Published November 21, 2014 by Cost Lawyer
Ongoing discussions are taking place in relation to the issue of exaggerated personal injury claims. Clause 49(1)(b) of the Criminal Justice and Courts Bill (expected to come into force in April 2015) addresses this point and has been recently debated in Parliament. Under this clause, unless satisfied that to do so would result in the Claimant suffering a substantial injustice (clause 49(2)), a court must dismiss an entire claim if the Claimant is found to have been fundamentally dishonest, either in relation to the main claim or a related one, and even if fundamental dishonesty is found only in relation to part of the claim. This effectively overturns a decision of the Supreme Court which held that, as a matter of principle, where there had been an abuse of process cases should only be dismissed in very exceptional circumstances.
But what is meant by “fundamental dishonesty” and what additional risks will the coming into force of this Bill pose to the Claimant? It is currently anticipated that the burden of proof in civil proceedings (on the balance of probabilities) will be applied rather than that in criminal proceedings (beyond reasonable doubt) and this clearly favours the Defendant. There is also the question as to whether or not QOCS will still apply in cases where the claim is not dismissed because it will cause substantial injustice. In any event, where a case is dismissed due to fundamental dishonesty, the Defendant’s costs are only payable to the extent that they exceed any damages which would otherwise have been awarded (clause 49(4)). For example, if the Defendant’s costs are £40,000 and the Claimant would have been awarded £25,000 damages, the Claimant will be ordered to pay the balance of £15,000 costs to the Defendant.
If the above clause comes into force, the additional risks to the Claimant could be substantial. Consider a case where an early admission of liability has been made but in which the Claimant’s claim in respect of future loss of earnings is found to be fundamentally dishonest. The parties have agreed all other heads of claim but cannot agree future losses and the case goes to trial. At trial the claim is found to have been fundamentally dishonest due to the Claimant’s unrealistic expectations as to his future losses. As a result, the claim is dismissed, the earlier admission of liability becomes meaningless and the Claimant receives nothing, whilst becoming liability for the Defendant’s costs inasmuch as they exceed previously agreed damages.
There remains the issue of whether or not to dismiss such claims in their entirety will result in injustices taking place. Lord Marks, at a debate on the issue in the House of Lords on 23 July 2014 stated:
“….the subsection works against the interests of justice, or certainly risks doing so, in two ways. The first is by imposing a presumption in favour of dismissal, subject to a modest saving provision that, frankly, is difficult to understand.” (Lord Marks is referring to the provision not to dismiss such claims where to do so would cause substantial injustice to the claimant)
“The second area where I believe there is a risk that justice will not be done is that the clause as it stands allows for no middle course – no way of allowing a judge to reduce the damages rather than dismiss the claim, where a reduction in damages is really what is required to do justice between the parties.”
The Government identifies a possible human rights issue as to the compatibility of the new rule with the right to peaceful enjoyment of possessions in Article 1 Protocol 1 – in particular the right not to be deprived of property without compensation. But it considers such deprivation to be justified in order to deter fraudulent claims and therefore compatible with Article 1 Protocol 1. The Government explains:
“The Government considers that the provisions of Article 1, Protocol 1, do not require that the power must only be confined to ‘very exceptional’ circumstances and that the balance struck in this clause is fair and proportionate. The discretion provided under clause 49(2) not to dismiss the claim where this would cause substantial injustice to the claimant will ensure that the courts have the flexibility to apply the provisions fairly and proportionately in the particular circumstances of an individual case.”
So what will be the effect of this clause when the Bill becomes law in April? Two things we can probably be sure of: firstly, nervousness on the part of Claimants as to how to plead in respect of quantum; and secondly, more Defendants taking cases to trial in the hope that the Claimant’s case will be dismissed as a result of fundamental dishonesty.
The net result therefore is likely to be a substantial increase in satellite litigation. Certainly, it remains to be seen whether or not the court’s discretion to allow the claim (on the basis that not to do so would result in substantial injustice to the Claimant) will be exercised in a manner which is fair to both parties. One also wonders how will the court decide what was fundamentally dishonest and what is simply a difference of opinion to be resolved in quantum negotiations or at trial? More interesting times ahead….