A clause inserted at the last minute into the Criminal Justice and Courts Bill, requiring courts to dismiss personal injury claims in their entirety where claimants have been “fundamentally dishonest”, has divided peers.
Lord Beecham, the shadow justice spokesman, described clause 45 – which followed a government announcement last month  on reducing insurance fraud – as an “entirely one-sided sanction”, because it failed to penalise defendants. Under the clause, claims must be dismissed unless it would result in “substantial injustice”.
During the bill’s second reading in the Lords earlier this week, Lord Beecham said the clause was inserted “no doubt once again at the behest of the Conservative Party’s friends and supporters in the insurance industry”.
The peer went on: “Again, this is presumably a moveable feast. Of course, a court can already penalise a claimant in costs if it is satisfied that a claim has been exaggerated but, more to the point, this is an entirely one-sided sanction.
“A defendant behaving in similar fashion would suffer no penalty, even though such conduct in a personal injury claim could itself add to the claimant’s suffering.”
Liberal Democrat barrister Lord Marks argued that judges should have the power to throw out an entire case for extreme dishonesty or to reduce awards of damages to reflect the court’s view of such dishonesty.
“However, there are many cases which are affected by what might reasonably be described as fundamental dishonesty where the needs of the claimant for the rest of his or her life must come first and in fairness must be met, and where completely depriving the claimant of damages would be very wrong,” he continued.
“But instead of giving a judge a discretionary power to reject an entire claim or reduce damages to an appropriate extent, this clause would provide that the court must dismiss the claim unless satisfied that the claimant would otherwise suffer substantial injustice. Once again, I sense a lack of trust in judges to act sensibly in the exercise of their discretion in accordance with the justice and requirements of the particular case that they are hearing.”
Lord Hunt of Wirral, a Conservative peer and partner in defendant law firm DAC Beachcroft, supported the principle behind clause 45, but said it might need “clarification and further amendment”.
He asked: “What does it mean to be fundamentally dishonest? What is the difference between dishonesty and fundamental dishonesty? Is it a civil standard of proof? To impose a criminal standard of proof would make it extremely difficult to bring any defence on this basis.
“We also have the situation, which I have known in my career as a practising solicitor, where quite often an overzealous claimant lawyer will include all sorts of areas of claim for which the claimant probably never had it in mind to sue and perhaps will link subsequent injuries to the original accident, when they were clearly due to something that happened afterwards and independently.
“How are we going to deal with a genuine injury that has nothing at all to do with the incident that has given rise to the claim?”
Lord Hunt added that he was not saying the government was “opening up Pandora’s box” with clause 45, but called on it to proceed “carefully and with caution”.
The Association of Personal Injury Lawyers, in its briefing for the debate, said the clause would lead to increase in satellite litigation as lawyers quarrelled over the meanings of ‘fundamental dishonesty’ and ‘substantial injustice’.
APIL predicted an increase in spurious allegations of fraud or dishonesty by “unscrupulous insurers” and an increase in the number of genuine claimants who underplayed their symptoms or failed to bring valid cases at all.
But Lord Brown of Eaton-under-Heywood, a former justice of the Supreme Court, said he was “unpersuaded” by the briefing. He said: “True, it will be necessary on occasion to argue over whether the claimant’s untruthfulness or exaggerations constitute fundamental dishonesty and perhaps it will be necessary to argue whether dismissing his claim entirely would cause him substantial injustice.
“However, given the readiness of some these days to treat an accident as a God-given opportunity to make a fortune… this seems to be a clear steer to how judges should exercise their discretion in the matter. The modest narrowing of an existing discretion is a price worth paying for the discouragement which it is hoped this new provision will provide to those who are inclined or tempted to advance dishonest claims…
“I see no possible logic in suggesting that this provision should therefore be mirrored in regard to the defendant’s conduct of their defence. Surely, on analysis, there is no sensible parallel to be drawn between the opposing cases.”
Justice minister Lord Faulks welcomed Lord Brown’s comments, saying: “Frankly, we do not think that a judge will have any difficulty recognising fundamental dishonesty. We are talking not about a schedule that contains some slight exaggerations or minor inaccuracies, but about fundamental dishonesty.
“If we ask a jury to decide a question of what is dishonest or not, surely we can entrust a judge to decide whether, in appropriate cases, there is fundamental dishonesty. The government are appalled by the explosion of litigation in claims that involve, frankly, lying and fraud.”