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29 May 2014

“Fundamental Dishonesty”

Cases coming to trial under the post 1st April 2013 costs regime are now becoming more common. If such a claim fails at trial then under r44.14 Qualified One-Way Costs Shifting (QOCS) the normal outcome is that any costs order against the Claimant for a sum greater than the amount the Claimant has recovered in damages (0 if the claim has failed) cannot be enforced without the Court’s permission. Under r44.16(1) the Court will grant permission where it finds, on a balance of probabilities, that the claim is “fundamentally dishonest”.

“Fundamentally dishonest” is new terminology for the CPR and there has been much legal commentary as to how the test is likely to be applied. Many had thought that the test would operate in the same way as that for “unreasonable behaviour” (r27.14(g)) to recover costs on the small claims track. However “fundamentally dishonest” perhaps suggests a higher threshold and change of focus than “unreasonableness”, leading some to wonder if it would be limited to findings of fraud.

At the time of writing (23.05.14) and to my knowledge the Court has made a finding of “fundamental dishonesty” under r44.16(1) in 2 cases. The first was the decision of HHJ Maloney QC in Cambridge County Court on 29th April 2014 in the case of Gosling v Screwfix. The case is unreported but has already been extensively commented on. In short the Court found the Claimant had been fundamentally dishonest where there had been an exaggeration of the value of the claim by around 50%. The judge held that there was a distinction to be drawn between dishonesty that was fundamental to the claim and that which was not. The judge concluded that dishonesty that was ‘incidental’ or ‘collateral’ to the claim would not be fundamental. However, dishonesty that went to the ‘whole or a substantial part of the claim’ was. In significantly exaggerating/misrepresenting the extent of his on-going symptoms, the Claimant’s conduct was dishonest. The judge also held that dishonesty, which went to half the value of the claim, was sufficient to be characterised as fundamental. On the balance of probabilities the claim was fundamentally dishonest.

A second finding of fundamental dishonesty came in the case of Vowles v Morgan, heard before DDJ McKay in Merthyr Tydfil County Court on 22nd May 2014. The case was a fast track claim for personal injury and consequential loss arising from a road traffic accident. However the claim was far from the run of the mill fast track RTA case characterised by a “momentary lapse of concentration” and “honest but mistaken recollection”. The background to the case was something of a Welsh valleys village vendetta. Both the Claimant and Defendant were young men who had grown up in the same village and had had quarrels in the past. One of the Claimant’s allegations against the Defendant was of a very serious nature. For the purposes of the issues in the claim however the Court was content to find simply that prior to the accident the parties knew each other and did not get along.

The location of the accident was a straight section of main road approaching the village where they both lived. The Claimant’s case was that he had braked on seeing a sign warning that in 300 metres the speed limit was reducing from a 60 to a 30. Upon braking the Defendant, travelling behind the Claimant, had collided with the rear of the Claimant’s vehicle. The Claimant accepted that he had driven off from the scene of the accident and that when he reported the accident to the police he had told them that the Defendant had been the one who had driven off. His explanation for this was that he panicked and that he was physically scared of the Defendant. The Claimant’s evidence was notionally supported by a passenger in his vehicle at the time, however in oral evidence the passenger admitted that he had been texting on his phone at the time and hadn’t really seen much that would assist the Court.

The Defendant’s case was that he had been in the process of overtaking the Claimant and was about to move past when the Claimant had moved from left to right, i.e. in front of the Defendant, and then slammed on his brakes causing the Defendant to collide with the rear of the Claimant’s car. The only explanation for such a manouevre was that the Claimant was deliberately attempting to block the Defendant and prevent him overtaking.

The Court preferred the evidence of the Defendant. The main reasons given in Judgment were that the Claimant had i) fled the scene, ii) phoned in a misleading report to the police, iii) braked when there was no need for him to do so (the reduction to a 30 mph limit was still 300 metres away) and iv) the extent of the damage was more consistent with the Defendant’s account, i.e. a sudden & sharp braking by the Claimant. The Court was unconvinced by the Claimant’s explanation for his actions following the accident, i.e. that he panicked and was afraid, particularly as the Claimant had been at home and at no immediate physical risk from the Defendant when he had phoned the police. The Court found that the Claimant had driven in a deliberately dangerous way to try to stop the Defendant overtaking him. However the Claimant had misjudged his “blocking” manouevre, and then “behaved like a guilty man” following the accident, culminating in the bringing of a claim for an incident he knew to have been caused by his own dangerous act.

On the basis of the Court’s findings the Defendant made an application under r44.16(1). Unsurprisingly the DDJ allowed the application on the basis that the Claimant had i) driven in a deliberately dangerous way, ii) fled the scene, iii) lied to the police and iv) presented a false claim.

Whilst it is clearly too soon to draw any firm conclusions about the “fundamentally dishonest” test, the 2 cases thus far would suggest that;
i. A finding that a claim is “fundamentally dishonest” is not limited to claims where a finding of fraud has been made.
ii. A finding that one element of the claim is dishonest may be sufficient for a finding of fundamental dishonesty if that element is sufficiently substantial - both Gosling and Vowles involved genuine accidents that were not fictitious or staged.
iii. Vowles would perhaps suggest that the Court is prepared to consider general bad conduct in addition to dishonesty as factors pushing towards a finding of fundamental dishonesty -  it was not dishonest to flee the scene or deliberately drive dangerously, but these were given as reasons for the finding in addition to the Claimant’s dishonest lying to police and presenting a false account of the accident.

No doubt as more claims come to trial under the QOCS regime there will be further decisions to define how the “fundamentally dishonest” is to be interpreted.

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