Potential implications of applying the concept of ‘fundamental dishonesty’ in the Criminal Justice and Courts Act 2015

Posted: 25/11/2015

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Section 57 of the Criminal Justice and Courts Act 2015 only applies to cases issued after 13 April 2015. The Act says that, for personal injury claims where a claimant is entitled to damages, a defendant can apply to dismiss the entire claim if the court is satisfied that the claimant has been fundamentally dishonest about the primary claim or a related claim. The court must dismiss the entire claim unless the claimant would suffer substantial injustice. The court’s order dismissing the claim must note the amount of damages that the claimant would have received because this amount is to be deducted from the defendant’s costs when their costs are assessed for the claimant to pay.

As there is no definition of ‘fundamental dishonesty’ in the Act, it will be interesting to see how the courts define it and how they balance their findings against any substantial injustice that claimants would suffer if their claim is dismissed. 

What does this mean for claimants?

Currently, there are no reported cases but, if the courts apply the new rule as strictly as they did when the Jackson changes were implemented (viz the Mitchell case), it is possible that, where a claimant has a £1,000,000 liability admitted claim but is considered to be fundamentally dishonest for including a small unsubstantiated special damages item, his entire claim could, theoretically, be dismissed. If the defendant’s costs were £50,000, then the defendant would not receive any of their costs because the net saving exceeds their costs. Where there are costs to be paid, ie the value of the claim is less than the defendant’s costs, a question will no doubt arise as to whether the insurer underwriting the claim will honour the claimant’s liability when the court has found them to be fundamentally dishonest. 

What does it mean for defendants?

Clearly, this Act potentially provides the basis for a windfall for insurers who could have a large claim dismissed even though liability is admitted but a finding of fundamental dishonesty has been made. Uncertainties arise in complicated cases as to how to evaluate the potential claim had it not been struck out and, therefore, what sum to offset against the defendant’s costs. Where liability is in dispute, there is contributory negligence or difficult causational issues, then how can a court accurately assess the real value of the claim to be offset against the defendant’s costs? There may need to be expensive satellite litigation to work this out and the defendant will have to work out if the exercise is worth the cost. 

The Act raises more questions than it answers. Some commentators have noted that the Act only applies to catch out claimants but ought to apply to fundamentally dishonest defendants as well. Nevertheless, parties will need to be careful how their cases are pleaded and the Act stresses the need to support claims with good, credible evidence. 

What are the implications for the claimant’s solicitors?

There are potential pitfalls for a claimant’s advisor who advances a case, either in the pleadings, the medical evidence or in the schedule of loss where a head of loss is exaggerated without documentary support. Solicitors will also need to be careful if they include the item without giving appropriate warnings with regard to the Act or carrying out their own checks as to the item’s veracity.

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