THE CURRENT IMPORTANCE OF PLEADINGS 9: THE PRIMARY FACTS UNDERLYING ALLEGATIONS OF DISHONESTY MUST BE PLEADED

May 9, 2025 · by · in Civil Procedure, Statements of Case

Parties alleging dishonesty and fraud have to be very careful in the way they plead their case.  These matters cannot be pleaded lightly, and there are professional obligations on the pleader to ensure that there is reasonably credible material that establishes a prima facie case of fraud.  This post looks at a case on the topic, useful links and guidance.

“the authorities are clear that if a party intends to allege dishonesty, then the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent must be pleaded; “

 

KEY PRACTICE POINT

Fraud and dishonesty are matters that have to be pleaded with extreme care. It is worthwhile looking at the useful links and other guidance set out below.

THE CASE

In Malhotra Leisure Ltd v Aviva Insurance Ltd [2025] EWHC 1090 (Comm) Nigel Cooper KC, sitting as a Judge of the High Court, was considering an insurer’s liability to pay under a policy following water escaping from a cold water tank in a hotel.  The claimant sought a declaration that the defendant was liable to pay under the policy. The defendant’s case was that the event was deliberate and the claimant’s claim had been supported by false statements or false evidence.

THE JUDGMENT ON THE PLEADINGS

101.Various matters were raised in cross-examination by the Defendant, which the Claimant says were un-pleaded. Examples given include the authenticity or otherwise of the inspection logs and the gates related to the Easteye litigation. The Claimant accepts if a matter goes purely to credibility then it does not need to be pleaded. However, the Claimant objected to these matters being used by the Defendant to support its case that the Claimant had deliberately and dishonestly caused the EOW on the basis that the primary facts underlying these allegations had not been pleaded.

102.In this regard, the authorities are clear that if a party intends to allege dishonesty, then the facts, matters and circumstances relied on to show that the defendant was dishonest and not merely negligent must be pleaded; see Three Rivers District Council v. Bank of England [2003] 2 AC 1 at [184] to [186] and Grove Park v RBS [2018] EWHC 3521 (Comm) at [24] – [26].

103.The inevitable difficulty in a case such as the present where (i) there is both a challenge to a witness’ credibility and (ii) it is also said that the same individual was party to a dishonest scheme to defraud insurers is to draw the line between what are matters which go purely to credibility and matters from which it is said an inference can be drawn that there was a dishonest scheme. In this regard, I consider it appropriate to follow the guidance of Carr J. (as she then was) in Baturina v Chistyakov [2017] EWHCV 1049 at [126]:

“I accept the submission on behalf of Ms Baturina that there is an extent to which it is permissible to pursue unpleaded challenges to credibility. But where it is intended to advance specific matters of dishonesty based on a particular set of facts, such matters should, as a matter of fairness, be pleaded. …”

104. Accordingly, I accept the submission from the Claimant that it is not open to the Defendant to build a fraud case based on matters which were not pleaded but are said to justify an inference that the EOW was deliberate. While it has not always been straight-forward to keep separate the distinction between matters which go to credibility and matters on which the Defendant can legitimately rely for the purposes of its case on fraud, I have endeavoured to keep this distinction in mind when considering the evidence.

 

THE PLEADER’S DILEMMA

Dishonesty cannot be pleaded in a vague manner.  A trial judge is likely to confine any case on dishonesty to the pleaded allegations.  Further there are clear professional duties on the person pleading the case to have evidence before them upon which they can properly found the allegations (see the Bar Council guidance below).

 WORTH READING ON ALLEGING, PROVING AND PLEADING FRAUD

 

BAR COUNCIL GUIDANCE

Guidance on Pleading Fraud

In the case of Medcalf v Mardell, the House of Lords considered paragraph 704(c) of the Code of Conduct and a barrister’s duties in considering whether or not to draft a document including an allegation of fraud.

Paragraph 704(c) states that a barrister should not draft a document containing any allegation of fraud “unless he has clear instructions to make such an allegation and has before him reasonably credible material which as it stands establishes a prima facie case of fraud”. In this case, the Court of Appeal had taken the view that a barrister in making such an allegation should have before him “evidence which can be put before the court to make good the allegation”.

The House of Lords rejected this interpretation. Lord Bingham of Cornhill, with whom the other law lords agreed, said that:

“… the requirement is not that counsel should necessarily have before him evidence in admissible form but that he should have material of such a character as to lead responsible counsel to conclude that serious allegations should properly be based upon it”.

The Professional Standards Committee (PSC) takes the view that there is no litmus test for determining whether it is proper to allege fraud. As Lord Bingham made clear:”Counsel is bound to exercise an objective professional judgment whether it is in all circumstances proper to lend his name to the allegation”. That decision will depend on the individual facts of each case.

It should be noted that although paragraph 704 refers specifically to fraud, the same principle would apply to any other allegation of serious misconduct.

First issued: March 2003

Last reviewed: September 2008

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