Judicial guidance on substantial injustice in Shaw v Wilde

Matthew Shaw v Gillian Wilde [2024] EWHC 1660 (KB)

This analysis supplements our main article summarising the fundamental dishonesty aspects of the judgment in the case of Shaw v Wilde, which resulted in an unprecedented FD finding and dismissal of a £6.6m claim, which you can read here. The full judgment can be found here.   

The main judgment is extensive and covers so many important practice points that it is necessary to consider the implications of substantial injustice separately.

Most FD cases touch on substantial injustice briefly, which is unhelpful to practitioners since there remains a dearth of judicial guidance in connection with this issue.

In common with the recent authority of Williams-Henry v Associated British Ports Holdings Ltd [2024] EWHC 806 (KB) the judgment in Shaw v Wilde is different, and HHJ Sephton KC provides insights useful to practitioners dealing with FD litigation.

Definition

Section 57(3) of the Criminal Justice and Courts Act 2015 defines substantial injustice as meaning ‘more than the mere fact that the claimant will lose his damages for those heads of claim that are not tainted with dishonesty’.  HHJ Sephton stated the definition was not ‘ambiguous, obscure, or absurd’, and it should be given its ordinary meaning.  It is a matter of simple statutory interpretation.

Section 57(2) confers a broad discretion when determining whether a dishonest claimant will suffer substantial injustice.

It is necessary for the court to consider the effect of deprivation of legitimate damages, and the judge quoted Knowles J in LOCOG as saying substantial injustice must arise ‘as a consequence of the loss of those damages’. Thus, the court must ascertain the consequences to a dishonest claimant of losing his valid damages. The judge rejected Mr Shaw’s argument that in high value cases loss of legitimate damages alone may be sufficient for substantial injustice. 

Implementation in Shaw v Wilde

Christopher Kennedy KC, for the defendant, suggested the court should compare Mr Shaw with a similar person, but one who had no solvent defendant to sue. The court found this approach helpful and adopted it. 

It is important to note that, in presenting submissions, Mr Shaw had failed to outline the consequences for him if his claim were dismissed. This was a huge gap in his case, however the void was filled by the judge. He felt obliged to make his own inferences as to what the consequences might be. These included:

• Mr Shaw may have to repay interim payments of £150,000.
• There may be a costs liability to the defendant.
• Mr Shaw’s earnings potential is significantly reduced. He is now in the same position as someone who is similarly injured but who has no legal claim to pursue, and will have to rely on ‘the same state support as the victim who has no solvent tortfeasor to sue’.
• Mr Shaw may have incurred debts in the expectation of a damages award, which he will now be unable to repay.
• He will need to rely on the state for his care, and items such as orthotics; ‘just as the victim who has no solvent tortfeasor to sue would have to do’.

The principal consequences would be financial, but Mr Shaw’s ‘basic needs would be met’ by state provision.

The fact there had been unsuccessful arguments concerning contributory negligence had ‘little bearing’ on whether Mr Shaw would suffer substantial injustice if his claim were dismissed.  However, the judge specifically took into account the extent of Mr Shaw’s dishonesty, and the blameworthiness which should be attached to it.

It was at this point in the judgment, that the Keoghs email dated 4 December 2020 became a critical consideration. It was designed to stop an interim payment application proceeding for £300,000 at a time when the defendant had yet to serve surveillance/intel and deploy arguments of FD. The email invited Mr Shaw to reflect on his claim, and to withdraw the application if he considered the evidence in support misleading.

Mr Shaw did not change course, and the application proceeded. HHJ Sephton KC was confident that after this email, if not before, Mr Shaw was aware of the consequences of presenting a dishonest claim. Despite that he did not admit his lies, in fact he continued to lie. As stated in the judgment, ‘he was unrepentant’.

The final paragraph of the judgment is a damning indictment of Mr Shaw and the claim he presented. It encapsulates in nine brief lines of narrative why the court found FD, and was disinclined to entertain substantial injustice:

• At the very least, Mr Shaw would have been aware of the consequences in proceeding with a dishonest claim after the Keoghs email of 4 December 2020.
• Despite that specific email warning, Mr Shaw “told important lies about his condition”.
• “Rather than admit his error, Mr Shaw persisted in his lies”.
• “He gambled that his lies would not be found out or that the court would excuse them”.
• It was accepted “dismissal of his heavy claim will cause Mr Shaw significant financial hardship”.
• However, dismissal “will not inflict substantial injustice”.
• The final line of the lengthy judgment simply reads: “Mr Shaw has only himself to blame”.

Practice points

In terms of practice points, the following are noteworthy:

• Unsuccessful liability arguments have little bearing on substantial injustice.
• Any increased burden on the state in failing to recover legitimate damages is irrelevant; the substantial injustice must arise from the consequences of losing those damages and be suffered by the claimant alone. It should be noted Ritchie J, at paragraph 178 of his judgment in Williams-Henry, indicated any transfer of burden to the state would be relevant ‘If the claimant is very seriously brain injured or spinally injured…’. That was not the case here. Mr Shaw suffered serious orthopaedic polytrauma and had made a good recovery such that he could BASE jump, for example.
• If no evidence is put before the court outlining the consequences flowing from the loss of legitimate damages, the court will simply make its own inferences. The significant risk is that those inferences will be insufficient to support a finding of substantial injustice. It will be a useful exercise for defendants to apply their minds as to the possible consequences, in order to assess the level of risk associated with a finding of substantial injustice.
• In appropriate cases it may be necessary to put down a marker with a claimant suggesting his claim is dishonest or pursues dishonest elements. This is a tactically sensitive issue, which should not be deployed without legal advice. In the vast majority of cases FD preparation will be undertaken over a significant period of time, and the results only disclosed once there is a statement of truth against which the evidential value of the material can be judged. This was an unusual case where the warning had to be given to prevent Mr Shaw recovering a further £300,000, taking total interim payments to £450,000 (which would not be capable of recovery following any finding of FD). At that stage there may have been the possibility of a realistic conversation about the value of what was, on any view, a significant claim; but the claimant ignored the warning and decided to proceed with the interim application. As such, covert enquiries continued and further damaging material was uncovered in the months and years that followed.