Howlett v & Anor

For the purposes of rule 44.16(1) of the Civil Procedure Rules 1998, dishonesty is fundamental when it goes to the root of the whole claim or a substantial part of it. Dishonesty about a collateral matter or a minor self-contained head of loss will not ordinarily suffice.

An insurer need not plead fraud, or expressly plead fundamental dishonesty, before the court can disapply qualified one-way costs shifting. The decisive question is whether the claimant had fair notice of the case suggesting dishonesty and a proper opportunity to answer it. Although an explicit allegation in cross-examination is best, no prescribed form of words is required where the challenge to honesty is clear in context.

The claimants sought damages for personal injury and financial loss allegedly caused when the first defendant's vehicle struck a parked car. The insurer denied that the accident occurred as alleged, put the claimants to strict proof, pleaded facts said to indicate a staged or contrived accident, and placed credibility in issue.

The Deputy District Judge dismissed the claim. He found the claimants' accounts untruthful and held that their dishonesty was fundamental. He therefore gave the insurer permission under rule 44.16(1) of the Civil Procedure Rules 1998 to enforce its costs order despite qualified one-way costs shifting. His Honour Judge Blair QC dismissed the claimants' first appeal in the County Court at Swindon.

The further appeal raised whether fundamental dishonesty could be found without an express plea of fraud or fundamental dishonesty, and whether the claimants had been given a fair opportunity to answer the allegation.

1. Appeal dismissed. The Deputy District Judge was entitled to find the claim fundamentally dishonest and to permit enforcement of the insurer's costs order under rule 44.16(1) of the Civil Procedure Rules 1998.

2. The court approved the contextual approach in Gosling v Hailo. Fundamental dishonesty is dishonesty on which the whole claim, or a substantial and important part of it, depends. It does not include dishonesty confined to a collateral matter or a minor self-contained head of damage.

3. Following Kearsley v Klarfeld [2005] EWCA Civ 1510, an insurer need not advance a substantive plea of fraud merely to deny a personal-injury claim. It may plead the material facts from which it invites the judge to infer that the accident did not occur, the claimant was not present, or the alleged injury was not sustained. Rule 44.16(1) can then be invoked if findings properly made at trial establish fundamental dishonesty. Paragraph 12.4 of Practice Direction 44 identifies the usual stage for determination; it does not impose a pleading requirement.

4. The governing safeguard is procedural fairness. A witness whose honesty is challenged must have fair notice of the challenge and a proper opportunity to respond. It is always preferable to put dishonesty expressly. However, neither a plea of fraud nor the use of words such as “dishonest” or “lying” is invariably necessary where the pleaded allegations, cross-examination and conduct of the trial made the challenge sufficiently clear.

5. Here, the defence expressly denied the alleged accident, identified credibility as an issue and set out detailed circumstances said to suggest a staged or contrived claim. The trial judge found that those matters had been explored fairly and squarely in evidence. The claimants had not been ambushed, and the findings of dishonesty properly supported the costs consequence.

• Court of Appeal (Civil Division): dismissed Mrs Howlett's further appeal in [2017] EWCA Civ 1696.
• County Court at Swindon: His Honour Judge Blair QC dismissed the appeal against the costs-enforcement decision.
• County Court at Portsmouth: Deputy District Judge Taylor dismissed the personal-injury claim, found it fundamentally dishonest, and permitted enforcement of the insurer's costs order.