A claimant â€¨solicitor's perspective â€¨on fundamental dishonesty
Following the recent appeal in Nesham, defendant insurers will have to think again before making allegations of fundamental dishonesty against claimants, writes Ghazala Bashey
The much-contested introduction of the fundamental dishonesty principle and its impact on litigation costs since 1 April 2013 has caused tension and elements of uncertainty in personal injury law.
Although arguably it has a place in the industry, insurance companies appear to be using this allegation too liberally on some occasions by ambushing the claimant after the trial simply because they did not succeed in establishing their claim. At the current time the defendant can do this even where neither fundamental dishonesty nor fraud have been specifically pleaded against the claimant, in a deliberate attempt to assert blame and seek costs.Unwarranted accusations
This was clearly illustrated by the recent appeal case of Nesham v Sunrich Clothing Ltd (22 April 2016, Newcastle upon Tyne County Court), in which His Honour Judge Freedman refused to grant an appeal against a costs decision where
no fundamental dishonesty finding was made following a hearing of a fast-track trial on 20 January 2016.
At the first hearing, District Judge Charnock-Neal heard both parties' versions of events, and chose to side with the defendant, dismissing the claimant's claim. The defendant then raised the allegation of fundamental dishonesty against the claimant for the first time in the case, suggesting that if the claimant's version was not to be preferred, it meant that he had in some way been dishonest. On this basis the defendant made an application pursuant to Civil Procedure Rules (CPR) 44.16 that the usual qualified one-way costs shifting (QOCS) order should be removed and that instead a costs order against the claimant should be enforced.However, Charnock-Neal did not find the claimant to be fundamentally dishonest, stating: 'He gave me his version of events, I preferred not to accept that version, but it does not necessarily follow that he was fundamentally dishonest.'
This sudden and unwarranted accusation of fundamental dishonesty is not only inappropriate, but can be distressing for claimants, many of whom have never had any previous dishonesty issues raised against them. After simply attending court and giving their version of events, they can suddenly face the risk of being liable for significant legal fees, the humiliation of their integrity being questioned, and the possibility of criminal sanctions.
Despite the district judge's clear dismissal of the assertion of fundamental dishonesty, the defence lodged an appeal upon this finding to claim the costs pursuant to CPR 44.16(1).
HHJ Freedman refused the appeal, stating that 'merely because an account of an accident has been rejected does not, to my mind, equate to fundamental dishonesty.'
He continued: 'Up and down the country on a daily basis, judges are being asked to decide whose account of a road traffic accident is more reliable. And it is the experience of everybody who litigates in this field that drivers involved in accidents will give different and contrary versions of accidents to the extent of not just which lane they were in, but where they came from, the route they had taken and so forth… which may not constitute dishonesty, far less fundamental dishonesty.'
Nesham is an important illustration of the way defendants' representatives are sidestepping QOCS rules by making an application under CPR 44.16, which could leave the claimant responsible for the defendant's costs. If this appeal had been successful, the claimant could have been responsible for a bill in the region of £9,000 in costs, which was significantly more than the modest sum that he was pursuing for his personal injury claim.
The outcome of this case, and the supporting comments given by HHJ Freedman, are a significant victory for claimants and their solicitors, reinforcing the fact that there is a difference between an unsuccessful claim and
a claim that is dishonest at the very core.
The fundamental dishonesty defence is, of course, not limited to QOCS within CPR 44.15
and 44.16. The introduction of fundamental dishonesty to section 57 of the Criminal Justice and Courts Act in April 2015 has also led to a large increase in defendants using it as a strategy to
get claimants to withdraw or under-settle their cases rather than face the serious risks and costs penalties of a finding of fundamental dishonesty against them. This could result in even a very genuine claimant getting 'cold feet' about the court process and accepting a lower offer simply to avoid the risks. It could be having an adverse effect on access to justice and this needs to be carefully monitored.
This does not mean that fundamental dishonesty is never justified. In the case of Michael Gosling v (1) Hailo (2) Screwfix Direct (29 April 2014, Cambridge County Court), the claimant was found fundamentally dishonest on the grounds that he significantly exaggerated his injuries to the point where there was no option other than to find his dishonesty fundamental.
Gosling had alleged that he had sustained injuries to such an extent that he was unable to walk without the assistance of a crutch, and that his wife had to do his shopping. Contrary to this, the defendant insurers obtained CCTV evidence showing Gosling out shopping at length without the use of a crutch.
Cases like Gosling may warrant the finding of fundamentally dishonesty, as the level of dishonesty considerably exceeds that of a mere inconsistency. However, it is hugely important for defendants to appreciate that the dishonesty must be fundamental to the claim - a mere inconsistency or failure to prove a claim does not meet the burden of fundamental dishonesty. Arguably, the burden to prove fundamental dishonesty should remain high as the effects can punish a claimant beyond the realms of the claim, and the possible consequences for their daily life - potential job loss, cost debts, inability to secure future insurance, court judgments, and possible criminal sanctions - are very serious.
Furthermore, we need to remember that defendants are not faced with the same challenges of fundamental dishonesty as claimants. For example, when the defendant alleges that no collision occurred or that the claimant was not the driver of the vehicle and the court goes on to find in favour of the claimant, the claimant does not get an automatic entitlement to allege fundamental dishonesty and a standard costs award, as defendants do when they prove fundamental dishonesty.
This is particularly unfair given that the allegations by the defendant may be entirely fabricated and can require the claimant to gather further evidence and conduct their case in a way that goes beyond what is usually required in straightforward fixed recoverable costs cases.
Yet the only remedy appears to be arguing for
the claimant to be awarded more than fixed recoverable costs under the escape clause pursuant to CPR 45.29J for 'exceptional circumstances', which is at the court's discretion and is not always guaranteed.Where there is clear, tangible evidence of fraudulent activity from a claimant, fundamental dishonesty has a valid role. However, at the same time, it seems that increased accusations of fundamental dishonesty can be misused as a way to force claimants into under-settling claims. Arguably, there is a need for tighter restrictions on making the allegation in a case where there are clearly insufficient grounds.
Unfortunately, for now, the question of identifying exactly how a claimant can avoid an allegation of fundamental dishonesty against them remains unclear. The Nesham case assists, but more court guidance is needed, and the blurred lines between inconsistencies and fundamental dishonesty need to be brought into clearer perspective to avoid any prejudice to claimants.
This is particularly true with the impending prospect of the increase in the small claims limit to £5,000, which may compound the issue. Without easy access to a solicitor, innocent accident victims will be in a more vulnerable position than ever. Direction must be given and measures taken to reject any findings of fundamental dishonesty in cases where it is not clear cut. There need to be tighter judgments, based on clear and compelling evidence of dishonesty, and we must also continue to strongly oppose the changes to the small claims limit as proposed by the government so that access to justice can continue.
For more information on the proposed
changes to the small claims limit, visit the
Access to Justice Action Group website (accesstojusticeactiongroup.co.uk).