Fundamental dishonesty – a new defendant tactic?

What constitutes “fundamental dishonesty” has recently been the focus of attention for personal injury practitioners, particularly since Section 57 of the Criminal Justice and Courts Act 2015 come into force on 13 April 2015. The section stipulates out that where the Court makes a finding of fundamental dishonesty then the whole claim must be dismissed, not just the dishonest element of the claim. It is a draconian measure and the only discretion the Court has is where it is considered that to dismiss the claim would result in a “substantial injustice” to the claimant then the claim does not have to be dismissed. However, in practice unless the dishonesty was minor against the backdrop of a significant claim, it is unlikely the court will often exercise this discretion.

The Act itself does not define what is meant by fundamental dishonesty, with Parliament leaving the parameters to judicial discretion. Despite this, guidance on what constituted “fundamental dishonesty” was largely absent until two recent decisions.

In London Organising Committee for the Olympic and Paralympic Games (in Liquidation) v Sinfield, the High Court found that to constitute “fundamental dishonesty” the actions of the claimant must “substantially effect” the case for the defendant to succeed in an application to have it struck out, even if the dishonesty only relates relate to part of the damages sought. In this claim, the claimant advanced as a head of claim, the services of a gardener, pleading that the service was required due to an injury sustained in the accident that prevented him from maintaining his property as he had done before the accident.  The claimant submitted invoices purportedly from the gardener; At trial, evidence from the gardener brought to light the fact that the claimant had fabricated the invoices and that he had received gardening services prior to the accident. The Court found that despite the view that the claimant had got himself in to a muddle, the invoices for the gardener were found to have been created dishonestly and represented approximately 42% of the total financial loss claim. Mr Justice Julian Knowles found that this amounted to fundamental dishonesty and overturned the first instance decision in which the claimant whilst not recovering for the cost of the gardener, recovered almost £27,000 in damages and a sum for costs. The claim for damages was dismissed entirely.

The second recent case was Mervin v Stolys [2018], in which the claimant suffered injuries in a road traffic accident in which he claimed damages in excess of £1 million for catastrophic injuries he alleged left him largely immobile, unable to work and needing significant care. The defendant pleaded fundamental dishonesty, having obtained surveillance footage and medical evidence that were at odds with the disabilities described by the claimant. Upon disclosure of this evidence the claim was withdrawn with no award for damages or costs made.

As a claimant solicitor, I do not in any way condone dishonest claims. The case of Mervin v Stolys was the right outcome.   Where evidence is produced that clearly shows fundamental dishonesty, the claimant should not be allowed to continue. However, there is a risk that Section 57 could be used by insurers as a negotiating tactic in claims which they consider are valued too high, but where there is no real suggestion of dishonesty.   There does appear increasing use of video surveillance evidence. Is this because insurers are trying to find evidence which may not go as far as so to support a finding of fundamental dishonesty, but will be used to sow a seed of doubt into the minds of the claimant’s advisors so as to cause them to advise acceptance of a sum which previously would not have been attractive.

Whilst Section 57 has its place and recent Court decisions should be a shot over the bows of any claimant considering pursuing a dishonest claim (whether the claim as a whole or a substantial part of it), Section 57 must not be used by insurers as another weapon in their armoury in attempts to reduce the value of claims. All lawyers representing claimants must of course be alive to the risks of dishonest claims and they should be prevented, but equally, simply because a insurer may not agree a head of claim or consider it is not necessarily in keeping with the nature of the injury, that is not an excuse to suggest the claimant is fundamentally dishonest. Time will tell whether insurers stop alleging that the claimant’s valuation is excessive and start suggesting that a claimant is being fundamentally dishonest.   Such blanket allegations cannot be made. Fundamental dishonesty has to be pleaded; the defendant has to have evidence in support. A claimant simply putting a value on a claim which is higher than the insurers consider it to be worth on the evidence should not lead to allegations of fundamental dishonesty by a claimant and any such suggestion must be fought.

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