FUNDAMENTAL DISHONESTY A DOZEN THINGS TO THINK ABOUT: A RECAP

Given recent decisions on fundamental dishonesty this may be a good time to rake over some key points.

“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.”

(Lord Faulks QC, Minister of State for Justice, Committee stage of the passage of the Criminal Justice and Courts Bill in the House of Lords (Hansard, 23 July 2014, cols 1267 – 1268):

1. “Fundamental” defined

In  Howlett v Davies [2017] EWCA Civ 1696 the Court of Appeal accepted the definition of His Honour Judge Moloney QC

” 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.’

This passage was  also adopted by the High Court in London Organising Committee of the Olympic And Paralympic Games (LOCOG) v Sinfield [2018] EWHC 51 (QB)

2. “Dishonesty” defined

“in Ivey v Genting Casinos Limited (t/a Crockfords Club) [2017] 3 WLR 1212 … the court restated the common law test for dishonesty and, in summary, held that whilst 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 different standard”

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

Menary v Darnton, Unreported, HHJ Hughes QC at Portsmouth County Court, (cited in  London Organising Committee of the Olympic And Paralympic Games (LOCOG) v Sinfield [2018] EWHC 51 (QB))

“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.”

3. Combining the two: “going to the root”

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.”

London Organising Committee of the Olympic And Paralympic Games (LOCOG) v Sinfield [2018] EWHC 51 (QB).

4.  The potential escape clause – substantial injustice

Section 57(2) states that court “must” dismiss the primary claim.  However there is a caveat “unless it is satisfied that the claimant would suffer substantial injustice if the claim was dismissed”.  There is no definition of “substantial injustice”. It is probable that this may deal with those cases where there is a major claim for damages and ongoing loss and the claimant is found to be dishonest on a relatively minor issue.

5. However the fact that a claimant will lose all their damages does not amount to a “substantial injustice”.

The issue was considered by Mr Justice Julian Knowles in

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

“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”

OTHER KEY POINTS

6. The court must dismiss the whole claim not just the the part on which the claimant has been found to be dishonest

Section 57(3) is phrased in a strange way. It means that the entire claim is struck out not just the element of the claim upon which dishonesty has been found.

“(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.”

7. The dishonesty can be in relation to a “related claim” but the related claim has to be a personal injury action

The term “related claim” has a clear definition in 57(8).

• It has to be a claim for “personal injury”
• It has to be in connection with the same incident or series of incidents.
• It has to be someone other than the claimant (“by a person other than the person who made the primary claim”).

So a related action in relation to property damage or car hire alone will not suffice. Such an action cannot be a “related claim”.

It is not clear whether proceedings have to be issued in relation to a “related claim”. s57.(8) states a claim includes a counterclaim but there is no further definition.

8. When striking out the claim the court has to assess the damages it would have paid

Even though the court dismisses the claim Regulation 57(4) means it has to record the damages it would have paid.  This means, in substantial cases, there may have to be a fairly detailed assessment of damages.

9. The damages that would have been awarded are then set off against any costs that the claimant is ordered to pay to the defendant

This is why the court has to assess the damages it would have paid. The sum that would have been awarded in damages is set off against any costs that the claimant is ordered to pay to the defendant.

It is not clear what happens when the potential damages exceeds the sum payable.  However a claimant in these circumstances should not expect the balance. It is a right of set off.

10. The loss of the damages claim is taken into account in any subsequent criminal or contempt proceedings

s.57(6) & (7) mean that the fact that the claimant has lost the damages claim is taken into account both in any crimimanl proceedings and and any proceedings for contempt of court in relation to the same action.

11. Fundamental dishonesty applies to a counterclaim

Section 57(8) makes it clear that the section applies to a counterclaim.

12. Fundamental dishonesty does not apply to actions issued before the Act came into force

That is the 13th April 2015.

THE SECTION AND THE GUIDELINES

SECTION 57 OF THE 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.”

THE EXPLANATORY NOTES

There are explanatory notes to the section