In Howlett v (1) Davies (2) Ageas Insurance Limited  EWCA Civ 1696 the Court of Appeal found that the Court was entitled to make a finding of fundamental dishonesty even though dishonesty or fraud had not been specifically pleaded in the defence.
Following a road traffic accident the claimant and her son claimed damages for personal injuries. The insurer did not accept that the accident had happened “as alleged, or at all”. No positive case of fraud was asserted although credibility was expressly stated to be in issue, the claimants were required to prove their case and specific issues of concern were set out in the defence.
Following the trial, the District Judge found that the claimants had actively tried to deceive the Court and held that the claim was “fundamentally dishonest” and granted the second defendant, Ageas, permission to enforce a costs order against the claimants.
The Claimants appealed against that decision, without success, and the matter was remitted to the Court of Appeal.
It was Mrs Howlett’s case that it was not open to the District Judge to make a finding of “fundamental dishonesty” and as a result he could not properly conclude that one-way costs shifting did not apply.
The Court of Appeal dismissed the appeal. It agreed that during the trial the honesty of the claimants had been adequately explored and that every opportunity had been given to the claimants to defend themselves.
The District Judge was entitled to find that the claim was “fundamentally dishonest” and, hence, that CPR 44.16(1) applied.
Where findings properly made by the trial judge led to the conclusion that the claim was fundamentally dishonest, a defendant could rely on CPR 44.16(1) regardless of whether there was any reference to fundamental dishonesty in its pleadings.
So far, this is the first time the Court of Appeal has considered the fundamental dishonesty exception in CPR 44.16(1) and defendants now have a binding authority which supports a common sense approach to this issue.
It is therefore clear that Judges are able to make a finding of fundamental dishonesty even where fraud or fundamental dishonesty has not been specifically pleaded in the defence. Crucially though, following on from this decision, claimants must have notice that there is a challenge to the integrity of the claim presented and they must have a proper opportunity to deal with the issues of honesty and credibility during cross examination.