15th Oct 2014

Fundamental dishonesty in injury claims

Solicitor Samantha Robson considers the impact of dishonesy on costs in personal injury claims

Since the Jackson reforms were introduced on 1st April 2013, claimants who seek compensation for personal injury have not had to worry about paying the defendant’s legal fees if their claim is unsuccessful.  This was one of the main reforms of the cost rules and is termed “qualified one way cost shifting”, or QOCS.  This principle means the defendants will be liable for the successful claimant’s costs, subject to two main exceptions:-

1. Under CPR 44.15 the claim was struck out because the claimant had no reasonable grounds for bringing the proceedings; the claim was an abuse of process; or the conduct of the claimant was likely to obstruct a fair disposal of the proceedings; or
2.  Under CPR 44.16 if the claimant was fundamentally dishonest.

The concept of fundamental dishonesty is probably is as well understood by the lay person as the judiciary.  The only reported case that offers much assistance is Gosling v Screwfix & Another (29th March 2014).  Mr Gosling alleged that he suffered considerable pain and severe restriction on his mobility following an operation to his knee. The defendants were suspicious about the extent of his disability and engaged covert surveillance.  Apparently the footage demonstrated that far from being incapacitated, the claimant was able to lead a perfectly normal life with little or no disability. The claim failed for obvious reasons and the parties were left arguing about who should pay whose costs.

The starting position was each side should pay its own costs. The defendant was not entitled to seek costs from the claimant under the principle of QOCS. The claimant was not entitled to seek costs from the defendant since he had lost his case.

The claimant would have settled for this status quo. However, the defendant argued that the claimant’s exaggeration constituted fundamental dishonesty, bringing the matter within CPR 44.16. The cost argument came before the Cambridge County Court. The Court distinguished between the example of the claimant who embellishes his claim in a minor and perhaps collateral way, from the claimant who exaggerates his claim to such a degree that the dishonesty goes to the root of the whole, or at least a substantial part, of the claim.

Perhaps in a last desperate attempt to avoid a cost liability, the claimant argued that fundamental dishonesty means dishonesty of such extreme that either liability as a whole or damages in their entirety must be at issue.

The Judge found that Mr Gosling’s dishonesty related to a very substantial element of his claim in respect of damages for pain and suffering and damages for future care. He found against the claimant and awarded costs in favour of the defendant.  Fortunately the claimant was protected by his before the event (or BTE) insurance which paid the defendants adverse costs order. A stark warning to a Claimant found to have embellished their claim, as in the absence of insurance, they could be facing a hefty legal bill.

Although defendants will be heartened that case law – such as it is – is on their side, there is further legislation afoot which will further assist defendants who face disingenuous claimants.

The Criminal Justice and Courts Bill currently before Parliament, may provide the defendants with a further line of argument in relation to claims involving the concept of fundamental dishonesty.

Under section 49 of the proposed Bill, where a defendant alleges that the claimant has been fundamentally dishonest in respect of either his personal injury claim, or a related claim, the court must dismiss the personal injury claim unless it is satisfied that the claimant would suffer substantial injustice.

At first blush this may seem little for a defendant to hang onto. However, a claimant who does not embellish his personal injury claim but exaggerates his cost claim, or his special damages (his financial losses suffered) to the extent that he is fundamentally dishonest, will have his entire claim struck out, notwithstanding the merits of that claim.

Each case will turn on its own facts, but claimants must be aware that even if dishonesty is only confined to one issue, if that exaggeration is substantial, the claimant runs the risk of the claim failing in its entirety and worse still, paying the defendants costs and losing the protection of QOCS.

Having said this, if a court makes an Order that a claimant has been fundamentally dishonest, either in respect of the main claim or a subsidiary claim such that the main claim is struck out, then the Court must record the amount of damages the claimant would have been awarded but for the finding of fundamental dishonesty. This is important because in an Order under section 49 for costs in favour of the defendant, the claimant may only be ordered to pay the defendant’s costs to the extent that they exceed the amount of damages recorded. Thus if the claimant would have been awarded £50,000 compensation but for a finding a fundamental dishonesty, and the defendant’s costs are £60,000 then the defendant will only receive £10,000 by way of a costs order. Of course the true value of the defendant’s victory is £100,000, being the damages of £50,000 it would have paid over to the claimant, plus the costs it would have incurred in defending the claim of £60,000, less the amount of costs paid to it by the claimant of £10,000.   Hence there is no injustice to the defendant.

Likewise, the true loss to the claimant is £60,000 being the £50,000 compensation that he has foregone by being fundamentally dishonest and £10,000 costs payable to the defendant.

If the Bill is passed into law without any further amendment, then the defendant will be left with the dilemma of the tactical choice if there is a suspicion of fundamental dishonesty on the part of the claimant.

Under section 49 a defendant can apply to have the claimant’s claim struck out if the Claimant has been fundamentally dishonest in relation to any claim.  This may be much easier than proving fundamental dishonesty in relation to the main claim.  If successful, the Defendant will seek an order for costs only for the amount of its costs over and above the amount of compensation the claimant would have been awarded but for the finding fundamental dishonesty. However, an application under this section affords the claimant a defence if it can show that he would be caused substantial injustice in having his main claim struck out.

Under CPR r 44.15 or 16 if the defendant can show the claimant’s main claim to be fundamentally dishonest it can ask for an order for all its costs. But, proving fundamental dishonesty of the main claim may be inherently more difficult, and the Claimant may be able to resist that application on the “Gosling” test.

It remains early days for cases litigated under the new costs regime, but it will be interesting to see how this area of personal injury litigation develops.  A claimant who does not exaggerate any aspect of their injury claim has nothing to fear, but it is a salutary warning to those prone to embellishment.

Samantha Robson is a Partner at robsonshaw and has been conducting injury claims since she first qualified in 1997.  If you would like to speak to Sam about your injury claim on a free, no obligation basis please contact her direct on sam@robsonshaw.uk, or call on 01392 345333.