What is required when a claimant applies for a judgment to be set aside on the basis of fraud? The proceedings in Takhar v Gracefield Developments Ltd [2019] UKSC 13 were the result of a family dispute. The claimant had tried to undo the transfer of a number of properties to the company, which she claimed to have executed as the result of undue influence or unconscionable conduct. But the judge at first instance dismissed her claim, because he was persuaded that the claimant had acted in accordance with a copy of a joint venture agreement that was produced to the court, even though the claimant stated that she could not remember signing it.
The claimant subsequently tried to overturn the judgment against her on the ground that it was obtained by fraud. And (having been refused permission to engage a handwriting expert during the original proceedings, because her application was rather too late in the day), the claimant produced a report from a handwriting expert suggesting that the signature on the copy joint venture agreement had been transposed from another document and was not hers.
The defendants sought to have the new proceedings struck out, arguing that they were an abuse of process because the claimant was trying to re-litigate a case that had already been decided. But the High Court decided to allow the claimant to pursue her claim on the ground – to put it in a nutshell – that “fraud unravels all”.
The Court of Appeal overturned the High Court decision. It ruled that a party who seeks to set aside a judgment on the ground that it was obtained by fraud must demonstrate that evidence of the fraud could not have been discovered by exercising reasonable diligence in the earlier proceedings. But was this right? Other Commonwealth jurisdictions take a different approach, ruling that the court’s responsibility to protect its processes and ensure that litigants do not profit from fraud takes precedence over the principle that litigation should not drag on in perpetuity.
The Supreme Court assembled a panel of seven to consider the claimant’s appeal – and reversed the Court of Appeal decision. Lords Kerr, Hodge, Lloyd-Jones and Kitchin agreed that the trial judge had not been asked to consider the possibility of fraud during the original proceedings, and that the claimant was raising a new point, as opposed to re-litigating the same claim. Furthermore, the authorities cited to the court did not support the rule that the Court of Appeal had extracted from them, or, if they did, they should not be followed.
What should the position be if the question of fraud was raised during earlier proceedings, but new evidence subsequently comes to light, or, alternatively, where fraud was suspected, but the claimant chose not to investigate further despite his or her suspicions? Their Lordships suggested that the courts should be entitled to exercise their discretion in such circumstances, without actually deciding the point.
Lady Justice Arden and Lord Sumption added remarks of their own. So too did Lord Briggs, who would have preferred to adopt an even more flexible approach, which would have enabled the courts to draw their own red lines by reference to the particular facts of the cases before them.
Allyson Colby, property law consultant
