These questions have been answered in the recent Court of Appeal decision, Lorna Howlett & Justin Howlett v Penelope Davies & Ageas Insurance Limited  EWCA Civ 1696.
The Claimants alleged that they had sustained personal injuries in a road traffic accident. The Second Defendant’s primary position was that it did not “accept that the index accident occurred as alleged, or at all”, putting the Claimants to strict proof. In its Defence, the Second Defendant had pleaded facts which were suggestive of the Claimants’ dishonesty. In particular it was averred that the accident circumstances suggested a staged/contrived collision (albeit fraud was not pleaded).
At trial, a host of inconsistencies were put to the Claimants, including the matters contained in the Defence. In closing, Counsel for the Second Defendant maintained that the collision had all the hallmarks of a contrived accident. Counsel for the Claimant stated that it was “impermissible” for the Court to make a finding of ‘fundamental dishonesty’ on the basis that it was not explicitly referred to in the Defence nor expressly put to the Claimants in cross-examination.
The claim was dismissed on the basis that the Claimants’ evidence could not be relied upon and that they had not suffered any injuries. The trial judge was satisfied that dishonesty had been “more than sufficiently” pleaded and that the relevant matters had been adequately put to the Claimants. He went then went on to make a finding of ‘fundamental dishonesty’. The Claimants appealed.
Newey LJ had to determine two issues (1) whether ‘fundamental dishonesty’ needed to be explicitly pleaded (2) whether ‘fundamental dishonesty’ needed to be expressly put in cross-examination.
In relation to the first matter, he held (at paragraph 31):
“the mere fact that the opposing party has not alleged dishonesty in his pleadings will not necessarily bar a judge from finding a witness to have been lying: in fact, judges must regularly characterise witnesses as having been deliberately untruthful.”
“the key question in such a case would be whether the claimant had been given adequate warning of, and proper opportunity to deal with, the possibility of such a conclusion and the matters leading the judge to it.”
In relation to the second matter, Counsel for the Defendant conceded that he had not expressly used the words “dishonesty” or “lying” in cross-examination. However, Newey LJ found that such phrases did not necessarily need to be expressly put so long as the matters supporting a finding of ‘fundamental dishonesty’ were “adequately explored” by counsel (paragraph 31). He added that the fact that a party had not alleged fraud in his pleading did not preclude him from suggesting that a witness was lying in cross-examination (paragraph 39).
Newey LJ was satisfied that the Claimants were given ‘adequate warning’ of the allegations of dishonesty and a proper opportunity to respond. Further, he found that the matters had been ‘adequately explored’ in cross-examination. The appeal was therefore dismissed. The following findings influenced his decision: the Claimants were put to strict-proof as to the occurrence of the accident, the Claimants’ attention was drawn to the allegations of dishonesty in the Defence, the Claimants’ attention was drawn to all the inconsistencies in the case, the Claimants had every opportunity to defend themselves and the case was put ‘fairly and squarely’.
His decision was someone caveated in that he went on to hold that where a claimant’s honesty is challenged it would be best practice (albeit not mandatory) to explicitly put this to the witness (paragraph 39).
This decision does not substantially change the status quo (in light of Kearsley v Klarfield  EWCA Civ 1510). Further, the question as to whether fraud should be formally pleaded remains a critical decision. However, the judgment is to be welcomed by defendant practitioners. There are many reasons why a defendant may not wish to plead fraud (lack of direct knowledge of events, professional obligations, allocation issues etc). In light of these concerns, defendants regularly put claimants to strict-proof and invite the Court to draw inferences of dishonesty.
It will now be more difficult for claimants to assert that a finding of ‘fundamental dishonesty’ cannot be made where it has not been explicitly pleaded and/or put to the claimant.
Defendants should ensure that ‘adequate warning’ is given to claimants of the dishonest allegations. Further ‘proper opportunity’ should be afforded to claimants to respond to such allegations.
Counsel should ensure that they ‘adequately explore’ the allegations of dishonesty in cross-examination and make an informed decision as to whether to explicitly put those matters to a claimant.