Pleading Fundamental Dishonesty
James Patience reviews the case law for 'Fundamental Dishonesty' and finds a much more nuanced position than you may think.
There have been a series of cases which seek to provide clarity on whether a defence of fundamental dishonesty must be pleaded. It is frequently asserted by defendant litigators that there is no requirement whatsoever to give notice of an allegation of fundamental dishonesty. Conversely, those who act for claimant’s often state that such an issue must be specifically pleaded in advance if it is to be relied upon. A brief review of the case law in this area reveals that, in fact, the position is more nuanced than either of those two commonly held positions.
In the case of Howlett v Davies  EWCA Civ 1696 the appellant and her son claimed damages for personal injuries and financial loss allegedly suffered because of a road traffic accident when they were passengers in the respondent’s car. The respondent’s insurer pleaded that they did not accept that the accident had happened “as alleged, or at all”. It was also pleaded that credibility was “in issue”. No positive case of fraud was pleaded, and S57 was not mentioned.
During the trial counsel for the defendant insurer alleged that the appellant, her son and the first respondent had actively sought to deceive the court. The defendant insurer submitted that if any element of fraud was found by the court, it would seek appropriate costs orders. The Judge subsequently found the claim to be fundamentally dishonest for the purposes of CPR r.44.16(1) and dismissed the claim with costs against the claimant.
On appeal the Court of appeal determined that the claimants had been accused of dishonesty during cross-examination and as such “has had fair notice of a challenge to his or her honesty and an opportunity to deal with it”. The court stated that fair notice could include, subject to context, cross-examination which did not include the words “dishonest” or “lying”, although that would be a matter for the trial judge. The Court determined that the key issue was:
“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 insurer had positively alleged fraud in its defence.”
Defendants frequently rely upon the dicta from Howlett as support for the proposition that it is not necessary to plead S57 or fraud at all to pursue these allegations at trial.
Howlett was applied in the case of Pinkus v Direct Line  EWHC 1671 where HHJ Coe QC, sitting as a Judge of the High Court, permitted the defendant to put forward its case of fundamental dishonesty and stated:
“At the beginning of the trial the claimant applied for a ruling that the defendant should not be allowed to run their case on conscious exaggeration, malingering and fundamental dishonesty. I gave an extemporary ruling allowing the defendant to run these arguments. I expand the ruling now to say that I find that in the circumstances of this case the principles set out by Newey LJ in Howlett apply in preference to the principle enunciated in Three Rivers. At the beginning of the trial the claimant had known “what he was facing” for some time. He knew he had been subject to surveillance. He knew there were issues in relation to the medical evidence which made conscious exaggeration at least a possibility…”
The issue was considered again in the case of Mustard v Flower  EWHC 846 (QB). That case concerned an application by the Defendant to amend their Defence to specifically plead “conscious exaggeration”, fundamental dishonesty and S57. The Defendant’s application was largely dismissed (they were permitted to amend to plead conscious exaggeration).
Master Davidson stated that the amendment was unnecessary:
“It is open to the trial judge to make a finding of fundamental dishonesty whether that has specifically been pleaded or not. To put that another way, an “application by the defendant for the dismissal of the claim” pursuant to section 57(1) of the 2015 Act does not require any particular formality. In an appropriate case it could, for example, be made orally and perhaps at as late a stage as the defendant’s closing submissions. But the factors governing whether the trial judge would then entertain it would be as set out by Newey LJ in Howlett , namely 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 insurer had positively alleged fraud in its defence”.
The case of Cojanu -v- Essex Partnership University NHS Trust  EWHC 197 (QB) could be said to represent something of a departure from the previous cases cited above. Claimants frequently rely on this case as support for the proposition that fundamental dishonesty and S57 must be pleaded, and it is easy to see why.
In that case Mr Justice Ritchie reviewed the previous case law and stated at paragraph 47:
“I extract from this judgment and the previous case law that there are 5 steps to be taken by a trial judge when faced with a defence under S.57 before a finding can be made of fundamental dishonesty:
- i) the S.57 defence should be pleaded;
- ii) the burden of proof lies on the Defendant to the civil standard;
iii) a finding of dishonesty by the Claimant is necessary (more on this below);
- iv) as to the the subject matter of the dishonesty, to be fundamental it must relate to a matter fundamental in the claim. Dishonesty relating to a matter incidental or collateral to the claim is not sufficient;
- v) as to the effect of the dishonesty, to be fundamental it must have a substantial effect on the presentation of the claim.”
While this case is certainly useful for Claimant lawyers, paragraph 47 needs to be approached with some caution. In the case of Cojanu fundamental dishonesty and S57 had been clearly pleaded. This was not the issue that was being considered on appeal. The issue that was being considered on appeal was essentially whether the Judge below was correct to conclude that Cojanu had been fundamentally dishonest based on discrepancies and inaccuracies in his pleaded case. Because the focus of Cojanu was not the extent to which fundamental dishonesty must be pleaded, it can be argued that the guidance from the earlier cases is to be preferred.
In the case of Jenkinson v Robertson  EWHC 791 (QB) the claimant was a litigant in person, there was no pleading of fundamental dishonesty or S57 and these issues were raised for the first time in closing submissions. The Judge found that the Claimant was fundamentally dishonest, and the Claimant appealed against this finding. One of his grounds of appeal was that he was not given fair notice of the allegation.
On appeal, the Hon. Mr Justice Choudhary held that:
“It is in the interests of basic fairness that a Claimant should be given adequate warning of, and a proper opportunity to deal with, the possibility of a finding of fundamental dishonesty. The consequences of such a finding are severe, and rightly so, but the safeguards against an unjust finding are the giving of adequate notice of the allegations and a proper opportunity to respond. What amounts to such notice or opportunity in a given case will depend on the circumstances. Ordinarily, the allegations will be either pleaded or set out in writing, but there may be cases where that is not necessary.”
During the trial it was not expressly put to the Claimant in cross examination that he was being dishonest. It was put to him that he was not suffering from the alleged pain when he said he was. The Court found that this was insufficient and amounted to unfairness.
Mr Justice Choudhary stated:
“…there is a world of difference between putting to the Claimant that he was not in fact suffering the pain he now alleges and an allegation that he is fabricating or exaggerating the entire story about pain.”
At paragraph 25 of the Judgment Mr Justice Choudhary summarises his view on the requirement for fair notice:
- v) An allegation of fundamental dishonesty does not necessarily have to be pleaded, the key question being whether the claimant had been given adequate warning of the matters being relied upon in support of the allegation and a proper opportunity to address those matters;
- vi) The s.57 defence can be raised at a late stage, even as late as in closing submissions. However, where the claimant is a litigant in person, the Court will ordinarily seek to ensure that the allegation is clearly understood (usually by requiring it to be set out in writing) and that adequate time is afforded to the litigant in person to consider the defence.”
The case of Cojanu represents something of a departure from the general rule that all that is required is “fair notice” of the allegation of fundamental dishonesty as opposed to a specific pleading of the allegation. While, as a matter of best practice, by far the best thing to do is to plead the matters fully in any Defence, there remains ample scope for defendants to argue that a claimant has had fair notice by other means. This is particularly the case where the claimant is legally represented. This author considers that the paragraph 25 of Jenkinson (set out above) accurately sets out the present position at law in relation to the requirement to plead fundamental dishonesty.