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Developments in fundamental dishonesty

Personal injury practitioners will be aware of the significance of a finding of fundamental dishonesty in the context of Qualified One-Way Costs Shifting (“QoCs”) following the implementation of the Jackson reforms. In addition to this those words could soon take on a new significance in the context of a defendant’s liability to a claimant and consequent costs orders in personal injury claims.

QoCs and Fundamental Dishonesty

As will now be familiar QoCs provide that a Defendant shall not be able to enforce any costs order against a Claimant in excess of the damages recovered by the Claimant unless:

a. The Claim is struck out because

i. The Claimant has disclosed no reasonable grounds for bringing the proceedings (CPR r44.15(a));
ii. The proceedings are an abuse of the court’s process (CPR r44.15(b)); or
iii. The conduct of the Claimant or a person acting on their behalf with the Claimant’s knowledge of such conduct is likely to obstruct the just disposal of the proceedings (CPR r44.15(c)).

b. The claim is found on the balance of probabilities to be fundamentally dishonest (CPR r44.16).

To date the meaning of fundamental dishonesty has not been considered at appellate level. In the absence of such consideration the best analysis of the meaning of the term can be found in the judgment of HHJ Moloney QC in Gosling v Screwfix and Another (Unreported, Cambridge County Court, 29th March 2014). In Gosling the Claimant was found as a consequence of a “frankly devastating surveillance video” (para 34 of the judgment) to be exaggerating both his ongoing pain and the limitations to his mobility following an anthroplasty operation to his knee. In considering whether this exaggeration constituted fundamental dishonesty HHJ Moloney QC held that the words must be interpreted purposively and considered that:

… 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. (para.45)

The Judge went on to reject the contention (which in any case was not suggested by the claimant) that fundamental dishonesty could only be found where “the dishonesty went to the root either of liability as a whole, or damages in their entirety” (para 49).

In Gosling the Claimant’s dishonesty was found to be fundamental as it related to a “very substantial element of his claim” (para 50) both in respect of general damages and damages for future care.

Criminal Justice and Courts Bill (“the Bill”)

The proposed s49 of the Bill currently before parliament provides a potential further string to the bow of a Defendant in a claim involving “fundamental dishonesty”. The section provides that where, upon an application by a Defendant, the court finds that the Claimant has been fundamentally dishonest in respect of either his personal injury claim or a related claim the court must dismiss the personal injury claim “unless it is satisfied that the claimant would suffer substantial injustice” (subsection (2)) were it to do so. For the avoidance of doubt subsection (3) provides that the duty to dismiss the claim includes the dismissal of elements in respect of which the claimant has not been dishonest.

Where the court makes such an order it must record in the order the amount of damages that would have been awarded but for the finding of fundamental dishonesty (subsection (4)). Subsection (5) then provides that any costs order made against a claimant following a finding of fundamental dishonesty may require the claimant to pay the defendant’s costs “only to the extent that they exceed the amount of damages recorded”.

Implications of the Bill

Should s49 of the Bill as it is presently drafted pass into law – it is currently at the report stage in the House of Lords – a defendant who is of the view that the claimant has acted in a fundamentally dishonesty way will have a tactical choice between:

a. Applying under s49 to have the claim dismissed and only being able to recover their costs over and above the damages that would have been awarded but for the fundamental dishonesty; and
b. Seeking permission to enforce an order for their costs to their full extent under CPR r44.16 notwithstanding any potential liability to the claimant.

How far this choice will make any practical difference to the outcome for the parties will depend on the exact circumstances of the case.

On the current wording of the Bill a critical factor in deciding how to exercise that choice will be how the court defines the words “substantial injustice” in s49(2). That is one of a number of unknowns at the present moment. One thing that does appear certain is that the words fundamental dishonesty and the two tests that use those words will be the subject of much speculation and considerable satellite litigation in the near future.