The Thin End Of The Wedge: High Court Considers The Legal Test For Setting Aside A Judgment Tainted By Fraud

Introduction

The interrelation between criminal and civil litigation is becoming ever more apparent. In two recent decisions the High Court deals with the tension between ensuring that finality of litigation is preserved whilst recognising that "fraud unravels all". At the heart of this tension is the question of whether in order to successfully set aside a judgment for fraud, it is necessary to show that the evidence of fraud was unavailable and could not have been obtained with reasonable diligence at the original trial?

In May 2015, two High Court Judges gave apparently conflicting answers to this question.

Balber Kaur Takhar v Gracefield Developments [2015] EWHC 1276 (Ch)

Background to the Case

The background to the case is unfortunately familiar to anyone working in property litigation. It was alleged by Mrs Takhar that various properties in Coventry of which she had been the registered proprietor had been unlawfully or unconscionably transferred out of her name. It was alleged by Mrs Takhar that the transfer of the properties to a company called Gracefield was strictly on the basis that she would still own the properties but that the defendants would be able to recover the expenses of carrying out refurbishment work on the properties.

It was alleged by the Defendant that the agreement was that the properties forming part of the company would have an attributed price of £300,000.00 which would be repaid to Mrs Takhar, but the surplus profit would be split 50/50.

The case was peculiar in that Mrs Takhar, whilst having some suspicions that certain documents which alleged to have her signature may have been forged or doctored, did not advance a positive case and at the time advanced the case that she could not remember signing certain documents. One key document was a Profit Share Agreement which apparently bore Mrs Takhar's signature. Mrs Thakhar made an application for permission to rely on expert evidence, however she had not denied that she signed the document and therefore the judge ruled against her on both the application for permission to call expert evidence and her claim.

Post Judgment

After the trial the Claimant and her son went through an exercise of comparing signatures on the Profit Share Agreement with other signatures within the trial bundles. What was discovered was a precise match of a signature on a letter and the Profit Share Agreement. The Claimant accordingly obtained expert evidence. In a trait which is becoming more common in these types of cases, the expert supported the conclusion that Mrs Takhar never physically signed the Profit Share agreement but rather that in his opinion the signature had been lifted from the letter and superimposed on the Agreement. The report apparently also cast doubt on several other documents relied on by the Defendants.

It is interesting to note that, the allegations against the Defendants could, if substantiated by evidence, amount to criminal offences such as (i) Fraud by false representation, contrary to section 2 of the Fraud Act 2006 (ii) Conspiracy to defraud at common law and contrary to section 1 of the Criminal Law Act 1977 (iii) Perverting the course of Justice, a common law offence.

There seems to have been a missed opportunity to identify these matters at the time by drawing the Court's attention to the similarities in the signatures at the time and seeking to instruct an expert.

The 2013 Proceedings

On 20 December 2013, the Claimant issued proceedings asking that the previous judgment be set aside on the basis that it was obtained by fraud. Further the Claimant sought to amend and introduce a claim for damages for conspiracy/deceit.

The Court examined the legal principles governing applications to set aside judgments for fraud which were summarised in The Royal Bank of Scotland v Highland Financial Partners LP and others [2013] EWCA Civ 328:

There has to be a "conscious and deliberate dishonesty; The relevant dishonesty must be "material"; and Materiality is assessed by the impact the fresh evidence would have had on the original decision (rather than if the claim were to be retried). Reasonable Diligence

Mr Justice Newey considered a key issue in dispute between the parties; whether for a judgment to be set aside on the grounds of fraud, there is a further requirement that new evidence could not reasonably have been obtained in time for the original trial.

Two key cases considered were the House of Lords in Owens Bank Ltd v Bracco [1992] 2 AC 443 and that of the Privy Council in Owens Bank Ltd v Etoile Commerciale SA [1995] 1 WLR 44.

The concept of reasonable diligence...