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To plead or not to plead? Fundamental dishonesty and statements of case: Mustard v Flower & Ors [2021] EWHC 846 (QB)

Legal Update

Written by Peter Yates.

Modern litigation requires a cards-on-the-table approach. Litigants cannot be expected to deal with a particular issue unless they have had sufficient notice of it, and parties must make clear what their positions are. How, then, should a defendant plead a case where it might be said that the claim is fundamentally dishonest, but where that cannot be known until the claimant has been cross-examined?

That was the issue in Mustard v Flower & Ors [2021] EWHC 846 (QB). The claim arises from a road traffic accident in 2014. Liability is admitted, but causation and quantum are in issue. The matter is due for trial in November 2021.

There is a significant dispute between the parties as to the claimant’s medical history and her post-accident presentation. Her case is that she sustained a subarachnoid brain haemorrhage and a diffuse axonal brain injury. The defendant says that she suffered no brain injury, and nothing more than a minor whiplash. The medical issues are closely linked to the parties’ different positions on the speed of the impact; the claimant says it was at least a medium velocity impact, and the defendant contends that it was minor.

The defendant made an application to amend its defence. Two amendments – dealing with the description of the forces involved and with the claimant’s pre- and post-accident medical presentation – were uncontroversial. The third proposed amendment was as follows (the italics are the court’s):

“4.4 The Claimant’s accounts of the RTA and its immediate aftermath, and the nature and severity of her symptoms both before and after the accident have varied over time, are unreliable and are in issue. They have been exaggerated (or in the case of her pre-RTA history minimised) either consciously or unconsciously – the Third Defendant cannot say which absent exploring the issues at trial. In the event that the Court finds that the Claimant has consciously exaggerated the nature and/or consequences of her symptoms and losses, the Third Defendant reserves the right to submit that a finding of fundamental dishonesty (and the striking out of the claim pursuant to section 57 Criminal Justice and Courts Act and/or costs sanctions including the disapplication of QOCS) is appropriate.”

Master Davison refused permission for the italicised part of the proposed amendment. It was said to be neither necessary nor appropriate.

The proposed reference to fundamental dishonesty was not necessary because it is open to a trial judge to make a finding of fundamental dishonesty whether it was pleaded or not. Reference was made to Howlett v (1) Davies (2) Ageas Insurance Limited [2017 EWCA Civ 1696 (where it was said that the key question was whether the claimant had been given adequate warning of, and a proper opportunity to deal with, the possibility of a finding of dishonesty) and Pinkus v Direct Line [2018] EWHC 1671 (where it was said that the claimant must have had sufficient notice of the issues to be raised). An application pursuant to section 57 “did not require any particular formality”, and “in an appropriate case” could be made orally and as late as during the defendant’s closing submissions. In Howlett, the defence had made it clear that the defendant did not accept that the index accident had happened as alleged or at all and that credibility was in issue, and had listed various factors which had cast doubt on the claim. That was said to have given the claimants in that case sufficient notice of the points the defendant intended to raise at the trial. In Pinkus, the claimant had known “what he was facing” for some time. In that case, the judge made it clear that no issue could be raised “of which the claimant would not have any sufficient notice and which he might have been able to deal with by way of additional evidence or which the experts would have been able to address, but had not and could not in the course of the hearing.”

Further, the proposed amendment was not appropriate because, on the evidence currently available, it had no real prospect of success. It was also said to cause prejudice to the claimant, who would have to report a plea of fundamental dishonesty to her legal expenses insurers, thereby opening up the theoretical possibility of them avoiding the policy ab initio (the judgment does not consider whether any such report would have to be made to the insurers if the defendant raised concerns about fundamental dishonesty in, for example, a CCMC, or in correspondence).

Two final points should be noted.

First, the claimant’s attempt to have the references to “exaggeration” of her symptoms excluded from the amended defence were rejected. The amended defence did not plead that any such exaggeration was “conscious” (on the contrary, the extract set out above explicitly left open the possibility of any exaggeration being unconscious). Had any such references been excluded, the claimant would no doubt have sought to use that exclusion in order to invite the trial judge to limit the defendant’s cross examination of the claimant. That, said Master Davison, would plainly be wrong and unfair to the defendant. The defendant had a proper evidential basis for pleading that there was exaggeration, and was entitled to explore whether that was benign or malicious.

Second, and somewhat against the tenor of the rest of the judgment, Master Davison ended this part of the judgment by stating that:

“nothing in the foregoing is intended to detract from the modern “cards on the table” approach. Where the defendant does have a proper basis for a plea of fundamental dishonesty and intends to apply under section 57, then, subject to the direction of the judge dealing with case management or the trial judge, that should ordinarily be set out in a statement of case or a written application and that should be done at the earliest reasonable opportunity. What I am intending to discourage are pleas of fundamental dishonesty which are merely speculative or contingent.”

On its face, therefore, the significance of this judgment is simply confined to those cases where there is a potential issue as to dishonesty, which may or may not be borne out after the evidence at trial. Nevertheless, this part of the judgment is not easy to reconcile with Howlett. What is clear is that the defendant must give the claimant sufficient notice of the matters which may underpin a future submission that the claim is fundamentally dishonest, and must do so in such a way that the claimant has had a proper opportunity to marshal evidence in response. Whether or not the pleadings actually plead fundamental dishonesty, the defence and counter-schedule should specify the matters on which that allegation may later be based.

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