Fundamental Dishonesty cannot be dealt with at Detailed Assessment
The Second Defendant has had permission to appeal refused in the case of XX & Anor v Young & Anor [2025] EWHC 2443 (SCCO) (24 September 2025) where it had sought to challenge the SCCO's decision on proportionality where the Defendants had raised fundamental dishonesty in the substantive proceedings and had sought to persuade the court to invoke its powers under CPR 44.11 which allows it to disallow or reduce costs where conduct before or during the proceedings or assessment proceedings was unreasonable or improper.
The SCCO did make some adjustments on the grounds of proportionality in its original decision but limited to internal communications only. Our previous blog on this can be found here.
Permission to appeal should only be given where either the court considers the appeal has a real prospect of success or there is some other compelling reason for it to be heard. The Second Defendant contended on both points and the court had to duly consider each.
Practice Point
The decision and dismissal of the application for permission to appeal may see Defendants, in some cases, take a more aggressive stance over costs terms where fundamental dishonesty is raised and a Claimant looks to conclude matters on a sum lower than that which is pleaded. The SCCO here effectively made clear that where a paying party wants to include a provision within a settlement agreement to restrict the time period costs can be recovered or to limit/disallow costs relating to specific issues then this must be done pre-settlement as the Detailed Assessment is not the correct vehicle for the same.
If you are unsure about the settlement terms proposed in relation to costs then seek specialist advice before consenting to the same. The lesson here is that once terms are agreed do not expect sympathy from the court if you then wish to re-open that agreement within any subsequent assessment proceedings.
As Costs Judge Nagalingam makes clear "a detailed assessment is not the forum to rescue or attempt to change the effect of a poorly worded order, or an order on agreed terms that one party is no longer content to be bound by."
Speed Read
For those wanting a speed read, the key issues can be summarised as follows:
1. The Second Defendant sought permission to appeal the court's decision at Detailed Assessment on proportionality and conduct on the basis that the court had not used its powers under CPR 44.11 to make a finding of misconduct and reduce or disallow costs accordingly. The Second Defendant averred that the court had erred by a failure to take into account a. the Second Claimant's failure to file or serve evidence responding to the surveillance evidence; b. for accepting a sum much less than pleaded; c. did not address or consider a proportionality based reduction for the period after the Claimant should have recovered; d. did not address/consider a proportionality based reduction for future losses given no damages were recovered for that head of claim; or e. did not consider a proportionality based reduction for the accommodation claim given again no damages were recovered for this head of claim.
2. Proportionality is not a tool to rescue poor Points of Dispute - "Proportionality is not intended to be a tool by which the court can consider further areas of reduction that the paying party never argued for."
3. Where settlement is reached net of contributory negligence it would be wrong to treat the settlement sum as though it was a gross figure.
4. The SCCO stated that "a case does not need to be 'interesting' or novel in order to be deemed complex".
5. The Second Defendant's arguments as to burden of proof were rejected on the basis that the Second Claimant did prove her claim having recovered £149,000 (net of contributory negligence) which was a significant sum of sum, the court providing that "one cannot imagine a professionally represented insurance backed client parting with such a sum if the Claimant had not proven her case." Further the court stated that "questions as to competing valuations, litigation risk and appetite for a trial [were] distinct from the core requirement to prove one's case".
6. On the subject of a failure to respond to the Second Defendant's surveillance evidence there is no need to respond to evidence which is provided on an informal basis. Unless and until there is permission to rely on the same there was no deadline or order requiring a formal response.
7. The court at Detailed Assessment could not revisit a reduction based on a notional earlier recovery date by the Claimant without retroactively assessing the medical evidence - "the purpose of a detailed assessment is not to hear and rule upon arguments a party wish they had run but failed or declined to do so [...] it would be manifestly unjust to make such a finding as the date of full recovery without permitting a separate and distinct hearing to decide upon the fact".
8. It was open to the Second Defendant to ensure that the settlement terms and order for costs reflected what was intended. Further if the Second Defendant felt they had a good case on fundamental dishonesty they could have run the case or use it as a lever to secure a costs order which protects their position. If the Second Defendant wished to have alternative costs terms they could have sought agreement to the same or made submissions in support prior to the case concluding. The order for costs in this claim was that agreed between the parties and could not be retrospectively changed. This could be the guise of a time limited order (i.e. costs to a specific date) or issue based order (reducing or disallowing specific elements of costs).
9. Where the Second Defendant contended that their had been nil recovery in respect of certain heads of loss "they [could not] categorically assert that nil was recovered".
10. The court has wide discretion on proportionality. Here the court had considered the outcome of the line by line assessment, made a proportionality reduction to internal communications and determined the rest of the costs were proportionate. The court is not required to go in search of further areas of reduction once the line by line assessed costs have been reduced to a proportionate sum. The fact the Second Defendant did not agree with the final figure was not a basis of appeal.
11. The suggestion that there was a tension between section 57 of the Criminal Justice and Courts Act 2015 and CPR 44.11 was rejected. The court stated that "One serves a very specific purpose, i.e. the provision to dismiss a claim in circumstances where there has been finding of fundamental dishonesty (even following a finding that a Claimant is entitled to damages). The other serves a general purpose, i.e. the provision to disallow all or part of the costs being assessed not limited only to where there has been a finding of fundamental dishonesty, but rather where the conduct (unlimited in scope or application) of a party or their legal representative is found to be unreasonable or improper."
12. It was accepted by the Second Defendant that the court cannot be asked to make a finding of fundamental dishonesty in a detailed assessment. Here the Second Defendant failed to explain how an assessing judge could account for the principles of section 57 of the Criminal Justice and Courts Act 2015 in order to make a CPR 44.11 misconduct finding without, in all but name, making a finding of fundamental dishonesty. Parliament has already put in place a procedure to follow where a Defendant considers that they have a case to plead on fundamental dishonesty. Allowing the Second Defendant to raise arguments which should have been before the trial judge at detailed assessment would be allowing a de facto application for a dismissal of a claim which had not been dismissed.
13. Detailed assessment is not the forum to rescue or attempt to change the effect of a poorly worded settlement order.
14. If you are seeking to argue that there are other compelling reasons for an appeal to be heard then be prepared to back up your arguments. Here the Second Defendant had contended that FOIL (Forum of Insurance Lawyers) would have been an intervener but provided no evidence for this. In addition, they argued that without an appeal there was a possibility all claims would go to trial, thus blocking the court. When asking for statistical data the Second Defendant could not present any as to how often fundamental dishonesty was pleaded nor how many cases this would impact. The SCCO was very critical of the failure to provide evidence/data that there was a wider argument at stake.
15. On the issue of conduct it would be inappropriate to expect a party to waive privilege as to their reasons for acceptance / agreement to a settlement, even if the Defendant believe there to be nefarious reasons. Such an approach would "set a worrying precedent and [...] likely harm the prospects of negotiated, pragmatic settlement discussions".
Background
The claim was an RTA, the Second Claimant was a pedestrian in the process of crossing a street when she was struck by a vehicle driven by the First Defendant, who failed to stop at the scene. Liability was never resolved but work was undertook on the basis that the First Defendant was at least primarily liable. The Second Defendant were the RTA insurer who confirmed they would be liable to satisfy any unsatisfied judgment against the insured driver.
The Second Claimant sustained significant injuries, requiring surgery. She required assistance at home and had a poor grasp of English. The Covid-19 pandemic disrupted her medical care.
Prior to a JSM in November 2022, the Second Defendant disclosed surveillance evidence and relied on expert comment that the Second Claimant's recovery was more advanced than she had reported when examined. The Second Defendant went as far to allude to an intention to argue fundamental dishonesty. The claim settled shortly after the JSM for a sum significantly below what was pleaded, ultimately settling for £149,000 net of contributory negligence compared with the pleaded value of £2.5m.
The Defendant's Position
The Second Defendant (Aviva Insurance) sought permission to appeal the SCCO's decision in relation to proportionality/conduct on the following basis:
"[a] The [2nd] Claimant's conduct as revealed in the surveillance evidence is so significant that if a CPR 44.11 reduction is not made for conduct in this case one will never be made.
[b] This means that Defendants must run every case to trial to get a finding of fundamental dishonesty before they can run a CPR 44.11 argument.
[c] Paragraphs [47] & [48] of the Judgment appear to reverse the Burden of Proof and ignore the fact that the [2nd] Claimant filed no evidence & offered no alternative explanation as to the blatant inconsistencies shown on the CCTV footage and the Experts Supplemental Reports.
[26] It would be of great assistance to all Defendant Insurers to have guidance from an Appellate Court as to fundamental [dishonesty] cases that should be run to trial and cases that can be dealt with at Detailed Assessment."
The Second Defendant accepted that "on an assessment of costs [the court] could [not] retroactively conduct a trial of an issue that the Defendant had alleged but neglected to run to trial as an argument".
It was averred by the Second Defendant that "there is a juxtaposition between a finding of FD versus awaiting a detailed assessment to secure a CPR 44.11 misconduct finding."
The court accepted "that may well be the case, but I doubt very much that the legal profession as a whole is so awash with fundamentally dishonest claimants (who presumably have evaded any form of detection or concern from those who represent them) that the fact a trial may be required would be somehow problematic."
The court continued:
"21. Ms McDonald wished to stress that the 2nd Defendant accepts the accident circumstances, and accepts the 2nd Claimant was injured. The 2nd Defendant's concern is that from around 2020 onwards the 2nd Claimant exaggerated her symptoms, misled examining medico-legal experts, and even involved family members (as witnesses) to collaborate in the alleged illusion, the net effect of which was that valuation was based on ongoing symptoms which lasted well beyond what might have ordinarily been expected.
22. Ms McDonald described the underlying case facts as "interesting" and submits that having an appellate court decision would assist as to how such a scenario should be approached in the future.
23. Ms McDonald sought to focus my mind on four key areas, being; the absence of an authoritative decision; the notion of a tension between Section 57 FD and CPR 44.11; the notion that FD is "still a fairly new concept"; and (albeit anecdotally) Ms McDonald's suggestion that FD is "regularly argued" in small and fast track claims.
24. Ms McDonald also advised me that surveillance evidence is usually triggered on claims with a value of more than £1m. This strikes me as anecdotal, but certainly not illogical.
25. Ms McDonald then addressed the inclusion of an 81 page bundle of expert evidence and comment in relation to the surveillance evidence, as part of the documents available to me in these detailed assessment proceedings.
26. She also addressed the question of whether consideration of that bundle would be straying into the provenance of a trial judge, expressing the view that consideration of conduct under CPR 44.11 cannot be the same process under which a court would make a finding of fundamental dishonesty. To some degree, the 2nd Defendant is seeking to attach a level of importance to that question such that an appellate court might be inclined to express a view.
27. Paragraph [24] of counsel's skeleton sets out the areas in which the 2nd Defendant considers that I fell into error, or otherwise failed to consider or address matters relevant to the issue of whether further reductions should be applied.
28. Namely, that I neglected to consider the 2nd Claimant's "failure to file or serve evidence putting forward any alternative explanation" for accepting a sum much less than that pleaded; that I did not address/consider making a proportionality based reduction for the "period after the Claimant should have recovered"; that I did not address/consider a proportionality based reduction "for future losses given that no damages were recovered for this head of claim"; and that I did not address/consider a proportionality based reduction "for the Accommodation claim given no damages were recovered for this head of claim"."
The Decision on Prospects of Success of An Appeal
The court considered the points raised by the Second Defendant, noting that proportionality could not be used to have the court consider further areas of reduction that were never argued for by the paying party.
The SCCO first considered whether an appeal would have a real prospect of success, it noted that:
1. A case does not need to be 'interesting' or novel in order to be deemed complex.
2. The settlement sum was net of contributory negligence and as such for the purpose of proportionality it would be wrong to treat the settlement figure as gross.
3. The Second Claimant did prove her claim by recovering damages. The insurer would not have paid such significant sums otherwise. Questions as to competing valuations, litigation risk and appetite for trial are all distinct from the core requirement to prove your case.
4. A party is not compelled to respond to surveillance evidence which is only disclosed on an informal basis. Unless and until permission is given to rely on the same there was no deadline or order requiring a formal response.
5. The court at Detailed Assessment could not revisit a reduction based on a notional earlier recovery date by the Claimant without retroactively assessing the medical evidence - "the purpose of a detailed assessment is not to hear and rule upon arguments a party wish they had run but failed or declined to do so [...] it would be manifestly unjust to make such a finding as the date of full recovery without permitting a separate and distinct hearing to decide upon the fact".
6. It was open to the Second Defendant to ensure that the settlement terms and order for costs reflected what was intended. Further if the Second Defendant felt they had a good case on fundamental dishonesty they could have run the case or use it as a lever to secure a costs order which protects their position.
7. The order for costs had been agreed between the parties and the Second Defendant could not, long after the event, seek to retrospectively alter the same. The Second Defendant should have sought to address the costs order before agreeing it.
8. The court has a wide discretion on proportionality and the decision made was within this wide ambit. The Second Defendant could not appeal a final figure because it did not like it.
9. There was no tension between Section 57 of the Criminal Justice and Courts Act 2015 and CPR 44.11. Indeed the court could not apply the principles of Section 57 to invoke CPR 44.11 on the basis of misconduct without making a finding of fundamental dishonesty in all but name.
It was held that "a detailed assessment is not the forum to rescue or attempt to change the effect of a poorly worded order, or an order on agreed terms that one party is no longer content to be bound by."
Judgment was entered in favour of the Second Claimant and well after the event the Second Defendant was seeking to obtain a 'quasi-finding of fundamental dishonesty as a rout to finding CPR 44.11 misconduct". The court expressed concern that this issue would have to be resolved before assessment had started and even before the costs claim was drawn as it could impact how it was presented. Ultimately the Second Defendant could have sought a costs order in the terms it wanted but it did not.
The Decision on whether there was some other compelling reasons for the appeal to be heard.
The SCCO rejected an argument that FOIL (Forum of Insurance Lawyers) would intervene in the case on the basis there was no evidence provided even as to an indication of interest from FOIL.
Further, the Second Defendant failed to provide statistical data on how often fundamental dishonesty was pleaded and how many case it would impact if not successfully appealed.
In addition, the court stated that there were no principles at play. Parties can argue both fundamental dishonesty and misconduct (on assessment). There was no evidence to suggest that the courts had become blocked with fundamental dishonesty applications at trial and if that was the case then there likely would be.
The SCCO dismissed that there were any other compelling reasons for the appeal to be heard.
Conduct
The SCCO next considered issues pertaining to conduct, the court ultimately considered that:
"99. Prior to drawing any final conclusion, I have reflected on whether permission to appeal ought to be given on the basis that I failed to properly consider whether the facts and circumstances of this case meet the threshold for a CPR 44.11 finding of misconduct such that the consequences, i.e. to "disallow all or part of the costs which are being assessed" could follow.
100. Preliminary points 1 to 5 of the points of dispute were addressed during the first 3 days of the detailed assessment of costs in this matter. Preliminary point 3 is marked "CONDUCT" and cites CPR 44.2(5) and CPR 44.11.
101. Whilst counsel's skeleton argument references my judgment dated 4 August 2025, I have not seen any request for a transcript of the February 2025 hearing during which I gave an ex tempore judgment regarding the preliminary points, including as to conduct.
102. As far as I can observe and understand, permission to appeal is not sought on the basis of my February 2025 ex tempore decisions, but rather on the constrained terms expressed at paragraph [24] of counsel's skeleton argument, which I have commented on above but for the sake of completeness I further observe as follows.
103. Firstly, not only does the 2nd Defendant exclude from consideration (and its submissions) the transcript of my ex tempore judgment as to conduct, they also neglect to acknowledge that the figure of £149,000 (net) arose from a joint settlement meeting. The settlement terms were then captured in an order made on agreed basis.
104. Secondly, it was open to the 2nd Defendant to make the provision of an explanation for acceptance a term of the agreement. They didn't, and I do not accept they can seek to open up that agreement long after the event. Like many cases, parties are entitled to settle on a commercial basis.
105. Thirdly, the 2nd Defendant may speculate as to nefarious the reasons for acceptance. However, once that agreement was struck and signed off, a party cannot reasonably be expected to waive privilege as to their reasons for acceptance. In my view, that would set a worrying precedent and one likely to harm the prospects of negotiated, pragmatic settlement discussions.
106. I consider I have otherwise addressed the sub-paragraphs of paragraph [24] of counsel's skeleton argument above.
107. Ultimately, the 2nd Defendant failed to convince me that the conduct of the 2nd Claimant before or during the proceedings was unreasonable or improper. I noted the arguments as raised in the points of dispute. I heard from counsel for both parties. I gave written and ex tempore judgments throughout. I concluded the threshold for misconduct had not been met.
108. In all the circumstances, I do not consider the proposed appeal would have a real prospect of success, and I do not consider there is some other compelling reason for the proposed appeal to be heard.
109. I therefore dismiss the application for permission to appeal."
