(1) Lorna Howlett and (2) Justin Howlett v (1) Penelope Davies and (2) Ageas Insurance Ltd EWCA Civ 1696
The claimant and her son pursued a claim for personal injury, loss and damage allegedly suffered as a result of a road traffic accident. The second defendant insurer did not accept that the accident had happened as alleged and/or had not happened at all.
The second defendant insurer did not plead a positive case of fraud but expressly stated that credibility was in issue. It was also suggested that the claimant and her son, along with the first defendant had actively sought to deceive the court and that if any element of fraud was found by the court then it would seek appropriate costs orders.
At first instance, the judge found the claim to be fundamentally dishonest and that the exception to qualified one-way costs shifting (QOCS) applied so the second defendant could recover their costs.
The claimants appealed against the decision.
The Court of Appeal held that a trial judge could disapply QOCS and make a finding that a claimant had been fundamentally dishonest in cases where fraud had not been alleged in the defence. It was concluded that statements of case were crucial to the identification of the issues between the parties and what fell to be decided by the court. However, the fact that the defendant had not pleaded dishonesty did not necessarily prevent a judge from finding that a witness had been untruthful.
It was stated that judges had to regularly characterise witnesses as having been deliberately untruthful, even where there had been no plea of fraud. The key question was whether the claimant had been given adequate warning of and a proper opportunity to deal with the possibility of a conclusion that they had acted dishonestly in bringing the claim. Also, it was concluded that an insurer did not necessarily have to allege that the claim was fundamentally dishonest for QOCS to be disapplied on this basis.
It was held that a defendant could invoke CPR, r. 44.16(1) in respect of disapplying QOCS, regardless of whether there was any reference to fundamental dishonesty in the pleadings.
It was noted that the second defendant had referred to the possibility of the court finding elements of fraud and expressly stated that it did not accept that the accident had occurred as alleged. It was held that the defendant had given the claimants sufficient notice of the points that they intended to raise at trial and the possibility that the judge would conclude as he did.
The Court of Appeal disagreed that the claimants had been ambushed and held that the honesty of the claimant’s evidence was adequately exposed during the course of the claimants’ cross examination. It was seen that the judge had made it clear from the outset that he would be considering matters of dishonesty and exaggeration and the claimants had been given sufficient opportunity to defend themselves.
The Court of Appeal made clear that what ultimately mattered is whether the claimants had fair notice of a challenge to their honesty and an opportunity to deal with it. It was stated that this would be fact specific, would depend on the points raised to a claimant during cross examination and was for the trial judge to determine.
It was held that the judge had been entitled to come to the finding that the claim was fundamentally dishonest and that QOCS could be disapplied. Here, the defence had invited the court to draw the inference that the claimant, on the facts, had not suffered the injuries alleged and the points in respect of the claimants’ honesty had been explored during the course of oral evidence.
The claimants’ appeal was dismissed.
What this means for you
This decision highlights that trial judges can make findings of fundamental dishonesty in cases where it has not been specifically pleaded by the defendant.
This is a positive judgment and sends a clear message to claimants that the courts are willing to penalise individuals who bring dishonest claims. In this case, the judge was held to have properly exercised their discretion when making a finding that the claim had been fundamentally dishonest, the second defendant should be awarded costs and that the costs order could be enforced.
In this case, the Court of Appeal noted that the decision in Haringey LBC v Hines  EWCA Civ 1111, turned not on the basis of the pleadings but on the fact that a party being accused of fraud and then called as a witness should have opportunity to answer these allegations when giving oral evidence. It can be seen that it would not be fair if a party did not have the opportunity to do so.
It should be noted that in Haringey the High Court made clear that before a finding of dishonesty could be made it must not only be pleaded, but must also be put to a party during cross-examination. As a result, this decision is slightly at odds with the decision in Haringey as the second defendant had not made any specific pleadings in relation to dishonesty or fraud.
A key point to note is that for a claim to be found fundamentally dishonest, the dishonesty needs to be fundamental in that it goes to the core of the claim. The term “fundamental” has to be in respect of an issue which is of crucial and central importance to the claim, which allows the court to exercise its discretion to apply the exception under CPR 44.16 in respect of disapplying QOCS. It should be noted that the dishonesty can be in respect of quantum as long as it can be proven to have significantly impacted upon the whole claim.