FUNDAMENTAL DISHONESTY AND SUBSTANTIAL INJUSTICE: THE CLAIMANT “HAS ONLY HIMSELF TO BLAME” IN LOSING £1.2 MILLION IN DAMAGES

I am grateful to barrister Matthew Snarr for sending me a  better copy of the judgments of HHJ Sephton KC (sitting as a High Court Judge) in Shaw -v- Wilde, a copy of that judgment is available here  Shaw v Wilde Final Judgment.  We have looked at the case before in relation to the primary finding of fundamental dishonesty. Here I want to look at the judge’s consideration of the “substantial injustice” argument in a case where the claimant, if he had not been dishonest, would have recovered in excess of £1.2 million in damages.

“Although the dismissal of his heavy claim will cause Mr Shaw significant financial hardship, I have concluded that it will not inflict substantial injustice. Mr Shaw has only himself to blame.”

THE CASE

The claimant brought an action for damages for personal injury.   The judge considered the damages claim in detail and held that the damages awarded would be in excess of £1.2 million. However the claim had been put a value considerably higher than that, with the claimant seeking in excess of £4 million. The judge found that the claimant had been fundamentally dishonest in the presentation of his symptoms and, therefore, would not recover any damages.

THE JUDGMENT ON SUBSTANTIAL INJUSTICE

Having found that the claimant was fundamentally dishonest the judge went on to consider whether the “substantial injustice” proviso should be used.  He found that the claimant would be left in a parlous financial state. However the claimant only had himself to blame and the “substantial injustice” proviso would not be applied.

“77. I conclude that Mr Shaw’s lies in relation to the claim constituted fundamental
dishonesty in relation to it. I am therefore obliged to dismiss his claim unless he
persuades me that he would suffer substantial injustice.

178. I heard submissions on the meaning of “substantial injustice” in the context of section

57. I respectfully agree with Julian Knowles J that, because of the words in section
57(3), “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” – see
LOCOG at [65]. Subject to that application of the canons of statutory interpretation, I
consider the expression to consist of ordinary English words whose meaning is not
ambiguous, obscure or absurd.

179. I was referred to a ministerial statement made by Lord Faulks about this provision. I did
not hear submissions about whether I was entitled to have regard to Lord Faulks’s
statement and was initially inclined to conclude that I ought not to. I have reflected on
the position. In my view, the statement may be helpful in identifying the mischief at
which the statutory provision is aimed and it is therefore permissible to consider it. The
relevant passage is as follows:

“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 socalled “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. I
notice that the noble Lord criticised the Government; I think that the inference was
that they were in some way in league with the insurance industry. We are talking here
about insurance premiums paid by members of the public. These cases also eat up
valuable resources of local and public authorities and employers, which could
otherwise be used for the benefit of business and in providing services to the public.
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.
The amendments tabled by my noble friend Lord Marks and others would
considerably weaken the effect of the clause by simply giving the court a wide
discretion were it satisfied that the claimant had been fundamentally dishonest, which
would enable it to either dismiss the claim, reduce the amount of damages or to do
neither. That would make it much less likely that those provisions would be used,
even in cases where the claimant has clearly been fundamentally dishonest. I do not
believe that that would be appropriate. We do not believe that people who behave in a
fundamentally dishonest way should be able to benefit by getting compensation
regardless.”

Insofar as the statement sheds light upon the meaning of “substantial injustice,” I
consider that the minister identified that the court was to be given “some flexibility to
ensure that the provision is applied fairly and proportionately.” However, the
Government was not prepared to give the court a wide discretion as an Opposition
amendment proposed: the court might only decline to impose the sanction of dismissal
“where it would cause substantial injustice to the claimant”. I find little assistance in
this statement by way of elaboration of the meaning of “substantial injustice”.

180. I accept the submission that section 57(2) confers upon the court a broad discretion to
determine whether the dishonest claimant will suffer substantial injustice.

181. I am, I think, entitled to consider the effect upon the dishonest claimant of being
deprived of his damages. This is perhaps what Julian Knowles J had in mind when he
said in LOCOG at [65], “What will generally be required is some substantial injustice
arising as a consequence of the loss of those damages” (my emphasis). Thus, although
I reject Mr Knifton’s submission that “in a case of very high value, the loss of
legitimate damages alone may be a sufficient reason to find that the claimant would
suffer substantial injustice,” I accept the proposition that the court may take into
account the consequences for the dishonest claimant of not receiving damages for the
losses he has proved to be genuine.

182. Mr Kennedy urged me to consider the position of a person who was injured to a similar
extent as Mr Shaw, but had no solvent tortfeasor to sue. I find it helpful to consider the
position of such a person in order to make a comparison.

183. In the present case, I did not hear evidence about what would happen to Mr Shaw if his
claim were dismissed: I must draw inferences from the evidence that was presented to
me. I take into account the following:
(1) If Mr Shaw’s claim is dismissed, he may be required to repay the interim payment
of £150,000 that he has spent (The court has a discretion whether to order the
interim payment to be repaid: see CPR 25.8(2)(a)). [In fact the court did order that the interim payment be repaid]
(2) The court may give permission for an order for costs to be enforced against him:
see CPR 44.16(1). (This sanction is available whether or not the claim is
dismissed.)
(3) Mr Shaw may have incurred debts relating to his condition and his pre-trial losses
in the expectation that he would obtain a substantial award of damages that would
have allowed him to liquidate his debts. I accept that some of these debts arose
before the allegation of fundamental dishonesty was made.
(4) I have found that Mr Shaw has a limited earning capacity. If his claim is
dismissed, he will not earn as much as he would have done if he had not been
injured, and he will not be compensated for those losses. He will, however, have
the same state support as the victim who has no solvent tortfeasor to sue.
(5) I have found that Mr Shaw requires additional care and assistance. He requires
orthotics. If his claim is dismissed, he will have to rely upon the (probably much
less generous) support provided by the state (such as NHS treatment and support
provided pursuant to the Care Act 2014) just as the victim who has no solvent
tortfeasor to sue would have to do.

The principal consequence of the dismissal of the claim would be that Mr Shaw’s
financial position would be much less favourable, even parlous. Owing to state
provision, however, his basic needs would be met.

184. Mr Knifton submitted that I should take into account that the defendant did not admit
liability and made unsuccessful allegations of contributory negligence. In my view,
these matters have little bearing on whether the claimant would suffer substantial
injustice if his claim were dismissed.

185. I also take into account the blameworthiness and effect of Mr Shaw’s dishonest
conduct.

186. I have found that Mr Shaw lied to the experts and to the court about the extent of his
disabilities. I am confident that after the defendant sent the email of 4 December 2020,
if not before, Mr Shaw was made aware of the potential consequences of presenting a
dishonest claim. Despite this, he did not admit that he had lied; on the contrary, he
continued to lie. He was unrepentant.

187. I have addressed earlier in this judgment the effect upon this litigation of Mr Shaw’s
lies: this claim, which would probably have settled if Mr Shaw had been honest,
occupied the court’s time for 10 days with the consequent cost to the parties and
expenditure of court resources. Mr Shaw’s lies have added to the corrosive effect upon
honest claims referred to by Moses LJ in the Smith case referred to above.

188. I am not persuaded that Mr Shaw would suffer substantial injustice if his case were
dismissed. He told important lies about his condition. After the defendant’s email of 4
December 2020, if not before, Mr Shaw ought to have been aware of the grave
consequences of doing so. Rather than admit his error, Mr Shaw persisted in his lies. He
gambled that his lies would not be found out or that the court would excuse them,
although he was aware of the risk that his claim might be dismissed if he were found
out. Although the dismissal of his heavy claim will cause Mr Shaw significant financial
hardship, I have concluded that it will not inflict substantial injustice. Mr Shaw has
only himself to blame.”