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Fundamental dishonesty allegations – defendants’ new ploy?

Flannigan: courts should be asked to discourage abuses

Flannigan: courts should be asked to discourage abuses

By Rachel Flannigan, partner, Express Solicitors

I recently had a case before the court where my client, the claimant, had been in a collision as a pedestrian with the defendant’s vehicle. There was a police report which clearly set out a collision occurred between the two. The matter was defended as there were different versions from the parties as to how the collision occurred with each blaming the other for causing the accident.

The claimant sustained a head injury and could not remember too much following the collision. Proceedings were issued and the matter went to trial.

The claimant’s family had heard that there was a witness to the accident and that he was known to an extended family member. He was contacted and a statement taken from him. He was able to recall the incident clearly and appeared to have a good view. Upon taking his statement, he did not appear to be misleading us. He was called to give evidence at trial.

We are all aware of how intimidating it can be for witnesses in the box giving evidence when the other side’s barrister starts cross examining you. The claimant gave her evidence clearly, and when questioned about the witness, she gave answers that the defendant’s representative took issue with – this was later described by the judge as evasive as she did not wish to accept the witness was known to her personally but the answers given were not untrue or dishonest.

The witness, however, gave far-from-convincing evidence, to the extent that the judge declared he was dishonest in that the judge made a finding he was not in the vicinity of the accident when it occurred.

The judge preferred the defendant’s version as to how the collision came about and dismissed the claimant’s claim and awarded costs against her. But as the conditional fee agreement came after April 2013, qualified one-way costs shifting (QOCS) applied and so the costs order could not be enforced without the permission of the court.

It was at that point that the defendant’s barrister piped up with an application for the judge to find the claimant’s claim was fundamentally dishonest and that the court should disapply QOCS and allow them to enforce the costs judgment.

This would have had a massive effect on the claimant. Her legal expenses policy would have been voided, meaning that it would not cover adverse costs and leaving her personally liable, but the policy would also refuse to pay out the disbursements incurred in her claim and she would have to pay those to us too. There would be a county court judgment against her and on her credit record and the chances were that the defendant would publicise the result and she would have her name forever associated with this.

There was also the possibility that they could then take the issue further and seek further investigations and refer the matter for criminal investigation and action. Those, of course, are very scary issues to have hanging over your head.

Unfortunately, the court had not time to hear submissions on the matter and allowed time for transcripts to be obtained by the defendant and thereafter for submissions to be filed at court. The defendant took their time to obtain the judgment and trial transcript and then proceeded only to send us the judgment transcript well after they had obtained the same despite the order of the court restricting the time from receipt to submissions. It was very unhelpful.

The claimant’s barrister wanted to be paid to draft submissions on a private basis, which the claimant could not afford and so we decided to protect her by having them drafted in house.

Our submissions focused on the fact that clearly the judge did not find the claimant herself to be dishonest or that her account of the accident was dishonest and that the judge did not find any evidence of collusion with the “dishonest” witness. The claim was only dismissed because the claimant did not prove her case, not for any other reason.

We also highlighted that even if the witness was not part of the evidence of the claim, then the trial and all costs would have still have gone ahead as there was a dispute between the two parties as to how the accident occurred which needed to be tried.

The judge concluded the claimant did not give dishonest evidence and that any alleged connection with the witness was not at the very root of the claim. He made no findings on whether the claimant knew the witness intended to give dishonest evidence, that she was involved in procuring that evidence or that she was involved in the rehearsing of his evidence. He therefore found no reason to depart from QOCS and refused permission to enforce the costs order.

This, of course, was of great relief to the claimant and should set a precedent for defendants not to waste judicial time and increase costs with spurious allegations of fundamental dishonesty in a bid to get their costs paid.

There was a legitimate reason for QOCS being created in the funding changes of April 2013. The burden of paying success fees and legal expenses premiums was shifted from the defendant so as ensure the claimant had a legitimate stake in their own costs, and the quid pro quo was that successful defendants would not get their legal costs paid unless QOCS was disapplied.

However, to my great disappointment, it appears defendants will not be taking greater care over making such allegations. My department received what appears to be a standard letter serving a defence from the large defendant firm DAC Beachcroft recently and within that letter was the following paragraph, quoted verbatim:

“We put you on notice that if the evidence permits, we will invite the court to make a finding of fundamental dishonesty. You will be aware that a court may make such a finding regardless of whether or not fraud is expressly pleaded. If the court accedes to our request the matter will become exempt to qualified one way costs shifting and costs will be recoverable on a CCFA basis.

“Please confirm that you have advised your client of the costs consequences of a finding of fundamental dishonesty. In addition, you (sic) client’s claim may be referred to the Attorney General for consideration of commencement of criminal proceedings. Alternatively the claim may be referred to the Insurance Fraud Enforcement Department for further investigation and our client will fully support a prosecution under the Fraud Act 2006. Furthermore your client’s details may also be uploaded to the Insurance Fraud Register which may affect her ability to obtain insurance products in the future”.

This was on a case in which, up until that point, there was an admission of liability and no inference that they had issues with the claim.

Any lay person reading that paragraph would be beside themselves with the fear of all those threats and consider whether to continue with their claim. Of course, this was on a letter enclosing a defence but I am guessing that we will start to see more of these ‘warnings’ on initial letters from insurers in order to discourage claimants from claiming.

I find it abhorrent that defendants think it is appropriate to write such things in letters and suggest we should tell our clients about the risks etc.

Firstly, any solicitor worth their salt would always advise claimants about fundamental dishonesty during the lifetime of the claim and certainly about signing documents with statements of truth. But if defendants are satisfied that there is something fundamentally dishonest about a claim being brought, then it should be, like fraud, expressly pleaded in a defence, not hinted at in correspondence in an attempt to put fear into a claimant.

If something unfolds during the directions stages of a claim, then they can make an application to amend the defence to plead this, or if something comes out within oral evidence at trial then they can make an application at the end of the hearing. But what they should not be doing is causally mentioning the possibility that they might make an application at the end of the case if the claimant doesn’t win.

I am also hearing that more and more applications are being made at the end of trials where the claimant does not win on the basis that they have not proven their case. Again, this is wholly wrong and an abuse of the use of fundamental dishonesty allegations.

Claimant’s representatives need to make sure that where such allegations and applications are made that they are opposed vigorously and where those allegations are unsuccessful ask for the defendant to pay the claimant’s costs of the application even where dealt with on the day of trial, as it is a formal application. Even on fixed-costs cases, there are fees fixed for such applications and if the defendant has made a spurious application, they should pay the costs of having it dealt with.

The courts should be asked to discourage such abuses of the application of fundamental dishonesty. Then perhaps defendants will rethink this tactic and actually only use it where there is actual evidence of fundamental dishonesty.