Hammer blow as Criminal Justice and Courts Act 2015 is given Royal Assent

On 12 February, the Ministry of Justice announced that new measures had been passed into law in the Criminal Justice and Courts Act 2015 which would further tackle insurance fraud. No specific date has been given for their implementation, but they are widely expected to come into force in April.

The regulations, contained in sections 57 to 61 of the Act, deal with marketing practices and court proceedings. In the case of the former, the Act bans law firms from offering inducements such as iPads or cash to potential clients. In the latter, courts will be required to throw out personal injury cases in their entirety, where the claimant has been found to be “fundamentally dishonest”, unless doing so would cause “substantial injustice”. Neither term is defined by the Act.

The prohibition of inducements, long called for by Justice Secretary Chris Grayling, has been welcomed by large parts of the claimant legal community. They also feel that a similar ban, which was imposed on claims management companies in 2013, should also apply to solicitors dealing in personal injury cases.

However, the introduction of a fundamental dishonesty test has been met with dismay in claimant quarters. One lawyer, Kerry Underwood, the chairman of Underwoods solicitors and Claims Magazine columnist, has said that it could revolutionise the personal injury sector.

As he explains on his blog, kerryunderwood.wordpress.com, section 57 (1)(b) of the Act requires a court to dismiss the whole of a personal injury claim if it is satisfied, on the balance of probabilities, that the claimant has been fundamentally dishonest in relation to any part of the claim.

“Thus fundamental dishonesty in relation to, for example, an aspect of future special damages means that the whole case, including the general damages claim, is lost. Likewise an exaggeration of symptoms, if that is held to be fundamental dishonesty, means that a client loses the whole claim including the claim for his written-off vehicle caused by the other party’s negligence,” says Underwood.

“As none of us know how these draconian and unprecedented provisions will be applied, solicitors should do everything possible to issue proceedings on all matters before the implementation date which is likely to be April 2015. Clearly cases in the filing cabinet now will be affected if proceedings are not issued before the due date.”

Underwood also explains that issuing proceedings is defined as “proceedings started by the issue of a claim form”. As a result, solicitors placing a case in the portal prior to implementation day of the new sanctions will not succeed in avoiding them.

“A claim is brought. Liability is admitted,” says Underwood, imagining a scenario once the Act is implemented. “Past specials are agreed and paid at £40,000. Generals are agreed and paid at £30,000. There is a dispute about future loss of earnings and that issue goes to court and the judge finds that the claimant had an unrealistic view of his future career prospects and has been fundamentally dishonest in his future loss of earnings claim.

“Bang goes the whole award and the claimant must refund the £70,000. Admissions in personal injury cases are now meaningless.

“Satellite litigation will not begin to describe what will happen; it will be constellation litigation.“

Stratos Gatzouris, a partner at Hill Dickinson, writing on the firm’s website, has said that it is likely that some clarity will be achieved once the provisions are tested in court. He has also pointed out that Lord Faulks said that the term “substantial injustice” was in place to give the courts some flexibility to ensure that the new regulations were applied fairly.

“The definition of fundamental dishonesty may or may not follow that which has been adopted in the lower courts recently when dealing with the concept as a QOCS exception. However, Lord Faulks has defined this as something ‘that goes to the heart of the claim’.

“It is unfortunate that the legislators saw fit not to specifically include special damage claims so that a claim can be struck out in its entirety (although Summers v Fairclough Homes [2012] UKSC 26 does state that this can be done but only in exceptional circumstances).”

“Insurers and those who genuinely do not support the making of dishonest claims, will welcome this legislation although a number of questions remain unanswered,” added Gatzouris.

Mark Dugdale