11 July 2018

Our e-update from April this year first discussed the Inner House of the Court of Session’s decision in Grubb v Finlay [2018] CSIH 29 which was an appeal of the judge at first instance’s refusal to dismiss the pursuer’s claim on grounds of fundamental dishonesty.

In Grubb, there was evidence that the pursuer was exaggerating his symptoms for financial gain. Both the Outer House and Inner House agreed that the courts in Scotland have the power to dismiss an action summarily where there is fundamental dishonesty on the part of the pursuer or an abuse of process. However, this power has to be exercised “sparingly” and only in “a very rare and exceptional case”. Whilst the defender’s attempts to have the case dismissed were defeated on the evidence, the defender did have significant success in limiting the extent of compensation awarded to the pursuer and on expenses, with two-thirds of the expenses of the action being awarded to the defender.

In considering fundamental dishonesty, given the paucity of judicial commentary on the subject in Scotland, it is useful to firstly consider the position in England & Wales. In that jurisdiction section 57 of the Criminal Justice & Courts Act 2015 (2015 Act) provides the court with the power to dismiss a claim upon application by the defendant where it is satisfied that the claimant has been fundamentally dishonest, unless the court is satisfied that the claimant would suffer substantial injustice. The High Court recently highlighted, in the case of London Organising Committee of the Olympic and Paralympic Games v Sinfield [2018] EWHC 51 (QB) that the starting point under section 57 is that the entire claim should be dismissed where there is fundamental dishonesty, unless it would cause substantial injustice. The loss of genuine damages was held to be insufficient to constitute substantial injustice in and of itself. Something more was needed to clear this hurdle. However, quite what constitutes substantial injustice was not considered in detail.

It was hoped in Scotland that, even in the circumstances of the Inner House rejecting the appeal in Grubb, the Lord President would have grasped the opportunity to provide guidance to the profession on how cases involving fundamental dishonesty should be dealt with in Scotland in the future. This, unfortunately, did not happen leaving a degree of uncertainty as to the circumstances in which the courts in Scotland will permit a case to be summarily dismissed on account of the dishonesty of the pursuer.

In Grubb, the court acknowledged that the power to dismiss exists where there is fundamental dishonesty but said nothing more. There have been no further decisions by the Scottish courts on this issue. Will the courts in Scotland adopt the English courts’ definition of fundamental dishonesty? That question remains unanswered. Whilst decisions from the English courts are not binding upon the Scottish courts, they are persuasive.

The waters are further muddied in Scotland by the Civil Litigation (Expenses and Group Proceedings) Act which, in section 8 of the Act, provides for a qualified one-way cost shifting (QOCS) in Scotland, as commented upon in our previous article.

The two exceptions to QOCS focussed upon here are where a pursuer makes a fraudulent representation / otherwise acts fraudulently or behaves in a manner which is manifestly unreasonable in connection with the claim.

The terms of section 8 are completely different terminology to the equivalent provision in the English and Welsh Civil Procedure Rules in which rule 44.16 states that orders for costs made against the claimant may be enforced where the claim is found to be “fundamentally dishonest”. In Scotland, we have the terms “fraudulent representation”, “acts fraudulently” and “manifestly unreasonable” with which to contend. It has clearly been the Scottish Parliament’s intention, for whatever reason, not to mirror the wording of fundamental dishonesty from the English Civil Procedure Rules. Quite how this provision will be interpreted by the Scottish courts is an area of uncertainty.

Comparatively, the consistency in terminology south of the Border between the 2015 Act and the Civil Procedure Rules ought to result in less dubiety and more certainty as to the circumstances under which the court will exercise its powers against a claimant who is being duplicitous. Judicial commentary on the interpretation of the terms “fundamental dishonesty” must be equally relevant in assessing both the merits of a defendant seeking an award of expenses against a claimant and the merits of an attempt to have an action summarily dismissed in cases south of the Border.

In reality, most cases in which there is genuine evidence of dishonesty will result in a negotiated settlement, be it by abandonment or otherwise. The costs involved for all parties are often too much of a risk in this uncharted territory. What is a “rare and exceptional case” of fundamental dishonesty in Scotland is likely to remain an area of uncertainty for some time coming.

We can expect to see some judicial involvement on the interpretation of section 8 of the Civil Litigation (Expenses and Group Proceedings) Act and the circumstances in which defenders will be permitted to recover costs. Until the courts provide guidance on this issue, the interplay between the two provisions will likely remain unsettled for some time coming.

Contact: Joanne Farrell, Senior Associate jfa@bto.co.uk T: 0141 221 8012

See also our article “A grubby business”