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Fundamentally Dishonest and After The Event Insurance

The new rule on fundamental dishonesty in personal injury actions came quietly into force on the 13th April under s57 of the Criminal Justice and Courts Act 2015.

Little has been said by the judiciary about this new rule and Claimants and their lawyers may well be carrying on their business as before.

"Fundamental dishonesty” first arose in the new CPR 44.16, so that Claimants who were found to be ‘fundamentally dishonest’ lost the protection of QOCS. But what exactly has changed under the new rule?

The court can now find that a Claimant has been fundamentally dishonest in relation to "the primary claim or a related claim”. Where such a finding is made, the court must dismiss the primary claim, unless it can be satisfied that the Claimant would suffer substantial injustice as a result.

Under the new s57, courts dismissing a claim on the grounds of fundamental dishonesty must record in their order the amount of damages they would have awarded to the claimant "in respect of the primary claim”. This amount is to be deducted from the costs the claimant is ordered to pay.

Meanwhile, defendant practice DWF has secured one of the first ‘fundamental dishonesty’ rulings, denying a claimant the protection of qualified one-way costs shifting (QOCS).

Here a claim was brought by a security guard who fractured his shoulder. The Defendant, Severn Valley Railway, had hired an ice rink to entertain families at its station in Worcester while the track was closed. The Claimant alleged that he had tripped on matting left behind after the rink had been removed and claimed for damages.

However, at trial in Telford County Court, DJ Rodgers made a finding of fact that the rink had not been dismantled and was still on the concourse at the time the accident was meant to have happened, which meant that the Claimant could not have been truthful.

Accordingly, the claim was dismissed and applying the fundamental dishonesty rule, the Claimant was ordered to pay over £11,000 in costs.

It should be noted that the court did not say that "fundamental dishonesty” had to be specifically pleaded, and was happy to use its discretion, based on the findings of fact from the trial.

So, do Claimant solicitors need to review their retainers and advise clients about the implications of the new ‘fundamentally dishonest’ rules?

The new s57 will apply to claims issued on or after 13 April, so we are unlikely to see the result of this for some time to come.

But Claimant solicitors must consider whether their retainers adequately deal with a case being struck out on the basis of fundamental dishonesty. Clear advice will have to be given to clients on the implications for their funding arrangements should this happen. If such allegations are made, the Claimant should be advised of the position that the After the Event Insurance provider is likely to take, indeed many Defendant’s will insist that the relevant ATE Insurance provider is notified.

Previously, it has been for the defendant to convince the court to exercise its power and strike out a claim; but under the new s57, the court must strike out unless convinced that doing so would cause the Claimant substantial injustice, therefore shifting the burden to the Claimant.

Perhaps now Claimant lawyers will stop padding out their Schedules of Loss with exaggerated claims, even if some of the items claimed are genuine

In any event, if the claim is dismissed due to a fundamental dishonesty on the part of the Claimant, is any After The Event Insurance provider going to indemnify such a case? That of course is unlikely to happen and as we find at present, sometimes Defendant’s do not want such findings as they do want to recover their costs.

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