Fundamental Dishonesty and Striking Out: London Organising Committee of the Olympic And Paralympic Games (LOCOG) v Sinfield [2018] EWHC 51 (QB)

The High Court has recently handed down judgment in the case of London Organising Committee of the Olympic And Paralympic Games (LOCOG) v Sinfield [2018] EWHC 51 (QB), in which Mr Justice Julian Knowles heard an appeal that sought to set aside a claim on the grounds of fundamental dishonesty.

The claimant brought a claim for gardening expenses, among other heads of loss, as a result of an injury sustained while volunteering at the Olympic Games. The claimant had a 2 acre garden and declared that a gardener had been employed for 2 to 4 hours of work per week, at a £13 hourly rate, from the period beginning 9 September 2012, at paragraphs 5 of the Preliminary Schedule of Loss. Special damages also sought future losses for gardening, at paragraph 8. This was calculated as 1 hour of gardening per week and the appropriate multiplier was 13.22. The total gardening expenses claim equated to 41.9% of the special damages presented on the Schedule, which was downgraded to a 28% proportion after PSLA damages were agreed.

Despite the fact the claimant signed a statement of truth which asserted that the facts stated in the Schedule were true, in a witness statement, Mr Price, the gardener, said:

I do not know why Mr Sinfield says that prior to his accident in September 2012 he and his wife looked after the garden themselves but following the accident he had to employ a gardener. This is just not true’.

Mr Price also denied that invoices, served in the claimant’s List of Documents, had  been issued by him, even though the claimant purported as such.

As a consequence, the defendant pleaded ‘fundamental dishonesty’. In a Supplementary Witness Statement, the claimant admitted that the original statement was ‘badly worded’, while the invoices were proof of ‘self-billing’.

At first instance, the judge found that the claimant was ‘with a dishonest state of mind’, although this did not constitute ‘fundamentally dishonesty’, as statements only related to a ‘peripheral’ part of the claim. The defendant subsequently appealed.

Before the Criminal Justice and Courts Act 2015 came into effect, if defendants suspected fraudulent activity, they could attempt to strike out claims as an abuse of process, pursuant to CPR 3.4(2)(b), or under the court’s inherent jurisdiction. This was often problematic. Indeed, in the case of Summers v Fairclough Homes Ltd [2012] 1 WLR 2004, Lord Clarke stated, at paragraph 49: 

... The draconian step of striking a claim out is always a last resort, a fortiori where to do so would deprive the claimant of a substantive right to which the court had held that he was entitled after a fair trial. It is very difficult indeed to think of circumstances in which such a conclusion would be proportionate. Such circumstances might, however, include a case where there had been a massive attempt to deceive the court but the award of damages would be very small’.

Section 57 of the 2015 Act provides defendants with the capability dismiss or strike out a claim, on the grounds of ‘fundamental dishonesty’, a concept first introduced in CPR 44, as a means of defeating qualified one-way costs shifting (QOCS).

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HHJ Moloney QC in Gosling v Hailo (2014), provided commentary on the definition of ‘fundamental dishonesty’, in a judgment on QOCS, at paragraph 45:

The corollary term to ‘fundamental’ would be a word with some such meaning as ‘incidental’ or ‘collateral’. Thus, 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.’

The present common law authority on ‘dishonesty’ was presented in the Supreme Court, at paragraph 74 of Ivey v Genting Casinos Limited (t/a Crockfords Club) [2017] 3 WLR 1212:

When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual's knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest’.

Knowles J, in the LOCOG appeal, contributed his own interpretation of ‘fundamental dishonesty’, in the context of s.57, before proceeding to apply this to the defendant’s grounds of appeal (paragraphs 62-65):

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WERE PARAGRAPHS 5 AND 8 OF THE SCHEDULE EXAMPLES OF ‘DISHONESTY’?

At first instance, the judge held that the claimant, in wrongly asserting that the employment of the gardener was a matter of choice and not necessity, were a product of ‘muddle and confusion’,

At paragraph 81, Knowles J, on this 1st ground of appeal:

‘... concluded that the judge was plainly wrong not to have reached the conclusion that paras 5 and 8 of the Preliminary Schedule were dishonest misstatements by Mr Sinfield that he had not employed a gardener prior to the accident, that he and his wife doing all the gardening, but that the accident had resulted in him having to employ one for the first time so as to generate the recoverable losses which he set out’.                                    

WAS THE CLAIMANT ‘FUNDAMENTALLY DISHONEST’ TO THE CLAIM?

At 1st instance, the judge reasoned that the claimant had only been ‘fundamentally dishonest’ in respect of the gardening expenses claim and not the entire claim.

On appeal, Knowles J applied his method to findings of ‘fundamental dishonesty’ (above), at paragraphs 84 to 87, as follows:

He presented a claim for special damages in a significant sum, and the judge found that the largest head of damage was evidenced by the dishonest creation of false invoices and by a dishonest witness statement. Both pieces of dishonesty were premeditated and maintained over many months, until LOCOG’s solicitors uncovered the true picture ... Mr Sinfield therefore presented his case on quantum in a dishonest way which could have resulted in LOCOG paying out far more than they could properly, on honest evidence, have been ordered to do following a trial.

I reject Mr James’ argument that the claim was not fundamentally dishonest because, by comparing multiplicands, the overstatement was less than £3000, and so any dishonesty cannot be said to go to the heart or root of the claim. The fact is that Mr Sinfield dishonestly maintained a claim for £14 033.18 which he was not entitled to ... The dishonesty therefore potentially impacted it in a significant way.

The judge should have concluded that Mr Sinfield had been fundamentally dishonest in relation to the claim and therefore, prima facie by virtue of s.57(3), the entire claim fell to be dismissed unless, by s.57(2), that would result in substantial injustice to Mr Sinfield. Instead, he asked himself the question (para 22): ‘If the greater part of the claim is genuine and honest, is the dishonesty fundamental? I answer that by considering s 57(2)’. In my respectful opinion, that was the wrong question and the wrong answer. If the claimant has been fundamentally dishonest in the way I have indicated then the fact that the greater part of the claim might be honest is neither here nor there (subject to substantial injustice): by enacting s 57(3) Parliament provided that the entire claim, including any genuine parts, are to be dismissed.

As I have said, I consider that even on the findings of dishonesty which the judge made, the claim should have been dismissed (subject to substantial injustice). But if I am right in relation to Ground 1 then, a fortiori, the claim should have been dismissed’.

WOULD THE CLAIMANT SUFFER SUBSTANTIAL INJUSTICE IN THE EVENT OF THE CLAIM BEING DISMISSED?

On this 3rd and final ground, Knowles J opined, at paragraph 89:

The starting point is s 57(3) ... it follows from this provision that something more is required than the mere loss of damages to which the claimant is entitled to establish substantial injustice. Parliament has provided that the default position is that a fundamentally dishonest claimant should lose his damages in their entirety, even though ex hypothesi, by s.57(1), he is properly entitled to some damages. It would render superfluous s.57(3) if the mere loss of genuine damages could constitute substantial injustice. The judge made no findings capable of supporting a conclusion that if the whole claim was dismissed it would result in substantial injustice to Mr Sinfield. Furthermore, the judge was wrong to characterise the gardening claim as peripheral. As I have explained, as originally presented, it was a very substantial part of the claim’.

In conclusion, the judge allowed the appeal, set aside the 1st instance judge’s order and dismissed the claim for damages, pursuant to s.57(2) of the 2015 Act.

Full judgment can be accessed here.