What is "Fundamental Dishonesty"?


24 June, 2014

What is "fundamental dishonesty"? Well fundamentally no one can really say. Surely, one is either honest or dishonest. The term comes from Civil Procedure Rules 44.16 (1). Under the new regime of "QOCS" (Qualified One-Way Costs Shifting) introduced in April 2013, a claimant is not required to pay the defendant's costs if she/he loses at trial. When QOCS was announced it caused so much consternation amongst defendants and insurers that a trade off was given and the concept of "fundamental dishonesty" was established.

CPR 44.16 states that "Orders for costs made against the claimant may be enforced to the full extent of such orders with the permission of the court where the claim is found on the balance of probabilities to be fundamentally dishonest." The legislators gave with one hand but took away with another as they failed to provide a definition of "fundamental dishonesty". It will therefore fall to the Courts to guide us on applying this new and ambiguous term. So far, there has only been one decision on this matter, the case of Gosling v Screwfix and Anor (unreported, HHJ Moloney QC, Cambridge County Court, 29 March 2014).

In the case of Gosling v Screwfix and Anor, Mr Gosling brought a claim against Screwfix after falling from a ladder in 2008. The Judge found that even though the claimant had suffered some injury in the accident, the covert surveillance revealed that he had significantly exaggerated the extent of his symptoms. The claim and the injury was genuine but the exaggeration of the extent of the injury equating to 50% of the claim was sufficient for the judge to make a finding of "fundamental dishonesty". The claimant was ordered to pay the defendants costs on an indemnity basis.

So what can defendants/insurers learn from this judgment? Firstly, even though the claim was genuine, an exaggeration of the value of the claim by 50% was sufficient for a finding of "fundamental dishonesty". Therefore the gates are open for defendants to pursue claimants that are not just fraudulent in the traditional sense. The burden of proof applied is the balance of probabilities, which in theory should make life easier for defendants. The dishonesty however must not be 'incidental' or 'collateral' and must relate to a substantial part of the claim.

It seems that the decision in Gosling v Screwfix will encourage more defendants to seek a finding of "fundamental dishonesty". Furthermore, Gosling v Screwfix can be used by defendants as a tool to put pressure on claimants where it appears obvious that the value of the claim is being exaggerated. In appropriate circumstances, it may be beneficial for defendants to obtain detailed evidence such as covert surveillance evidence to persuade judges to make a finding of "fundamental dishonesty". A word of caution however, the decision in Gosling v Screwfix is a County Court decision. A decision from a higher court is inevitable and will take precedence over the findings in Gosling v Screwfix.

For more information please contact Sarah Wilkinson at our Blackburn office, Marsden House, 28-32 Wellington Street (St. Johns), Blackburn, Lancashire, BB1 8DA.
Tel 01254 222439 or email: sarah.wilkinson@forbessolicitors.co.uk


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