In 2014 BLM obtained what has been widely accepted as the first and leading decision of His Honour Judge Moloney QC sitting in the Cambridge County Court about the meaning of “fundamental dishonesty” and the application of Qualified One-way Cost Protection (QOCS) in Gosling v Hailo & Screwfix. The decision has been widely-quoted since and approved by many judges across the country faced with fraud issues. The Court of Appeal has now approved Gosling’s interpretation of fundamental dishonesty unanimously, adopting it without amendment, as a “common sense” approach when considering a case involving fraud.
The legal issues
Gosling involved arguments of dishonesty about the extent of damages for injury claimed. The claimant had discontinued his claim and the issue was whether costs should be payable by the claimant as an exception to the QOCS protection on the basis of fundamental dishonesty pursuant to CPR 44.16. Liability aspects may have necessitated a hearing involving all parties to determine, whereas considering dishonesty only about the amount claimed could be dealt with cost effectively on BLM’s application on the papers from the medical and surveillance evidence. HHJ Moloney QC in considering the meaning of “fundamentally dishonest” said in his judgment:
“It appears to me that this phrase in the rules has to be interpreted purposively and contextually in the light of the context. This is, of course, the determination of whether the claimant is ‘deserving’, as Jackson LJ put it, of the protection (from the costs liability that would otherwise fall on him) extended, for reasons of social policy, by the QOCS rules. It appears to me that when one looks at the matter in that way, one sees that what the rules are doing is distinguishing between two levels of dishonesty: dishonesty in relation to the claim which is not fundamental so as to expose such a claimant to costs liability, and dishonesty which is fundamental, so as to give rise to costs liability. The corollary term to ‘fundamental’ would be a word with some such meaning as ‘incidental’ or ‘collateral’. Thus, a claimant should not be exposed to costs liability merely because he is shown to have been dishonest as to some collateral matter or perhaps as to some minor, self-contained head of damage. If, on the other hand, the dishonesty went to the root of either the whole of his claim or a substantial part of his claim, then it appears to me that it would be a fundamentally dishonest claim: a claim which depended as to a substantial or important part of itself upon dishonesty.”
In Howlett v Davies & Ageas in the Court of Appeal on the 30 October, Lord Justice Newey in an unanimous and leading judgment adopted this approach to defining the term without amendment describing it as a “common sense” approach. In that case, arguments about dishonesty centred around suspicions that an alleged low speed road traffic accident had not occurred at all, so in relation to both liability and the extent of damages claimed. The finding of fundamental dishonesty was challenged on appeal to the Court of Appeal on the basis that it had not been pleaded in the defence and the case had not been conducted at trial on the basis of fraud. Such low speed impact cases often have such defences on the basis of previous Court of Appeal guidance in Kearsley v Klarfield. In accepting Gosling’s definition of fundamental dishonesty, the Court of Appeal in Howlett determined after detailed consideration of all the authorities that it was not fatal to its finding of fundamental dishonesty that the defendant’s solicitors had not formally pleaded fraud or that the defendant’s counsel had not cross examined explicitly on the basis of “fraud” or “dishonesty”. Scrutiny of the exact wording of the defence and the implications of each question in cross-examination was necessary to decide whether fraud had been put as an issue to make the finding of fundamental dishonesty an appropriate one.
What this means for you
Gosling has been established as the leading authority in this area since 2014 and BLM is reassured that its ground-breaking success has been formally approved by the Court of Appeal. Gosling’s “common sense” definition of fundamental dishonesty was accepted without further comment. Howlett was involved more with determining whether criticism of a finding of fundamental dishonesty on the basis of the way the defence was pleaded and conducted arguably without putting the claimant on proper notice of it was appropriate.
The decision is in the context of low speed impact cases where Kearsley had already acknowledged that defences may not formally plead fraud. Arguably it is not authority beyond this to avoid a pleading of fraud where the evidence is clear and fraud is what the case is really about. The question as to whether fraud should be formally pleaded remains a crucial decision to be made on the facts of the case to avoid expensive protracted litigation or, conversely, potential punitive orders, should fraud be pleaded incorrectly. Tactical consideration of claimant ATE insurance withdrawal is also a factor. The case confirms that this area is a specialism that requires careful balanced consideration of technical legal issues in every case.