The Government hopes to introduce a new measure to combat dishonest claims. Clause 45 of the Criminal Justice and Courts Bill would allow a court to dismiss a personal injury claim altogether if it finds that the claimant has been ‘fundamentally dishonest’ in the course of the litigation – unless it is satisfied that they would suffer ‘substantial injustice’ as a result.

Justice Minister Lord Faulks told peers: 'The Government simply do not believe that people who behave in a fundamentally dishonest way by grossly exaggerating their own claim or colluding should be allowed to benefit by getting compensation in spite of their deceit.'

He dismissed a proposal by Labour to apply a similar provision to defendants as they can already be penalised by having their defence struck out, or an adverse costs order imposed for example.  

The Association of Personal Injury Lawyers (APIL), an organisation formed by claimant lawyers to represent the interests of personal injury victims, has warned that the clause will encourage satellite litigation as parties argue over what is meant by ‘fundamental dishonesty’ and ‘substantial injustice’. 

However, Lord Faulks made clear that the clause is intended to target dishonesty that goes to the heart of the claim: '[The judiciary] 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.'

Conservative peer, Lord Hunt of Wirral, went further and attempted to amend the clause to remove the word ‘fundamental’, arguing that all dishonesty was fundamental by its nature. He criticised advertisements for personal injury lawyers that gave claimants the impression of ‘free money’ and felt that claimants '... see that there is no real penalty for trying on either that they have been injured at all or a deliberate exaggeration of the symptoms that they have suffered.'

The Government hopes that the policy will reduce the volume of dishonest claims and ensure that only reasonable and genuine compensation is awarded. Figures from the Association of British Insurers suggest that there were 59,000 dishonest motor claims in 2013, representing 8% of all claims and a 34% increase on 2012.

However, APIL predicts an increase in ‘spurious allegations of fraud by unscrupulous insurers’ and a rise in genuine claimants underplaying their symptoms and failing to bring valid claims for fear of being falsely accused.

The Bill is not yet law and it remains to be seen whether clause 45 will be retained in its current form in the final draft and precisely how the courts will apply the new power, once in force. Lord Faulks indicated that the wording will need to be looked at further during the next stage of the process. What is clear is the Government and members of the House of Lords recognise  the increase in exaggerated personal injury claims and are prepared  to act in an effort to prevent it.