Criminal Justice and Courts Bill

Fraudsters beware: ‘Fundamentally dishonest’ law will see dismissal of claims in their entirety

A new law which brings hope to defendants fighting fraudulent claims has been passed in Parliament. The Criminal Justice and Courts Bill contains a provision which requires courts to dismiss the whole of the claimant’s claim if it is satisfied that the claimant has been ‘fundamentally dishonest’.

For over two years BLM and Zurich have joined forces to keep the topic of fraud and fundamentally dishonest claims high on the agenda of the Ministry of Justice, the Law Commission and the Transport Select Committee.

Clause 56 of the Criminal Justice and Courts Bill, entitled the ‘fundamentally dishonest’ clause, has received backing from defendants and their insurers. The new law will come into force imminently, following Royal Assent.

BLM has taken the lead on the issue of fraud and fundamental dishonesty with Zurich culminating in the 2012 landmark decision in Summers v Fairclough Homes, which provided the authority for an entire claim to be struck out at any stage, including after trial, for an abuse of process.  In Summers the Supreme Court did not disturb the lower Court’s award of almost £89,000 in damages for the genuine part of Mr Summers’ claim, despite the finding of fraud by gross and deliberate exaggeration.

Until now, the courts have had only a discretionary power to dismiss an entire claim for fraudulent behaviour which amounted to an abuse of process, but it is a power used rarely, and a fraudulent claimant may still receive compensation in relation to the “genuine” element of the claim.  The discretionary power provided by Summers has lacked consistency in its practical application.  Given the number of cases where fraud (or gross and deliberate exaggeration) continues to be pleaded, publicity of the Supreme Court judgment appears to have had limited deterrent effect.

The use of “fundamentally” in the clause as a qualification provoked debate in the Lords, where some thought it an unnecessary addition.  A helpful response from the Justice Minister, Lord Faulks QC, identified that whilst the phrase was “not linguistically attractive … the clause is aimed at … something that goes to the heart [of a claim]”  Importantly, he observed that determining whether the dishonesty was “fundamental” was something “well within the capacity of any judge.”

David Spencer, partner at BLM and solicitor for the defendant in the litigation and appeal of Summers, said: “BLM continues to be at the forefront of fighting fraudulent claims and this legislation is a fitting conclusion to many years’ of hard work in the fraud arena.  Honest claimants continue to have nothing to fear when this new law comes into effect.  Claimants who are dishonest, and found to be so, should not be surprised to be heavily penalised, even to the extent of forfeiting their entire claim.”

“The concern offered by claimant representatives that this statute will be a “stick used to beat every claimant” is baseless; an application to dismiss the entire claim can only be made with evidence in support and the courts are unlikely to look kindly on defendants who offer a speculative plea.”

David Southwell, Head of Personal Injury Claims at Zurich, said: “Dismissal of a “fundamentally dishonest” claim might be thought a harsh sanction by some, but if its aim is to deter presentation of fraudulent claims from the outset, while at the same time sanctioning those few which might nonetheless enter the system, it can only be a positive thing.  This outcome is potentially worth millions of pounds to our customers.”