How Section 57 of the Criminal Justice and Courts Act 2015 undermines legal principle, creates uncertainty and harms honest claimants.

The origins of the defence of fundamental dishonesty

It is now a decade since the defence of fundamental dishonesty was established in personal injury litigation.  Section 57 of the Criminal Justice and Courts Act 2015 followed the failure of insurers to persuade the Supreme Court in Summers v. Fairclough Homes Limited that such a defence was necessary given the level of fraud, in particular road traffic claims. The campaign continued through parliamentary lobbying, with success in the enactment of Section 57.

A radical sanction with disproportionate consequences

An important feature of the argument for the statutory defence was that the level of fraud was now such that it was a significant factor in the continuing rise of insurance premiums.  

For my part, I was not sure why the level of fraudulent claims indicated the need for such a radical measure as the now established defence of fundamental dishonesty.  The result of this defence is that a Claimant can have their entire action dismissed for fundamental dishonesty, even when a Judge has concluded that the Claimant has suffered injury, indeed severe injury, as a result of the Defendant’s breach of duty.  So in the case of Williams-Henry in April 2020, Mr Justice Ritchie would have assessed damages at £900k in the absence of fundamental dishonesty.  He was trumped in July the same year by His Honour Judge Sephton KC, who would have assessed damages in the absence of the finding of fundamental dishonesty at £1.2m.

Existing sanctions for dishonest claimants

My scepticism was based on the unsurprising fact that the law has never encouraged dishonesty; indeed, the opposite.  A dishonest Claimant would face a whole range of sanctions if the same was established rising from an adverse costs order to a committal to prison for contempt of court or criminal prosecution.

The real problem: impact on honest claimants

But why worry about dishonest people? I am not worried about dishonest people. However, it has become clear that the statutory provision does not merely act to the detriment of dishonest people but also impacts on the claims of honest individuals.  This situation arises, I believe, because the defence is not based on any recognisable legal principle, but rather reflects the spin which resulted in the provision being enacted.

A statute without principle or definition

A trial involving an allegation of fundamental dishonesty will involve a Judge having to analyse two critical issues, assuming that dishonesty is established.  First, the Judge will have to decide whether the dishonesty is fundamental within the meaning of the statute.  If so, then secondly, the Judge will have to decide whether the Claimant would nonetheless suffer substantial injustice if the claim was dismissed on this basis.  Conspicuously, the statute offered no definition or guidance as to the meaning of these critical terms.  In fact, in parliamentary debate it was stated that a definition would be unhelpful as the Courts could be otherwise provided with “some flexibility to ensure that the provision is applied fairly and proportionately.”

Judicial attempts to impose structure

Whilst Judges have attempted to provide some guidance, including Mr Justice Ritchie in the Williams-Henry case and Mr Justice Freedman in Denzil v. Mohammad, it is not disrespectful to observe that this guidance does not provide clarity, but emphasises the lack of the same.  In practical terms, a Claimant has no real way of knowing whether the defence would succeed.  Consequentially, those advising Claimants are unable to offer any clear assessment of prospects of success.

Tactical pleading and aggressive investigation

This uncertainty is operating in an environment where the defence seems to be used indiscriminately.  Whilst Defendant lawyers appear to have enthusiasm for the defence, this is not always displayed with professionalism, or even in some cases humanity.  Investigation often includes raking through individual social media accounts to identify some possible discrepancy with their claim.  If this is achieved, then an allegation of fundamental dishonesty is made.  Worse still, some defences reserve the Defendant’s right to plead fundamental dishonesty in circumstances in which there is no indication or evidence of the same. 

Psychological and financial pressure on claimants

It is unreal to argue that honest individuals have nothing to fear.  The impact on them is to be seen in the context of their already understandable anxiety about Court proceedings.  Seeing an official document which indicates that they have been fundamentally dishonest can often phase a Claimant, driving them to an  under-settlement.

The promised benefit that never arrived

Since 2015, apart from the effect of the pandemic, there has been a consistent rise in insurance premiums.  There appears to be no indication that this draconian defence has actually had any effect on the cost of, in particular, motor insurance.