The Criminal Justice and Courts Act 2014 received royal assent yesterday 12 February 2015.

Section 57 of the Act contains the much awaited provision which places an obligation on judges to strike out a personal injury claim where there is a finding of fundamental dishonesty. The Act extends the concept of fundamental dishonesty beyond the exception to qualified one way costs shifting (QOCS) introduced as part of the civil justice reforms 2013.

The Act also includes section 58, which prohibits certain regulated persons from offering inducements to make personal injury claims. The regulated persons that fall within the ban are defined by reference to their regulating body. While it would seem that the Act intends to include solicitors, the regulating body is referred to as the Law Society when it should be the Solicitors Regulation Authority. Whether the courts will construe this as extending to solicitors therefore remains to be seen.

Section 57

In a claim (or counter-claim) for personal injury (referred to as the “primary claim”), if a court finds both that:

i) the claimant is entitled to damages; and

ii) the claimant has been fundamentally dishonest in relation to that primary claim or a related claim (defined as a claim that is in connection with the same incident or series of incidents as the primary claim and one that is made by a person other than a person who made the primary claim), then on application by the defendant, the court must dismiss the primary claim in its entirety, along with any related element – unless it is satisfied that the claimant would suffer substantial injustice as a result.

In so doing, the court must also record the amount of the damages that the court would have awarded, but for the dismissal of the claim. This sum will be deducted from any assessed costs awarded to the defendant.

In the event that the claimant is found guilty in any subsequent criminal proceedings or proceedings for contempt of court, that court must have regard to the dismissal of the primary claim when considering sentencing and disposal of those proceedings.

What does this mean?

The clause targets those claims for personal injury where the evidence suggests that the claimant has been fundamentally dishonest in pursuing that claim.

The question of whether there has been substantial injustice is left to the court to determine.

A personal injury claim will include any disease or other impairment of a person’s physical or mental condition.

A related claim will include a claim for damages made by another person in the same incident which is fundamentally dishonest. A typical example would be a personal injury claim submitted by a bogus passenger. In those circumstances, the strike out will extend to both the bogus passenger and any genuine personal injury claimant supporting it.

Once a claim has been struck out, the claimant will be ordered to pay the defendants costs, less the value of any genuine element of the claimants claim. The net effect of this costs provision mirrors the fundamental dishonesty exceptions to QOCS.

What is not clear?

It is not yet clear how the courts will define ‘substantial injustice’ or ‘fundamentally dishonest’ in the context of this Act.

It also remains to be seen whether subrogated claims will be treated as claims made by another person although it is hoped that they will fall within this section.

The definition of ‘personal injury’ is not particularly helpful. It would appear that special damages which may ‘relate’ to the claim for personal injury such as vehicle damage are unlikely to be struck out, although other damages that are linked to a personal injury claim (such as care, rehabilitation, future loss) may possibly form part of the ‘primary claim’ and will fall within the strike out provision.

Comment

It is likely that some clarity will be achieved once the provisions are tested in court.

Lord Faulks has indicated that the term ‘substantial injustice’ is there so that it ‘… gives the court some flexibility to ensure that the provision is applied fairly and proportionately’.

The definition of fundamental dishonesty may or may not follow that which has been adopted in the lower courts recently when dealing with the concept as a QOCS exception. However, Lord Faulks has defined this as something ‘that goes to the heart of the claim’.

It is unfortunate that the legislators saw fit not to specifically include special damage claims so that a claim can be struck out in its entirety (although Summers -v- Fairclough Homes [2012] UKSC 26 does state that this can be done but only in exceptional circumstances).

The definition of ‘related claims’ would appear to overrule Ul Haq -v- Shah [2009] EWCA Civ 542 in that it suggests that  the claim of a genuine occupant of a vehicle who supports a bogus claim of another will be struck out. Equally, if a co-claimant supports a fundamentally dishonest claim by another claimant (such as a spouse for example), then that too will fall foul of the Act.

While the Act has been passed, a commencement date had yet to be determined. Section 57 will apply to all proceedings issued from the date on which the Act comes into force. Nevertheless, insurers and those who genuinely do not support the making of dishonest claims, will welcome this legislation although a number of questions remain unanswered.