Court of Appeal gives guidance on fundamental dishonesty

31st October 2017

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Qualified One-Way Costs Shifting (‘QOCS’) was introduced on 1 April 2013 as part of the civil justice reforms recommended by Lord Justice Jackson. QOCS acts as form of protection for claimants in personal injury claims as if a claim is unsuccessful, generally, a defendant cannot recover its legal costs from the claimant. This can leave some defendants in an unusual, and often uncomfortable position, whereby it is more expensive to successfully defend a claim at trial, than it is to settle the claim. However, QOCS protection is not impenetrable and its protection will be lost if the claim is found to be fundamentally dishonest.

The definition of fundamental dishonesty is provided in Gosling v Hailo and Screwfix Direct [2014]. In that case the Claimant fell from a ladder manufactured by the first Defendant and sold by the second Defendant. The Claimant was found to have exaggerated his injuries. He claimed he had constant pain and used a crutch, but was observed shopping at length without the use of crutches, and then adopting crutches to attend a meeting with a medical expert. HHJ Maloney said fundamental dishonesty went to the root of the whole of a claim or a substantial part of it. As the dishonesty in this case was said to contribute to a substantive part of the claim, the Claimant was no longer afforded the protection of QOCS, and although part of the claim was found to be legitimate (in that the Claimant had suffered some harm) a costs order was made against the Claimant.

Three recent cases have brought the point of fundamental dishonesty into the spotlight. Noreen Murray, a cleaner, made a claim of almost £19,000 against her employer for a work-related back injury. She claimed that, as a result of the incident, she could not stand or walk for more than thirty minutes. 19 days after Ms Murray claimed to have been injured, she was filmed on Channel 4’s ‘Coach Trip’ taking part in a bungee jump. As well as losing her QOCS protection, Ms Murray was also handed a 10-month jail sentence, suspended for 2 years.

Paul Roberts and Deborah Briton claimed nearly £20,000 from Thomas Cook after allegedly suffering severe gastric illness on two successive holidays to Spain. Thomas Cook used evidence from social media to refute the fundamentally dishonest claims, and avoided payment of damages and a reported £28,000 in legal costs. In addition, Thomas Cook pursued a private criminal prosecution against the pair for fraud. The couple admitted the offences in October this year, and they were sentenced to 15 and 9-month custodial sentences respectively.

Yesterday, the Court of Appeal gave important guidance on the approach to findings of fundamental dishonesty in Howlett & Howlett v Davies & Ageas [2017]. The turning point of this case was whether a finding of fundamental dishonesty (as distinct from fraud) could be made, even if the defendants had not expressly pleaded it. The Court of Appeal held that fundamental dishonesty does not have to be pleaded for QOCS to be displaced, and that defendants need only challenge the honesty of the a claimant’s case. The key question was whether the claimant had been given warning and proper opportunity to deal with the possibility of such a conclusion. It is good practice, held the Court of Appeal, to challenge the credibility of a claimant explicitly in cross-examination.

The above cases highlight how fundamental dishonesty can attempt to re-balance the costs scales in a defendant’s favour. It is therefore important that defendants bear this potential exception to the QOCS rule in mind during litigation and at trial. Although fundamental dishonesty will not in itself defeat a claim, it is proven to have the potential to save a defendant thousands of pounds in legal costs.

Further Information and Legal Advice

If you would like further information on the above or would like to discuss please contact a member of our Corporate Risk & Insurance Team

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