A fundamental change for dishonest Claimants - DAC Beachcroft

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A fundamental change for dishonest Claimants

Published On: 20 February 2015

The Criminal Justice and Courts Act, which received Royal Assent and became law on 12 February 2015, will present Claimants with increased risks in the event that their personal injury claim is exaggerated or fraudulent.
Gosling v Screwfix

29/4/2014, Cambridge County Court, HHJ Moloney QC

The Claimant dishonestly exaggerated a substantial part of his claim for damages (about one half of the claim), which was found to have been a fundamentally dishonest claim. It must be the case that dishonesty fundamental to a sufficiently major part of the claim would suffice to deprive the Claimant of his costs protection, and open him to the court's discretion as to how much of the costs he should pay. The Claimant was ordered to pay all of the Defendant's costs following his discontinuing the claim after the dishonesty had been exposed.

Whilst historically the courts have had the opportunity to dismiss claims found to have been dishonestly exaggerated, a more common route has been to allow the damages which the claim merited, rather than the inflated claim presented, and penalise the Claimant in costs, fundamental dishonesty falling within the exceptions to qualified one way costs shifting allowing costs orders to be enforced with the court's permission.

In the future, where the court decides on the balance of probabilities that the Claimant has been fundamentally dishonest in relation to the primary personal injury claim,  section 56 provides that it must dismiss the claim (including elements of the claim which are not fundamentally dishonest) unless satisfied that it will cause substantial injustice to the Claimant.

The legislation presents conundrums which will require judicial interpretation, including the meaning of 'fundamental' and 'substantial injustice', and the fact that it will not apply where proceedings are issued before its implementation date may signal a rush to issue claims where solicitors doubt the honesty of their clients.

The provision relates to the personal injury claim which is expected to include intrinsic heads of loss, such as loss of earnings and care, but will not extend to related property damage claims such as vehicle repairs and hire charges.  It will allow the courts to dismiss a genuine injury claim if the Claimant supports the dishonest claim of a fellow Claimant, for example a phantom passenger alleged to have been in the same vehicle.

It is clear that the legislation is intended to deter potential Claimants from presenting fraudulent claims, Lord Brown stating in the House of Lords that the modest narrowing of an existing provision is a price worth paying for the discouragement which it is hoped this new provision will provide to those who are inclined or tempted to advance dishonest claims. 

'Substantial Injustice'

Whilst not defined in the Act, an example may be the claim of a brain injured child, whose parents exaggerate the amount of care provided and aids and appliances purchased, for example exaggerating a £4,000,000 claim by a further £500,000. Whilst the exaggeration is dishonest and relates to the primary claim, dismissing the child's claim would cause substantial injustice to the child.

By way of example, we should consider a claim presented for damages in excess of £1,000,000 following an innocuous injury, where surveillance evidence demonstrates that the true value of the claim is less than £20,000. At present the Claimant would recover his £20,000, and may be penalised in costs, but, whilst possible it would be unlikely for the claim to be struck out.

If the proceedings in the same claim were issued after implementation of this section, the outcome would be very different. On finding the claim to have been fundamentally dishonest, the court (in response to an application by the Defendant) would be required to dismiss the claim. This claim is not expected to be viewed as one in which substantial injustice would result from its dismissal.

The court would not stop at dismissing the claim, and the finding of fundamental dishonesty should see the court assess the damages it would have awarded, had the claim not been dismissed. It should then assess the costs of the Defendant, deduct from the costs award the damages (which would have been paid but for the dishonesty), and make an order that the Claimant pay the Defendant's net costs.

Although reducing the costs the dishonest has to pay may appear to be at odds with the overall intent of the Act, it addresses concerns that the provision may have gone too far, had the Claimant not only been refused damages but also required to pay all of the Defendant's costs.

The Claimant who, historically received £20,000 albeit with penalties in costs, should now face a substantial liability toward the Defendant's costs without recovering any damages.

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