For some years now, those defending personal injury claims have struggled with the thorny issue of fraud.

The principle of fundamental dishonesty, which seeks to lower the burden of proving an element of fraud or clear exaggeration, has been with us for two years now. However, despite a number of attempts to secure a landmark decision on fundamental dishonesty, the courts' approach has differed from case to case.

Background

Section 57 Criminal Justice and Courts Act 2015 entitles the court to dismiss claims which, on the balance of probability, are fundamentally dishonest.

In conjunction with this, CPR 44.16 enables the court to set aside the usual rule that Qualified One-way Costs Shifting (QOCS) will apply, so if a case is held to be fundamentally dishonest, the defendant will be able to recover costs.

The courts' approach

Whilst there have not yet been any cases decided at Supreme Court level, there have been several first instance and Court of Appeal decisions which provide guidance on how the courts are approaching situations of fundamental dishonesty.

The starting point remains Gosling v Hailo and Screwfix Direct Ltd[1] (2014). HHJ Moloney held that the claimant's claim was on balance “fundamentally dishonest” because, whilst the claimant had suffered a genuine injury, he had grossly exaggerated his symptoms. The exaggeration was found to be in respect of only one aspect of his claim but was considered to be to such a significant degree so as to go to "the heart" or "the root" of the claim and to render the entire claim dishonest. The claimant was ordered to pay the defendant’s costs of the action on an indemnity basis. However this case still leaves open the question of how much dishonesty is required before a claim can be said to be "fundamentally" dishonest.

In the more recent Court of Appeal case of Rizan & Rilshad v Hayes & Allianz[2] [2016], the court was unable to say that an accident had on balance occurred at all. But did it follow that any claim was therefore dishonest?

At first instance, HHJ Harris dismissed the claim stating that he could not possibly be satisfied that the account given by the claimant was a satisfactory one and so the claim must fail. The judge went on to say that, "If it were necessary to do so, which it isn't, I would find that this was a fraudulent claim."

The Court of Appeal set aside the judge's finding that, had it been necessary to decide, the claim was fraudulent; it was not a "binary choice" between conspiracy or accident. However the Court of Appeal found the claimants' explanation of how the collision occurred utterly unconvincing and so upheld the judge's dismissal of the claim.

In Meadows v La Tasca[3] (2016) the District Judge disapplied QOCS after the claimant's occupiers' liability claim was dismissed. There were grave inconsistencies in the claimant's evidence, the medical evidence and the testimony of the witnesses to the extent that the judge concluded that not only did the accident not happen in the way described, but that it did not happen at all.

However, on appeal whilst HHJ Hodge agreed that there were a number of inconsistencies which prohibited the court from finding that the claimant had discharged her burden of proof, the cumulative effect was not so great that there could be a finding of fundamental dishonesty. The judge concluded that many of the inconsistencies could be due to "confusion or lack of clarity" or even "mistake". The effect of QOCS was reinstated.

HHJ Hodge said that the starting point should be the guidance given in Gosling. But he stressed that there was a distinction to be drawn between a lie "told merely to bolster an honest claim…" and a lie that "goes to the whole root of the claim". He considered that the district judge should have limited his decision to a finding that the claimant had not made out her case. A finding of fundamental dishonesty and disapplication of QOCS went too far.

If the interpretation of these issues is correct and the court has to find that not only has the case not been proven, but also that the evidence demonstrates that there has been a "conspiracy", is fundamental dishonesty any easier to prove than fraud?

In Rayner v Raymond Brown[4] (2016) the claimant discontinued her claim for damages for injuries sustained in a road traffic accident. The defendant sought to set the discontinuance aside and seek a finding of fundamental dishonesty so that QOCS would be disapplied.

At first instance, the judge found that the accident had been accurately recounted by the claimant but that there had been fundamental dishonesty in respect of the presentation of the nature and extent of her injuries. Both at first instance and on appeal it was held that the exaggeration was dishonest and was fundamental to the claim for damages. HHJ Harris stated that "fundamental dishonesty means a substantial and material dishonesty going to the heart of the claim – either liability or quantum or both – rather than peripheral exaggerations or embroidery."

In Menary v Darnton[5] (2016) the court at first instance concluded that there probably was no collision between the claimant's and the defendant's vehicle at all, and there was a failure to disclose previous relevant medical history. However, the trial judge did not consider the claimant to be fundamentally dishonest.

On appeal, HHJ Hughes criticised this approach and said "if a claim such as this is not fundamentally dishonest, what claim could be? " The dishonesty went to the root of the claim and went beyond "the exaggerations, concealments and the like that accompany personal injury claims from time to time…"

Conclusion

The courts at first instance and on appeal have given very little clear and consistent guidance as to what amounts to fundamental dishonesty.

What we do know is that the dishonesty must be something that goes to "the heart" or "the root" of the matter (Gosling).

The courts also ask whether the "dishonesty" can be explained by confusion or "mistake" (Meadows). Or is it a black or white case where the claimant must have known he or she was lying?

In terms of whether the dishonesty is "fundamental", the test appears to be:

  • Is the dishonesty peripheral or does it go to the root of the claim? (Menary)
  • Is the dishonesty substantial and material? (Rayner)

It can only be a matter of time before the appeal courts have to deal with the question of "fundamental dishonesty" in more robust terms. Defendants need to know whether the test for fundamental dishonesty is a two-limb test, considering dishonesty first and then fundamentality, as described above. The appeal courts need to define the extent of the dishonesty to be proved and the extent to which this pollutes the remainder of an otherwise genuine claim; and establish with clarity the circumstances in which a defendant might expect the full anticipated effect of Section 57 and the removal of QOCS protection to be applied.

We will keep you advised of further developments in this field.