FUNDAMENTAL DISHONESTY: WHERE 3% OF THE CLAIMED DAMAGES ARE AWARDED THE WHOLE CLAIM IS DEFINITELY TAINTED

We are returning to the judgment of Mr Justice Cotter in Muyepa v Ministry of Defence [2022] EWHC 2648 (KB).  The judgment recounts the history and detail of the legislation and principles governing fundamental dishonesty before applying them to the facts of the case itself.

“After an initial period of trying to cope with the symptoms he decided to present a picture to the defendant, his friends, medico-legal experts and the court that he was suffering from a very severe NFCI which had left him greatly disabled. He fundamentally and persistently transformed the claim by dishonest exaggeration. His dishonesty tainted the whole claim from the outset.”

THE CASE

The claimant brought a claim for damages for personal injury arising from a Non Freezing Cold Injury. The judge found that the claimant had suffered a minor injury but that the claim for damages had been exaggerated.   The judge then considered whether the claimant had been fundamentally dishonest.

 

THE JUDGMENT ON THIS ISSUE
  1. I start with the legal framework
Relevant principles   
“2. 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.
  1. 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.
  2. 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.”
  1. In Versloot Dredging BV and another v HDI Gerling Industrie Versicherung AG and others [2014] EWCA Civ 1349 Lord Justice Clarke observed at paragraph 105:
“Since Summers, judges have showed a willingness to strike out claims including personal injury claims before trial or award nominal damages where those claims were pursued fraudulently: Scullion v Bank of Scotland (HHJ Cotter QC, Exeter County Court, 24 May 2013), where a claim for personal injury was struck out on the basis of sustained dishonesty during the litigation[36]Homes for Haringey v Fari [2013] EWHC 757 which records at [17] the striking out of an exaggerated claim for personal injury; Joseph v Spiller [2012] EWHC 2958 where Tugendhat J refused to award more than nominal damages in a defamation case because of the fraudulent presentation of special damages despite the fact that some were genuine.”
  1. In the Supreme Court in the same case  [2017] AC 1, Lord Hughes, referring to the ‘fraudulent claims rule’, i.e., the rule that a genuine insurance claim supported by fraudulent evidence should fail even if valid in law, stated:
“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.
  1. 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.”
  2. Parliament then acted. At the Committee stage of the passage of the Criminal Justice and Courts Bill through the House of Lords, Lord Faulks QC stated (Hansard, 23 July 2014, cols 1267–1268).[37]
“Under the current law[38], 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 appropriate. 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. Section 57 of the Criminal Justice and Courts Act 2015 provides:
“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.”
  1. The burden is on the Defendant to establish on the balance of probabilities that the Claimant has been fundamentally dishonest. I would respectfully agree with Lord Faulks’ comment that application of the test within the section is well within the capacity of any judge who will know exactly what the clause is aimed at. I also do not believe any gloss is needed upon the plain wording. The issue is highly fact specific.
“74. 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.”
“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 [Qualified One-way Costs Shifting] 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.
  1. 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.”
“62. 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.
  1. 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.”
“Parliament has plainly concluded that the aim of addressing the evils of dishonest claims justifies depriving a claimant of the part of the claim he can prove and providing the defendant with the windfall of not having to satisfy a lawful claim, albeit one that may have been dishonestly presented. The only escape from the default position of dismissal arises if the injustice the dishonest litigant suffers is ‘substantial.’”
  1. The learned judge went on to hold that it would not cause substantial injustice to deprive the fundamentally dishonest claimant of the whole of her damages, notwithstanding she had used a large interim payment to buy a house which would have to be sold in order to repay the money. Permission was subsequently given to make an application for committal for contempt. After a hearing I imposed a penalty of seven months imprisonment for contempt.
  2. As I have already set out, the determination of 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 can be difficult to assess and the court is entitled to approach the exercise with considerable caution. Dishonesty may well have a pervasive effect, and given that the claimant retains the burden of establishing the true extent of loss it may be difficult to satisfy the court of what is likely to have occurred in the absence of objective or independent evidence which is unaffected by the dishonesty. In Iddon HHJ Sephton QC found that had he not dismissed the claim he valued it at just over £70,000. He recognised it was a “conservative” valuation.
  3. In cases of this nature when considering whether the Claimant’s dishonesty has been fundamental dishonesty in relation to the primary claim or a related claim I have found the following three questions (which have a degree of overlap) to be helpful
(a)         At what stage and in what circumstances did the Claimant’s dishonest conduct start?  In some cases the true core of the claim, the base, can be determined without considerable difficulty and the dishonesty can be traced to a point/time when the Claimant decided to consciously exaggerate for financial gain, for example after an operation or treatment has alleviated symptoms. The timeframe may be an extended period, e.g. as residual symptoms gradually ease, or sharply defined. In other cases it may be more difficult to identify when the dishonest conduct started. In any event the court is entitled to proceed with considerable caution in answering this question given the limits of any reliable evidence.
(b)         Does the dishonesty taint the whole of the claim or is it limited to a divisible element?
(c)         How does the value of the underlying valid claim (which the court must assess) compare with that of the dishonestly inflated claim? There is no set ratio as to what constitutes fundamental dishonesty but it is usually important to consider relative values.
Analysis
  1. Turning to the present case my analysis is as follows;
Was the Claimant dishonest?
  1. I am wholly satisfied the Claimant was dishonest. He deliberately exaggerated symptoms and functional limitations for financial gain. I would have found so in the absence of any evidence from Marlon Lessey. As it is I accept his evidence. Had what he saw also been captured on camera I very much doubt the claim would have reached trial, certainly in anything like the form that it did.
At what stage did it start?
  1. I find that the Claimant began to deliberately and significantly exaggerate symptoms in March/April 2017 in order to secure his discharge from the army with a payout. So he was dishonest from a very early stage and before the case was commenced.  
Does the dishonesty taint the whole of the claim?
  1. Once a Claimant has been proved to have dishonestly and significantly exaggerated his symptoms, by indisputable visual evidence, considerable care has to be taken when determining what the true extent of injury was and is. Sometimes a baseline was/is objectively verifiable by independent evidence (such as testing), or a person will have had an operation and the court may be able to conclude that the exaggeration only occurred when symptoms were alleviated by the procedure. In such circumstances it may be possible to carve out the dishonest element of the claim. However, in a case where the diagnosis primarily relies on the Claimant’s reporting of the history of symptoms, the persistent and significant, dishonest exaggeration of those symptoms may taint the whole case making it very difficult to assess the extent of any true underlying claim. That is the position in this claim.
How does the underlying valid claim (which the court must assess) compare with the dishonest element.
  1. I start with the claim advanced. At the start of the trial the Claimant’s schedule sought damages of £2,977,821 and also an award of general damages of £60,000 plus interest); so total damages of over three million pounds.   However, this was a reduction from the sum claimed in his Interim Schedule of Loss dated 17th February 2021 of £3,766,615 as the deception in relation to where Mrs Muyepa was living had been discovered.  This dishonest deception alone wiped £675,363 off the Claimant’s own valuation of future care (and altered the past care claim). As the Trial progressed the schedule figure was amended down due to concessions (so on the basis of the Claimant’s own case) to £1,694,975 (a reduction of 55%) of the interim value. As I have set out above the award I make for the true extent of injury is £97,595.33. This is just over 3% of the claim when advanced at its highest and approximately 5.5% of the claim as advanced at the end of the trial. These figures, even if my assessment of the true value is necessarily conservative, speak for themselves.    
Conclusion on the issue.
  1. I find that the Claimant suffered a minor NFCI. After an initial period of trying to cope with the symptoms he decided to present a picture to the defendant, his friends, medico-legal experts and the court that he was suffering from a very severe NFCI which had left him greatly disabled. He fundamentally and persistently transformed the claim by dishonest exaggeration. His dishonesty tainted the whole claim from the outset.
  2. I find that the Claimant has been fundamentally dishonest in relation to the claim
Substantial injustice
  1. Where a Court finds fundamental dishonesty it must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed. In London Organising Committee of the Olympic and Paralympic Games v Sinfield Knowles J stated:
“65. 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.”
I respectfully agree. Although, as with Mrs Iddon a substantial award would have been made had there been an honest claim, there is no substantial injustice by reason of its loss.  I also do not accept that there are any other realistic grounds for arguing injustice.
Conclusion
  1. I am satisfied on the balance of probabilities that the Claimant has been fundamentally dishonest in relation to the claim and therefore dismiss it by reason of section 57(2).
  2.  Had the claim not been dismissed the claimant would have been entitled to damages in the sum of £97, 595.33.