Fraudulent claims and general dishonesty can be opposed by defendants on a number of grounds. In this feature article, we summarise the increasing use of ‘fundamental dishonesty’ pleadings, substantiated by s.57 of the Criminal Justice and Courts Act 2015. This provision was most recently applied in the High Court case of Razumas v Ministry of Justice  EWHC 215 (QB).
Before doing so, we explore the alternative methods by which defendants have endeavoured to strike out suspected fraudulent claims in the past, e.g. by arguing that the statement of case is an ‘abuse of the court’s process’. We then go on to discuss the chronological implementation of ‘fundamental dishonesty’ into legal provisions, initially in respect of CPR Part 44 QOCS disapplication.
Lastly, we analyse the recent decision of London Organising Committee of the Olympic and Paralympic Games (LOCOG) v Sinfield  EWHC 51 (QB), in which Mr Justice Knowles established the current authority on s.57. Did the Razumas case apply LOCOG? This is what the final section of our feature article examines.
PRE-CRIMINAL JUSTICE AND COURTS ACT 2015
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.
In order to make a finding of ‘abuse of process’, Sir James Wigram V.-C., in the case of Henderson v Henderson (1843) 3 Hare 100, held that:
‘... the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time’.
Lord Diplock, in Hunter v Chief Constable of the West Midlands Police  AC 529, provided additional guidance on the power of the court to strike out a statement of case, on the basis of ‘abuse of process’:
‘... an inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people. The circumstances in which abuse of process can arise are very varied; those which give rise to the instant appeal must surely be unique. It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power’.
In Attorney-General v Barker  1 FLR 759, Lord Bingham described an ‘abuse of process’ as:
‘... a use of the court process for a purpose or in a way which is significantly different from the ordinary and proper use of the court process’.
Lord Bingham also ruled in the application for strike out for ‘abuse of process’ in Johnson v Gore Wood & Co  AC 1. Commenting on the favourability of the court to strike out, his Lordship said:
‘Litigants are not without scrupulous examination of all the circumstances to be denied the right to bring a genuine subject of litigation before the court. This does not however mean that the court must hear in full and rule on the merits of any claim or defence which a party to litigation may choose to put forward’.
He went on to reason that any application for strike out, on the grounds of ‘abuse of process’, would require:
‘... a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court... ‘
It is clear then, from case authority, that obtaining strike out when defendants allege ‘abuse of process’ of the court, yields a high threshold. Indeed, in the case of Summers v Fairclough Homes Ltd  1 WLR 2004, Lord Clarke stated:
‘... 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’.
The position taken by the court, in prioritising access to justice ahead of strike out, has meant that defendants, wary of fraudulent claimant activity, have shown reluctance towards making applications, on the grounds of ‘abuse of process’, to obtain a remedy.
THE CRIMINAL JUSTICE AND COURTS ACT 2015
The Criminal Justice and Courts Act 2015 now provides defendants to personal injury litigation with the ability to dismiss or strike out a claim, on the grounds of ‘fundamental dishonesty’, pursuant to s.57. ‘Fundamental dishonesty’ is a concept which was first introduced in Part 44 of the Civil Procedure Rules, as a means of defeating qualified one-way costs shifting (QOCS).
Section 57 of the 2015 Act states:
CASE LAW INTERPRETATION OF ‘DISHONESTY’
Prior to the LOCOG case, there had been no substantive guidance on what constituted ‘fundamental dishonesty’ under the Criminal Justice and Courts Act 2015.
Nevertheless, HHJ Moloney QC in Gosling v Hailo (2014), had previously 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.’
In the case of Menary v Darnton (2016), HHJ Hughes QC used similar language to describe ‘fundamental dishonesty’, for the purposes of CPR 44.16, necessitating the presence of ‘some deceit that goes to the root of the claim’.
In the same year, HHJ Harris QC, in Rayner v Raymond Brown (2016) contributed towards the dearth of case law defining ‘fundamental dishonesty’, under CPR 44.16, by stating that:
‘... a substantial and material dishonesty going to the heart of the claim - either liability or quantum or both - rather than peripheral exaggerations or embroidery, and it will be a question of fact and degree in each case’.
A year later, in the Supreme Court, the case of Ivey v Genting Casinos Limited (t/a Crockfords Club)  3 WLR 1212, expanded on the common law definition of ‘dishonesty’. At paragraph 74, the presiding judge stated:
‘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’.
SECTION 57 DECISION ON ‘FUNDAMENTAL DISHONESTY’ PRIOR TO LOCOG
Although the LOCOG case is the highest authority for decisions of ‘fundamental dishonesty’, several earlier cases commented on the scope of the Criminal Justice and Courts Act provision. Indeed, in Versloot Dredging BV v HDI Gerling Industrie Versicherung AG, the Supreme Court observed:
‘Parliament has thus gone further than this court was able to do in Summers v Fairclough Homes’.
Elsewhere, District Judge Bishop considered the breaches, omissions and deception, employed by the claimant in Johnson v Qainoo (2017), reasoning that s.57 ‘fundamental dishonesty’:
‘... must be substantial and it must be material to part or all of the claim. It is clearly a question of fact and degree in each case, but it must be crucial to a major part of the claim. It does not include minor exaggerations or fabrications. It is not ancillary or peripheral. It must be crucial to a major part of the claim’.
In Johnson, the judge found the claimant to have been ‘overwhelmingly dishonest’, and went on to say:
‘Section 57 is designed to be punitive. The fact that he has suffered a real and painful injury is irrelevant ...’
In the County Court case of Stanton v Hunter (2017), Recorder SA Hatfield QC made a ruling, pursuant to s.57, which was deemed to be similar to the ‘use of the term in the QOCS jurisdiction’. Accordingly, the claim was dismissed in its entirety, after having ensured that the claim had not caused the claimant to suffer ‘substantial injustice’. On this limb of s.57, the Recorder said that:
‘... miserable consequences which are likely to accrue ... cannot here be equated with "substantial injustice", or the purpose of the legislation would be frustrated’.
Finally, in Barber v Liverpool City Council (2017), which directly preceded LOCOG, the judge ruled in favour of dismissing the claim, finding that the claimant had been ‘fundamentally dishonest’ within the scope of the Criminal Justice and Courts Act. Interestingly, the judge reasoned:
‘It should be noted that the test under CPR 44.16 is whether the claim is fundamentally dishonest. There is a subtle difference from section 57 of the Criminal Justice and Courts Act 2015, where the test is whether the claimant has been fundamentally dishonest. As was pointed out by HHJ Hughes QC in Menary v Darnton (2016), however, the honesty or otherwise of the claimant will often be indistinguishable from that of the claim.
Adopting that purposive interpretation in the context of the policy underlying the QOCS provisions, I have no doubt that the Claimant's dishonesty in the present case was fundamental, in that it went to the root of a substantial part of his claim, rather than some collateral matter or minor, self-contained head of damage’.
THE LOCOG CASE
Mr Justice Julian Knowles, in the High Court case of London Organising Committee of the Olympic and Paralympic Games (LOCOG) v Sinfield  EWHC 51 (QB), established the comprehensive test for ‘fundamental dishonesty’, under the 2015 Act.
The facts of the case regarded a claimant, who 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 sought to set aside the claim on the grounds of ‘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 this decision, before Knowles J, who interpreted the methodology of ‘fundamental dishonesty’ pleadings, and formulated a template for applications under s.57, at paragraphs 62 to 65, as follows:
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 text judgment of LOCOG can be accessed here.
IMPACT OF LOCOG
Just one week after the LOCOG judgment was handed down, it was reported that a claimant had withdrawn from his pursuit of a personal injury claim, which would have been fully particularised in the region of £1.5 million. Withdrawal occurred following the defendant’s ‘fundamental dishonesty’ pleading.
In this instance, the claimant was injured in a road traffic accident and sustained severe lower limb fractures, leading to compartment syndrome and numerous surgeries. In light of suspicion over the claimant’s credibility, the defendant insurer commissioned surveillance evidence. From this, it was discovered that while extensive rehabilitation and care had been funded by the insurer, the claimant’s continued reporting of immobility, a need for substantial care and an inability to work, was dishonest. In fact, the claimant was found to be fully mobile, capable of riding and working on a motorbike and engaging in home removal activities. Irrespective of the claimant’s regained physical function, he ‘even went through further unnecessary and painful surgeries to perpetuate his fraud’.
The insurer pled ‘fundamental dishonesty’ and ‘when confronted with ... [this] ... Mr Mervin [the claimant] took the decision to withdraw his claim with immediate effect, with no damages or costs being paid’.
A partner at the law firm which acted for the insurer, at the time, stressed the effect of the LOCOG judgment as a deterrent to bringing exaggerated claims:
‘In particular, despite his serious injuries and his decision to undergo unnecessary further surgery to perpetuate his fraud, the claimant was still prepared to drop his claim, rather than allowing his dishonesty to be further scrutinised via the court process.
This decision is likely to have been a wise one in light of the guidance issued by the High Court in LOCOG, which reflects the hardening legislative and judicial attitudes to fraud’.
THE RAZUMAS CASE
The most recent case on ‘fundamental dishonesty’, in respect of the Criminal Justice and Courts Act 2015, is the case of Razumas v Ministry of Justice  EWHC 215 (QB). Judgment was handed down on 12 February 2018.
For contextual purposes, it is important to note that Razumas was a case of clinical negligence. The claimant, who spent much of 2010 to 2013 incarcerated, had a fall, in Pentonville Prison, in 2010. Shortly afterwards, a lump developed on the gastrocnemius muscle of his calf. A 10x7 cm mass was observed by a consultant in January of 2011, but it wasn’t until after a non-diagnostic biopsy, conducted in August of 2013, that the claimant received his diagnosis of cancer. As a result of this, knee amputation was performed on 3 November 2013, at which point, the malignant tumour had grown to 20x7 cm mass.
Subsequently, the claimant brought a claim in clinical negligence, against the Ministry of Justice (MoJ), for a breach of its non-delegable duty of care. The claimant alleged that the defendant was responsible for the prison healthcare providers’ failure to diagnose him claimant’s cancer, by failing to communicate appointments and enable hospital appointment attendance.
Did the Defendant’s Causation Arguments Implicate the Claimant in Dishonesty?
During submissions on causation, the defendant argued that the claimant’s conduct constituted a novus actus interveniens (a new, intervening act), which broke the chain of causation and relieved the defendant from vicarious liability.
Between 11 January 2011 and 4 April 2011 and between 3 August 2011 and 9 July 2012, the claimant was released on license. The defendant argued that the claimant’s omission to seek medical treatment in these periods undid any earlier negligence.
What is more, when the claimant returned to prison in July 2012, he told the healthcare staff that he had seen a GP and been given an operation date of 13 July, at Newham hospital, for removal of the lump. However, the defendant submitted that it had found no record of any medical consultation, while also adducing evidence that ‘healthcare staff in the prison took a number of steps to confirm the identity of the GP and the hospital at which the operation was to be performed, also without success’. Further, the claimant’s evidence was accepting of the fact that he had lied about surgery and this was consistent with the medical expert, Professor Grimer.
On balance, the judge asserted, at paragraph 201:
‘Mr Razumas' evidence as to the alleged appointment was confused and unconvincing. He accepted that he had lied in one respect about it ... I concluded that I could place no reliance on his evidence in this respect ... I therefore accept that he failed to seek medical treatment during the relevant period’.
As such, the defendant averred that the claimant’s false information, in his Particulars of Claim, were ‘fundamentally dishonest’, arguing that the claim should fail, pursuant to s.57 of the Criminal Justice and Courts Act 2015.
Firstly, on the question as to whether the claimant had acted in a ‘fundamentally dishonest’ manner, the defendant expressed that ‘... although the allegation in question is only one of a number of allegations over a period of time’, the allegation was ‘central’ to the case, not ‘collateral’ or ‘minor’.
By contrast, the claimant urged Cockerill J:
‘... to regard the dishonesty as being some way from the test of fundamental dishonesty. It was submitted that even if the court should find that Mr Razumas lied about the Newham proposed surgery, these untruths "barely scratch the bark" and go nowhere near the root of the case’.
In reaching her decision, the judge applied the test of Knowles J, at paragraphs 62 to 65 of the LOCOG judgment (above), concluding:
‘Did Mr Razumas act dishonestly in relation to the primary claim and/or a related claim? To this the answer must be yes. He has one main claim, and the dishonesty went to one route to succeed on it in full. Has he thus substantially affected the presentation of his case, either in respect of liability or quantum, in a way which potentially adversely affected the defendant in a significant way? Again the answer must be yes. The argument which he advanced went to an entire factual section and pleaded occasion which would have entitled relief on the main claim. Thus the first part, fundamental dishonesty is made out’.
On the ‘substantial injustice’ limb of s.57, the claimant submitted that there was a ‘gross disproportion between the lies and the effect of depriving him of an award’, and this disproportion should fall within the meaning of s.57(2).
Despite the claimant’s protestation, Cockerill J reasoned:
‘I do not consider that there could be any way out for Mr Razumas via the argument on substantial injustice. It cannot in my judgement be right to say that substantial injustice would result in disallowing the claim where a claimant has advanced dishonestly a claim which if established would result in full compensation. That would be to cut across what the section is trying to achieve’.
The judge went on to explain that the LOCOG judgment indicated the need for ‘something more’ than the ‘mere loss of damages to which the claimant is entitled’.
In acceptance of this principle, she said:
‘Something more is required. That something more is not made out here and so, if there were a claim it would fail at this stage’.
The full text judgment of Razumas can be found here.
From the decision of Razumas, it is clear that the methodology of s.57, employed by Knowles J in LOCOG, has been followed. To add to that, the case of Razumas is another example of a defendant successfully obtaining dismissal of a claim. This is especially significant, as reliance on ‘abuse of process’, as a means to strikeout claims, has often been unsuccessful, per Lord Clarke in Summers v Fairclough Homes Ltd. That being said, Razumas and LOCOG are just two cases in an otherwise premature area of ‘fundamental dishonesty’ law, under the Criminal Justice and Courts Act.
Uncertainty still remains over what types of conduct go to ‘the root’ of a claim, thereby satisfying the ‘fundamentally dishonest’ limb? Over time, a clearer picture should emerge on this issue. Additionally, the use of ‘something more’, as a test for ‘substantial injustice’, is a vague term, which will undoubtedly be subject to wide interpretation and judicial discretion.
As ‘fundamental dishonesty’ pleadings increase, the use of s.57 as a viable argument, when defendants suspect claimant fraud, should grow in certainty.