The government believes its new ‘fundamental dishonesty” rule could lead not only to the number of personal injury claims being reduced but may “have some form of deterrent effect” against exaggeration, it has emerged.
The rule, contained in clause 45 of the Criminal Justice and Courts Act, would require courts to dismiss claims in their entirety where the claimant had been ‘fundamentally dishonest’, unless this would cause substantial injustice.
In a recently published impact assessment on the new rule, the Ministry of Justice (MoJ) said the change would “send a strong message to claimants that if they act in a fundamentally dishonest way there is a greater probability that they will lose all compensation”.
The MoJ went on: “The government anticipates that this will reduce the number of fundamentally dishonest PI claims, and the associated costs of paying compensation, which are met by insurers and by bodies such as the NHS which are not insured.
“In addition, as a behavioural response, the government expects that other PI claims may be exaggerated less, again leading to lower compensation paid by defendants.”
Clause 45 was added to the Act at a late stage and initially met some spirited opposition in the House of Lords, before peers relented and let it pass. 
The assessment said the government does not record data on the number of claims involving ‘fundamental dishonesty’ and the MoJ accepted that only a “small number of claims” would be considered by the courts to fall into this category.
“In the absence of a firm body of evidence to the contrary, it has been assumed that, overall, the amount of legal work required to settle claims in future will remain broadly the same, both on the part of defendants and claimant lawyers.
“It could be that less work is required to resolve some claims in future if the claim appears to defendants to be less exaggerated and if defendants accept the claim with less discussion and negotiation. Conversely it could be that claimant lawyers devote more resource in future to demonstrating that a claim is honest.”
The MoJ said the government had made “no assumption” about the “aggregate reduction in compensation paid” as a result of some settlements being lower.
However, it added: “The government believes it is reasonable to consider that the increased prospect of a claim being dismissed with no compensation paid at all may have some form of a deterrent effect on other cases.”