After Newcastle-based Winn Solicitors struck a significant blow against defendant insurers seeking to make allegations of fundamental dishonesty, legal director Ghazala Bashey discusses the impact of this ruling on claimants and claimant solicitors…
Since the introduction of the fundamental dishonesty principles, and particularly since Section 57 of the Criminal Justice and Courts Act 2015 came into force in April 2015, defendants have taken up the issue with zeal. Numerous cases have been heavily publicised in which some disingenuous claimants have been punished for bringing dishonest and exaggerated claims; however, amid the defendant-based fervour and enthusiasm for findings that offer them significant costs rewards, the fact that some claimants are wrongly and unfairly accused has been sadly lost. The recent case of Nesham v Sunrich Clothing Limited (unreported, 22 April 2016) may help to redress this balance.
In this instance, the defendant’s representatives sought to obtain a finding of fundamental dishonesty on appeal, simply because the claimant had failed to establish liability in a fast-track RTA case. In refusing permission to appeal, His Honour Judge Freedman’s judgement offers hope for claimants who are relentlessly and unfairly accused of being ‘fundamentally dishonest’.
The claimant in this case had been involved in an RTA in October 2014. Liability was disputed, as is the case in many RTA claims, and the matter ultimately proceeded to trial in January 2016 at North Shields County Court before District Judge Charnock-Neal. The claimant lost on liability.
The judge and counsel attending agreed that qualified one-way costs shifting (QOCS) applied to the case, which protected the claimant against paying the defendant costs. The introduction of QOCS implemented a recommendation of Lord Justice Jackson which was aimed at counter-balancing the impact on personal injury claimants of the decision to abolish recoverability of CFA success fees and, in particular, ATE insurance premiums.
It was at this late stage in the proceedings, however, that the defendant’s representatives, for the first time, sought to accuse Nesham of being a liar and claimed that he was ‘fundamentally dishonest’. The point had never been pleaded and was pursued as an attempt by the defendant’s representatives to recover costs.
DJ Charnock-Neal considered the submissions and held that the claimant “gave me his version of events. I have preferred not to accept that version, but it does not necessarily follow that he was fundamentally dishonest.”
The defendant had therefore failed in their attempts to secure a finding of dishonesty and, having been accused once of lying, Nesham thought that was the end of the matter – having walked away with no compensation but also with the protection afforded to him by QOCS; however, the defendant’s representatives did not stop there and instead lodged an appeal against the District Judge’s findings. If successful on appeal, the defendant’s representatives could potentially have established that a claimant who fails on liability in a straightforward case could almost automatically be found to be fundamentally dishonest and face a large costs order alongside potential criminal sanctions. This could have set an extremely dangerous precedent for all personal injury claimants.
Thankfully the claimant was in a position to have legal representation (a position that might not be the case if the small claims reforms proposed by the government are implemented) and was able to defend the appeal.
The appeal hearing took place on 22 April 2016 before HHJ Freedman, who refused permission to appeal, citing that “merely because an account of an accident has been rejected does not, to my mind, equate to fundamental dishonesty.”
He continued: “Up and down the country on a daily basis, judges are being asked to decide whose account of a road traffic accident is more reliable. And it is the experience of everybody who litigates in this field that drivers involved in an accident will give different and contrary versions of accidents to the extent of not just which lane they were in, but where they came from, the route they had taken and so forth… which may not constitute dishonesty, far less fundamental dishonesty.” The defendant was ordered to pay the claimant’s costs of the appeal.
Nesham is an important illustration of the way in which innocent, albeit unsuccessful, claimants are vulnerable to serious allegations with little risk to the defendant’s representatives. There is no doubt that fundamental dishonesty has a place where claims are grossly exaggerated, but it appears that some defendants are taking an improper approach to it as an arguable costs exercise and a tool to pressurise claimants into not pursuing claims. If they had succeeded here, the claimant would have been responsible for a bill of approximately £9000 – far more than the modest sum being pursued for compensation.
The fundamental dishonesty defence is, of course, not limited to QOCS within 44.15 and 44.16. The introduction of fundamental dishonesty to section 57 of the Criminal Justice and Courts Act in April 2015 has also led to a huge increase in defendants using it as a strategy to drop or settle claims.
In the recent case of Ravenscroft v Ikea (unreported, 2015) a grandmother was accused by the defendant of bringing a fundamentally dishonest personal injury claim after a wardrobe, which had recently been moved by staff, fell towards her and her grandchild, injuring her arm, wrist, shoulder and neck. They stated that she had exaggerated her injuries. The claimant, undeterred, fought her case at trial, where District Judge Bernadette Stonier did not find her to have been fraudulent and awarded £3000 in damages and interest. Ikea were liable for legal costs.
The attempt by a large company to allege fundamental dishonesty under Section 57 is very concerning in this instance. Ravenscroft found herself struggling to uphold her reputation as a good citizen who attempted to protect her grandchild from harm, after being accused of fraudulent behaviour. On top of what was already a stressful experience, she was faced with an in-court battle, not only to get the compensation she was rightfully entitled but to honour her reputation.
There is no doubt that in cases where there is clear and substantial evidence of fraudulent activity, there is a place for fundamental dishonesty to be alleged; however, increasingly, alleging fundamental dishonesty is being used as a way of avoiding the payment of costs or as a method to force claimants into withdrawing or under-settling their claims. With this in mind, there is a need for tighter restrictions on alleging fundamental dishonesty in cases where are insufficient grounds to do so.
With the imminent prospect of the government making changes to the small claims limit, there is a distinct possibility that the situation will worsen. If claimants are not able to access a solicitor unless their claim is worth more than £5000, they will be in a more vulnerable position than ever. We must demand more from the industry. Firstly, there needs to be tighter regulations on allegations of fundamental dishonesty, and secondly, we must continue to strongly oppose the changes to the small claims limit as proposed by the government.
To join the fight against the proposed changes to the small claims limit, and to fight for access to justice, visit the Access to Justice Action Group website