review is limited to the judge’s judgment and his reasons for his determination. However, in light of para 30 of Mr Sinfield’s first witness statement, in which he unambiguously said that ‘Pre-accident Christine and I did all the gardening’, it seems to me to be inescapable that Mr Sinfield was intending to say the same thing in the Preliminary Schedule. As I have explained, the judge reached the conclusion that para 30 was, in effect, a dishonest ‘cover-up’ of paras 5 and 8, which he said was the product of muddle and confusion. But nowhere in his judgment does he make a finding as to what it was that happened to make Mr Sinfield realise between the date of the Preliminary Schedule and the date of his witness statement that there was an error in the Schedule. Therefore, it seems to me that the judge’s conclusion was one which was not supported by any evidence.

Conclusion

1. 1. For these reasons, I have concluded that the judge was plainly wrong not to have reached the conclusion that paras 5 and 8 of the Preliminary Schedule were dishonest misstatements by Mr Sinfield that he had not employed a gardener prior to the accident, that he and his wife doing all the gardening, but that the accident had resulted in him having to employ one for the first time so as to generate the recoverable losses which he set out.

Ground 2: the judge’s conclusions on the question of fundamental dishonesty

1. 1. The judge concluded that Mr Sinfield had been dishonest in relation to para 30 of his first witness statement and by creating the false invoices, and that he had been fundamentally dishonest in relation to the gardening claim (para 21), but not that he had been fundamentally dishonest in relation to the claim (para 23). In my judgment, the judge was wrong and he should have concluded on a balance of probabilities that Mr Sinfield had been fundamentally dishonest in relation to the claim. In the analysis which follows I will rely solely on the findings of dishonesty which the judge made against Mr Sinfield (and which have not been challenged), in case I should be held to be in error in my conclusions on Ground 1.

   2. As I have set out, 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, 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.

   3. Even on the findings made by the judge, according to that test, what Mr Sinfield did was fundamentally dishonest. He presented a claim for special damages in a significant sum, and the judge found that the largest head of damage was evidenced by the dishonest creation of false invoices and by a dishonest witness statement. Both pieces of dishonesty were premeditated and maintained over many months, until LOCOG’s solicitors uncovered the true picture. As presented on the Preliminary Schedule, items 5 and 8 made a total of £14 033.18 out of a total claim for special damages of £33 340.86. Mr Sinfield therefore presented his case on quantum in a dishonest way which could have resulted in LOCOG paying out far more then they could properly, on honest evidence, have been ordered to do following a trial.

   4. I reject Mr James’ argument that the claim was not fundamentally dishonest because, by comparing multiplicands, the overstatement was less than £3000, and so any dishonesty cannot be said to go to the heart or root of the claim. The fact is that Mr Sinfield dishonestly maintained a claim for £14 033.18 which he was not entitled to. The fact that a later medical report showed that a gardener would have been employed within three years, thereby limiting future losses to three years, is neither here nor there. For all Mr Sinfield knew, LOCOG might have been willing to settle the case at or near the dishonestly claimed figure of damages long before the medical report was served. The dishonesty therefore potentially impacted it in a significant way.

   5. The judge should have concluded that Mr Sinfield had been fundamentally dishonest in relation to the claim and therefore, prima facie by virtue of s 57(3), the entire claim fell to be dismissed unless, by s 57(2), that would result in substantial injustice to Mr Sinfield. Instead, he asked himself the question (para 22): ‘If the greater part of the claim is genuine and honest, is the dishonesty fundamental ? I answer that by considering s 57(2)’. In my respectful opinion, that was the wrong question and the wrong answer. If the claimant has been fundamentally dishonest in the way I have indicated then the fact that the greater part of the claim might be honest is neither here nor there (subject to substantial injustice): by enacting s 57(3) Parliament provided that the entire claim, including any genuine parts, are to be dismissed.

   6. As I have said, I consider that even on the findings of dishonesty which the judge made, the claim should have been dismissed (subject to substantial injustice). But if I am right in relation to Ground 1 then, a fortiori, the claim should have been dismissed.

Ground 3: substantial injustice

1. 1. At para 23 of his judgment the judge held that Mr Sinfield had not been fundamentally dishonest but if he was wrong about that, then it would be substantially unjust to dismiss the entire claim given that (in the judge’s view) it related to a peripheral part of the claim and the remainder of the claim was honest and genuine. In my view the judge was wrong to make a finding of substantial injustice on this basis.

   2. The starting point is s 57(3). As I have explained, it follows from this provision that 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. The judge made no findings capable of supporting a conclusion that if the whole claim was dismissed it would result in substantial injustice to Mr Sinfield Furthermore, the judge was wrong to characterise the gardening claim as peripheral. As I have explained, as originally presented, it was a very substantial part of the claim.

Conclusion

1. For these reasons, the appeal is allowed, the judge’s order of 18 September 2017 is set aside, and the claim for damages is dismissed under s 57(2) of the 2015 Act.