The limits to fundamental dishonesty: Michael v IE & D Hurdford Ltd (t/a Rainbow)  EWHC 2318 (QB)
September 28, 2021
As a personal injury barrister, I frequently represent Claimants who have been accused of dishonesty. Cases involving allegations of dishonesty are very complex and the stakes are very high.
You might be forgiven for thinking that once a Claimant wins at trial they can finally put their feet up and relax. After all, the Judge presiding over the trial has decided that they were telling the truth. But sometimes, the Defendant has a final trick up their sleeve. There is nothing stopping the Defendant from bringing an appeal. The Defendant can go to a more senior Judge (usually, at Circuit or High Court level) and argue that the Judge who dealt with the original trial was wrong. The Defendant will try to persuade the Judge dealing with the appeal that the Claimant was dishonest after all.
It is worth emphasising that appeals for Defendants are not a silver bullet. The Judge dealing with the appeal cannot simply substitute their views for those of the original Judge. They will have to decide whether the decision that the Claimant was a honest witness was one that no reasonable Judge could have made. The Judge dealing with the appeal will be necessarily deferential to the Judge who heard the trial. They will have had the chance to watch the Claimant give evidence. The Judge dealing with the appeal has not. It is very rare that the Judge dealing with the trial will make a decision which is obviously wrong. This tends to be immediately apparent from the judgment. If the Defendant pursues an appeal, and the appeal fails, this is an easy way to waste lots of money.
However, if the Defendant does appeal, the Claimant can be left in a difficult position. The Claimant will usually have been represented during the trial by solicitors acting on a no-win-no-fee agreement. When it comes to the appeal, the Claimant will sometimes be required to pay their lawyers privately. Defendants, on the other hand, are usually represented by large insurance companies. Their resources are effectively unlimited. A Defendant can spend as much money as they need to in pursuing an appeal. If the Claimant successfully defends against the appeal, they are effectively left where they started. If the appeal is allowed, the Claimant will lose their compensation and end up with a finding of fundamental dishonesty. It is easy to see why Claimants might feel that an appeal puts them in danger whatever the underlying strengths of the appeal might be.
This is why the recent decision of Michael v IE & D Hurdford Ltd (t/a Rainbow)  EWHC 2318 (QB) is so refreshing. The case involved a Claimant who brought a claim for personal injury compensation. The Defendant alleged dishonesty during the trial but was unsuccessful. The Claimant was awarded compensation and the Defendant appealed. For whatever reason, the Claimant’s solicitors no longer represented the Claimant during the appeal. The Claimant’s solicitors did not instruct counsel to attend the hearing. The Claimant himself did not attend the appeal hearing. The Claimant was effectively defenceless. But the Judge dealing with the appeal (Stacey J) did not simply let the Defendant win by default. The Judge carefully reviewed the evidence and decided that there was no sustainable challenge to the decision made by the Judge who presided over the trial. The appeal failed.
There are some important points to take away from the judgment and I will deal with these below.
The test for dishonesty remains a subjective one
At paragraph 36 of the judgment, Stacey J quoted the test for dishonesty in the important Supreme Court authority of Ivey v Genting Casinos UK Ltd  UKSC 67:
“The definition of dishonesty is as set out in Ivey v Genting Casinos UK Ltd (trading as Crockfords Club)  UKSC 67,  3 WLR 1212. At para 74:
‘These several considerations provide convincing grounds for holding that the second leg of the test propounded in Ghosh does not correctly represent the law and that directions based upon it ought no longer to be given. The test of dishonesty is as set out by Lord Nicholls in Royal Brunei Airlines Sdn Bhd v Tan and by Lord Hoffmann in Barlow Clowes: see para 62 above.When dishonesty is in question the fact-finding tribunal must first ascertain (subjectively) the actual state of the individual’s knowledge or belief as to the facts. The reasonableness or otherwise of his belief is a matter of evidence (often in practice determinative) going to whether he held the belief, but it is not an additional requirement that his belief must be reasonable; the question is whether it is genuinely held. When once his actual state of mind as to knowledge or belief as to facts is established, the question whether his conduct was honest or dishonest is to be determined by the fact-finder by applying the (objective) standards of ordinary decent people. There is no requirement that the defendant must appreciate that what he has done is, by those standards, dishonest.’” [author’s emphasis]
It is important to remember that dishonesty is still something which has to be viewed subjectively. It is the state of mind of the Claimant that the court is concerned with. The court must decide what the Claimant knew or believed about the facts of the case before then deciding whether they were dishonest. This is really important when considering any shortcomings in the evidence. It is sometimes tempting to assume that a Claimant who is inconsistent, or is generally a poor witness, must be lying. However, the court needs to consider the state of mind of the Claimant. The court thus has to grapple with the question of whether the Claimant has consciously set out to mislead the court. How likely is this? Is it not more likely that the Claimant has simply struggled to get their evidence across?
A witness who struggles to give coherent evidence may be confused – not dishonest
One of the interesting things about the judgment is that there are several excerpts from the cross-examination. The transcript shows that the Claimant appeared to struggle to understand some of the questions which were put to him. Where the Claimant understood the questions, the Claimant struggled to give a coherent response. The following excerpt is from paragraph 22 of the judgment:
“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. The following extract is illustrative:
“Q: Do you accept that the contents of paragraph 15 before they were amended are dishonest because that didn’t happen?
A: Which one didn’t happen?
Q: The contents…the events that you described in paragraph 15 did not happen, did they?
A: I don’t understand this one. Is it saying that (inaudible) is required?
Q: Can you read English?
A: Yes, but —-
Q: Have you read it? You understand what it says in English don’t you? I just want to be absolutely clear that you understand what it says in English
A: I don’t think, sir, this is not clear from me.
Q: You…did….you told the maker of that statement that that’s what happened, didn’t you, the maker of that document, I should say? Sorry, I’m going to need an answer to the question, please.
A: I don’t know, I really don’t understand this one.
And so it went on.” [author’s emphasis]
To be fair to the Defendant, a Claimant who struggles to answer questions may not be confused. They may be feigning ignorance as a means of avoiding difficult questions. However, the Judge pointed out that the decision of the original Judge rested upon their assessment of the Claimant as a witness. The original Judge was better placed to make this assessment than the Judge dealing with the appeal. The original Judge was perfectly entitled to decide that the Claimant was confused, as opposed to anything more sinister:
“[…] Although the entire record of the proceedings had been transcribed for the appeal, it is impossible to pick up nuance, intonation, pauses and the like from reading a transcript, or even tell why a witness’s sentence was incomplete (see paragraph 13 above). The Recorder was much better able to decide that the respondent was not feigning ignorance and dissembling when he appeared confused than the appeal court with only the transcript to go on. This case is an illustration of the importance of live evidence and the power of the trial process to establish the facts and ensure a just outcome for both parties. It was through Mr Poole’s advocacy that the incorrect, or deceitful, claim for physiotherapy was revealed for example and through the respondent’s oral evidence that the appellants were unable to establish that he had been dishonest.” [paragraph 56; author’s emphasis]
Shortcomings in pleadings or disclosure statements are not automatically evidence of dishonesty
The Defendant pointed out during the trial (and the appeal) that there had been serious problems with the pleadings and the disclosure statement. In a nutshell, the Claimant had signed statements of truth in these documents to confirm that they were accurate. It turned out that they were not accurate (and in fact, were seriously misleading). The Defendant suggested that this was itself equivalent to dishonesty. However, the Judge made clear that this was going too far. The Judge emphasised that shortcomings in pleadings or disclosure statements should not automatically be considered to be evidence of dishonesty. The real question is whether the Claimant can provide an honest explanation:
“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 test for dishonesty is that set out in Ivey cited above. Reference to the case of LV v Zafar  EWCA Civ 392 (civ) does not assist. It concerned contempt of court which has its own definition, for which dishonesty is not a necessary ingredient. The test of recklessness is different to the test of dishonesty, even though recklessness in signing a false statement of truth, or disclosure statement may result in committal proceedings under CPR 81.18. But contempt of court is a different concept to dishonesty. There may also, of course, be cases where signing an inaccurate witness statement, statement of case or disclosure statement will be evidence of dishonesty, such as in LOCOG v Sinfield and Roberts v Kesson but it does not automatically follow. In this case the respondent was able to provide an honest explanation.” [paragraph 49; author’s emphasis]
The court may need evidence about the advice given to the Claimant by his solicitors before drawing inferences about the signing of documents
As mentioned above, the Claimant had signed documents which were inaccurate. The Judge made clear that the court in deciding whether to hold this against the Claimant may need to have evidence about the advice which was given to him before the documents were signed. The question is again whether the Claimant simply did not understand what he had signed, or whether he did understand what he had signed and there was instead some malign purpose:
“The respondent was not asked to waive legal professional privilege and there was no evidence before the court as to what advice had been given to him by his solicitors about the various documents he had signed. The Recorder was entitled to conclude that the respondent did not understand the documents, whether those that he had himself signed, such as his witness statement, or those signed on his behalf by his solicitors, namely the Particulars of Claim and the Reply. The Recorder noted at paragraph 23:
‘It seems to me that the explanation for that [a vehicle repair quotation] 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 whom, 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.’” [paragraph 47; author’s emphasis]
The lessons learned
This is an interesting case with some important lessons for Claimants:
- If you are successful, but the Judge fails to deal with something adequately in the judgment, always ask the Judge to give additional reasons. Any deficiency in the judgment will be exploited by the Defendant in any appeal.
- If you are successful, and the Defendant pursues an appeal, don’t panic! The fact that the Defendant is appealing does not necessarily mean that they have proper grounds to appeal. However, be prepared to fight the appeal if the court grants leave.
- If you are representing a Claimant who has been successful at trial, and where there has then been an appeal, bear in mind that leaving them to their own devices on the appeal may do real damage. On the other hand, successfully resisting an appeal may mean being awarded a significant sum of standard basis costs.
N.B. This article is provided for information purposes only and does not constitute legal advice. Chris will be more than happy to advise with any specific queries.