Wed, 14 Apr 2021
When I was in pupillage, about the only thing that was not wholly different from what had been taught at Bar school was that you did not plead fraud or dishonesty without proper grounds. This was all turned on its head with the introduction (or perhaps invention) of the concept of ‘fundamental dishonesty’ (“FD”) in personal injury claims, in relation to both the claim and the claimant.
With this new concept, the age-old rule and settled position about pleading fraud has arguably been diluted. Avoiding for a moment the semantics about whether FD and fraud are the same thing, a claimant, and indeed a judge, should be aware of the issues in the trial. The dishonesty of a witness should - indeed I would say ‘must’ - always be put to them, fairly and squarely in a way they should understand. It should be an unusual case where this was not obviously flagged in advance and the basis for it set out, at least in pleadings, but I do not rule out potentially by some other means. But always it must be particularised.
There will of course be occasions where dishonesty is ‘rumbled’ in court. That possibility is hardly something new or with which a court cannot cope with. There is nothing to stop an amendment to pleadings being applied for, or a sensible discussion between counsel and a judge as to whether dishonesty is now an issue that does need to be explored in cross-examination because the issues have changed in light of how the evidence has developed.
The present position is ripe for further clarification from the Court of Appeal. FD is an important issue and yet the result, intentionally or otherwise, of Howlett v Davies & Ageas Insurance Limited  EWCA Civ 1696 appears to allow defendants to raise it as a matter of routine. The last sentence of paragraph 31 of Howlett is variable in its application – “The key question in such a case would be whether the claimant has been given adequate warning of, and a proper opportunity to deal with, the possibility of such a conclusion [of FD] and the matters leading to a judge to it, rather than whether the insurer had positively alleged fraud in its defence.” Adequate warning is not always expected by some judges to need to be by way of Defence, Counter-Schedule, or formal application. FD has been allowed to be put to claimants based on a vague, unparticularised allegation in a solicitor’s letter, sent some considerable time prior to trial and not followed up with specifics, despite an explicit request for the same from the firm instructed by the claimant. The FD issue on fast-track trials is regularly raised but rarely particularised, even though a finding of FD is no less serious than one of fraud.
The judgment of Master Davison in Mustard v Flower & Anor  EWHC 846 (QB), available on Bailii, gives an excuse to discuss this issue again. In short, the Master did not allow an amendment where the Defendant reserved the right to make an application under s.57 Criminal Justice & Courts Act 2015 and/or to set aside QOWCS protections under Part 44. The Master’s reasoning was as follows:
- There was no reason to reserve the position under s.57, because an application could be made at any time;
- There was no proper basis at that time for FD being present;
- It was potentially prejudicial to the Claimant with regards to her insurers and could increase administration, costs and anxiety of the litigation.
On the facts of that case, there being no basis at the time of the amendment application to alleged FD, “Whether fundamental dishonesty is pursued will be a matter on which the defendant’s insurers and their legal team will have to form a view at the trial. Whether the court then entertains an application will depend on the trial judge’s assessment of a) whether it has some prospect of success and b) the considerations of fairness described above.” Master Davison is crucially pointing out that allegations of FD should be properly considered. They should have a proper basis to give rise to a prospect of success and must address the fairness of the application being made. In short, they engage professional obligations, which whilst different, are akin to alleging fraud or dishonesty more generally.
The Master made clear that what was being discouraged were “pleas of fundamental dishonesty which are merely speculative or contingent.” A claimant not facing a plea, contingent or otherwise, remains at risk because the spectre of such an application always remains. However, importantly the judge also said that, in addition to the approach that may be required at trial in some cases, as set out above, “Where the Defendant does have a proper basis for a plea of fundamental dishonesty and intends to apply under section 57 then… that should ordinarily be set out in a statement of case or a written application and that should be done at the earliest reasonable opportunity.”
The judgment is a timely reminder that defendants should be properly setting their cards out where they do think they have a proper basis. Defendants are not prevented from raising FD where it inserts itself into the case, such as the way evidence develops in the litigation or at trial, but there should still be a proper thought process as to whether it is right to raise FD, on what basis and at the right time. That should either be done formally prior to trial, or conscientiously and clearly considered by the legal team where it raises itself as an issue at trial and set down in some way for everybody to consider. It should not be allowed to be contingently pleaded and then allowed to be raised as an issue at every personal injury trial.
Written by Alexander Mellis from No5 Barristers' Chambers.