Recent cases provide some new guidance on the options available to litigants.

Strike out

The leading case on the dishonest conduct of litigation and the option of a "strike out" application is Arrow Nominees v Blackledge [2000] 2bclc 167. The Claimant was prepared through dishonest means to try and  strengthen what was perceived to be a weak claim. The dishonest means included forging letters, document destruction and fabrication. The Court of Appeal held that in this case the Claimant’s conduct had amounted to such an abuse of the process of the court as to render further proceedings unsatisfactory and would have prevented the court from doing justice. The judge in these circumstances was entitled to refuse the Claimant to take any further part in the proceedings and should have determined the proceedings against the Claimant by allowing the defendant’s application to strike out the Claimant’s petition.

The court does not strike out a claim due to disapproval of the litigant’s conduct, but because it believes that the conduct has led to an unacceptable risk that there will be an unsafe judgement. The dishonest litigant may be punished through other means if appropriate, as discussed below.

In the recent case of Zahoor v Masood [2009] EWCA 650 the Court of Appeal again had to consider similar issues. In this case both parties to the litigation were dishonest. The judge found at the conclusion of the proceedings that both parties had been guilty of forgery and perjury in the conduct of the proceedings. However, he decided not to strike out the Claimant’s claim on the basis that the defendant had also been guilty of misconduct. He went on to decide the main issues largely in favour of the Claimant. The Court of Appeal held that where a Claimant was guilty of misconduct in relation to proceedings, which was so serious that it would be an affront to the court to allow him to continue with the claim that the claim could be struck out. The judge should consider only the Claimant’s conduct and whether he had forfeited the right to an adjudication of his claim. The defendant’s conduct in this context was irrelevant.

The Court of Appeal had another opportunity to consider the related scenario of whether or not to strike out a genuine claim in circumstances where two of the three Claimants had colluded in the making of a fraudulent claim on behalf of the other Claimant arising out of the same road traffic accident in Shah v  Ul Haq [2009] EWCA Civ 542. The Claimants had genuine personal injuries claims but colluded with a third Claimant to support her fraudulent claim that she had also been in the car at the time of the accident. The defendant applied unsuccessfully to strike out the whole claim. The judge did however order the two successful Claimants who did have genuine claims to pay indemnity costs. The Court of Appeal found that a fair trial in these particular circumstances was still possible therefore the claim should not be struck out. There was no general rule of law, whether in contract or tort, that dishonest exaggeration of a genuine claim would result in dismissal of the whole claim. In this particular case there had been a fair trial and the judge had reached entirely proper findings. The judge could only mark his disapproval of the Claimants’ dishonesty by imposing appropriate sanctions as to costs.

Costs Sanctions       

In Shah v Ul Haq the successful Claimants were left with an order that they pay two-thirds of the defendant’s costs on an indemnity basis.

It is always worth remembering that there is a wide discretion available to the court in relation to costs if it believes that a successful party has been guilty of dishonesty or inflating a claim.

Exemplary damages

The object of exemplary damages is to punish and deter. It is possible to ask for exemplary awards in relation to the tort of deceit. A recent example consists of a policy holder fraud. In Axa Insurance v Jenson Lawtel 18/2 09 the policy holder pretended that her caravan had been stolen. The policy holder received payment before the fraud was discovered. Criminal proceedings were taken and the policy holder received a caution. The judge decided that this caution did not qualify as "punishment" whereby she could avoid double punishment. Exemplary damages were awarded of £4,000 which was about 50% of the basic claim of £8,103 for the return of the money paid out under the policy.

Contempt of court

In Walton v Kirk [2009] EWHC 703 QB the applicant’s insurers applied to commit Mrs Kirk for contempt of court. She had claimed substantial damages arising out of a minor RTA. There were discrepancies between statements verified by a statement of truth and video evidence and also verification of knowingly falsified claims for state benefit. Contempt of court is dealt with by CPR r.32.14 which allows for the possibility of a person being prosecuted for contempt if he or she made, or caused to be made, a false statement in a document verified by a statement of truth, without an honest belief in its truth. The applicant had to prove each of the three elements of the contempt beyond reasonable doubt. Any genuine doubt has to be resolved in the respondent’s favour. The three elements are:

i.          the falsity of the statement;

ii.          the false statement has or would have interfered with the course of justice;

iii.         when the false statement was made, the maker had no honest belief in the truth of the statement.

Mrs Kirk was duly found guilty of contempt in relation to two of the allegations. These were the completion of the "Incapacity for Work" questionnaire and her application for a disabled parking badge. These applications were both verified by a statement of truth. The court found that these applications once verified by the statements of truth would have interfered with the course of justice in the personal injury claim.

It must be noted however that the burden of proof in contempt cases is very high – the criminal standard applies and any application would have to be prepared in great detail. It is unlikely that the courts will be willing to consider such proceedings except in extreme cases. It is suggested that any defendant in a similar position should wait for documents verified by a statement of truth before disclosing any video evidence.

Conclusion

These recent cases demonstrate a willingness to confront dishonest and exaggerated claims by litigants and provide guidance as to the court’s approach in dealing with these issues. In relation to the practical considerations of dealing with a strike out application in the course of litigation, then this must be done promptly otherwise the opportunity will be lost. Practitioners will have to weigh up the benefits of making such an application with the risks of losing and paying out costs, and the inevitable diversion from trial preparation against seeking to gain an advantage from an opponent’s dishonest actions at trial.