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Government looks to extend 'fundamental dishonesty'

The Government has for some time been concerned with the increase in the number of fraudulent and grossly exaggerated personal injury claims, the effect that they have on the level of motor insurance premiums and the drain caused on the resources of local and public authorities and private employers.

Current position

A finding of fundamental dishonesty is already one of the few mechanisms that leads to a claimant losing the protection offered to them under the qualified one-way costs shifting (QOCS) regime. Where a finding of fundamental dishonesty is made a defendant is able to seek to recover their full costs outlay from the claimant. What is meant by fundamental dishonesty is not defined in the rules and is left to the judge to decide and that lack of a clear definition has left defendants as well as claimants uncertain as to what might be meant by the phrase.

The decision in April by HHJ Maloney in the unreported case of Gosling v Screwfix and Anor has provided some assistance on both the meaning and the practical application of fundamental dishonesty. In a ruling that has been well-received by defendants, the court found that fundamental dishonesty had to be given a “purposive and contextual” meaning. In essence, thought had to be given as to whether the dishonesty was such that the court ought to deny the relevant claimant QOCS protection. In doing so, the court ought to consider whether the dishonesty went to the “whole or a substantial part of the claim” and if that was the case then a finding of fundamental dishonesty should be made.

However, Gosling is a first instance decision and therefore not binding, though can be of some persuasive effect a district judges. Further, although the decision is a helpful indicator of how flexible a court might be in its approach, questions remain as to when a court ought to consider the application of fundamental dishonesty and the appropriate stage to raise it. Sections of the judiciary have been critical of defendants for failing to plead fundamental dishonesty in the defence (although there is no obligation to do so) as they view the concept of raising fundamental dishonesty as analogous to pleading fraud pre-QOCS.

Government proposals

Clause 49 of the Criminal Justice and Courts Bill proposes that a court should be required to strike out a claim in the event of a finding of fundamental dishonesty, even if part of the claim is honestly pursued, unless the claimant would suffer “substantial injustice”. The court would be required to record the amount of damages that would have been awarded had a finding of fundamental dishonesty not been reached which would become the “recorded amount”. Recovery of the defendant’s costs would then be linked to that figure, so that a defendant will only be able to recover an amount over and above the “recorded amount”. Currently, if there is a finding of fundamental dishonesty, then recovery of defence costs is not fettered in this way. The requirement to record the amount of “honest damages” is also designed to assist the appellate courts in the event of appeal as well as capable of being used within any subsequent criminal proceedings. The recording of the damages amount will potentially also inadvertently act as a deterrent as it will be clear what has been lost by the dishonesty.

Clause 49 appears to be an attempt to fuse together the principle of fundamental dishonesty (as seen in the QOCS regime), and which does not provide a sanction against the claim for damages itself (only against costs) with the power to strike out a claim established by Summers v Fairclough [2012] UKSC 26 and CPR r.3.4 (which does provide a sanction against the claim itself).

The proposals relate to both dishonesty in a claimant’s own case as well dishonestly supporting a claim brought by someone else. This would greatly enhance the ability to tackle phantom passenger claims and would see an end to potential injustice as happened in Ul-Haq and Others v Shah [2008] EWHC 1896 (QB), where the Claimant was not denied his damages, even though he had fraudulently supported a claim brought by another individual.

In a continuation of what appears to be a holistic approach to tackling fraud, the clause provides that in the event that there is a criminal conviction or successful contempt proceedings, the court must have regard to the dismissal of the primary claim when sentencing the claimant or otherwise disposing of the proceedings. This inclusion confirms a clear intention to ensure those found to be fundamentally dishonest face further sanction over and above adverse findings in their substantive claim but it also seeks to ensure that any punishment is proportionate. It is unlikely that the reference to subsequent criminal or contempt of court proceedings shall make the process of either any simpler. however the prevalence of this type of further action ought to increase. Both sets of action should be at the forefront of the court’s mind when assessing cases of this kind.


Whilst the Government’s approach to tackling fraud in personal injury claims is to be welcomed, questions remain as to the practical application of the proposals. The terms “fundamental dishonesty” and “substantial injustice” have not been defined and it is expected that it will for the courts to interpret what is meant by both. Cases such as Gosling which interpret “fundamental dishonesty” for the purposes of QOCS will therefore be relied upon when it comes to interpreting the same phrase as used within the current Bill.

Equally of concern is the apparent disparity between the current uncapped recovery of defence costs under the current QOCS regime and the capped approach to costs proposed in clause 49. We foresee a danger that a defendant may secure a finding of “fundamental dishonesty” but that the cap may mean that in many cases they fail to recover their costs leading to injustice. We will need to see whether that proves to be the case.

In addition, the proposals refer to the dismissal of the “primary claim” if fundamental dishonesty is established. This expression could be problematic owing to the number of stakeholders in fraud litigation. For instance it remains to be seen how the courts will approach the dismissal of an accident management company’s claim for recovery, storage and hire charges, which can be by far the largest aspect of a claimant’s claim. If, in that example the special damages are deemed fundamentally dishonest, but the personal injury claim, (which is presumably the “primary claim”) is honest, will the whole claim be dismissed? Satellite litigation is likely until judicial guidance is received.  

Finally, whilst the proposals will require amendments to the CPR provisions on QOCS, it remains to be seen how the proposals will impact on other aspects of the CPR. At present, provisions such as non-party costs and wasted costs orders can be sought and these are in harmony with the current QOCS regime. However, the new proposals mean that these areas will potentially require amendment or at the very least, judicial guidance. We regularly seek and recover defence costs from the funding providers and/or claimant solicitors (as wasted costs) in fraud cases and consideration is needed as to whether the status quo in this regard will be maintained and early clarification would be beneficial.

Looking ahead

In the face of a 50% increase in the number of claims presented from 2006/7 to 2013/14 (according to the government fact sheet supporting the Bill), the proposals as a whole are to be commended. They unite existing threads in the continued fight against dishonesty in personal injury claims and give a greater incentive to defendants and their insurers to investigate and challenge dubious claims for compensation. The clear link to subsequent criminal and contempt proceedings is welcomed and will act as a deterrent to those considering bringing dishonest claims.

Clause 49 survived attempts to amend it in the House of Lords, including an attempt to include a section that would provide for the striking out of a defence where fundamental dishonesty on the part of the defendant had been found. The Bill proceeds to the Report Stage in the Lords on 20 October 2014 and presumably there is ample time for it to be made into law before the end of this Parliamentary Term.

For further information on the Bill and how it might impact upon your approach to dealing with fraud cases, please contact Sunil Nannar.


For further information please contact Sunil Nannar, Senior Solicitor on 0161 603 5202.

By Sunil Nannar

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.