13 April 2015Print This Post

Satellite litigation warning as new fundamental dishonesty rule comes into force

James Heath

Heath: A “simple, but quite nebulous, concept”

The new rule on fundamental dishonesty in personal injury actions, which comes into force today under section 57 of the Criminal Justice and Courts Act 2015, brings with it “a lot of potential for satellite litigation”, a leading defence lawyer has warned.

James Heath, director of counter-fraud strategy at Keoghs, described fundamental dishonesty as a “simple, but quite nebulous concept”.

The concept was first introduced two years ago in CPR 44.16, meaning that claimants found to be ‘fundamentally dishonest’ lose the protection of qualified one-way costs shifting (QOCS).

Under the new rule, which comes into force today, where a court finds that a claimant has been fundamentally dishonest in relation to “the primary claim or a related claim”, the court “must dismiss the primary claim, unless it is satisfied that the claimant would suffer substantial injustice”.

Mr Heath said section 57 was “quite a different remedy” from CPR 44.16. “Clients will need to understand the difference between the two regimes that rely on the same concept. The challenge for the defendant is to pick the right one and fight it accordingly. The costs consequences are very different for both.”

Under section 57, courts dismissing a claim on the grounds of fundamental dishonesty must record in their order the amount of damages they would have awarded to the claimant “in respect of the primary claim”. This amount must be deducted from the costs the claimant is ordered to pay.

Mr Heath said the result was that if the defendant’s costs were less than the notional damages, the defendant recovered nothing. “The only rationale I can think of for this to prevent the claimant from having an otherwise legitimate damages claim denied and being penalised on costs.”

He said it was unclear whether defendant insurers would have to “pin their colours to the mast”, and say whether they were going for section 57 or CPR 44.16, or just mention fundamental dishonesty.

Meanwhile, he said there was still no leading authority from the High Court or above on CPR 44.16. “They’ve all been local, county court decisions so far,” Mr Heath said. “We’ve had around a dozen.

‘It’s too early to tell what the impact of the original rule will be, as the bank of cases and the publicity is only starting to build. It has not had a deterrent effect yet.”

Mr Heath added that the firm had not seen any spike in claims yet, as lawyers rushed to beat the implementation date for section 57. “The section applies to claims issued on or after 13 April, so claimants may have issued but not yet served proceedings.”

By Nick Hilborne

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