Is there a difference between a fundamentally dishonest claim and a fundamentally dishonest claimant in the context of Section 57 of the Criminal Justice and Courts Act?

Michael v IE&D Hurford Ltd (t/a Rainbow) [2021] EWHC 2318 (QB)

In his influential judgment, Mr Justice Knowles in LOCOG v Sinfield acknowledged that “it will be rare for a claim to be fundamentally dishonest without the claimant also being fundamentally dishonest, although that might be a theoretical possibility, at least.”

This theoretical possibility was recently addressed in the High Court decision of Michael v IE&D Hurford Ltd (t/a Rainbow).

The Defendant appealed a first instance decision rejecting their application to dismiss the Claimant’s claim for fundamental dishonesty pursuant to Section 57 of the Criminal Justice and Courts Act. It was submitted that the Recorder should have reached the “unavoidable and inevitable” conclusion of a finding of fundamental dishonesty following the Claimant’s oral evidence at trial. The oral evidence contradicted his pleaded claim and witness statement.

Dismissing the appeal, the High Court confirmed that it was open to the lower court to find that “signing an inaccurate witness statement, statement of case or disclosure statement” does not automatically lead to a finding of dishonesty on the part of the Claimant. The first instance court was satisfied that the Claimant was able to provide an honest explanation for the inconsistencies.

It is interesting to contrast the test for contempt of court to that of dishonesty. Contempt of court applies the test of recklessness, meaning that signing an inaccurate witness statement, statement of case or disclosure statement can result in committal proceedings. Signing an inaccurate statement might not result in your claim being unsuccessful but could result in a loss of liberty.

In similar circumstances, how might defendants avoid circumstances in which a court might find the claim to be dishonest, but not the claimant? Do decisions such as Michael open the door to dishonest claimants blaming their legal representatives for dishonest statements?

The appeal judgment seems to suggest that defendants be given the opportunity to ‘explore’ potential issues of complicity and collusion between claimants and their representatives in such circumstances. However, the practicalities of such an exploration within the confines of litigation, were disappointingly not addressed by the High Court.

First instance decision

The Claimant was involved in a road traffic accident in 2018. It was not disputed that the collision occurred, but three heads of loss remained in dispute: credit hire, physiotherapy, and the value of the injury claim. The statements of case consisted of the Particulars of Claim, Defence and Reply to the Defence.

The Claimant’s witness statement stated he was told he “might benefit from physiotherapy to help aid faster recovery. I obtained this as I feel that it helped.” The claim for physiotherapy sought to recover the costs of 8 sessions at £100 each, and “was accompanied by detailed notes of some 8 treatment sessions seemingly compiled by the physiotherapist.”

At trial, the Claimant stated he had only attended one session of physiotherapy. This was plainly at odds with the pleaded claim, his witness statement and the physiotherapist ‘notes’. This evidence was “happily volunteered” by the Claimant, as was ostensibly inconsistent evidence in respect of his employment history and credit card statements. Clearly, this was “information that did not assist his claim.”

Nonetheless, the Recorder concluded “the [Claimant’s] oral evidence in cross-examination was honest and accurate insofar as the [Claimant] could understand what was being asked of him and remember.”

The discrepancies were explicable on the basis that the Claimant “did not know or understand the basis of the claim that the solicitors had advanced on his behalf.” The Claimant was awarded damages for the successful element of his claim, and the application for a finding of Section 57 dishonesty was dismissed.

Appeal

The appeal could be summarised as a solitary pleading; that the Recorder was wrong to have found the Claimant was not fundamentally dishonest and therefore wrong to dismiss the application under Section 57. The appeal set out five issues which should, in the submission of the Defendant, have inevitably led to a finding of fundamental dishonesty. This included the evidence and statements submitted around the physiotherapy, credit hire and employment history.

The appeal was dismissed. Mrs Justice Stacey noted that the Recorder’s reasoning was full and comprehensive. The challenge to the finding of fact required a “very clear case” to overturn the first instance decision, and as the case turned on the credibility of the Claimant, the appellate courts had to be very cautious interfering with the finding of fact.

Despite acknowledging that the Claimant had signed documents with a declaration of truth, “the Recorder was entitled to conclude that the respondent did not understand the documents.” Any discrepancy could be explained by his lack of understanding.

Analysis of the decision

Dismissing the appeal, Mrs Justice Stacey reiterated the test for dishonesty established in Ivey v Genting. This test considers whether the Claimant’s conduct was honest by applying the objective standard of ordinary people. The Court will consider the Claimant’s own knowledge or belief as to the facts when applying this objective standard.

There’s an argument that labelling the test as an objective standard is misleading.

Ultimately, the factfinder still has to determine themselves whether a claimant was dishonest by their objective standard (a judge doesn’t conduct a straw poll outside the Court when reaching the conclusion). Reasonable people can disagree on what the threshold for dishonesty is (or whether it’s been met).

It is not unreasonable to suggest that some would consider the behaviour or knowledge of the Claimant in Michael to have been dishonest (the Defendant clearly did). As seen in LOCOG itself, variance between the interpretation of the threshold can (and does) occur within the judiciary.

In the first instance decision of LOCOG, Recorder Widdup found that the creation of false invoices and misstatement by Mr Sinfield was “dishonest by ordinary standards.

However, he still found “Mr Sinfield did not set out to bring a dishonest claim but made a careless error in the initial presentation of part of his case which he later compounded by attempting to conceal it”, indicating that initial part of his conduct was not dishonest.

He also declined to make a finding of Section 57 fundamental dishonesty. By contrast, Mr Justice Knowles had no hesitation in reaching such a conclusion. His view seemingly being that one knows whether or not one has a genuine claim for gardening or not.

If those two judges can look at the same set of facts and reach different conclusions as to what is or is not dishonest, where does this leave a Defendant with a potential Section 57 argument from a practical perspective?

What we can say with confidence is that in this instance the facts in Michael were not enough to generate a finding of ‘subjective’ (albeit said to be objective) dishonesty.

The fact he had signed the Particulars of Claim, disclosure and witness statements were not enough.

Indeed, Mrs Justice Stacey stated that “it is too bold a submission to assert that an inaccurate pleading or defective disclosure statement is synonymous with the respondent's fundamental dishonesty.

Perhaps not too many people could disagree with that conclusion in the broadest of terms albeit one might be tempted to add the caveat but it feels like a clue.

It would be very difficult for a reasonable tribunal to reach the conclusion that a person who can be shown to have known they were acting dishonestly was not in fact dishonest:

Judge: “I appreciate you may think you were dishonest – but I disagree.

Not very likely is it?

The appeal judgment appeared to target the inquiry on whether the Claimant’s explanation for dishonest statements was dishonest, not on whether his statements themselves (which are, let us recall, signed with a statement of truth) are dishonest. The following element of the judgment perhaps raises more questions than answers:

Where, as here, there was a genuine accident with genuine injuries and vehicle damage, but also aspects of the evidence which appear troubling or dishonest, a Defendant may, in order to prove dishonesty on the part of a Claimant him or herself, need to explore in evidence potential complicity or collusion by a Claimant with their solicitor. It may depend in part on the adequacy of the explanation for the inaccuracies provided by the Claimant. That did not happen in this case.

How would a defendant prove the proposed ‘collusion’ though? The above judgment ignores the very practicalities of privilege and the ability of defendants to ‘explore’ these issues, for example, by seeking access to the claimant’s file of papers.

In the absence of unfettered access to claimant solicitors’ files for this exploration, it is apparent that a claimant would need be seen to ‘own’ the dishonesty. Decisions such as Michael suggest that a claimant could effectively ‘hide’ dishonesty behind the actions of their solicitors, or other issues such as language difficulties.

Imagine Mr Michael confirmed on his own terms or in his own words that he had attended eight sessions of physiotherapy, and then offered oral evidence at trial (or been shown evidence) that he had only attended one session – that doesn’t make such a claimant honest, it just means he has been caught (albeit he’s “caught” himself”).

It would have been very difficult for the first instance judge to find he was not dishonest based on the Claimant’s own knowledge of the facts, and on an objective standard in our view. However, as the Claimant’s inconsistency was set out in documents prepared or disclosed by his solicitors, the Recorder at first instance was comfortable in finding he had an honest explanation for the inconsistencies.

Ensuring that a claimant owns their dishonesty therefore is an integral part of Project Martello, our market leading strategy for claims where Section 57 arguments can be deployed. Recent successes provide demonstrable examples of this strategy.

In the first example, we recently reported on the successful defence of a claim valued in excess of £100,000 by our fraud team in circumstances where a litany of alleged symptoms advanced by a Claimant was nothing more than a fiction.

In our second success, we achieved savings of £190,000 for our insurer client when the Claimant’s exaggerated claim was dismissed by the Court. A finding of Section 57 fundamental dishonesty was made, QOCS was disapplied, and we were awarded in excess of £30,000 in respect of our costs. The Claimant had exaggerated a genuine injury and dishonestly claimed benefits. Once again, we were able to tie the Claimant to his unreliable evidence and successfully defend the claim. Our piece detailing and commenting on this success will be made available soon.