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Fundamental Dishonesty Goes Beyond Claims in the Fast Track- Sunil Nannar, DWF LLP

06/11/17. Although there are many reports of a finding of fundamental dishonesty in whiplash cases, they are only now starting to emerge in larger claims. Sunil Nannar looks at the judgment in one such case, Stanton v Hunter (2017), where the claimant's attempt to exaggerate his claim for loss of earnings, saw his claim dismissed and lose out on the genuine elements of his claim, which the court valued over £50,000.

Background

When does exaggeration become fraud? Whilst a finding a fraud is the 'gold standard' sought by all counter fraud lawyers, it may be that there is insufficient evidence to discharge the burden that a Defendant has to meet in any given case to achieve that outcome.

A finding of fundamental dishonesty under the QOCS regime, on any aspect of a Claimant's claim or under Section 57 of the Criminal Justice and Courts Act 2015 (CJCA) is usually sufficient to see the entirety of a Claimant's claim dismissed, irrespective of whether fraud is pleaded or not. Raising arguments of fundamental dishonesty is therefore a powerful weapon, particularly in the field of large loss claims, which could yield significant reserve savings.

But what is fundamental dishonesty, when is the test likely to be met and how should a Defendant deploy it when faced with a case where they perceive a claim to be exaggerated – when is the exaggeration sufficient for s.57 to come into play?

The application of fundamental dishonesty

Neither CPR r.44.16, nor s.57 of the CJCA offers a definition of what constitutes fundamental dishonesty. Since QOCS was introduced in 2013, and since the introduction of s.57 in 2015, there have been a substantial number of reported cases where the issue of fundamental dishonesty was considered by the courts, but almost all of those cases do not arise out of claims where there has been what might be considered a significant injury.

From the reported cases, only in Gosling v Screwfix & Anor (2014) could it be said that the Claimant had sustained a serious injury: in that case the Claimant sustained what was described by HHJ Maloney QC as a "serious injury to his knee" and that decision pre-dated the coming into force of the CJCA. In arriving at the conclusion that the claim was fundamentally dishonest, the Judge said in Gosling:

"Overall, I therefore conclude that in relation both to that very substantial element of his claim, future care, and in relation to an even larger part of his claim, general damages for pain, suffering and loss of amenity, the dishonesty in question here, if established, is fundamental to those heads of damage, and thus to around half of the total claim in damage terms. It appears to me to be very clear that on any sensible definition of a “fundamentally dishonest claim”, dishonesty crucial to such a large part of the claim under those two heads is sufficient to enable the claim to be characterised as fundamentally dishonest."

So, dishonesty that went to 50% of the Claimant's claim was considered fundamental. In addition to the claim in Gosling, we now have a second instance of a court considering fundamental dishonesty where the injuries were serious and where the Defendant sought to deploy s.57 of the CJCA.

Fundamental dishonesty in large loss claims

In the recent first instance decision of Stanton v Hunter 2017 WL 0221 2901, the Claimant alleged he had sustained serious injury, having fallen through the roof of an outhouse building on the Defendant's farm in July 2012. The injuries led to a month long stay in hospital, reconstructive surgery and left the Claimant with permanent disability to the shoulder. The Claimant sought damages in excess of £140,000 including £84,000 for future loss of earnings.

The Defendant admitted primary liability but considered the claim to be fundamentally dishonest - surveillance showed the Claimant to be back at work after the accident, contrary to his evidence. Indeed, it transpired that he had worked on 133 occasions from September 2012, to September 2015. Despite Recorder Hatfield QC noting the very real injuries that the Claimant had sustained and having observed at trial, the Claimant's continued difficulty of movement, which he accepted ought to be compensated, the Claimant's claim was found to be fundamentally dishonest. The entire claim was struck out.

The Court went on to record, as it was obliged to do under s.57 the amount of damages that would have been awarded in the sum of £51,625 of which £35,000 was for entirely legitimate general damages. £8,517.41 was to be awarded for loss of earnings, but for the exaggeration.

The Court readily found the exaggeration amounted to fundamental dishonesty as the claim for loss of earnings formed the vast proportion of the entire claim. However, it seems apparent from the Judgment that the value only formed part of the reasoning. The Judgment outlines in detail the instances of the exaggeration within the Claimant's pleadings and case generally, so perhaps the number of instances of exaggeration may be enough to trigger a finding of fundamental dishonesty, no matter how minor the aspect of the claim featuring the dishonesty - the entire claim will be tainted.

Comment

In light of this judgment at least, Defendants should therefore re-consider their strategic approach to all but the more minor signs of exaggeration across all heads of loss and claim types.

In the field of large loss claims, a tactical approach can be adopted. In cases of minor and isolated instances of exaggeration, when considered against the claim overall, the threat of putting forward arguments of fundamental dishonesty may yield vastly reduced settlement whereas before the introduction of fundamental dishonesty, such minor exaggeration was largely ignored factor.

In cases where there is evidence of habitual and repeated exaggeration and an attempt to support it with the production of evidence, defendants could adopt the stance that the entire claim is tainted. That is even if the exaggeration relates to the pursuit of a relatively small head of loss, compared to the remainder of the matter, as long as the exaggeration is maintained.

It is essential that defendants properly consider the deployment of fundamental dishonesty, in both the content of QOCS and s.57 and their interplay with other regimes, such as Part 36 and applications to strike out under CPR r.3.4 and how best to deploy some of the tactical options available to them.

Indeed, in the case of Sikand v CS Lounge Suite Ltd & Anor (2016), a case where DWF acted for the defendant, the claimant had attempted to dishonestly suggest that he had been unable to work following two accidents at work, whereas the evidence gathered via social media sites suggested otherwise. He had attempted to inflate his loss of earnings claim to £200,000. An application to strike out under CPR r.3.4 was successful on the basis that the claimant's dishonesty had tainted his whole claim and meant that he should lose his right to pursue his case to trial and QOCS fell away.

Sunil Nannar
DWF LLP

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