The recently proposed Criminal Justice and Courts Bill is of great interest to insurers in light of the relatively late inclusion of clauses addressing fraudulent claims. The wording of these clauses provided for dismissal of personal injury claims for fundamental dishonesty and the prohibition of inducements.
However, the House of Lords has now published a revised third list of amendments which are a discouraging sign that Parliament is not prepared to follow through on the Government’s promise to tackle fraudulent claims.
The proposed amendments
Removal of ‘fundamental’
Clause 45 provided for dismissal of a claim where the claimant was found to be fundamentally dishonest.
Clause 45(1) sets out the circumstances to which the provision will apply. The previous wording stated that the provision was to apply in claims for personal injury, where the court finds the claimant would be entitled to damages, but on the balance of probabilities, and following application by the defendant, the claimant is found to have been fundamentally dishonest. Following the latest debate, the Lords have amended this to remove the word ‘fundamentally’. In essence, the claimant need only be dishonest, not fundamentally dishonest. This is welcomed in principle on the basis that ‘dishonesty’ is easier to interpret without the limitation of the term ‘fundamental’ and should therefore catch more claims. However, the term ‘fundamentally dishonest’ is still used throughout the rest of the bill and it is therefore unclear what the true intention of this amendment is.
Dismissal will be optional
Clause 45(2) sets out what the court should do in the circumstances set out in clause 45(1). The previous wording provided that the court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice. This whole clause has been replaced. The new wording provides that the court may dismiss the primary claim. The use of the word ‘may’ instead of ‘must’ allows the court an unsatisfactory discretion, but is also likely to result in inconsistent decisions.
The claim will not necessarily be dismissed
The new wording of clause 45(2) provides an alternative sanction to dismissal of the claim. The court may dismiss the primary claim, ‘or reduce the damages award to such extent as the court deems just having regard to all the circumstances of the case including the extent and nature of the claimant’s fundamental dishonesty in relation to the claim’. This not only waters down the sanction for the dishonest claimant, but it also retains the phrase ‘fundamental dishonesty’. This does not sit comfortably with the removal of the word ‘fundamental’ in clause 45(1).
The court is not under a duty
An amendment to the wording of clause 45(3) makes it quite clear that the court has a power to sanction the claimant, but is under no duty to do so. Again, this discretion is likely to result in inconsistent decisions and a worrying lack of certainty.
No provision for the claimant to pay costs
Clause 45(5) has been removed in its entirety. This clause provided that where a claim is dismissed, the court may make an order for the claimant to pay the defendants costs up to the amount of the damages that they would have been awarded if not for the dishonesty. It echoed the fundamental dishonesty exception to qualified one way costs shifting (QOCS) and so was not strictly necessary. However, its removal is a further example of the general dilution of the provision.
The defence could be struck out
Two clauses 45(7A) and (7B) have been added, to impose a sanction on a defendant in circumstances where they are found to be fundamentally dishonest. The new wording provides that where the court is satisfied on the balance of probabilities that the defendant, either in its defence or in an application for the dismissal of the claim, has been fundamentally dishonest, then the court must strike out the defence and enter judgment on the claim, unless it is satisfied that the defendant would suffer substantial injustice if the claim were allowed. It is noted that, unlike clause 45(1), this does not require an application by the claimant and the court has no discretion. The use of the word ‘must’, instead of ‘may’, means that this is harsher on defendants than claimants. There is no explanation or apparent justification for this inequality.
Rules against inducements extended to third parties
More positively, the clause prohibiting regulated persons from offering inducements to make a personal injury claim has now been amended to extend the prohibition to third parties. This will ensure that regulated persons do not circumvent the rule by appointing a non-regulated person to offer the inducement on their behalf.
What does this mean?
This is by no means guaranteed to be the final position. The Bill remains in the legislative process and could be re-amended considerably before it is passed into law. However, this round of amendments is a disappointing development. The initial wording was applauded as a clear message that fraud will not be tolerated - these amendments suggest that there is no real commitment to the cause. The inconsistency as to whether dishonesty has to be fundamental is perhaps indicative that Parliament has not thought the amendments through.
Needless to say that we will be keeping a close on eye on the debate as it unfolds. Watch this space!