Fundamental Dishonesty. Brian McCluggage 3 March 2016

Transcription

1 Fundamental Dishonesty Brian McCluggage 3 March 2016

2 Purpose of talk Clarity as to the 2 species of Fundamental Dishonesty Analysing the nature of the dishonesty in your case Analysing the evidence: is the dishonesty Fundamental Tactics and Good Practice Where Fundamental Dishonesty fits into the armoury

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4 Two species of Fundamental Dishonesty 1. Fundamental Dishonesty as an exception to Qualified One-Way Costs Shifting (QOCS): CPR Dismissing a case for Fundamental Dishonesty pursuant to section 57, Criminal Justice and Courts Act 2015 Different purpose Different effect Is fundamental dishonesty the same for both?

5 Species 1: QOCS Fundamental Dishonesty About permission to enforce costs orders in your favour. Whether you have won, lost or drawn your case. CPR Part Need to be fully familiar with the entire scheme of QOCS before pursuing this option

6 Species 2: Section 57 CJCA 2015 About dismissing successful claims where the claimant is entitled to damages in respect of personal injury. Section 57 CJCA 2015 May have to run the case to a trial There is an interesting argument on that as we shall see.

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8 The structure of QOCS Section 26(1) (3) LASPOA authorises costs-shifting and restrictions upon it Basic rule contained in CPR Wagennar v. Weekend Travel Limited [2014] EWCA Civ 1105: QOCS does not apply between non-claimant parties vital if you are co-defending or seeking Part 20 contribution

9 Its not just Fundamental Dishonesty CPR 44.14(1): allows a defendant to set-off his costs against its own liabilities to a claimant for damages (strangely not against costs) at the end of the proceedings. Damages wipe out CPR 44.15: strike-outs No reasonable ground for bringing proceedings Abuse of process (eg Summers v. Fairclough) Conduct of claimant or someone on his behalf is likely to obstruct the just disposal of the proceedings Does not reflect CPR3.4(c): failure to comply with rules or court orders CPR 44.16(2): claims for benefit of person other than the claimant

10 Rule CPR: The Fundamental Dishonesty Exception to QOCS (1) Exceptions to qualified one-way costs shifting where permission required 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.

11 The Fundamental Dishonesty Exception to QOCS (2) SO: Permission of the Court Civil standard balance of probabilities Fundamentally dishonest is the threshold condition PD44 contains some procedural guidance: Normally direct that FD issues be determined at trial If case settled, FD is only be determined in exceptional circumstances Claimants cannot escape through a notice of discontinuance

12 What procedure? The Fundamental Dishonesty Exception to QOCS (3) Most commonly after trial and findings of fact by judge But: Gosling v. Screwfix (2014): where a discontinuance, may be an efficient and summary approach having regard to proportionality and the overriding objective HHJ Maloney QC held that a dishonesty allegation involving liability would have needed oral evidence. On quantum, a devastating surveillance video allowed for a summary procedure, even though C had not seen all of the video!

13 PD44.12 (d): the costs attributable (d) the court may, as it thinks fair and just, determine the costs attributable to the claim having been found to be fundamentally dishonest a. If the claim is fundamentally dishonest, the claimant loses his shield and the standard costs rule of CPR Part 44.3 should apply? OR b. The only inter party costs arising are those relevant to the fraudulent parts of the claim? OR c. Only costs relevant to the determination of whether the claim is fundamentally dishonest or not?

14 Assessed costs recoverable This is very important in a Fast Track claim. The fixed costs regime is disapplied: see CPR 45.29F(10) This may be a reason why the insurer would wish a finding of FD even if there is a right of set out against damages Eg. Defendant has two or three interim costs orders. May need to ask for the costs order not to be assessed until end if fraud in issue. Important where there is an issue-based costs order after a FT trial eg. PI claim honest, but hire claim or loss of earnings claim dishonest. Can have full assessed costs of defending hire set off against damages!

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16 Section 57, CJCA 2015 (1) Justice minister Lord Faulks in debate in House of Lords: The government simply do not believe that people who behave in a fundamentally dishonest way by grossly exaggerating their own claim or colluding should be allowed to benefit by getting compensation in spite of their deceit.

17 Section 57, CJCA 2015 (2) 57 Personal injury claims: cases of fundamental dishonesty (1) This section applies where, in proceedings on a claim for damages in respect of personal injury ( the primary claim ) (a) the court finds that the claimant is entitled to damages in respect of the claim, but (b) on an application by the defendant for the dismissal of the claim under this section, the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim. (2) The court must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed. (3) The duty under subsection (2) includes the dismissal of any element of the primary claim in respect of which the claimant has not been dishonest.

18 Features of section 57 (1) Upon an application by the defendant is a Part 23 application required or sufficient to make oral application at the end of the trial? Probably depends whether pleaded ie. sufficient notice. the claimant has been fundamentally dishonest cf QOCS 44.16: the claim is found. to be fundamentally dishonest Is there significance in the difference? must dismiss : put as a duty to try and stop naughty judges from using their discretion, subject to the substantial injustice exception.

19 Features of section 57 (2) Court finds the Claimant is entitled to damages In other words, the Claimant is successful. Those who look at fundamental dishonesty through lens of staged accidents find this conceptually difficult. Does the court need to have assessed damages before this provision applies? That is, after trial? Or is a judgment with damages to be assessed enough?

20 Features of section 57 (3) Unless it is satisfied that the claimant would suffer substantial injustice The claimant s get out to avoid absurd results. Courts likely to find that the burden lies on the claimant. Will be argument over substantial (cf Equality Act 2010: more than minor or trivial ) Suspect will be applied in cases of genuinely serious injury. How then will dishonesty be fundamental?

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22 The Substance of Fundamental Dishonesty (1) Dictionary Definition of Fundamental : Concise OED: adj: of or serving as a foundation or core; of central importance

23 The Substance of Fundamental Dishonesty (2) Gosling v. 1) Hailo 2) Screwfix (2014) HHJ Maloney QC: Fundamental is opposite to incidental or collateral The root of either the whole of his claim or a substantial part of his claim Interpreted purposively and contextually in light of the context is the claimant deserving of the protection Need to remember that dishonesty is more than exaggeration: Axa v. Rossiter [2013] EWHC 3805 (Stewart J.): a contempt case

24 An alternative and more flexible test? A. The importance of the fraud to the sums or issues at stake; B. Whether the dispute would have been settled or determined at an earlier stage of the proceedings without the fraudulent aspect. I suggest that that proportionality or resources spent really factor into determining whether fraud is fundamental.

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26 In practice what fraud is core? A taxonomy: A. A fraudulent cause of action. B. A false head of loss. C. Use of a fraudulent device. D. Fraudulent exaggeration of genuine loss.

27 A: Fraudulent Cause of Action A contrived road traffic accident. Genuine injury based on contrived circumstances: eg. the classic fall down the stairs being pinned to an actionable defect on the pavement. Genuine accident, but false version of events for liability purposes eg. road traffic accident where a claimant is found to have lied about the circumstances, because accounts are irreconcilable

28 Hussain v. 1) Bouygoes 2) Zurich (2016) Birmingham County Court, Mr. Recorder Matthews Genuine accident and no issue that claimant injured Wholly different accounts of the accident C says D overtaking 2 cars at a junction D says C pulled out from a parked position Recorder preferred D s account. Fundamental dishonesty found In context of a false witness (see next category)

29 B: False head of Loss Genuine accident, injury and liability, but claims loss of earnings when in fact was unemployed. Genuine accident with vehicle damage, hire and storage, but not injured (eg. a false whiplash) Vehicle storage claim, when car sitting at home. Will this just depend on falsity as a percentage of the genuine value of the claim? My alternative test works better.

30 C: Use of a fraudulent device Eg. forged document, stooge witness, but in support of a genuine claim Cf Agapitos v. Agnew [2002] EWCA Civ 247 first party insurance claim, but different principles apply Hussain v. Bouygues (UK) Ltd (2016): false witness strikes at the integrity of the civil justice system.

31 D: Fraudulent exaggeration of genuine loss Loss of earnings: C has suffered loss but returned to work 6 months earlier than he said Cf. C says unable to work again but running a nursery franchise without telling anyone Injury: Whiplash but claims chronic pain shown to be false by surveillance Badly broken leg with definite symptoms, can walk 2 miles though says only 50 metres. Plainly more difficult: a matter of degree

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33 Tactics & Strategy Section 57 will cause courts concern, especially in cases involving more serious injury. Insurers will want to be seen as assertive rather than aggressive in section 57 cases. Risk that the higher courts will tighten the standard of fundamental dishonesty to prevent claims being dismissed under section 57 too easily. As fundamental dishonesty will have to be interpreted the same way, that could paradoxically weaken the exception to QOCS! Pin colours to the mast: plead it in the Defence. May provide settlement discount. Will Claimants go on the offensive? Application for contempt against Defendant witness if the Claimant succeeds?

34 How does FD fit with other recourse? The courts may use s.57 as a justification to weaken the standards in Summers v. Fairclough for striking out for abuse of process. Perhaps need not be seen as an exceptional remedy. Section 57(6) and (7) of CJCA 2015 holds that in contempt or criminal proceedings, the dismissal of the claim must be brought into account when sentencing. May make the difference between a custodial sentence and a fine. Contempt proceedings hardly worthwhile for a fine. If dismissal of claim or loss of QOCS, may make exemplary damages less likely in a deceit case as less imperative to punish.

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36 Conclusions See loss of QOCS in the context of other powers the court has eg. abuse of process, discretionary costs power There needs to be a more nuanced approach to what constitutes fundamental dishonesty Insurers need to watch that only the right case goes to appeal. Preferable that a claimant with a distasteful case appeals from a finding of fundamental dishonesty. Insurers should settle off an appeal brought by a highly sympathetic claimant where a judge at first instance has been harsh. There is too much to play for on the early appeals.

37 Brian McCluggage o Call 1995 o 16 years of experience in fraud work: conducting fraud trials before many firms had their own departments. o Conducted many of the leading fraud ring cases o Practice now predominantly high value PI, also professional negligence and first party insurance disputes o In the area of insurance fraud still conducts appeals; cases involving complex or unusual points; malingering in high value PI; fraud rings; first party insurance fraud o Contact through pi@9sjs.com