The insurance industry has been following the progress of the Criminal Justice and Courts Bill closely in light of the proposal to include a clause dismissing claims where there is a finding of fundamental dishonesty. After much debate, which almost turned the clause on its head, the Lords have finally come to an agreement.

Fundamental dishonesty

Clause 45 of the Bill provides that when a court finds both that (1) the claimant is entitled to damages; and (2) the claimant has been fundamentally dishonest, then on application by the defendant, the court must dismiss the claim in its entirety - unless it is satisfied that the claimant would suffer substantial injustice as a result.

The clause was inserted into the Bill late in the day and some peers argued that it went too far. Various amendments to the wording were proposed, including one which removed the requirement for the dishonesty to be ‘fundamental’ and allowed the courts discretion as to whether to invoke the sanction or whether to simply reduce damages. There was also a proposal to include a similar provision for defendants, but this has not been included in the final wording.

During a debate at committee stage on 23 July, Lord Faulks explained: ‘There has been - and the Government seek to address this by this clause - an epidemic of people claiming in circumstances that most right-thinking people would find deeply unattractive… Clause 45 seeks to strengthen the law so that dismissal of the entire claim should become the norm in such cases. However, at the same time, it recognises that the dismissal of the claim will not always be appropriate and gives the court the discretion not to do so where it would cause substantial injustice to the claimant… The clause gives the court some flexibility to ensure that the provision is applied fairly and proportionately.’

Speaking about the incorporation of the word ‘fundamental’, Lord Faulks also made clear that the clause is intended to target dishonesty that goes to the heart of the claim: ‘They will know exactly what the clause is aimed at - not the minor inaccuracy about bus fares or the like, but something that goes to the heart. I do not suggest that it wins many prizes for elegance, but it sends the right message to the judge.’

Clause 45 has now been agreed, subject to further consideration of 45(5) dealing with costs penalties on the claimant, and this is welcomed by insurers. 

The Bill is not yet law and continues in committee stage with further debate over other aspects of the Bill. It will then proceed to report stage, with a third reading and consideration of amendments before being passed through for royal assent.