Cautionary tales amongst the fraud successes

2024 was another year where defendants had several high-profile trial successes in cases involving allegations of fundamental dishonesty (“FD”). This was not least noticeable within the large loss arena with cases such as Kirsty Williams-Henry v Associated British Ports Holdings Ltd [2024] EWHC 806 (KB) and Shaw v Wilde [2024] WHC 1660 (KB)grabbing many of the headlines.

However, amongst these well earnt successes are several cases that should give defendant’s some food for thought. In a number of cases the courts have refused to make findings of FD in cases where they view the allegations of dishonesty have not related to the substantive claim, as illustrated in Cullen v Henniker-Major [2024] EWHC 2809 (KB), or the defendants could not properly substantiate allegations with firm evidence as seen in Thakkar (& Others) v Mican [2024] EWCA Civ 552.

In Cullen, HHJ Ambrose refused several allegations of FD made by the defendant. The allegations included allegations surrounding paid care the claimant paid her carers during the first lockdown despite the fact she was isolating at the time and whilst she went away on holiday, even though the carers in question did not accompany her. HHJ Ambrose stated that it was “conspicuous that the claimant makes no claim in respect of her paid care and therefore no claim in respect of her paid care during lockdown or her paid care whilst on holiday.” Despite hearing complex and detailed arguments on whether the care had formed part of the claim previously, the court was satisfied that the payments did not make up part of the claimant’s primary claim for the purposes of a finding of FD.

In Thakkar there was a genuine dispute as to the accident circumstances of a road traffic collision. The claimants averred that the defendant drove his van into their car. The defendant disagreed and said that the claimants’ car pulled out from a parked position into the side of their van. There was an independent witness who supported the claimants’ version of events. The defendant called into question the independence of this witness and pleaded within the defence that the claimants’ credibility and honesty would be questioned at trial. Prior to the trial the trial judge presided over the CCMC and when considering whether the defendant could amend their defence to plead FD commented that she was unimpressed by the allegations of dishonesty, pointing out that "all the [defendant] had were doubts" and asking, "why on earth is there any basis for pleading fundamental dishonesty?". The relevant amendments were refused for these reasons. It followed, at trial, that the court preferred the claimants and the independent witness’s version of events, and no finding of FD was made.

It's worth recalling that Section 57 of the Criminal Justice and Courts Act 2015 was created primarily as a shield to protect defendants from dishonest claimants and claims. When considering whether such a significant allegation should be made against a claimant, defendants should (amongst other criteria) address whether a) there is firm and clear evidence of dishonesty, and, b) whether that dishonesty relates to the substantive part of the claim (and goes to its heart). The defendant may have doubts about the claimant’s veracity and, there may indeed, be some concern in relation to matters that fall outside the claim. However, this is not sufficient for a trial judge to make a finding of FD.

Insurers should continue to take a no tolerance approach to fraud, especially given the reported rise of the same over recent years. Checks and balances can be put in place by defendant insurers to ensure that allegations are made (and pleaded if preferred) in cases where the high bar and strict legal tests are met. Suggested steps such as seeking additional legal advice by counsel and/or others legal experts within this field before signing off on the allegation being made may be sensible. Having a designated fraud lead to run allegations by may also be another step that may be taken. These steps amongst others will ensure that the making of such a significant allegation is monitored, resulting in it only being utilised in appropriate cases.

Having sufficient checks and balances would seem to be increasingly important as the risk of indemnity costs still looms large for defendants following the case of Thakkar (& Others) v Mican [2024] EWCA Civ 552. Although the Court of Appeal refused the claimant’s appeal to award indemnity costs following an unsuccessful pleading of FD by the defendant in the initial claim, Lord Justice Coulson left a sting in the tale within paragraph 28 of the judgment stating that a defendant who makes allegations of this kind runs “a very significant risk that, if the allegations fail, indemnity costs will be awarded against them”.