A High Court judge has struck out a claim on the grounds of fundamental dishonesty even though the majority of the claim (by value) was honest and a county court recorder had earlier found the dishonesty to be the result of covering up a “muddle” rather than setting out to deceive. In doing so, Knowles J gave useful guidance on the meaning of “fundamental dishonesty” in s.57 Criminal Justice and Courts Act 2015 (“s.57”). In summary:
- In considering whether certain words were used dishonestly, the court should ask itself, firstly, what the words mean, and secondly, whether the claimant could have genuinely believed that meaning.
- A claimant is fundamentally dishonest if, on a balance of probabilities, his dishonesty substantially affected the presentation of his case, either in respect of liability or quantum, in a way that potentially had a significant adverse effect on the defendant when judged in the context of the litigation.
- A dishonest claimant does not suffer substantial injustice merely by losing damages to which he would have been entitled in the absence of his dishonesty.
In LOCOG v Sinfield  EWHC 51 (QB), Mr Sinfield had broken his arm while volunteering at the Olympic Games. LOCOG admitted liability, but applied to dismiss the claim under s.57 on the grounds that he had been fundamentally dishonest in relation to the claim. Where a claimant is found to have been fundamentally dishonest in relation to a claim, s.57 requires the court to dismiss the entire claim, unless to do so would cause substantial injustice to the claimant. This provision was introduced by Parliament to address a perceived trend for claimants to submit dishonest or exaggerated claims for personal injury.
As well as claiming damages for the pain and suffering caused by his injury, Mr Sinfield claimed special damages under various headings, including medical expenses, travel, a broken watch strap, and the costs of hiring a gardener to undertake tasks he could no longer perform. The claim for gardening expenses accounted for 28% of the total. It was set out in two schedules of damages and a witness statement, supported by copy invoices. LOCOG subsequently discovered that Mr Sinfield had already employed a gardener for the same weekly hours before the accident. In addition, the invoices were found to have been created by Mr Sinfield himself without the gardener’s permission.
At first instance, the recorder refused to strike out the claim under s.57. He found that Mr Sinfield had intended to make an honest claim, but had been confused at the time of signing the first schedule of damages. His dishonesty in the subsequent documents had been intended to cover up the “muddle” in which he found himself as a result. The recorder considered this to be collateral rather than fundamental dishonesty. Since the majority of the claim was genuine, the recorder concluded that Mr Sinfield would suffer substantial injustice if the entire claim was struck out. He gave judgment for Mr Sinfield in the sum of slightly under £28,000.
On appeal, Knowles J reversed this decision and struck out the claim on three grounds:
- Knowles J considered that the recorder was plainly wrong to find that the claim for gardening expenses was included in the first schedule as a result of confusion rather than dishonesty. While an appellate court should be reluctant to overturn a judge’s finding of fact, that reluctance would be greater where the judge below had relied primarily on oral evidence and lesser where he had relied on a mixture of oral evidence, written evidence and inference. In this case, there was a clear inference from the first schedule of damages that Mr Sinfield had not employed a gardener before the accident, whereas Mr Sinfield must have known that in fact he had. Knowles J observed that the judge had failed to ask himself two key questions: what did the words in the schedule mean, and could Mr Sinfield have genuinely believed that meaning?
- It did not matter that the gardening expenses were not the majority of the claim. It was the largest head of damages and could have led LOCOG to settle the claim for far more than they could have been ordered to pay on honest evidence. A claimant was fundamentally dishonest if, on a balance of probabilities, his dishonesty substantially affected the presentation of his case, either in respect of liability or quantum, in a way that potentially had a significant adverse effect on the defendant when judged in the context of the litigation.
- A finding that the claimant would suffer substantial injustice if his claim were dismissed requires something more than simply the loss of damages which he would have received if he had claimed only what he was honestly entitled to. Otherwise, the introduction of s.57 would have been superfluous, since the law already allowed courts to disallow individual heads of damage that were fraudulently claimed. Parliament intended to introduce a new penalty whereby fundamentally dishonest claimants would lose their entire claim.
Knowles J also confirmed in his discussion that that in considering dishonesty under s.57, the court should apply the test in Ivey v Genting Casinos Limited  3 WLR 1212. Under this test, a defendant is dishonest if his conduct would be considered dishonest by the standards of ordinary people, even if the defendant himself did not realise that this would be the case.
Insurers, public bodies and others who regularly handle personal injury claims in the course of their normal business will welcome this decision, which represents a refreshingly robust approach to s.57 and takes a common-sense approach to the interpretation of dishonesty in general.
This is believed to be the first reported decision on the interpretation of “fundamental dishonesty” in s.57. The analysis by Knowles J is clear and succinct, and as such it is likely to be influential even though, as a High Court decision, it is not technically binding on other High Court judges. Legal departments that regularly defend personal injury claims will benefit from becoming familiar with it and may wish to review any ongoing matters in which dishonesty or exaggeration are suspected in order to assess whether or not they meet the requirements for a potential strike-out application.
Insurers and others who discover after paying a claim that it may not have been genuine may also be able to recover the sums paid by bringing a deceit claim against the fraudulent party or parties. A recent illustration of this is the case of UK Insurance Ltd v Gentry  EWHC 37 (QB), in which a driver who helped to stage an accident was ordered to repay nearly £75,000 in damages to insurers who had erroneously compensated another participant in the fraud.