Fundamental Dishonesty – The Future Landscape

News | Mon 16th Feb, 2015

As many readers will know, the government has now introduced a further way for a claim to be struck out in the Criminal Justice and Courts Act 2015.  In essence, section 57 of the Act provides that if, on an application by the Defendant, an otherwise successful claimant is found to have been ‘fundamentally dishonest’ in relation to their claim, that claim must be dismissed unless the Court is satisfied that the claimant would suffer substantial injustice.

Much of the debate about this section of the Act has focused on what is meant by the term ‘fundamentally dishonest’, with the contention seemingly focused on the word fundamental (at one stage in the House of Lords, it was proposed that the word fundamentally be removed entirely!).  It is important to remember that the section will only apply where a claimant has been successful.  Thus, a ‘staged-accident’ claim would not fall within the scope of the section, because such claims would be dismissed.  Consequently, and from the Hansard Transcripts of the Bill’s various readings (available here), it appears that the legislature has in mind the situations discussed in the Summers v Fairclough Homes; in short, the significantly exaggerated claim.  As practitioners will recall, in Summers the Supreme Court held that, in such cases, the Court had a discretionary power to strike out the case in its entirety, thereby depriving the claimant of even the unexaggerated element of their claim.

Therefore, it could be argued that, at its most elementary, all section 57 will do is codify this power.  However, I consider it will also both reverse the burden of convincing the Court to exercise its discretion regarding striking out the claim, and fetter that discretion.  Under the common law, it is for the Defendant to convince the Court to exercise its power; under the proposed section 57 the Court must strike out unless convinced that doing so would cause the Claimant substantial injustice.

It seems to me, therefore, that a body of jurisprudence will develop about the both the meaning of ‘fundamental dishonesty’ and ‘substantial injustice’.

As was seen in the case of Gosling v Screwfix, the designated civil circuit judge sitting at Cambridge County Court was prepared to hold that exaggeration of symptoms that effectively doubled the claimed value of the claim was ‘fundamental dishonesty’.  Will a similar interpretation be applied under section 57?  Possibly, yes.  But, what was at stake in Gosling was the costs of proceedings, not the recovery of any damages at all, but the case was decided under the QoCS regime.

As for what amounts to ‘substantial injustice’, there is no guidance in the proposed Act.  It is clear, though, that a substantial injustice cannot be the fact that the Claimant would be deprived of damages for any non-dishonest element of their claim.  Such an interpretation would undermine the purpose of the Act.  It seems to me that, if a Court is satisfied a claimant’s dishonesty is such that it warrants her whole claim being struck out, it is likely to view any injustice arising from the subsequent deprivation of any damages as being of the claimant’s own making and, therefore, not a substantial injustice.  In other words, a claimant will have a very high threshold to cross in order to persuade a Court not to strike out her claim, and probably have to point to some compelling extraneous circumstances as a suitable reason.

Defendants already have a very many number of weapons in their arsenal to attack dishonest and fraudulent claims.  I consider the section 57 of the Criminal Justice and Courts Act not only strengthens that arsenal but could lead to many more successful applications for claims to be struck out.  As a result, perhaps now more than ever, claimant representatives need to be alive to the need not to present exaggerated claims.  Will this, though, lead to somewhat speculative, but otherwise meritorious claims not be pursued for fear of a finding of fundamental dishonesty being made should the claimant not come up to proof?  I fear it will.

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