A kick in the 'fundamentals'

Clause 45 of the Criminal Justice and Courts Bill was agreed following debate by the House of Lords on 23 July 2014. It now returns to the House of Commons. The Bill provides that a claim must be struck out in circumstances where the claimant has been found by the court to have been, “fundamentally dishonest,” and the court considers that the claimant would not suffer, “substantial injustice.”

Clause 45 reverses the Supreme Court decision in Summers v Fairclough Homes, in which application to strike out was refused. The claimant originally valued his claim at over £800,000. Surveillance evidence demonstrated he had grossly exaggerated his disability. He then reduced his claim to £250,000. He was awarded £88,716.

Attempts were made in the Lords to alter the clause. Lord Hunt proposed to remove the word ‘fundamentally’ saying, “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.’”

The Peers rejected the amendment, Lord Faulks (Minister of State for Justice) said that the removal of the fundamental requirement would not be proportionate or practical, whilst recognising that the application of the clause would be, “a difficult balancing act.” He said: “The Government simply do not believe that people who behave in a fundamentally dishonest way…by grossly exaggerating their own claim or colluding should be allowed to benefit by getting compensation in spite of their deceit. Clause 45 seeks to strengthen the law so that dismissal of the entire claim should become the norm in such cases.”

He added that the sanction, “will be imposed only where the dishonesty is fundamental; that is, where it goes to the heart of the claim. Ask a judge to decide whether someone has been fundamentally dishonest, it is well within the capacity of any judge. They will know exactly what the clause is aimed at — not the minor inaccuracy about bus fares or the like, but something that goes to the heart. I do not suggest that it wins many prizes for elegance, but it sends the right message to the judge.”

The retention of ‘fundamental’ means that the judge will have to decide that dishonesty goes to the heart of the claim before balancing this against the genuine part of the claim and considering whether “substantial injustice” would result from strike out.

Lord Marks suggested that public purse considerations could also be taken into account. Could ‘substantial injustice’ include any element of consideration of costs to the public purse - especially NHS care? He is presumably talking here about the failure to recover NHS charges through CRU (not currently a feature in most disease cases).

There is a real problem with this. Cost to the taxpayer of fraudulent claims could potentially be invoked in any number of different ways. Any wording which tried to introduce such broader considerations would almost certainly empty the provision of all practical effect. Clearly, the threshold for strike out under Clause 45 will be very fact dependant.

Dishonestly making out a claim for five bus fares when one bus fare was incurred will not support a possible strike out, even though the claimant knew when signing the schedule of loss that this was the case.

Assessing cases for strike out is likely to boil down to an informed, ‘I know one when I see one’ approach. Cases will be decided upon their own facts and it is impossible to define the limits of the clause in operation.

The most significant factor should be balancing the potential value of the compensation to be gained by dishonesty against the value of the genuine part of the claim. Significant costs of investigating and litigating the dishonest part of a claim could also be important. In many cases it may be that the threat of an application could be as important as actually carrying that through. Insurers may already have a fair idea about which claimant firms seem to have the most dubious claims. Deterrence is often the best way to use any weapon.