DEFENDANT NOT PERMITTED TO PLEAD FUNDAMENTAL DISHONESTY ON A SPECULATIVE OR CONTINGENT BASIS

In  Mustard v Flower & Ors [2021] EWHC 846 (QB) Master Davison refused a defendant’s application to amend its defence to plead fundamental dishonesty on a “contingent” basis.  The judgment deals with important issues as to how a defendant must approach a pleading of dishonesty.

“… 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.”

FUNDAMENTAL DISHONESTY WEBINAR: A REMINDER

I am co-presenting a webinar with solicitor John McQuater on fundamental dishonesty in personal injury action on the 11th May 2021. Details of how to book are available here. 

THE CASE

The claimant brought an action for damages for personal injury.  The matter is listed for trial in November 2021. The defendant applied for permission to amend its defence.  Some of the proposed amendments were agreed.  The claimant did not agree to an amendment by which the defendant sought to “reserve the right” to argue fundamental dishonesty.

THE PROPOSED AMENDMENT

“4.4 The Claimant’s accounts of the RTA and its immediate aftermath, and the nature and severity of her symptoms both before and after the accident have varied over time, are unreliable and are in issue. They have been exaggerated (or in the case of her pre-RTA history minimised) either consciously or unconsciously – the Third Defendant cannot say which absent exploring the issues at trial. In the event that the Court finds that the Claimant has consciously exaggerated the nature and/or consequences of her symptoms and losses, the Third Defendant reserves the right to submit that a finding of fundamental dishonesty (and the striking out of the claim pursuant to section 57 Criminal Justice and Courts Act and/or costs sanctions including the disapplication of QOCS) is appropriate.“

1. The claimant objected to all but the first sentence of this proposed new paragraph. She said that I should not give permission for these amendments. Because this raised an issue of principle that I did not find altogether easy to resolve and because of pressure of time, I reserved judgment.”

THE MASTER’S CONCLUSIONS: DEFENDANT REFUSED PERMISSION TO AMEND

The Master refused permission to amend.  This was a contingent or speculative assertion, none of the medical experts had reported dishonesty.  In any event it was unnecessary.

1. 1. Somewhat against my first instinct, I have concluded that I should not allow the italicised section of the disputed amendments.

1. 1. The cases I have referred to establish that it is open to the trial judge to make a finding of fundamental dishonesty whether that has specifically been pleaded or not. To put that another way, an “application by the defendant for the dismissal of the claim” pursuant to section 57(1) of the 2015 Act does not require any particular formality. In an appropriate case it could, for example, be made orally and perhaps at as late a stage as the defendant’s closing submissions. But the factors governing whether the trial judge would then entertain it would be as set out by Newey LJ in Howlett, namely whether the claimant had been “given adequate warning of, and a proper opportunity to deal with, the possibility of such a conclusion and the matters leading the judge to it rather than whether the insurer had positively alleged fraud in its defence”. Or, to adopt the language of HHJ Coe’s judgment in Pinkus, whether the claimant had had “sufficient notice” of the issues raised and the opportunity to deal with those issues by way of additional evidence, if necessary, including from his experts.

1. 1. A factor underlying these decisions is that (as was explicitly raised in Pinkus) neither the defendant nor the judge may be in a position to make any conclusions about a party’s honesty until that party has given evidence and been cross-examined. That will especially be the case where honesty or dishonesty turns on the distinction between conscious and unconscious exaggeration. It would also not be professionally proper for a defendant’s legal representatives to allege fraud or fundamental dishonesty based upon mere suspicion, or upon a mere prospect that that is how the evidence might turn out. So there will be many cases where it would not be practical or proper to require a defendant to have made such an allegation prior to the trial in order to make an application under section 57.

1. 1. This is just such a case. Whether fundamental dishonesty is pursued will be a matter on which the defendant’s insurers and their legal team will have to form a view at the trial. Whether the court then entertains the application will depend on the trial judge’s assessment of (a) whether it has some prospect of success and (b) the considerations of fairness described above.

1. 1. Thus it might be said, (as Mr Audland QC does indeed say), that the sort of contingent and provisional plea proposed is simply giving the claimant fair warning that the defendant may, if the evidence turns out a certain way, make an application under section 57. However, on careful reflection, that is not how I would analyse the situation and I refuse permission for the amendment for the following reasons:

i. The proposed amendment serves no purpose. In the circumstances of this case, the defendant can, if appropriate, make the application without having foreshadowed it in a pleading. The somewhat doom-laden wording that the defendant “reserves the right to submit that a finding of fundamental dishonesty (and the striking out of the claim pursuant to section 57 Criminal Justice and Courts Act and/or costs sanctions including the disapplication of QOCS) is appropriate” is unnecessary. It is not quite correct to label an application under section 57 a “right” and, even if it were, there would be no requirement to have “reserved” the right in advance.

ii. At the present time, a plea of fundamental dishonesty has no real prospect of success and therefore, even pleaded on a contingent basis, does not satisfy the test for granting permission to amend. Dishonesty, as opposed to a functional disorder or somatisation, is not, or not clearly, raised by the medical experts. If it has a basis, that basis is, on present material, slender. By contrast, if the correct diagnosis is a functional disorder, that would seem to have a good “fit” with the claimant’s pre-accident history and the fact that she suffered a subarachnoid haemorrhage very shortly afterwards. Even if, as the defendant contends, that was entirely unconnected with the accident, it could hardly have failed to have raised fears and anxieties in the claimant’s mind.

iii. It causes prejudice to the claimant. As Mr Dickinson has explained, a plea of fundamental dishonesty has to be reported to the claimant’s legal expenses insurers and opens up a theoretical possibility of them avoiding the policy ab initio. At the very least that will create an added burden of administration and costs. Furthermore, a finding of fundamental dishonesty has grave implications for the claimant and the proposed amendment, if allowed, would be apt to raise further fears and anxieties for which, at the present time at least, there is no proper basis.

1. 1. Mr Grant’s submission went slightly wider than the italicised words. He wanted me to refuse permission for the preceding sentence and another sentence in a proposed new paragraph 4.6.5. Both these sentences refer to the claimant’s “exaggeration of her symptoms”. But the defendant does not presently plead that such exaggeration has been or is “conscious”. The proposed amendments make it clear that this is a matter which it intends to “explore at trial”. If I were to refuse permission for these amendments, Mr Grant would no doubt use that as the basis for an invitation to the trial judge to limit the scope of Mr Audland QC’s cross-examination of the claimant. (I note that in Pinkus Mr Grant made exactly such a submission to HHJ Coe QC, which she rejected. I note also that she went on to make a finding of fundamental dishonesty.) Plainly, that would be wrong and unfair to the defendant. The defendant has a respectable body of evidence that the claimant has exaggerated (or, in the case of pre-accident symptoms, minimised) her symptoms. It is entitled to explore whether the motivation for any exaggeration or minimisation is benign. That is far removed from threatening, at this stage, an application under section 57 CJCA and is, in my view, a proper pleading. I have no hesitation in allowing these amendments.

1. 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.