Fundamental Dishonesty Costs: What Happens When a Claimant is Dishonest?

A finding of fundamental dishonesty in a personal injury claim can have serious financial consequences. A claimant may lose their compensation and become responsible for the defendant’s legal costs, potentially amounting to tens or hundreds of thousands of pounds.

Although personal injury claimants usually benefit from costs protection, that protection can be lost where the court finds that a claim was fundamentally dishonest.

A recent case involving Allianz and DWF illustrates the consequences. A claimant pursuing approximately £250,000 in compensation was ordered to pay £35,804.68 in legal costs after the court found his claim fundamentally dishonest.

For claimants facing substantial costs orders, however, there is another important consideration: even where liability for costs has been established, the amount claimed may still be challenged.

What is Fundamental Dishonesty in a Personal Injury Claim?

Fundamental dishonesty arises where dishonesty goes to the heart of a claim or a substantial part of it. It is different from a minor mistake, an inaccurate recollection or an inconsistency in someone’s evidence.

For example, a person injured in a genuine accident may exaggerate the extent of their injuries or claim losses they have not suffered. If that dishonesty affects a substantial part of the case, the court may find the claim fundamentally dishonest.

When injury claiming, the claimant must provide an accurate account of the accident, injuries, medical history and financial losses.

Evidence considered by the court may include medical records, witness statements, surveillance footage and social media activity. However, allegations of dishonesty must be supported by evidence. An allegation of fundamental dishonesty does not automatically mean that the claimant has acted dishonestly.

What Does Section 57 of the Criminal Justice and Courts Act 2015 Say?

Section 57 of the Criminal Justice and Courts Act 2015 allows courts to dismiss claims where fundamental dishonesty has been established. It applies where the court finds that a claimant would otherwise be entitled to personal injury damages but is satisfied, on the balance of probabilities, that the claimant was fundamentally dishonest in relation to the claim or a related claim.

The court must dismiss the entire claim unless doing so would cause substantial injustice. This means that even genuine parts of a personal injury claim can be dismissed because of dishonesty affecting another substantial part.

The court must also record the damages it would otherwise have awarded. Under section 57(5), that amount is deducted from the defendant’s costs liability calculation. The legislation can apply to personal injury and clinical negligence claims, although its application depends on the circumstances of the case.

Read the full section 57 legislation.

What Happens to Legal Costs After a Finding of Fundamental Dishonesty?

One of the most significant consequences is the potential loss of Qualified One-Way Costs Shifting protection.

What is QOCS?

Qualified One-Way Costs Shifting (QOCS) is a system designed to limit the financial risk faced by claimants bringing personal injury proceedings. Under the ordinary QOCS rules, a defendant’s ability to enforce a costs order against a claimant is restricted.

The rules help ensure that genuine claimants are not automatically exposed to substantial costs simply because their case is unsuccessful. However, QOCS protections are not absolute.

Does Fundamental Dishonesty Remove QOCS Protection?

Under CPR 44.16(1), where the court finds that a claim was fundamentally dishonest, it may give permission for the defendant to enforce its costs order in full. This can expose the claimant to a substantial personal liability.

Importantly, the court’s decision to dismiss claims under section 57 and its decision concerning QOCS are separate legal questions. A defendant may pursue a finding of fundamental dishonesty for costs purposes even where the circumstances do not involve a successful section 57 application.

The applicable rules can be found in CPR Part 44.

Recent Case: £250,000 Injury Claim Results in £35,804 Costs Order

In October 2026, DWF reported the outcome of a personal injury claim against a defendant insured by Allianz. The claim arose from a road traffic accident in September 2019.

Although liability for the collision had been admitted, Allianz challenged the claimant’s account of the accident and the injuries allegedly caused. The claimant sought damages of up to £250,000, alleging significant long-term injuries.

At a hearing in Brighton County Court on 3 July 2026, District Judge Sullivan accepted evidence that the collision occurred at approximately walking pace, rather than at the much higher speed alleged.

The court also considered inconsistencies in the claimant’s evidence and medical history. It found that the claimant had dishonestly exaggerated the accident and his injuries, and that none of the injuries claimed had been caused by the collision.

Although the substantive claim had previously been discontinued, Allianz pursued the fundamental dishonesty issue.

The court found the claim fundamentally dishonest, removed the usual QOCS protection and ordered the claimant to pay £35,804.68 in legal costs.

The case demonstrates that discontinuing proceedings does not necessarily prevent a defendant from pursuing the costs consequences of fundamental dishonesty.

Full details of the case can be found here: DWF – £250k Injury Claim Collapses in Court, 16 October 2026

Can Defendants Recover Costs on the Indemnity Basis?

A finding of fundamental dishonesty can also lead to arguments that costs should be awarded on the indemnity basis. Under the standard basis, the court considers whether costs were reasonably incurred, reasonable in amount and proportionate.

On the indemnity basis, proportionality does not apply in the same way, and doubts about reasonableness are resolved in favour of the receiving party.

This can make indemnity costs more favourable to defendants seeking to recover costs following dishonest litigation. However, a finding of fundamental dishonesty does not automatically mean that every item claimed will be recoverable or that indemnity costs must be awarded in every case.

The wording of the costs order and the basis of assessment remain important.

Can You Challenge Costs Following Fundamental Dishonesty?

Yes. Even where a claimant has lost QOCS protection and is liable for the defendant’s legal costs, the amount payable may still be disputed. A finding of fundamental dishonesty does not automatically establish that every fee and expense claimed by the defendant is reasonable.

For example, a defendant might claim £200,000 in legal costs, but the paying party may challenge the hourly rates, time spent, duplication of work or particular disbursements. The appropriate challenges depend on the costs order and the applicable basis of assessment.

Where costs are subject to detailed assessment, the receiving party will usually serve a Bill of Costs and Notice of Commencement. The paying party generally has 21 days to serve Points of Dispute.

Our Points of Dispute services help paying parties identify and challenge costs that may be excessive or unreasonable.

ARC Costs Case Study: £400,000 Costs Claim Reduced by Approximately 50%

ARC Costs recently assisted a client facing a legal costs demand of approximately £400,000.

The potential financial consequences were extremely serious, including the risk that the client could lose the remaining equity in their home.

Our team reviewed the Bill of Costs, prepared Points of Dispute and conducted negotiations with the receiving party.

The matter was settled for approximately half the original amount claimed.

Original costs claimed: Approximately £400,000

Agreed settlement: Approximately £200,000

Reduction achieved: Approximately £200,000 (50%)

Although the client remained responsible for a substantial sum, the reduction significantly limited their financial exposure. This example highlights an important distinction: being liable for legal costs does not necessarily mean having to pay the full amount demanded.

The example illustrates ARC Costs’ work challenging a substantial costs claim. It is not presented as a confirmed fundamental dishonesty case.

How ARC Costs Can Help With Fundamental Dishonesty Costs

ARC Costs assists paying and receiving parties with legal costs disputes throughout England and Wales.

Where a claimant faces substantial costs following a finding of fundamental dishonesty, we can review the Bill of Costs, prepare Points of Dispute and negotiate with the receiving party.

We also assist defendants and insurers seeking to recover costs, including preparing Bills of Costs and dealing with detailed assessment proceedings.

Our experienced Costs Lawyers provide specialist advice and representation in costs disputes.

Whether you need to recover costs following a dishonest claim or challenge a substantial costs demand, obtaining advice early can help you understand the available options.

Contact ARC Costs to discuss your legal costs requirements.

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