Fundamental Dishonesty

Article

02 December, 2014

After much debate in the House of Lords, the proposed clause 49 of the Criminal Justice and Courts Bill currently has been agreed. The Bill is expected to become law by January 2015 with the implementation date likely to be April 2015. The aim of Bill is to prevent fraudulent and perhaps more crucially, grossly exaggerated claims.

Clause 49 provides that upon an application by the defendant, if the Court finds on the balance of probabilities that a claimant who is entitled to damages has been 'fundamentally dishonest' in relation to the primary claim (or related claim) the court must dismiss the claim, unless it is satisfied that the claimant would suffer "substantial injustice". Any genuine element of the primary claim where the claimant has been honest will also be dismissed.

Where the Court makes such an order it must record the amount of damages that it would have been awarded but for the finding of the fundamental dishonesty and the dismissal of the claim.

Any costs order made against a claimant following a finding of fundamental dishonesty may require the claimant to pay the defendant's costs but only to the extent that they exceed the amount of damages recorded. So, for example, if the defendants costs are £15,000 and damages would have been £10,000, then a claimant would be required to pay the balance of £5,000 to the defendant.

The clause has received criticism for failing to define key terms such as "fundamental dishonesty" or "substantial injustice". The terms will therefore be open to judicial interpretation and inevitably the subject of immense satellite litigation.

How rigorously the clause will be interpreted by the judiciary remains to be seen. Opponents have suggested that claims of "fundamental dishonesty" will be made arbitrarily by defendants. This is unlikely to be the case, as without firm evidence such claims will inevitably fail. Concerns have also been raised over where the judiciary will draw the line in such cases. In a House of Lords debate, Lord Marks asked whether claiming five bus fares when only one was incurred would require the Court to dismiss the entire claim? Such decisions will be left to judicial discretion to determine.

Forbes Comment

It is anticipated that clause 49 of the Criminal Justice and Courts Bill will benefit insurers and defendants. The balance of probabilities test is a relatively low hurdle to overcome and consequently there will be an even greater incentive for defendants to fully investigate potentially fraudulent and exaggerated claims. Moreover, clause 49 will be a useful tactical tool for defendants to put pressure on claimants and claimant solicitors where 'fundamental dishonesty' is suspected.

For further information please contact Sarah Wilkinson on 01254 222440 or email sarah.wilkinson@forbessolicitors.co.uk

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