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Fundamental Dishonesty, what is it and the implications?

Posted on 14th November 2018

Qualified One Way Costs Shifting (“QOCS”) rules were introduced into the Civil Procedure Rules (CPR) on 1st April 2013 as part of Lord Justice Jackson’s reforms. The rules are contained within CPR 44.13 – 44.17 and CPR44 Practice Direction Section 12. The rules were introduced to allow a Claimant to avoid costs liability if their case failed, as long as they had not been guilty of fundamental dishonesty.

What is the definition of fundamental dishonesty?

The definition of fundamental dishonesty was clarified in the case of 1) Lorna Howlett (2) Justin Howlett v (1) Penelope Davies (2) Ageas Insurance Limited. The court of Appeal considered the judgment of HHJ Maloney QC in Gosling v Hailo, where it was held that:

“a claimant should not be exposed to costs liability merely because he is shown to have been dishonest as to some collateral matter or perhaps as to some minor, self-contained head of damage. If, on the other hand, the dishonesty went to the root of either the whole of his claim or a substantial part of his claim, then it appears to me that it would be a fundamentally dishonest claim: a claim which depended as to a substantial or important part of itself upon dishonesty.”

Did the dishonesty go to the root of the claim?

The crucial issue is whether the dishonesty went to the root of the claim, or a substantial part of it. The Defendant does not have to plead fundamental dishonesty in their Defence. However they should provide the Claimant with notification that their credibility/honestly is likely to be challenged.

If a Defendant is successfully able to establish that there has been fundamental dishonesty, they are entitled to argue that the QOCS protection should be removed from the Claimant. This is contained within CPR 44.16(1), which also states that it will be considered on the balance of probabilities.

In addition, pursuant to Section 57(2) Criminal Justice and Courts Act 2015, if the court finds the Claimant has been fundamentally dishonest under Section 57(2), “the court must dismiss the primary claim, unless it is satisfied that the Claimant would suffer substantial injustice if the claim were dismissed”. In the case of Razumas v Ministry of Justice [2018] EWHC 215 (QB) the High Court held that something more than the loss of damages was required before there could be substantial injustice.

Further consequences of fundamental dishonesty

A further possible consequence of fundamental dishonesty is contempt of court proceedings.

By way of an example, we acted for a client who had been involved in a road traffic accident. As a result of the accident the client was injured. The client then brought a claim for personal injury as a result of the accident. Part of the claim was that they were unable to enjoy a holiday as much as they had intended due to the accident. Due to this they had lost out financially as the travel and activities were un-refundable.

However, the solicitors acting for the insurer carried out their own investigations. They subsequently found evidence on the client’s Facebook page of the client partaking in extreme sports shortly after the accident. As a result, the solicitors made an application to court for fundamental dishonesty.

Having considered the Defendant’s application it was quite likely that the application would be successful. They had raised dishonesty and the provision of false evidence across the client’s Schedule of Loss, Part 18 replies and Witness statement. Due to this, it was in the client’s bests interests for the matter not to proceed to trial and for a settlement to be entered into.

Ultimately, the client entered into a settlement whereby they discontinued their claim and paid the Defendant’s solicitor’s legal costs. In resolving the matter prior to trial and the Defendant’s application being heard, the client was able to pay less than if he had lost at trial or the application having being successful.

However, it should be noted that under paragraph 12.4 of CPR44 Practice Direction that the court can still consider whether there has been fundamental dishonesty even if the Claimant has withdrawn the claim.

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