Human nature

It is sad to say, that insurance fraud is present in a significant number of cases in road traffic litigation. Whether that involves hardened criminals operating in organised gangs to fake accidents and claims, or otherwise ordinary people who feel able to lie that they have sustained whiplash injury when they have not, these cases are now commonplace: present to a far greater degree than they were 20 years ago. Credit hire claims are not immune to this trend, and the issues of fundamental dishonesty that they create.

The concept of fundamental dishonesty arises in the context of credit hire claims in two particular respects, which can be characterised as dishonest claimants and dishonest claims. The first is to be found in section 57 of the Criminal Justice and Courts Act 2015 which provides as follows:

(1)This section applies where, in proceedings on a claim for damages in respect of personal injury (“the primary claim”)—

(a)the court finds that the claimant is entitled to damages in respect of the claim, but

(b)on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim.

(2)The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed.

(3)The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.

(4)The court’s order dismissing the claim must record the amount of damages that the court would have awarded to the claimant in respect of the primary claim but for the dismissal of the claim.

(5)When assessing costs in the proceedings, a court which dismisses a claim under this section must deduct the amount recorded in accordance with subsection (4) from the amount which it would otherwise order the claimant to pay in respect of costs incurred by the defendant.

(6)If a claim is dismissed under this section, subsection (7) applies to—

(a)any subsequent criminal proceedings against the claimant in respect of the fundamental dishonesty mentioned in subsection (1)(b), and

(b)any subsequent proceedings for contempt of court against the claimant in respect of that dishonesty.

(7)If the court in those proceedings finds the claimant guilty of an offence or of contempt of court, it must have regard to the dismissal of the primary claim under this section when sentencing the claimant or otherwise disposing of the proceedings.

(8)In this section—

“claim” includes a counter-claim and, accordingly, “claimant” includes a counter-claimant and “defendant” includes a defendant to a counter-claim;

“personal injury” includes any disease and any other impairment of a person’s physical or mental condition;

“related claim” means a claim for damages in respect of personal injury which is made—

(a) in connection with the same incident or series of incidents in connection with which the primary claim is made, and
(b) by a person other than the person who made the primary claim.

(9)This section does not apply to proceedings started by the issue of a claim form before the day on which this section comes into force.

The section enables a defendant to seek the dismissal on an otherwise genuine claim, which is tainted to a fundamental degree by dishonesty on the part of the claimant. It should also be noted that the section has no application to claims which are purely fraudulent, such as staged accidents, as it requires the primary claim to be a genuine one. It also provides for an oft overlooked mechanism, by which a claimant does not face double jeopardy in respect of a defendant’s costs, as the court must deduct by way of statutory setoff the claimant’s notional damages from his costs liability. It is a potentially powerful weapon in the hands of a defendant to a claim.

Fundamental dishonesty, also gives rise to what can be regarded as a key exception to the QOCS protection which might otherwise shield a claimant from the effects of adverse costs orders: per rule 44.16(1) CPR:

Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest.

In this respect it should be noted that it is the claim that must be dishonest, rather than the claimant. This may be a distinction without a difference. What then is fundamental dishonesty, as distinct from collateral dishonesty or being a little bit dishonest in the prosecution of a claim? There have been a number of cases in the last couple of years, which have shed some interesting light on the concept of fundamental dishonesty: it should be remembered that historically the question of whether someone was dishonest or not was typically a “jury point”. Over the years, the courts have refined the directions to be given to a jury as to what constitutes dishonesty, but it was for many years properly to be regarded as a question of common sense as to whether someone was dishonest or not.

Because dishonesty is such a serious matter and has serious consequences for someone adjudged to be dishonest, there are certain safeguards which have to be met before that allegation can be made and put. The first is the professional standards imposed on solicitors and barristers not to make such allegations without a proper foundation. I can count on the fingers of each hand, the number of times in 22 years of practice, where I have pleaded fraud against someone in a pleading. The obligations imposed on barristers are put thus in rule C7 of the Code of Conduct:

rC7 –Where you are acting as an advocate, your duty not to abuse your role includes the following obligations:
.1 – you must not make statements or ask questions merely to insult, humiliate or annoy a witness or any other person;

.2 – you must not make a serious allegation against a witness whom you have had an opportunity to cross-examine unless you have given that witness a chance to answer the allegation in cross-examination;

.3 – you must not make a serious allegation against any person, or suggest that a person is guilty of a crime with which your client is charged unless:
.a – you have reasonable grounds for the allegation; and
.b – the allegation is relevant to your client’s case or the credibility of a witness; and
.c – where the allegation relates to a third party, you avoid naming them in open court unless this is reasonably necessary.
Solicitors are under a similar duty in their own Code of Conduct:

You must achieve these outcomes:

O(5.1) you do not attempt to deceive or knowingly or recklessly mislead the court;
O(5.2) you are not complicit in another person deceiving or misleading the court;

And

IB(5.8) suggesting that any person is guilty of a crime, fraud or misconduct unless such allegations:

(a) go to a matter in issue which is material to your own client’s case; and
(b) appear to you to be supported by reasonable grounds;

IB(5.9) calling a witness whose evidence you know is untrue;

The second safeguard is that a person facing an allegation of fundamental dishonesty should have that made apparent to them, and given a chance to deal with it. In the case of Howlett v Davies and Ageas Insurance Limited [2017] EWCA Civ 1696 the Court of Appeal stated the matter thus:
31. Statements of case are, of course, crucial to the identification of the issues between the parties and what falls to be decided by the Court. However, the mere fact that the opposing party has not alleged dishonesty in his pleadings will not necessarily bar a judge from finding a witness to have been lying: in fact, judges must regularly characterise witnesses as having been deliberately untruthful even where there has been no plea of fraud. On top of that, it seems to me that where an insurer in a case such as the present one, following the guidance given in Kearsley v Klarfeld, has denied a claim without putting forward a substantive case of fraud but setting out “the facts from which they would be inviting the judge to draw the inference that the plaintiff had not in fact suffered the injuries he asserted”, it must be open to the trial judge, assuming that the relevant points have been adequately explored during the oral evidence, to state in his judgment not just that the claimant has not proved his case but that, having regard to matters pleaded in the defence, he has concluded (say) that the alleged accident did not happen or that the claimant was not present. The key question in such a case would be whether the claimant had been given adequate warning of, and a proper opportunity to deal with, the possibility of such a conclusion and the matters leading the judge to it rather than whether the insurer had positively alleged fraud in its defence.
32. Further, I do not think an insurer need necessarily have alleged in its defence that the claim was “fundamentally dishonest” for one-way costs shifting to be displaced on that ground. Where findings properly made in the trial judge’s judgment on the substantive claim warrant the conclusion that it was “fundamentally dishonest”, an insurer can, I think, invoke CPR 44.16(1) regardless of whether there was any reference to fundamental dishonesty in its pleadings. To my mind, there is force in Judge Blair QC’s comment (in paragraph 54 of his judgment):
“I observe that one does not have to plead a claim for an award of costs on the indemnity basis (as opposed to the standard basis), so why would one have to expressly plead this more remote stage of the costs determination exercise, namely for an order for the enforcement of an adverse costs order?”
In the next post, I shall consider what the courts consider to be fundamental dishonesty, looking at the appellate caselaw.

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