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Peers back ‘fundamental dishonesty’ rule

Houses of Parliament [1]

Lord Hunt argued that the word “fundamentally” should be removed

The government’s new ‘fundamental dishonesty’ rule for personal injury actionshas passed its committee stage in the House of Lords without being amended.

The rule, contained in clause 45 of the Criminal Justice and Courts Bill, [2] would require courts to dismiss claims in their entirety where the claimant had been ‘fundamentally dishonest’, unless satisfied that the claimant would suffer substantial injustice as a result.

Lord Hunt of Wirral, partner at DAC Beachcroft and chairman of the British Insurance Brokers Association, proposed an amendment which would have removed the word ‘fundamentally’.

The Conservative peer said that “it seems to me that dishonesty is one of those absolute concepts: either you are dishonest or you are not, in the same way that you cannot refer to something as ‘very unique’ or to someone as ‘slightly pregnant’.

“I know that a similar phrase was used in the Civil Procedure Rules following the seminal – perhaps I should now call it the ‘fundamentally seminal’ – review by Lord Justice Jackson of civil legal costs, but I am not aware that it has been tested or scrutinised by the appeal courts as yet. I would welcome clarification from the minister about the thinking behind the choice of this phrase.”

Lord Hunt said he could not agree that his amendment was going too far. “If a claim is brought which contains a dishonest element – and dishonest always means that there is proof of a deliberate intent to deceive – then that behaviour should rightly put the whole claim at risk.”

Lord Faulks, the justice minister, said it was a “difficult balancing act”, but the government did not believe that removing the word ‘fundamentally’ would be proportionate or practical.

“The sanction imposed by the clause is a serious one – denial of compensation to which prima facie somebody is entitled – and we believe that it should be imposed only where it goes to the heart of a claim.”

He added that he believed the clause would “send a strong message to deter dishonest behaviour” and give a greater incentive to defendants and insurers to investigate dubious claims. “One of the problems is that defendants are often not incentivised to investigate claims properly and pay them out far too easily.”

Lord Hunt agreed to withdraw his amendment.

For Labour, Lord Beecham said the party was content “to allow the courts to deal with any abuse, both in determining the issues of damages and costs and in pursuing criminal proceedings when they are appropriate, and would regard that as applicable to all kinds of claims, not just personal injury claims”.

Lord Faulks said the “epidemic of people claiming in circumstances that most right-thinking people would find deeply unattractive” was why personal injury was being targeted. The clause sought “to strengthen the law” so that dismissal of the entire claim should become the norm in such cases, rather than the exception as now, he explained.

The minister rejected a Labour amendment to apply the rule to defendants, saying this was “fundamentally misconceived” because defendants do not receive damages (except in relation to a counter-claim, when the rule would apply). “A defence which has no merit can be struck out, and there are a number of ways in which a defendant who behaves dishonestly can be penalised.”

Craig Budsworth, chairman of the Motor Accident Solicitors Society, commented: “No defence can be made of outright examples of fraudulent and deliberate exaggerated claims, but as the ‘fundamental dishonesty’ powers are drafted, there is the potential for all sorts of otherwise legitimate claims to be unjustly thrown out. The courts will require much greater clarification of the powers if injustices are to be avoided.”