Non disclosure and fundamental dishonesty

One of the obligations that a court often imposes upon a claimant by way of case management directions in a credit hire claim, is a specific requirement to provide copies of what might be usefully described as the impecuniousity documents. These will usually include the claimant’s bank statements, credit card statements, and proof of earnings, such as wage slips or accounts or even tax returns. In default of providing such documents, the claimant will be debarred from claiming impecuniousity.

Such an obligation on the one hand can be seen as otiose, given that all of these documents would be encompassed within the scope of an order for standard disclosure anyway. On the other hand, the district judges who make these orders, do so in order to control the evidence, and to ensure that there is scrupulous compliance with the provision of what may be the crucial documents in the case.

Sadly, such orders are often honoured by way of breach. This can occur for a number of reasons. The first is simple forgetfulness, as to what accounts and credit cards someone may actually have had a couple of years earlier. The second is carelessness, with a failure to either impress upon a client what their duty is by the solicitor with conduct of the case or carelessness on the part of the client who does not read letters from his solicitor. A third reason is dishonesty: perhaps a claimant is dodging tax and National Insurance contributions, or perhaps they have other sources of income demonstrated on their bank accounts, which the authorities know nothing of.

It will always be fruitful for defence counsel at a credit hire trial to scrutinise the orders that have been made, the documents that have been provided and to consider whether there has been compliance with the order or not. That then provokes a tactical decision as to whether to make an application for a debarral order at the commencement of the trial, or to explore matters in cross examination, and make the point in closing submissions. Even if it appears there has been notional compliance, exploring the issue in cross examination is usually worthwhile.

The problem for a claimant and those who represent claimants, is that non-compliance with an order for disclosure of documents, may have consequences which are more far reaching than a debarral. It might be open to a court to conclude that the failure to give disclosure, is deliberate, and the reason it is deliberate, is due to dishonesty. If that dishonesty is fundamental, this can lead both to the loss of the entire claim and also the disapplication of QOCS, assuming that a personal injury claim is involved too.

A recent example of these factors in play is the decision of the High Court in the case of Haider v DSM Demolition Limited [2019] EWHC 2712 (QB) where it emerged at trial there had been material non disclosure of documents. As noted by the High Court judge:

52. The context of these submissions is as follows. Many road traffic cases involve claims for credit hire charges. These arise where the claimant is supplied with a replacement car on credit by a credit hire company whilst his/her own car is off the road, and s/he then seeks to recover these charges from the defendant. Frequently these charges are large, and they can exceed the claimed personal injury damages. The charges levied by credit hire companies are generally greater than those levied by ordinary car hire companies. Where credit hire charges are claimed, the defendant’s insurer is generally concerned to find out whether the claimant could have afforded a replacement vehicle by some other means than by using a credit hire company, thus avoiding the increased charges (eg, by taking out a loan or by using his/her own credit card). The position was considered generally by the House of Lords in Lagden v O’Connor [2004] 1 AC 1067, [42]. Lord Hope referred to what the Court of Appeal had said at [2003] QB 36, [128], namely that in some cases it would be necessary to consider the financial ability of a claimant to pay car hire charges, and that his was a question that trial courts should be easily able to cope with. Lord Hope said of this:

“That seems to me to be a fair assessment. In practice the dividing line is likely to lie between those who have, and those who do not have, the benefit of a recognised credit or debit card. It ought to be possible to identify those cases where the selection has been made on grounds of convenience only without much difficulty.”

In relation to the alleged actions of dishonesty the facts supporting that allegation were as follows:

53. It is against this background that the Defendant says that the Claimant made a false disclosure statement in his List of Documents, which was verified by a statement of truth dated 22 March 2018, when he failed to disclose his credit cards. It says that that non-disclosure was a lie, which the Claimant then compounded in his reply to the Defendant’s Part 18 questions. Question 8 asked him whether he could have afforded to hire a vehicle other than on credit, and question 10 asked, if the earlier answer was ‘no’, that he list all his credit cards and supply supporting information such as credit limits and statements. To question 10 the Claimant replied, ‘I did not have any credit card accounts.’

54. In fact, when he came to give evidence, the Claimant admitted to having two credit cards at the relevant time, namely a Barclaycard and a card issued by Vanquis Bank. When pressed why he had not disclosed these, he said that the Barclaycard account was ‘closed’; that he did not have any access to credit on it; and that he had defaulted on hisrepayments. When asked by the judge, ‘Why did you not say, “I have an account but there’s nothing in it because of X, Y and Z” ?’ the Claimant answered, ‘I should have. That’s an error on my part on that.’ He did not give evidence about the other card.

55. In relation to his bank accounts, in his Part 18 replies the Claimant disclosed one account with HSBC ending **34. When he came to give evidence it was put to him that the statements he had disclosed for this account did not show the paying in by him of a cheque for £3800 from the Defendant’s insurers by way of interim payment. It was therefore put to him that he must have had another account that he had failed to disclose. The exchange was as follows:
“Q. So I suggest to you that the only possible conclusion to be drawn from that by the trial judge is that that is because you had another account.
A. Which I can disclose. I can –
JUDGE TINDAL: Yes, but did you have one, because the whole point is that the order is that you were supposed to be disclosing all your relevant accounts. So are you admitting that you have not disclosed a relevant account ?
Q. Again it’s a difficult one, because no, I didn’t have another account. HSBC made an error. The bank’s made an error on that. They gave me for the same account, I don’t know why I was given 2 cards for the same account, the same account. And like I said, I can get access to the HSBC and show you where the money went into, my HSBC account. So there was nothing hiding, that I’m storing away thousands or whatever you’re trying to …

Q. Are you denying having more than one bank account ?
A. I’m not denying it. I opened one account. They made an error, and they gave me another account. I opened one account.”

At first instance the judge had not thought this was terribly significant and indeed went on to find that the claimant was honest:

56. The judge dealt with the credit card and bank account evidence in his judgment at [5]- [7]. He said that ‘the position was that [the Claimant] did have a credit card, but it was ‘maxed out’; that there had been points about ‘whether there had been sufficient disclosure of bank statements’; that there had ‘not been particularly good disclosure; but that none of it had given him the impression that the Claimant had been dishonest. The judge said that his inconsistencies were explicable on the basis he was trying to recall events four years ago and that he was ‘basically an honest man’.

The High Court judge disagreed. Notwithstanding that this was an appeal by way of review, on what is quintessentially a question of fact, but also one of multi-factorial judgment and impression, the findings below were overturned:

57. In my judgment this conclusion was not reasonably open to the judge. It was plainly dishonest for the Claimant not to have disclosed his credit cards or his second bank account and the accompanying documentation. The questions he was asked were not difficult (and he did not say that he had not properly understood them); they were in writing; he had time to consider his documentation; and he had the opportunity to take legal advice if he was unsure about how to answer and what to disclose. Even if he was telling the truth about his Barclaycard account having been closed, that did not relieve him of the obligation to disclose it and the associated paperwork. He gave no explanation at all for not disclosing his Vanquis Bank card, and his claim that somehow the bank had given him another account in error, into which he had just happened to pay his interim payment, was not credible. The Claimant’s actual state of knowledge was that he knew full well that he had two bank account and two credit cards, and that he had concealed this information. Nor, for the reasons I have given, could the Claimant’s failure be explained on the grounds that he was being asked to recall events from four years previously.

The basis for overturning the decision on appeal was a failure to properly evaluate the evidence and draw appropriate inferences from it:

58. I have set out the judge’s reasoning but, with respect to him, he did not properly address the evidence. This was not simply a case where there had just been ‘not particularly good’ disclosure by the Claimant. He deliberately failed to disclose highly material evidence. There was simply no basis on which the judge could properly have concluded that the Claimant had simply got confused on these issues. The only possible reasonable inference from the evidence was that the Claimant intentionally failed to make full disclosure, and that failure can only be labelled as dishonest.

Of course, not all dishonesty is fundamental. Having conducted many hundreds of trials throughout my career as a common law barrister, I have noted that regrettably people tell lies in county court trials every day: most of the time the lies don’t matter, but some issues will prove to be fundamental, rather than going to collateral matters, which in themselves are not terribly significant:

59. Was this dishonesty ‘fundamental’, in the sense explained in Howlett, supra ? In my judgment it was. The dishonesty in question did not relate to some collateral matter, but went to the root of a substantial part of the claim. The claim for credit hire charges (and associated losses) exceeded £30 000. The importance of the Claimant giving proper disclosure about his financial circumstances needs to be emphasised. Part of the purpose of a statement of truth is to bring home to party signing the solemn nature of what s/he is doing, and importance of telling the truth. To knowingly give a false statement of truth is a contempt of court: CPR r 17.6(1). Moreover, as the Defendant correctly observed in its Skeleton Argument, the County Court cannot carry out an assessment of the issue of impecuniosity when a litigant fails to give full financial disclosure. By doing as he did, the Claimant prevented the Defendant from carrying out a proper investigation into his claimed impecuniosity. This skewed and distorted the presentation of his claim in a way that can only be termed fundamentally dishonest.

60. It follows that the judge was wrong not to have concluded (per CPR r 44.16(1)) that the claim was not fundamentally dishonest so as to allow the order for costs made against the Claimant to be enforced to its full extent.

The lesson to be learned from such cases, is to test the client’s own evidence and recollection of what documents they have, before proceedings are issued. A determinedly dishonest client will usually be able to fool their solicitor to this point: but such enquiries will prevent a careless or forgetful client from being at risk of a finding of fundamental dishonesty, and as with all such enquiries, they have to be made either face to face or over the phone.

Because careless or forgetful clients won’t read the letters their solicitors send them.

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