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High Court decision clarifies position on S57 fundamental dishonesty

January, 24, 2018

The High Court has handed down the first substantive decision dealing with the interpretation of fundamental dishonesty in section 57 CJCA 2015, clarifying the position for practitioners who had so far been relying on various County Court decisions including the guidance provided by HHJ Moloney in Gosling v Hailo (which was a case dealing with fundamental dishonesty in the context of qualified one way costs shifting under CPR 44.16).

London Organising Committee of the Olympic and Paralympic Games v Sinfield

The claimant, Mr Sinfield, was a volunteer at the London Olympics, who fractured his wrist whilst working at the Games. The claim for injury was eventually agreed at £16,000.

In addition to his claim for injury, Mr Sinfield claimed the costs of employing a gardener to tend to his two acre garden. This item was pleaded at almost £14,000 which represented 42% of the special damages and 28% of the overall claim.

The claimant supported this claim by production of invoices from one Mervyn Price, the gardener whose services were said to be engaged due to the claimant’s injuries. The defendant carried out investigations which showed that Mr Price had worked for the claimant since 2005 and that he had not produced those invoices.

The defendant sought a finding of fundamental dishonesty and consequential dismissal of the whole claim under s.57. The trial judge, Mr Recorder Widdup, found that the claimant was not fundamentally dishonest, holding instead that he was “muddled, confused and careless”. While Sinfield had been dishonest in his witness statement and by disclosing invoices he drafted himself, the invoices were “true in part” and had only been created to “conceal the earlier muddle in which he had found himself”. The judge held that the dishonesty was fundamental to the gardening claim only, as opposed to the whole claim and that the dishonesty “did not contaminate the entire claim”.

The judge went on to state that, even if he was wrong about that, exercising his powers to dismiss the entire claim would constitute ‘substantial injustice’ as the dishonesty related to a peripheral part of the claim and the remainder of the claim was genuine.

In allowing the appeal, Mr Justice Julian Knowles provided fresh guidance on the circumstances that should lead to a finding of fundamental dishonesty, stating:

“A claimant should be found to be fundamentally dishonest within the meaning of s.57(1)(b) if the defendant proves on a balance of probabilities that the claimant has acted dishonestly in relation to the primary claim and/or a related claim (as defined in s.57(8)), and that he has thus substantially affected the presentation of his case, either in respects of liability or quantum, in a way which potentially adversely affected the defendant in a significant way, judged in the context of the particular facts and circumstances of the litigation. Dishonesty is to be judged according to the test set out by the Supreme Court in Ivey v Genting Casinos Limited (t/a Crockfords Club)

In addition, he considered the issue of ‘substantial injustice’:

“It seems to me plain that substantial injustice must mean more than the mere fact that the claimant will lose his damages for those heads of claim that are not tainted with dishonesty. It would render superfluous s.57(3) if the mere loss of genuine damages could constitute substantial injustice.”

Commentary

Much of the discussion on the circumstances in which the courts may make findings of fundamental dishonesty has focused on the value of the dishonest element as a percentage of the genuine claim. There was uncertainty as to whether s.57 would be applied to dismiss a claim if the genuine element was valued at more than the fraudulent.

This is therefore a significant decision because the claimant’s dishonesty related to only 28% of his claim. Indeed Mr Justice Knowles commented “If the claimant has been fundamentally dishonest in the way I have indicated then the fact that the greater part of the claim might be honest is neither here nor there (subject to substantial injustice)”.

Applying the test based upon whether the claimant’s conduct would potentially ‘substantially affect’ a defendant is in our view wider than the expressions ‘going to the root’ or ‘going to the heart’ of the claim that have been used in other judgments. For example, if a claimant was found to have produced evidence from a false witness to an accident then s.57 should apply.

Further, it would therefore appear open to defendants to challenge ancillary aspects of a claim where they feel they can meet the court’s definition. For example, perhaps claims for treatment fees pursued with the support of fabricated invoices/discharge reports would be enough to trigger a finding of fundamental dishonesty. The decision will mean that tactics and advice as to s.57 should be considered and provided in a wider range of cases.

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