Fundamental dishonesty – the importance of ensuring that you’ve given sufficient notice and that your grounds go to dishonesty rather than incompetence

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Background

In 2018, the Court of Appeal in Howlett & Anor v Davies & Anor [2018] 1 WLR 948 set out that fairness sat at the heart of the notice requirements for fundamental dishonesty. The crux of the matter was “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.”

Despite this, the issue arose again in Mustard v Flower & Ors [2021] EWHC 846 (QB) and it was again determined that a defendant was not required to plead fundamental dishonesty as a precursor to making a section 57 application under the Criminal Justice and Courts Act 2015 .

The issues of the notice to be provided and the ‘red flags’ which can be taken into account in asserting fundamental dishonesty have remained a matter of some dispute and has led to two recent authorities.

Cojanu v Essex Partnership University NHS Trust [2022] 4 WLR 33

Cojanu concerned a clinical negligence claim brought by a prisoner at Her Majesty’s Prison Bedford who alleged there had been delays in providing him with surgery. In April 2021, District Judge Spencer granted the Defendant permission to amend their defence to positively allege fundamental dishonesty. The Defendant alleged fundamental dishonesty on the following bases:

1. The Claimant asserted that he had been injured when he was attacked by his wife whereas, he had been convicted of her attempted murder;
2. The Claimant pursued future loss of earnings on the basis of UK salary rates when he was resident in, and intended to continue living in, Romania; and
3. That the required surgery would be cheaper in Romania than had been claimed.

As such, there could be no dispute in Cojanu that the Claimant had been provided with sufficient notice.

The Claimant was found to be fundamentally dishonest and appealed. On appeal Mr Justice Ritchie considered the extent to which inaccuracies in pleadings and schedules could amount to dishonesty. He held that:

“I consider that the incorrect pleading and the failure to quantify the claim properly by the Claimant’s lawyers in the schedule is not in this case a fundamental dishonesty. It was not a dishonesty at all. In addition, on the facts of this case inadequate pleading is not within the mischief which Parliament aimed to prevent by the passing of s.57. Nor is incompetence, carelessness, negligence or mere omission by the lawyers. The section requires proof of the Claimant’s dishonesty not his lawyers’ lack of competence. It may be a moot point whether that includes the dishonesty of his lawyers (none is asserted here) but that may be an issue for another case, it was not in issue before me in this appeal.”

This is likely to be seen as a blow to Defendants who often rely on inaccuracies as between pleadings, schedules, witness statements and reports to medical professionals to build a picture of a Claimant whose account of their accident or injuries has substantially changed. However, it should be borne in mind that:

1. In determining that claiming UK work rates was not dishonest the Judge took into account that the Claimant had not said in his witness statement that he was relying on UK wages, nor had the Claimant himself suggested he could earn UK wages;
2. That under CPR 52.21(4) the schedule was signed with the Claimant’s approval, but the Claimant required a translator and would also have no basis on which to challenge the law underpinning his schedule; and
3. As such, the basis on which the Claimant himself could be found to be dishonest in the presentation of his claim was unclear.

It is important to remember that this Judgment does not extend as far as to say that a Claimant cannot be found to be fundamentally dishonest based on inaccuracies in their pleadings or schedule. It is in effect, simply a reassertion of the test in Ivey v Genting Casinos [2017] UKSC 67 that the first question is the actual state of the Claimant’s knowledge or belief. The real question will be whether it was the Claimant, and their presentation of their claim, which led to the untrue presentation or an error of their legal representative. However, it is now likely to be more difficult where a Claimant does not speak English to rely on errors in pleadings and other documents which have not been translated to the Claimant.

 

Jenkinson v Robertson [2022] EWHC 756

The second recent case on fundamental dishonesty concerned a litigant in person bringing a claim for damages for personal injury in a road traffic accident. Fundamental dishonesty was not pleaded but the Defendant had alleged in pre-trial correspondence that the claim was “exaggerated and unreasonable.” The Claimant requested the grounds on which the Defendant made this allegation, but the Defendant refused to provide any.

The Claimant was found to be fundamentally dishonest at trial and following this appealed.

On appeal, the Hon. Mr Justice Choudhary held that:

“32. It is in the interests of basic fairness that a Claimant should be given adequate warning of, and a proper opportunity to deal with, the possibility of a finding of fundamental dishonesty. The consequences of such a finding are severe, and rightly so, but the safeguards against an unjust finding are the giving of adequate notice of the allegations and a proper opportunity to respond. What amounts to such notice or opportunity in a given case will depend on the circumstances. Ordinarily, the allegations will be either pleaded or set out in writing, but there may be cases where that is not necessary.”

The Judge also provided useful guidance on the language and specificity that may be required in any such notice, going on to find that:

1. A claim that is unreasonable can be misconceived rather than necessarily dishonest;
2. A claim that is exaggerated may be exaggerated because the Claimant wrongly believes that the losses arise out of the incident; and
3. Asserting that a claim is not credible is not, without more, in the circumstances of the case, an unequivocal allegation.

As such, it appears that Defendants will have to go further than simply asserting claims are unreasonable, exaggerated or not credible if they want to be sure of providing sufficient notice.

It is further noted that during the trial itself it was not expressly put to the Claimant that he was being dishonest. It had simply been put to him that he was not suffering from the alleged pain when he said he had been. The Judge went on to say that “there is a world of difference between putting to the Claimant that he was not in fact suffering the pain he now alleges and an allegation that he is fabricating or exaggerating the entire story about pain.”

At paragraph 25 of the Judgment, the Judge provided a helpful synopsis of the process to be considered when asserting fundamental dishonesty which will be of significant assistance to those practicing in this area:

“It is clear from these authorities that in an application under s.57 of the 2015 Act:

i) The burden is on the defendant to establish on the balance of probabilities that the claimant has been fundamentally dishonest;

ii) An act is fundamentally dishonest if it goes to the heart of or the root of the claim or a substantial part of the claim;

iii) To be fundamentally dishonest, the dishonesty must be such as to have a substantial effect on the presentation of the claim in a way which potentially adversely affects the defendant in a significant way;

iv) Honesty is to be assessed by reference to the two-stage test established by the Supreme Court in Genting;

v) An allegation of fundamental dishonesty does not necessarily have to be pleaded, the key question being whether the claimant had been given adequate warning of the matters being relied upon in support of the allegation and a proper opportunity to address those matters;

vi) The s.57 defence can be raised at a late stage, even as late as in closing submissions. However, where the claimant is a litigant in person, the Court will ordinarily seek to ensure that the allegation is clearly understood (usually by requiring it to be set out in writing) and that adequate time is afforded to the litigant in person to consider the defence.”

The key points to take away from the decision in Jenkinson v Robertson are that:

1. The basic principle in Howlett that there is discretion as to how and when fundamental dishonesty is raised is broadly retained;
2. The extent to which a Defendant has to ensure that the Claimant understands that fundamental dishonesty is being alleged will vary, and that burden will be higher if the Claimant is a litigant in person;
3. Where the Claimant is a litigant in person the Defendant is likely to need to take steps to ensure they understand the nature of allegation being made. This will be important to protect Defendants as more leniency is likely to be afforded to litigants in person in assessing whether notice was sufficient;
4. Simply alleging a case is unreasonable, exaggerated or not credible is unlikely to be sufficient;
5. While a Defendant is not required to set out their planned cross-examination they will be required to indicate the source of the dishonesty (for example, an exaggeration of symptoms). The key issue to bear in mind is whether the Claimant has sufficient information to obtain any documents or evidence countering the allegation; and
6. That at trial cross-examination ought to be conducted to ensure that dishonesty and not simply an error is being alleged.

It is important to remember that despite the above, where a Defendant does have the information to plead fundamental dishonesty, that clearly remains best practice. But there will always be cases where that isn’t possible or practical. The issue of notice will clearly continue to affect a significant number of cases as concerns about inconsistent statements or medical histories regularly do not properly come to the Defendant’s attention until witness statements and medical records have been disclosed. In those circumstances, notice in correspondence is likely to be the proportionate and practical solution, but care needs to be taken to ensure that Defendants go beyond simply a bare assertion.

Written by Meredith Daniel