Dishonesty: In the Spotlight Again

Introduction

In recent months, the High Court has handed down two appellate decisions of undoubted significance in relation to arguments that a Claimant has been fundamentally dishonest.  Those cases are Mansur Haider v DSM Demolition Ltd [2019] EWHC 2712 (QB) and Jason Roberts v (1) Alan Kesson; (2) Tesco Underwriting Limited [2020] EWHC 521 (QB).  In what is clearly a continually developing area of law, of particular importance for Defendant insurers, the judgments are worth considering in more detail.

Mansur Haider v DSM Demolition Ltd [2019] EWHC 2712 (QB)

Facts

Haider concerned a claim for damages arising out of a road traffic accident in July 2014.  Inter alia, the Claimant brought claims for credit hire and associated losses which exceeded £30,000.  In support of his claim for hire charges, the Claimant asserted that he was impecunious. 

The Defendant alleged that the collision was deliberately staged and that the Claimant, in conjunction with the car in front of him, intentionally brought about the crash by braking suddenly and unnecessarily so as to cause the Defendant’s insured to hit the Claimant from behind.  At first instance, HHJ Tindal, found that the Claimant had reasonably braked in light of the car in front of him performing a dangerous manoeuvre by turning left at the last minute, but that the Claimant “over-braked and overreacted and came to a stop”, thereby depriving the Defendant’s insured of the opportunity to stop himself.  The Judge found that there was no negligence on the part of the Defendant’s insured, and therefore the claim failed.

During the litigation, the Claimant had signed a disclosure statement, verified by a Statement of Truth, which did not disclose the existence of any credit cards he held.  He had also been asked a series of Part 18 Questions in which he was specifically requested to list all his credit cards and supply supporting information such as credit limits and statements.  In response to that question, the Claimant had replied, “I did not have any credit card accounts”.  At trial, in oral evidence, the Claimant admitted to possessing two credit cards at the relevant time.  Moreover, the Claimant had been asked Part 18 Questions about his bank statements and, in his Replies, disclosed that he held one bank account with HSBC.  It was put to him in cross-examination that the bank accounts disclosed did not show the paying in, by him, of a cheque in the sum of £3,800 made to him by the Defendant’s insurer by way of an interim payment.  In evidence, the Claimant accepted that he had another account, but stated that he had only opened one account and the bank had made an error and opened a second account in his name.

The Defendant had argued before the Judge that the Claimant had not been honest in relation to both his disclosure and his evidence.

HHJ Tindal took the view that there had not been ‘particularly good disclosure’ but that none of it had given him the impression that the Claimant had been dishonest.  The Judge took the view that the inconsistences were explicable on the basis the Claimant was trying to recall events four years ago and he was ‘basically an honest man’.

Appeal

Both parties appealed.  The Claimant’s appeal (as to the Judge’s findings on liability) are not relevant for current purposes.

On appeal the Defendant argued that the Claimant’s case was fundamentally dishonest and that HHJ Tindal should have so found, because first, the Claimant did not disclose, either on his list of documents, or in his response to Part 18 Questions, that he held two credit cards.  It was said that the disclosure list was false; the non-disclosure was a lie; and the Claimant compounded that lie in his Responses to the Part 18 Questions.  Secondly, the Claimant did not disclose that he held a second bank account, but had only admitted this in cross-examination. 

Judgment

Julian Knowles J allowed the Defendant’s appeal, finding that the claim was fundamentally dishonest. 

His Lordship considered that the Part 18 Questions asked of the Claimant were not difficult; had been put in writing; and the Claimant had time to consider the relevant documentation and take legal advice before answering them.  His Lordship also considered that the account given by the Claimant in oral evidence, namely that the bank had opened another account in his name in error, into which the Claimant had paid his interim payment, was not credible.  The Court found that the Claimant knew he had two bank accounts and two credit cards, and that he had concealed the information.  Julian Knowles J considered that the Claimant had deliberately failed to disclose highly material evidence, and that there was no basis on which HHJ Tindal could properly have concluded that the Claimant had simply been confused about those matters.  The only possible reasonable inference was that the Claimant intentionally failed to make full disclosure and that such failure was dishonest. 

As to the question of whether the dishonesty was “fundamental”, his Lordship considered it was.  It did not relate to some collateral matter, but went to the root of a substantial part of the claim (in excess of £30,000).

Of particular importance, his Lordship stated, “[T]he importance of the Claimant giving proper disclosure about his financial circumstances needs to be emphasised”, and he aligned himself with a submission made by Counsel for the Defendant, that “…the County Court cannot carry out an assessment of the issue of impecuniosity when a litigant fails to give full financial disclosure.  By doing as he did, the Claimant prevented the Defendant from carrying out a proper investigation into his claimed impecuniosity.  This skewed and distorted the presentation of his claim in a way that can only be termed fundamentally dishonest” [59].

Jason Roberts v (1) Alan Kesson; (2) Tesco Underwriting Limited [2020] EWHC 521 (QB).

Facts

The claim concerned a road traffic accident in July 2017.  The Second Defendant was suspicious about the circumstances of the accident but, at first instance, Recorder Kelbrick found that the accident was the result of the negligent driving of the First Defendant.  At the time of the accident the Claimant was driving a Mercedes E250 which suffered significant damage all along its nearside.  The Claimant’s Schedule of Loss, supported by a Statement of Truth, claimed the pre-accident value of the vehicle in the sum of £10,400, on the basis that the vehicle was, in effect, a ‘write off’.

In his first witness statement, dated the 6^th March 2018, the Claimant confirmed that the engineer’s report advised the vehicle was to be written off and stated that he had authorised the sale of his vehicle for salvage, which salvage monies he then used to hire a replacement taxi on a cash basis.  He maintained his claim for the pre-accident value of £10,400.

The Second Defendant undertook enquiries which revealed that on the 5^th March 2018 (i.e. the day before the Claimant signed his first witness statement) the Claimant’s Mercedes had passed its MOT.  They also discovered Facebook entries in which the Claimant was seeking to sell the vehicle in a roadworthy state, backed by the MOT certificate, for £7,000.

Having had those enquiries brought to his attention, the Claimant produced a second witness statement in which he said that, on reflection, the first statement was accurate, “save for one small detail”.  The High Court subsequently considered that the second statement did not fully explain the picture in respect of vehicle disposal, hire charges and what happened thereafter.

In the second statement, the Claimant gave evidence that he had sold the vehicle to his brother in law, who ran an auto company, but that his brother in law became frustrated because of delays and, in order to avoid tension between them, in September 2017 the bother in law persuaded the Claimant to take the damaged car back.  The Claimant’s position then being that in September 2017 the car was returned to him, but in its damaged state.  On his own evidence, the Claimant then, apparently, purchased parts for the vehicle, engaged his brother in law to undertake the repairs (which took about a week), following which the car was returned to him.

At trial, it was put to the Claimant that his claim in relation to the £10,400 pre-accident value was dishonest.  The Claimant had, eventually and it seems with some reluctance, accepted in oral evidence that his initial witness statement was untrue.

At trial, the Defendant made submissions on the issue of fundamental dishonesty and, in particular, argued that the entirety of the claim was so infected by dishonesty that s. 57 of the Criminal Justice and Courts Act 2015 should be activated.  

Recorder Kelbrick gave what was described on appeal by Jay J as a “rather brief” ex tempore judgment.  The Recorder did not address specifically the issues joined under s. 57 of the 2015 Act.  He addressed the claim for £10,400 and pointed out inconsistencies between the two witness statements.  He made a finding that the Claimant had, “accepted he was dishonest in part when making his first statement, but I do observe that he did not persist with that dishonesty.  Whether or not that was because he had been, to use [Counsel for the Defendant’s] words – ‘flushed out’ – or whether it was not, nevertheless he did not persist with it, and did not persist with it in oral cross examination today”.  The claim for £10,400 was rejected on the basis there was insufficient evidence to support it.  It could have been framed as a claim for the cost of repairs and the diminution in value of the Claimant’s Mercedes, but there was no evidence on either of those two matters.  He dealt with other claims that were before him in relation to storage charges, hire charges etc.

Appeal

On appeal the Defendant argued that the Recorder’s judgment was seriously deficient in relation to the s. 57 issue and that there was a mass of evidence which demonstrated that, in particular, the Claimant’s first witness statement was dishonestly untrue.  It was argued that the Claimant had stated precisely, and in terms, that the vehicle had been sold when that was not the case, and it was only when the Second Defendant drew attention to that fact, that the Claimant changed his story.  The Defendant also relied on the decision of Julian Knowles J in Haider in relation to the Claimant’s failure to disclose various financial documentation/information in support of a plea of impecuniosity vis-à-vis credit hire charges.

Jay J concluded that the Recorder’s reasons for his decision were inadequate; he had not properly addressed the issue of dishonesty.  Objectively speaking, Jay J considered that the Claimant’s first witness statement was untrue on an important issue (the claim for £10,400 pre-accident value) and the second witness statement did not put the matter right.  Jay J considered that the Recorder should have grappled with those matters properly and made clear findings, but he had not done so.  Accordingly the appeal would be allowed.

However, the question for the Court was remained whether, in the circumstances of the case, the appeal should be conducted by way of a rehearing, with the High Court determining the issue(s), or whether a retrial would be required.

Jay J observed that that the conducting of a rehearing was not straightforward given a finding of fundamental dishonesty against the Claimant was extremely important and that he should only proceed on that basis if he was driven to conclude that there was only one answer to the fact in issue, and that if he were in any doubt, he should direct there to be a new trial.  In relation to arguments about storage charges, and hire charges, Jay J was not prepared to conclude that there was ‘only one answer’ such that he should conduct a rehearing.

However, in relation to the claim for £10,400 pre-accident value, Jay J concluded the result was different – the only permissible conclusion was that the Claimant had been fundamentally dishonest in advancing a false claim in the Schedule of Loss and in his first witness statement.  No proper explanation had been given for those falsities and none could possibly exist.

Jay J gave some useful guidance as to the approach to be adopted when considering the operation of s. 57, which is of general application (at [54]): “The language of Section 57 is important.  The Court must be satisfied on the balance of probabilities that the Claimant has been fundamentally dishonest.  The real question is whether the Claimant has been fundamentally dishonest and not whether he has persisted in that dishonesty” (emphasis maintained).

Jay J also considered that the Claimant’s dishonesty was ‘fundamental’.  He adopted the formulation provided by Julian Knowles J in the London Olympic and Paralympic Games case.  Jay J also provided further useful, general guidance as to the meaning of ‘fundamental’ and the approach to be adopted in stating: “In my view, what is required is a global assessment in light of the claim as advanced in its entirety, but also in view of the saliency and importance of the particular claim under consideration” (at [60]) and, “In my judgment, applying that approach, which is necessarily a holistic approach…” (at [61]). 

In a parting comment that is sure to resonate loudly on both sides of such litigation (for obviously different reasons!) Jay J said, “It was the policy of Parliament in enacting Section 57 that even in circumstances where other claims may be valid, if a party advances a claim which is dishonest and it is significant and substantial, the Court should not be slow to find that the stringent criterion of Section 57 has been fulfilled” (at [61]) (emphasis added).

Comment

The approach of HHJ Tindal in Haider will no doubt resonate with many practitioners’ own personal experiences in credit hire cases where impecuniosity is alleged.  On many occasions, witnesses and Judges are painstakingly taken through the failings in disclosure only for the Judge to then brush those failings to one side as being of minor/trivial significance and/or insufficient to overcome the Judge’s ‘impression’ that a witness is otherwise credible and honest.  Whilst naturally each case will turn, to a large extent, on the evidence given by an individual Claimant in order to explain the failure(s) in disclosure of relevant documents, in the absence of a compelling reason, it seems that a lax/excusatory approach to those failings on the part of the Judge is now unlikely to be unsustainable. 

It is instructive to look at the tone and language used by Julian Knowles J, in finding that dishonesty was proved in Haider (emphasis supplied):

• “It was plainly dishonest for the Claimant not to have disclosed his credit cards or his second bank account and the accompanying documentation” [57];
• “He deliberately failed to disclose highly material evidence” [58];
• “The importance of the Claimant giving proper disclosure about his financial circumstances needs to be emphasised” [59];
• By failing to provide full disclosure, “…the Claimant prevented the Defendant from carrying out a proper investigation into his claimed impecuniosity.  This skewed and distorted the presentation of his claim….” [59]

These comments – that card/bank statement information is “highly material evidence” and that the absence of the same “skews and distorts” the presentation of the Claimant’s claim, and prevents a Defendant (and it should be said by extension, the Court) from being able to properly assess the claim, are powerful dicta.  So too is his Lordship’s comment that, “It was plainly dishonest for the Claimant not to have disclosed his credit cards or his second bank account and the accompanying documentation”.  That latter passage will no doubt be regularly brought to the attention of first instance Judges up and down the country.

The facts of Haider also indicate that, where the documentation received suggests the Claimant has not been entirely open with their disclosure and/or not provided everything they ought to have done, it may well be appropriate to draft a series of concise and focused Part 18 Questions, to pin down precisely what the Claimant is saying about his/her financial position.  This will necessitate early, and forensic, consideration of the financial documentation.

Roberts is an important decision not least for three reasons:

• First, it confirms that what matters for the purpose of applying s. 57 is whether the Claimant has been dishonest, and not whether, for example, the Claimant had been (or at least arguably had been) dishonesty at some prior stage, but had since relented/otherwise not persisted in his/her prior dishonesty. 
• Secondly, it reiterates that in considering whether proven dishonesty is ‘fundamental’ the Court must undertake a global assessment in light of the claim advanced in its entirety as well as in view of the saliency and importance of the particular claim under consideration.  A “holistic” approach is to be taken. 
• Thirdly, and probably most importantly, it confirms that Courts should not be slow to find that the requirements of s. 57 have been met.

Both these judgments are undoubtedly to be seen as resounding successes for Defendants.

Although dealing with differing effects of a finding of fundamental dishonesty (the disapplication of QOCS pursuant to CPR r. 44.16(1) in Haider, and dismissal of an otherwise compensable claim under s. 57 in Roberts) these two judgments, following on as they do from two now very well-known decisions of Martin Spencer J in the cases of Molodi and Richards, certainly appear to evidence a continuing trend at High Court appellate level to adopt a much more robust approach to issues of dishonesty, as well as a greater willingness to find that dishonesty has been established.  The High Court appears to be sending a clear message that the hitherto more indulgent and excusatory approach, as appears to still be the case in the County Court, is not to be tolerated.  One need only consider what was described as being the “much too benevolent approach” of HHJ Main QC in Molodi; or the decision that HHJ Tindal had reached a conclusion which was not reasonably open to him in Roberts, to appreciate that the High Court anticipates, and expects, that Judges will take a tougher stance on dishonesty.  Indeed, Jay J’s indication in Roberts that the Court should not be slow to find that s. 57 had been satisfied, could hardly be clearer.

Jake Rowley is a member of the Farrar’s Building Personal Injury and Civil Fraud Teams.  Jake frequently delivers training, seminars and workshops upon request.  Please direct any such request to the Farrar’s Building Clerking Team.

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