Mrs Figg, clearly nervous, gave testimony. Fudge, Malfoy, and the toad-woman mocked Mrs Figg for being a Squib, which did not boost her confidence. Also, it became clear that whilst she had felt the effects of the Dementors (feeling cold, and a complete lack of happiness), she had not seen the Dementors that night. And since she claimed this very thing, to have seen the Dementors, she was caught in a lie.