With fundamental dishonesty rulings, courts are calling time on fraudsters
Much needed clarity has been brought to the law on fundamental dishonesty after the recent judgment in Sinfield v London Organising Committee of the Olympic and Paralympic Games. The ruling from Mr Justice Knowles should embolden insurers tackling fraudulently exaggerated claims to the benefit of honest policyholders.
What constitutes fundamental dishonesty? An entirely fabricated claim, such as a staged traffic accident, manifestly meets the threshold. But what of the genuinely injured claimant who embellishes a claim in the hope of securing greater damages?
The High Court ruling provides an answer. Sinfield injured his wrist while working at the 2012 Olympic Games. He alleged that he and his wife used to do all of their gardening at their home but after the accident they had to employ someone else to do it, and part of his claim involved £14,785.31 for “gardening costs”.
Sinfield disclosed invoices purportedly from a gardener. However, the gardener gave evidence for the defendant that he had worked for Sinfield before his injury and had not prepared any of the invoices submitted by the claimant. The amount he had charged was about £1,650.
At first instance the judge refused to dismiss the claim for fundamental dishonesty. He concluded that the claimant was “muddled, confused and careless” about the gardening component of the claim but that this “did not contaminate the entire claim”.
But on appeal Mr Justice Knowles overturned the recorder’s conclusion, citing the Supreme Court’s recent landmark decision in Ivey v Genting, which confirmed that “whilst dishonesty is a subjective state of mind, the standard by which the law determines whether that state of mind is dishonest is an objective one, and that if by ordinary standards a defendant’s mental state is dishonest, it is irrelevant that the defendant judges by different standards”.
The judge held that dishonesty was fundamental if it “substantially affected the presentation of [the] case, either in respects of liability or quantum”, concluding that “the fact that the greater part of the claim might be honest is neither here nor there”.
It is now indisputable that claimants cannot rely on subjective ignorance or misunderstanding to escape assertions of dishonesty. Nor can those who exaggerate substantial portions of their claims rely on a genuine injury.
Sinfield is one of many recent judgments that seriously frustrate the potential arguments of would-be fraudsters. In 2016 the Supreme Court held in Hayward v Zurich Insurance Company, that where an insurer was induced to enter into a settlement by fraudulent misrepresentations, being suspicious of representations will not necessarily prevent the recovery of sums paid out.
These judgments reflect a sea change in how courts approach fraud allegations and a new willingness to be decisive when the evidence provides two possible alternatives: a tortuous and illogical conclusion that the claimant is innocent but desperately confused, or the logical conclusion that, no matter how impressive the claimant’s demeanour and apparent good character, that person is nevertheless dishonest.
By providing clarity, it must be hoped that insurers will use the Sinfield judgment to benefit honest policyholders.
Caroline Harrison KC is a clinical negligence specialist barrister at 2 Temple Gardens in the Temple.
This article was originally published in The Times Law Brief and can be accessed here.