Kennedys secures first authoritative court guidance on ‘fundamental dishonesty’ in PI claims

The High Court has today provided the first authoritative guidance on the meaning of ‘fundamental dishonesty’ in the context of personal injury claims, saying that the claimant’s actions must “substantially affect” the presentation of his case for sanctions to bite.

We acted in the case of London Organising Committee for the Olympic and Paralympic Games (in Liquidation) v Sinfield [2018] EWHC 51 (QB), in which Mr Justice Julian Knowles found that the case was substantially affected by such dishonesty. Even though the dishonesty only related to part of the damages sought, the whole claim was dismissed as a result.

The claim was brought by a company director who was a volunteer at the London Olympic and Paralympic Games and suffered an accident causing long-term disability.

Liability was admitted in full by the defendant’s insurer, Aviva. The claimant said the accident meant that he could no longer look after his two-acre garden and had to employ a gardener as a result. He provided invoices from the gardener and this part of the claim was for nearly £15,000, 42% of the total claim for special damages.

There were reasons to be suspicious of this and, using our fraud intelligence team, we established that the gardener had actually worked for the claimant for many years prior to the accident, and that he did not produce the invoices.

The defendant successfully applied to amend its defence to plead fundamental dishonesty under section 57 of the Criminal Justice and Courts Act 2015.

The claimant responded to the allegations by saying his first statement was badly worded. Rather, he had previously employed the gardener out of choice, but now it was out of necessity. He admitted creating the invoices and reduced the gardening claim to £1,650.

At first instance, Mr Recorder Widdup at Oxford County Court ruled that the claimant did have an element of a genuine gardening claim but its presentation was muddled, confused and careless. He found the claimant had dishonestly created false invoices and had been dishonest in his first statement, but that this dishonesty did not contaminate the entire claim. He awarded the claimant damages of £27,750.

On our advice, Aviva appealed and today Mr Justice Julian Knowles overturned the recorder’s ruling, dismissing the entire claim. He said:

A claimant should be found to be fundamentally dishonest within the meaning of section 57(1)(b) if the defendant proves on a balance of probabilities that the claimant has acted dishonestly in relation to the primary claim and/or a related claim… and that he has thus substantially affected the presentation of his case, either in respects of liability or quantum, in a way which potentially adversely affected the defendant in a significant way, judged in the context of the particular facts and circumstances of the litigation. By using the formulation ‘substantially affects’, I am intending to convey the same idea as the expressions ‘going to the root’ or ‘going to the heart’ of the claim.

Knowles J held that the claimant had knowingly made dishonest misrepresentations in his schedule of loss which could have resulted in the defendant’s insurers paying out far more than they could properly, on honest evidence, have been ordered to pay.

The fact that the greater part of the claim may have been genuine was “neither here nor there” where the court finds fundamental dishonesty, he added.

He went on to say that where an application is made under section 57 and the judge determines that the claimant has been fundamentally dishonest, the entire claim must be dismissed, including any genuine element of the claim, unless the claimant can show he would suffer substantial injustice if his claim was dismissed. There was no evidence here to support a finding of substantial injustice.

Further, Knowles J said the recorder had been wrong to characterise the gardening claim as peripheral, given that it made up a substantial part of the initial claim.

After various lower court rulings on ‘fundamental dishonesty’, it was important to have a binding decision that enables paying parties to take on those who bring dishonest claims. This is vital in the fight against fraud, but honest claimants have nothing to worry about. Mr Justice Julian Knowles has provided clear guidance on how the test works in relation to section 57, and it will also apply to CPR 44.16, where a finding removes a claimant’s costs protection under qualified one-way costs shifting (QOCS). Both are helpful for defendants, but section 57 carries the real bite, since the entire claim will be dismissed unless the claimant proves substantial injustice, with the claimant paying the defendant’s costs less the amount the he would otherwise have received in genuine damages.

Roger Jones, Partner