Proving Fundamental Dishonesty

Three recent cases, considered below, have provided guidance as to how a court should assess allegations of fundamental dishonesty.

‘When you blame and criticize others you are avoiding some truth about yourself’. Deepak Chopra

Amdur v Krylov (13/04/2021, HHJ Blackhouse, County Court at Central London)

Liability was admitted. Causation and quantum were very much in dispute. The Claimant, a clairvoyant to the rich and famous, sometime TV presenter, and a self-styled ‘wheeler dealer’ who bought and sold cars, paintings, watches and candles, brought claims for general damages, loss of earnings, credit hire and physiotherapy following a road traffic accident.

The Claimant claimed to have been unable to have offered psychic readings for 2 years after the accident as he had been unable to concentrate properly. He said that he ‘just lay on my couch’ and did not go out, except for treatment during the first few months following the accident.

The Claimant’s loss of earnings claim was variously quantified throughout the claim at £162,500, £100,000, £264,087 and £312,500. The Claimant had previously obtained a forensic accountancy report, but decided not to rely on that report at the pre-trial review. By the date of trial, the loss of earnings claim was quantified at £150,000, with the Claimant now appearing as a litigant in person, having parted company with his solicitors some 11 months previously.

The Claimant’s evidence regarding the intensity and duration of his symptoms was undermined by social media intelligence and bank statements obtained by the Defendant, which showed that the Claimant had attended at a charity event 9 days after the accident and had then travelled to India at 3 months post-accident. Various other entries showed him attending at charity events during the 2 year period over which lost earnings were sought.

Contrary to the Claimant’s assertion that he had been unable to work, various transfers in his bank statements were accompanied with the reference ‘reading’. There were also a number of large cash deposits. The Claimant explained the ‘reading’ entries as payment for readings undertaken prior to the accident; suggesting that he told clients not to pay him unless he was ‘100% right’, and that this frequently caused a delay in payment.

That explanation was undermined by the fact that many of the payments were from repeat clients. The Claimant then suggested that such payments were for candles. The trial judge rejected that explanation and found that: ‘I am prepared to accept that he may not have felt well enough to do as many as usual or to work to normal capacity, but I am satisfied that he did some readings’.

From an analysis of the Claimant’s bank accounts, the Defendant was able to show that the Claimant sustained no loss of income following the index accident.

The trial judge described the case as ‘unusual’ in that the Claimant disavowed the Schedule of Loss served with the Particulars of Claim (and signed with a statement of truth), together with two later emails, described as part statement, part updated schedule of loss.

It was noted that the Claimant had been ‘at pains to tell the court that he considers that his solicitors had exaggerated his claim by putting forward heads of loss which he is no longer pursuing’. That is not, in my experience, an unusual scenario, especially when a claimant runs into difficulty in cross-examination. The issue is made worse by the fact that many witness statements fail to deal adequately, or at all, with items of special damage.

As to the various financial claims that the Claimant had not pursued to trial, the court noted:

91. The use of the past tense in s57 (‘has been’) and the case of Roberts v Kesson [2020] EWHC 521 both show that abandoning or correcting dishonest claims will not necessarily allow a claimant to escape a finding of fundamental dishonesty.

The court also noted the difference between a loss which was not proven on the evidence- as was found to be the case with the Claimant’s credit hire claim- and claims which were advanced dishonestly.

The claim for loss of candle sales was found not to be dishonest as the Claimant ‘admitted in his witness statement of April 2019 and in cross-examination that he made some such sales after the accident’.

The Claimant’s undoing proved to be his positive and maintained averment that he had been unable to work as a psychic reader for 2 or more years after the accident. The court applied the test for fundamental dishonesty as follows:

For the reasons I have already given, I have found that this was an untrue statement and that the Claimant was able to and did do some psychic readings following the accident. Clearly, he must have known that he did that work and I find that in this respect the Claimant has been dishonest. I am also satisfied that this is fundamental dishonesty in that the dishonesty went to a substantial part of the claim. At its lowest, the Claimant was seeking £80,000 for lost psychic readings (in the Levine letter) and six-figure sums for loss of earnings generally. This head of claim formed a substantial proportion of the value of the claim and I also accept that the presentation of the claim in this way adversely affected the Defendant’s ability to settle the claim.

Interestingly, the court went on to find that a claim of £10,000 for loss of rental income, found not to be proven, was, in any event, ‘not significant in the context of this case’.

Having found the Claimant to have been fundamentally dishonest, the court dismissed the claim pursuant to s. 57 of the Criminal Justice and Courts Act (CJCA) 2015.

Michael v 1) I E & D Hurford Ltd, 2) NFU Insurance [2021] EWHC 2318 (QB)

Liability was admitted, with the Defendants contending that the claims for personal injury, physiotherapy and credit hire were fundamentally dishonest.

There were a number of issues with the Claimant’s evidence, including:

That of a claim for 8 sessions of physiotherapy, supported by an invoice and discharge report detailing notes of those 8 sessions, only one session had been undertaken, with the Claimant completing home exercises thereafter. When challenged, the Claimant claimed that he was confused about both the questions posed and the nature of the claim;
Failing, in the context of an assertion of impecuniosity, to disclose that he worked part-time for Asda (in addition to disclosed employment with Uber) and to provide wage slips for that employment. The Claimant immediately admitted this when cross-examined about his bank statements and maintained that he had disclosed that employment to his solicitors, but that they had failed to note it;
Failing to give disclosure of credit card statements; his bank statements showing that payments had been made to credit card accounts. The Claimant, again, contended that he had given the documents to his solicitors and was puzzled why they were not before the court.

At first instance the Recorder found that the Claimant ‘was not “basically fraudulent”’ and, despite dishonesty in certain aspects of the claim, the Claimant was found to be honest.

In reaching that conclusion, the Recorder noted that the Claimant had “happily volunteered” information in cross-examination and noted:

“I assume a more determined fraudster – as was put to him he was – could simply have said absolutely nothing about it. It seems to me that the explanation for that being omitted lies in the way in which his evidence was prepared. I am reluctant to criticise individuals or firms of solicitors or anyone else from who, of course, I have not heard, but there are question marks, it seems to me, about what went into that statement and what was omitted from it.”

It is however easy to see the limitations of that approach, especially in cases in which a claimant realises that the ‘game is up’ in cross-examination and cynically provides a mea culpa in an attempt to avoid a finding of dishonesty.

The single issue on appeal concerned the correct approach to s. 57.

The case serves to highlight the, admittedly rare, occasions when there will be a difference between whether ‘the claim’ (per CPR 44.16(1) or the Claimant (per s. 57(1)(b) of the CJCA 2015) is fundamentally dishonest.

Whilst Julian Knowles J in Sinfield observed (obiter) that:

“60. …it will be rare for a claim to be fundamentally dishonest without the claimant also being fundamentally dishonest, although that might be a theoretical possibility, at least.”

Stacey J noted:

51. It may, perhaps, be a less rare occurrence than it seems when the benefit of the disputed elements of a claim (such as physiotherapy treatment, vehicle storage and transportation and credit hire fees) are not paid to a claimant for their benefit, but paid to the service provider, by a claimant’s solicitor.

The Defendant’s appeal failed, with the High Court holding that the Recorder was entitled to conclude from the Claimant’s oral evidence in cross-examination that he was not dishonest; noting his lack of familiarity with his statement and his ready concessions in cross-examination.

What of the fact that the Claimant had signed various documents with a statement of truth? Stacey J held that:

49. It is too bold a submission to assert that an inaccurate pleading or defective disclosure statement is synonymous with the respondent’s fundamental dishonesty.

The court referred to the Ivey test for dishonesty and found that the Claimant was not dishonest on that basis.

The case underscores the importance of ensuring that statements are drafted in the witnesses own language (per CPR 32.8 and 32PD.18.1):

22. The lack of familiarity with his statement was evidenced from the respondent’s cross examination when he explained that he did not understand some parts of the statement that he was taken to and could shed no light on them and appeared unconfident of his ability to read English and it is apparent from his evidence that English was not his first language.

Aspiring appellants would also be well-advised to consider carefully the wording of the court at first instance. Stacey J noted that:

42. In Haider v DSM Demolition [2019] EWHC 2712 (QB) the challenge was to the adequacy of the judge’s reasoning in light of the claimant’s evidence which was “plainly dishonest” thus enabling Julian Knowles J to overturn the first instance judge’s conclusion. On the facts of that case the plain dishonesty was also demonstrably fundamental and went to the root of the claim. Similarly, in Roberts v Kesson and Anor [2020] EWHC 521 the claimant had accepted that parts of his first witness statement were dishonest... The findings of fact led inexorably to the conclusion that the dishonesty that the claimant had admitted went to the root of the claim.

Thorny issues regarding privilege, proportionality and practicality arise from Stacey J’s observations at para. 51 that:

If the defendant solicitors consider that potential dishonesty lies with a claimant’s solicitor and not their client then surely their attention is better directed at the solicitor firms, rather than the hapless client who has instructed them?

…Where, as here, there was a genuine accident with genuine injuries and vehicle damage, but also aspects of the evidence which appear troubling or dishonest, a defendant may, in order to prove dishonesty on the part of a claimant him or herself, need to explore in evidence potential complicity or collusion by a claimant with their solicitor. It may depend in part on the adequacy of the explanation for the inaccuracies provided by the claimant. That did not happen in this case.

Clearly the Defendant did not know until cross-examination what the Claimant’s evidence would be regarding the physiotherapy documentation and his failure to understand his statement. How could those issues have been raised with the Claimant’s solicitors prior to trial?

Further, attempts during cross-examination to explore what a claimant was told by their solicitors are almost always met with an objection that legal advice privilege applies.

There is scope in certain circumstances for defendants to rely on the provisions of CPR 44.16(2), although it is difficult to envisage how those provisions would have assisted the Defendant in this case.

Elgamal v Westminster City Council [2021] EWHC 2510 (QB)

The Claimant sustained a serious knee injury whilst exercising at the Defendant’s gym. Liability was compromised at 65% in the Claimant’s favour. The Claimant contended that the accident had curtailed his career as a stuntman, however the Defendant had concerns, primarily arising from surveillance evidence, that the Claimant was exaggerating his symptoms.

By the time of the orthopaedic joint statement, the experts had viewed the surveillance footage and agreed that the Claimant was capable of walking normally, using a staircase and using public transport. They were agreed that there was no evidence that he could squat, kneel or twist on his left knee, and that his symptoms did not reasonably prevent him from his current freelance work which was of a sedentary and light manual capacity.

The Defendant noted that the Claimant had previously presented with an antalgic gait (i.e. limping) when examined by the experts. However, as noted by Jacobs J in relation to the past loss of earnings claim of £67,576.99:

19. The Defendant’s case on fundamental dishonesty did not, however, focus on this aspect of the claim actually made. This was for good reason. The case of fundamental dishonesty concerns the alleged exaggeration of the Claimant’s symptoms, including the manifestation of a limp, to Mr Unwin and others.

However, there is nothing which suggests that this exaggeration, even if it existed, had an impact on the claim in respect of past losses that the Claimant was putting forward.

The Defendant was similarly hampered in making a fundamental dishonesty submission regarding the provisional future loss of earnings claim of £20,000 and the future loss of opportunity claim of £307,000, with Jacobs J noting that:

23. …Again, this was for good reason. There was no doubt that the undisputed injury had put paid to the Claimant’s career as a stunt man, regardless of whether the Claimant was exaggerating a limp, or difficulties walking or anything else.

The Defendant’s submissions on fundamental dishonesty centred on the past care claim of £10,666, and on a statement signed by the Claimant shortly after service of the Defence in which the Claimant alleged that he was unable to sit for any length of time, could not walk for more than 20 minutes without the knee giving way, and that he ran awkwardly and with a noticeable limp.

Following disclosure of the Defendant’s surveillance evidence the Claimant provided a second statement in which he described making a significant effort to appear ‘normal’, and that his body subsequently ‘paid the price’ for this.

At trial, the judge found that the Claimant was exaggerating the ongoing effects of his injury and awarded him damages of £125,321, but refused the Defendant’s submission to dismiss the claim pursuant to s. 57 of the CJCA 2015, holding:

“What do I make of this claim?

The claimant clearly in his evidence believes that he is disabled to a greater extent than I have found. He gave clear evidence that he was making adjustments to get into the car that were not visible to me. From his perspective he was not lying. However objectively he was exaggerating and so as a fact was lying.

It is not just a case of looking at what claimant claims v. what he’s recovered. The reality of why he’s not recovered the major head of claim, future loss of earnings is the failure to produce the evidence to establish a difference between what a stuntman earns and sedentary employment. His lies played no part in this aspect of the case.

Although I have not accepted the level of his ongoing disability and therefore found there was an exaggeration; there was an exaggeration as to the level of the ongoing disability arising from a very serious base injury.

Those findings were not fundamental to this case. They certainly did not result in a reduction in general damages to the level the defendant submitted or indeed anywhere near that level, nor did they result in a loss of a Smith v Manchester award.

The claimant was thus not fundamentally dishonest and my awards stand.”

On appeal, the Defendant argued that the words ‘potentially adversely affected’ within the Sinfield definition of fundamental dishonesty indicated that the court should be concerned not only with the claim that was actually advanced, but with the claim that might potentially have been put forward in the light of the alleged dishonesty had the surveillance evidence not been disclosed.

Jacobs J rejected that proposition:

70. I do not accept the full width of this approach. The relevant statutory word is “fundamental”. That is the only statutory word, and paragraphs [62] and [63] in Locog should not be read as though they are a substitute for it…

71. The Defendant’s argument, based on the word “potentially”, loses sight of the need for the dishonesty to go the root of the claim. It invites enquiry into what claims might have been advanced, even if they were not actually advanced. It is difficult to see how a claim which was not actually advanced can be said to have been fundamentally dishonest... I do not consider that the Locog case is to the contrary effect. Julian Knowles J was considering a dishonest claim for gardening expenses that was actually made. He was not considering dishonesty in the context of a claim that was not actually made, but which might theoretically have been made.

72. Ultimately, it seems to me that the question of whether the relevant dishonesty was sufficiently fundamental should be, and is, really a straightforward “jury” question: as HHJ Harris QC said, it is a question of fact and degree in each case as to whether the dishonesty went to the heart of the claim. That must involve considering the dishonesty relied upon, and the nature of the claim – both on liability and quantum – which was actually being advanced.

Therefore, whilst the court will analyse abandoned or reduced heads of loss when considering fundamental dishonesty, it will not speculate as to claims that might have been advanced.

As to the type of evidence that might be required, Jacob’s J noted that:

75. … In my view, where there is room for dispute as to the impact of alleged dishonesty on a particular head of claim, then the Defendant – who bears the burden of proving fundamental dishonesty – will need to lay the necessary groundwork for its argument; for example, by eliciting from experts that their opinion on a particular head of loss would be different if a claimant’s case as to the extent of injury were accepted or rejected.

The decision of the trial judge was upheld with the appeal court declining to find dishonesty in circumstances where the judge below had not done so:

94. In the present case, the judge held that the Claimant clearly in his evidence believed that he was disabled to a greater extent than the judge had found. The judge went on to say that, from the claimant’s perspective, he was not lying. In my view, these findings negate a necessary requirement for a finding of dishonesty, since they can only be read as a finding that the Claimant had a genuine belief in the facts which he represented. That finding must relate both to the Claimant’s evidence in the witness box at trial, and statements to similar effect to doctors at an earlier stage. The judge did not find that the Claimant had (subjectively) lied to him in his evidence, or that he had (subjectively) lied in the statements that he made to doctors’.

Practice Points:

Be realistic and try to identify at an early stage which heads of loss are likely to be fundamentally dishonest and which are likely to fail for want of evidence. A targeted and proportionate approach will be more persuasive at trial.
Ensure that all previous Schedules of Loss are in the bundle. I often see trial bundles that only contain the final Schedule. As the court noted in Amdur, abandoning or correcting dishonest claims will not necessarily allow a claimant to escape a finding of fundamental dishonesty.
Respond fully to the Schedule of Loss in the Defence. This will ensure that the areas of dispute are properly identified prior to disclosure, and will assist in ensuring that full and proper disclosure relevant to those issues is provided.
Ensure that witness statements are drafted in the witnesses own language so as to prevent, or at the least reduce, any later argument that they have not understood the contents.
Consider whether Pt. 18 Questions are required, either before or after witness statement exchange, to clarify any areas of ambiguity and to ensure that any evidence of concern is directly addressed by the claimant.
Seek disclosure of bank statements if there are any concerns as to whether the claimant has continued to work or may have had alternative sources of income.
Consider whether, as suggested in Elgamal, expert evidence is required on the impact of any alleged dishonesty on the value of the claim.