Background

Fundamental dishonesty is a useful weapon in every fraud lawyer's armoury, but its successful deployment is in the hands of the judiciary.

We have found that judges have been very inconsistent in their willingness to make a finding of fundamental dishonesty and we are going to look at how this has developed over the years.

Let's first go back to 2015, when Section 57 of the Criminal Justice and Courts Act 2015 came into force. This entitled the court to dismiss the entire claim where, on the balance of probability, the claimant has been fundamentally dishonest. Dismissal of the claim is mandatory unless the court is satisfied that the claimant would suffer substantial injustice if the claim were dismissed, and the claimant loses their QOCS protection.

We noticed an initial reluctance of the judges to make a finding of fundamental dishonesty as they got to grips with this new legislation. However, as the years went by the number of fundamental dishonesty findings increased. In 2019 alone our fraud team had secured 138 fundamental dishonesty findings and made fraud savings of over £42million within that 12-month period.

Why the fall?

After the rise, soon came the fall when the country was hit by the COVID-19 pandemic in 2020.

The courts were not prepared for disruption on the scale caused by the pandemic and steps were taken to reduce contact by closing some courts, suspending the vast majority of civil trials to focus on priority cases and increase the use of technology to support remote hearings.

The courts took time to recover from the pandemic and we are still experiencing significant court delays. This has meant that not as many claims have been reaching trial and if a date is listed, they are quite often being vacated at the last minute due to the lack of judicial availability.

We have also seen a high number of discontinuances in the days before trial, quite often on the morning of trial, where it is likely opposing counsel has read the brief and recommended settlement, thereby denying our clients the opportunity of having their day in court and securing the fundamental dishonesty finding.

The rise – 2024 the BOOM YEAR?

However, in recent months, we have experienced a much welcomed resurgence of fundamental dishonesty findings. The rise has been particularly noticeable with low-speed impact and exaggerated claims.

A recent example of this was in the Birmingham County Court in May 2024 before DJ Mody on a Direct Line Group case.

It was a low-speed impact claim where the judge rejected the claimant's assertion that damage to his vehicle was related to the accident or that the accident was of sufficient enough speed to have caused injury.

At various points the judge found the claimant to be inconsistent and the answers to his questions were unsatisfactory. The claimant had tried to blame his solicitors, his interpreter, his medical expert, his GP and his daughter for the inconsistencies. The judge found that only the claimant was to blame and that he had been fundamentally dishonest.

Accordingly, the judge dismissed the whole claim which gave rise to savings of £16,780.00 and granted permission for an enforceable cost order to be made against the claimant in the sum of £8,154.72.

Mandy Forster, Counter Fraud Operations Manager, Direct Line Group: “It is pleasing to see a robust approach being taken in relation to these dishonest claims, enabling us to protect our customers, shareholders and the business from the impact of fraud. It is vital there are robust deterrents in place to discourage people from making false claims.”

Strategically, we are using the court's willingness to find fundamental dishonesty to your advantage in claims with strong evidence, particularly where the claimant seeks to discontinue. We have had a great deal of success with setting aside notices of discontinuances and are making an increased number of applications for findings of fundamental dishonesty.

A recent example of this was heard by the Burnley County Court in April 2024. The claimant allegedly suffered neck and back injuries, together with significant psychological injuries, which manifested as travel anxiety and social anxiety. She also complained of headaches, pins/needles and numbness in her hands and legs, all as a result of the road traffic accident. We robustly defended the claim which resulting in the claimant discontinuing her claim and repaying the interim payment of £1,000.

We subsequently issued an application for a finding of fundamental dishonesty based on the surveillance footage which showed the claimant walking her dogs, driving on a motorway for 190 miles, assisting at a triathlon event and with the unloading of fencing materials from a pick-up truck during the prognosis period.

At the hearing District Judge Clarke found:

"I am satisfied that there is dishonesty and I am satisfied that it is fundamental. If her case had been proven it would have resulted in a very large claim. Without those allegations this is a low value claim. The inaccuracies in her evidence go to the core of the claim. I do find the claimant fundamentally dishonest pursuant to CPR 44.16 (1)."

The advantage of seeking a fundamental dishonesty finding is that not only did we save our client £135,000, but they were also awarded an enforceable costs order of £23,000, which we are currently seeking recovery of.

Summary

The significant three-fold increase in findings of fundamental dishonesty in recent months sends a strong message to those contemplating bringing a fraudulent claim. The courts are willing to take a strong stance in the right claims and fraudsters will be punished by losing any right to compensation, for even the genuine elements of the claim, and be left with a hefty legal costs bill to pay.

For more information or advice, please contact one of our experts in our Counter Fraud Team.