Fundamental Dishonesty & Pleadings: Howlett Revisited
The issue of the need to plead Fundamental Dishonesty (‘FD’) in more marginal cases has recently been revisited in a judgment which confirms what many defendant practitioners had already considered to be the case, or at least had hoped would be the case if it were tested.
Mustard v Flower originally made the headlines back in 2019 when the Claimant’s conduct in covertly recording parts of a neuropsychological examination, and the conduct of the Defendant’s expert in conducting the same examination, both came under the scrutiny of Master Davison.
The second judgment in the case, handed down on 12 April 2021, considers the extent to which it is necessary to plead the possibility that FD might be raised at trial when there is insufficient evidence to plead FD at the time of pleading. To what extent does the Claimant need to be put on notice of a possible FD application when the Defendant is not in a position to plead a positive case of dishonesty?
Mustard is another in a long line of ‘subtle’ Traumatic Brain Injury (‘TBI’) claims: claims in which there is little if any sign of organic TBI but yet where the claimant suggests that they suffer disabling symptoms as a result of the TBI. Such claims often give rise to suspicion. There are often significant differences of opinion between the experts instructed on either side as to whether there is any TBI at all; there may also be issues as to whether such organic damage as might have been sustained would give rise to anything more than a very short period of relatively minor symptoms. They are often further complicated by the possibility of somatisation and/or functional explanations for the claimant’s presentation. Such cases can be far from straightforward and often require detailed forensic consideration. Much will come down to the chronology and to the live evidence.
Mustard is such a ‘subtle’ TBI case. The Claimant was involved in a RTA with the First and Second Defendants as long ago as 2014. Liability is not in issue. She alleges that she sustained a TBI with subarachnoid haemorrhage and diffuse axonal injury (‘DAI’). She claims she suffered a severe TBI but that the manifestation is ‘subtle’. DAI is often a source of great controversy in such cases as it is often very difficult to detect, even with highly specialised sensitive brain scanning. The Defendants in Mustard argue that the RTA was very low velocity and that the Claimant sustained no TBI at all.
That then is the background. The claim is set down for a 10 day trial with the usual wide range of experts in November 2021. Ahead of that, the Defendants wished to put the Claimant on notice that they might raise FD at trial. They proposed various amendments to the Defence. The first related to the force of the collision; the second was a detailed exploration of the Claimant’s presentation.
The key issues centred on the final of the amendments, which itself loosely fell into three parts. The first part noted that the Claimant’s report of her symptoms had varied over time. There could be no proper objection to that amendment – it is exactly the sort of pleading one would expect to be pleaded in a Counterschedule. The second was an assertion that the Claimant had exaggerated her symptoms either consciously or unconsciously. That appears to reflect the medical evidence, which does not go as far as to say that the Claimant is fraudulent. It was common ground that there was insufficient material to plead fraud at this stage. The Claimant did oppose the second part of the amendment but that need not trouble us for these purposes. That part of the amendment was allowed.
The most controversial part of the amendment application was the third part: “In the event that the Court finds that the Claimant has consciously exaggerated the nature and/or consequences of her symptoms and losses, the Third Defendant reserves the right to submit that a finding of fundamental dishonesty (and the striking out of the claim pursuant to section 57 Criminal Justice and Courts Act and/or costs sanctions including the disapplication of QOCS) is appropriate.”
This is a curious pleading, for a number of reasons. It is a proposed amendment to the Defence, not a pleading in the Counterschedule, which will presumably set out the Defendant’s case on quantum. It does not plead a positive case of fraud, only a contingent intention to raise such an allegation if the material is there to do so following cross-examination. It was plainly right not to attempt to plead a positive case of fraud given the high bar and given that the medical evidence does not support such an allegation. But was it really necessary to put the Claimant on notice of the possibility of an application at trial if the evidence supported it? The Defendants clearly wanted to avoid a position whereby the Claimant argued at trial that she was ambushed and that it was therefore improper for fraud to be explored in cross-examination. The Master confesses in the judgment (para 18) that his first instinct was that that part of the amendment should be allowed. I confess that my first instinct was that it should not and that the consequences could be really quite serious if that sort of pleading were to become necessary. I know others had the same reaction.
A positive case of fraud should of course only be pleaded where the material is there to do so. What about cases falling short of that but where there are suspicions? Many practitioners, certainly defendant pracitioners, were satisfied with the compromise reached by the Court of Appeal in Howlett v Davies in 2017. In essence the finding there was that provided that there was enough material in the pleading to give a claimant notice of the position to be taken at trial, there was no need for fraud to be expressly pleaded. That was a vital finding: there will be many cases where there are suspicions of fraud but where, for example, there might be alternative explanations for a presentation such as functional symptomatology or somatisation. As Master Davison noted in Mustard (para 20 of the 2021 judgment), in such cases the Judge will not be able to draw conclusions as to dishonesty until after cross-examination; in the same way neither would it be appropriate for the Defendant to plead fraud before that time. However, if there is sufficient material after cross-examination, the Defendant can then make the FD application, with no particular formality.
The genesis of this amendment application may have been Pinkus v Direct Line, a previous outing of a similar point between the same counsel and the same road traffic insurer in 2018. Pinkus was referred to in the Master’s judgment in Mustard and was presumably referred to extensively in argument. The claimant in Pinkus applied at the beginning of the trial to prevent the defendant from exploring issues of fraud in cross-examination, the underlying material having been pleaded in the Counterschedule. HHJ Coe, sitting as a Judge of the High Court, refused that application – relying on Howlett. The Judge did however add that she “would not allow any specific points to be taken or arguments to be run which caused prejudice to the claimant because they came too late and in respect of which he had had no notice and could not deal with them or any such point where the experts would need to consider matters further and/or prepare supplementary opinion/reports/letters which could not fairly be done in the course of the trial.” As it was, Mr Pinkus was found to be fundamentally dishonest and his claim was dismissed.
One can therefore understand the Defendants’ wish to avoid such an application and/or their wish to flush out a similar application by the Claimant well in advance of the trial.
Yet, the third part of the amendment potentially creates as many problems as it sought to avoid: if that type of pleading were to be commonplace it would plainly undermine the basis of the Court of Appeal’s position in Howlett; further there was a grave risk that it would give rise to satellite applications as to the extent to which the Claimant had really been put on sufficient notice, albeit in circumstances where, as the Master noted, defendants and their legal teams would not in fact be in a position to decide whether to make an FD application until the closing stages of the trial. Of course, claimants should be given fair warning but that is precisely what the Howlett approach seeks to achieve. It requires a defendant to have pleaded sufficient material to put the claimant on notice of the likely issues; the rest is left to the trial judge and to an application made at the appropriate time with the benefit of the requisite underlying material.
In what must be seen as a victory for common sense and clarity, the Master rejected the third part of the amendment. He did so for three reasons: such a pleading serves no purpose as the Defendant can make the FD application without having pleaded it expressly (Howlett) and there is no ‘right’ to be ‘reserved; and in any event such an application would have no prospects of success at the pleading stage given the potential for other interpretations of the Claimant’s presentation. The Master also noted the perhaps less obvious point that the Claimant would have to report the FD allegation to insurers. That is, with respect, far less convincing, not least because (1) the pleading is not actually an allegation of FD at that stage (that being the very point of the pleading) and (2) one would have thought that the Claimant would have to report the risk of an application in any event, relying on Howlett and given the Defendants’ approach, the approach of the medical evidence and given the remainder of the amendment.
The Master made it very clear that where there is the material to plead FD, it ought to be pleaded (para 24). That was of course uncontroversial.
If anything, this latest judgment reminds defendants of the need to plead the factual basis for their case and, most importantly, the factual basis for the position they might wish to take at trial if the material to run FD becomes available. That much was clear from Howlett but this is a timely reminder of the potential risks of failing to do so. Fortunately, however, there is no need to set out every permutation in an effort to ensure that the Claimant has no avenue to object, thereby risking giving them potentially greater opportunity to object based only on the interpretation of the contingencies.
Written by Andrew Davis QC.