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No requirement to plead fundamental dishonesty:

Lorna & Justin Howlett v Penelope Davies & Ageas Insurance Limited [2017] EWCA Civ 1696, considered.

The Court of Appeal confirmed that there was no obligation to expressly plead fundamental dishonesty in order to invite the court to make such a finding at trial.

In this case, a claim for personal injury following an alleged road traffic accident, the [Second] Defendant insurer had advanced a put to proof defence only. Although it must be recognised that the defence did plead that the Second Defendant ‘did not accept that that the accident occurred as alleged or at all’. Credibility had been expressly put into issue. The defence pleaded that Ageas ‘did not assert a positive case on fraud at this time.

The Deputy District Judge at first instance found:

  • that the defence ‘suggested in the clearest possible terms to the claimants that they have not been honest’ and that there were allegations of dishonesty therein.
  • that there had been cross examination to that effect and so the claimants had known what they were facing.
  • that the two Claimants had been fundamentally dishonest in their claims and that, therefore, the Claimant lost their QOCS protection.

The Claimants appealed to HHJ Blair, sitting at the County Court at Swindon. The appeal was dismissed and the Claimants then appealed to the Court of Appeal. The matter came before Newey LJ, Lewison LJ & Beatson LJ.

Delivering the judgment of the Court, Newey LJ found that whilst statements of case are crucial to the identification of the issues between the parties and what falls to be decided by the Court, the mere fact that the opposing party has not alleged dishonesty in his pleadings will not necessarily bar a judge from finding a witness to have been lying: in fact, judges must regularly characterise witnesses as having been deliberately untruthful even where there has been no plea of fraud.

Newey LJ continued that where a claim is denied, and the pleadings follow the guidance from Kearsley v Klarfeld (not putting forward a substantive case of fraud, but setting out “the facts from which they would be inviting the judge to draw the inference that the claimant had not in fact suffered the injuries he asserted), it must be open to the trial judge, assuming that the relevant points have been adequately explored during the oral evidence, to state in his judgment not just that the claimant has not proved his case but that, having regard to matters pleaded in the defence, he has concluded (say) that the alleged accident did not happen or that the claimant was not present. The key question in such a case would be whether the claimant had been given adequate warning of, and a proper opportunity to deal with, the possibility of such a conclusion and the matters leading the judge to it rather than whether the defendant had positively alleged fraud in its defence.

There was no obligation upon a defendant to have alleged in his defence that the claim was fundamentally dishonest in order for QOCS to be displaced.

However, it should be noted that Ageas’ defence, while eschewing “a positive case of fraud at this stage”, adverted to the possibility of the Court finding “elements of fraud to this claim”; the defence expressly stated that Ageas did “not accept the index accident occurred as alleged, or at all”, and it was denied that “there was an accident as alleged”. Further, various matters were pleaded, casting doubt on the claim, including facts that were stated in terms to be “beyond mere coincidence and, instead, … indicative of a staged/contrived accident and injury”. It was held that this gave the claimants sufficient notice of the points that the defendant intended to raise at trial and the possibility that the judge would make a finding of fundamental dishonesty. It could be argued that these pleadings go further than the standard ‘put to proof’ defence and that, in the right case, it could still be open to a claimant to argue that s/he has not been given adequate warning of the issues to be raised at trial and the possibility of a finding of fundamental dishonesty. As always, each claim will need to be considered on its own merits. However, it would certainly appear that that particular argument will now be more difficult for a claimant to pursue.

Newey LJ, in light of the authorities referred to in paragraphs 34-35 of his judgment, considered whether the honesty of the claimants’ evidence and case was adequately explored during the oral evidence. Whilst no transcript was available, it was clear to their Lordships from the written judgment of the Deputy District Judge that it had been. Interestingly, in re-examination, counsel for the claimants had asked whether her evidence had been honest (she replied that it had been), thereby putting honesty into issue in any event.

Newey LJ ended his judgment with the following unequivocal comments:

‘First, where a witness’ honesty is to be challenged, it will always be best if that is explicitly put to the witness. There can then be no doubt that honesty is in issue. But what ultimately matters is that the witness has had fair notice of a challenge to his or her honesty and an opportunity to deal with it. It may be that in a particular context a cross-examination which does not use the words “dishonest” or “lying” will give a witness fair warning. That will be a matter for the trial judge to decide. Secondly, the fact that a party has not alleged fraud in his pleading may not preclude him from suggesting to a witness in cross-examination that he is lying. That must, in fact, be a common occurrence.’

This decision essentially confirmed the practice that had been in place in any event. The complaint that fundamental dishonesty had not been formally pleaded was infrequently successful beforehand and will be even less likely to succeed now. The decision centres on whether a claimant has been given sufficient warning of the issues that a defendant will raise at trial and the possibility of a finding of fundamental dishonesty. If a put to proof defence is advanced in less robust terms than was apparent in this case, it might well be argued that there was no / no adequate warning. Equally, however, Newey LJ’s final comment suggests that adequate warning may well come from cross examination alone.

Whether or not a claimant has been given fair warning will be determined by the trial judge in each case. A defendant that pleads, for instance, that it is denied that a claimant was injured in an accident will probably have done enough. However, a brief recital of the key facts that a defendant relies upon for rejecting the claim, and a warning that, dependent upon the oral evidence given at trial, the court may be invited to make a finding of fundamental dishonesty, will put a defendant in a much stronger position.

Bernard Pressman / 31st Oct 2017


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