Practice and procedure – Abuse of process – Fraud – Defendant appealing against judgment on grounds that claim based on false evidence and judgment procured by fraud – Defendant ordered to serve statement of case – Claimant applying to strike out statement of case – Whether defendant entitled to challenge judgment as obtained by fraud – Whether challenge based on fraud amounting to res judicata or abuse of process – Application granted
The claimant was the former owner of the leasehold on a flat at 8 Burch Road, Gravesend. The defendant owned the freehold and was obliged to keep it in a reasonable state of repair. The claimant brought proceedings in the county court alleging breaches of the defendant’s repair obligations. The claimant alleged that various items of disrepair, for which the defendant was liable, had led to her flat becoming very damp, making it necessary to redecorate and repair its interior. She had been unable to rent out the flat and had had to sell the property at auction to mitigate her losses.
The court made an order awarding the claimant £62,834.25 plus interest plus costs on an indemnity basis. The defendant appealed, alleging that the claim was based on false evidence and on forged documents and the order was procured by fraud. The appeal was stayed while the fraud allegation was determined as a preliminary issue. The judge required the defendant to make a statement of case as if it was a fresh claim to set aside the order.
The claimant issued an application notice seeking to strike out the statement of case on the basis that it raised matters which were res judicata and/or an abuse of process. She argued that the allegations of fraud in the statement of case had been made in the proceedings before the county court and were either abandoned by the defendant or adjudicated in her favour. Moreover, the fraud issue was not based on fresh evidence: virtually all the evidence on which the defendant sought to rely was within its knowledge at the time of trial, albeit the defendant had not been permitted to deploy all of that evidence.
Held: The application was granted.
(1) The principles applicable to res judicata and abuse of process generally were modified where it was said that the judgment was obtained by fraud. Where the issue of fraud had not been raised or determined in earlier proceedings, a judgment might be set aside even if the fraud could, with reasonable diligence, have been discovered in the earlier proceedings. However, there might be a discretion to refuse to entertain an application to set aside judgment where there had been a deliberate decision not to investigate the possibility of fraud in advance of the first trial, even if that had been suspected, or a deliberate decision not to rely on a known fraud: Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2019] EGLR 19 applied.
An action to set aside a judgment on the basis that it had been obtained by fraud was a cause of action in itself. In the present case, the question whether the cause of action should proceed arose in the context of an appeal from the original decision, rather than a fresh claim, but there was no difference of principle. A key ingredient of the cause of action was that the party and the court were deceived by the fraudulent evidence of the other party and the court required “fresh” or “new” evidence or facts. The facts or evidence relied on had to be materials which were not known, at the time of trial, to the party now alleging that it was deceived.
(2) Although the need for new or fresh evidence was strictly about the validity of the cause of action pleaded in the statement of case, the considerations which underpinned the requirement for fresh evidence overlapped with those which underpinned arguments of res judicata and abuse of process, namely the need for finality of litigation. There might in law be exceptional cases where the evidence of fraud was known to a party and in its possession, but could not be deployed, and the second action was then permitted to proceed. However, there was no general rule that it was only when there had been an entirely free choice not to rely on known evidence of fraud that the second claim would be prevented from proceeding.
In the present case, the questions whether the claimant’s evidence was truthful and the impugned documents were authentic were raised at the outset in the county court proceedings and were litigated before the court. The honesty of her claim was in substance challenged. The majority of the impugned documents were central to the court’s decision on the claim for the costs of repair and redecoration, particularly those documents which evidenced the fact and amount of the payments made. The judge explicitly determined those issues. The defendant’s true complaint was essentially that it did not put forward the whole of its case at trial.
(3) Assuming that res judicata applied in the present context, the defendant was barred from running its case that the claimant had given false evidence and relied on forged documents before the county court judge, subject to its arguments that it should be permitted to rely on evidence in relation to those issues which had not been before the court. There were no special circumstances that would make it unjust to refuse to allow the defendant to reopen the issues which had been before the county court judge; it would be unjust to the claimant to allow the defendant to do so. Virtually all the material on which the defendant now sought to rely to prove its allegations had been known to it and in its possession by the time of the trial and the materials in question ought to have been deployed at trial.
There was nothing to prevent such deployment provided the defendant had complied with the rules and directions of the court. Given the rules of pleading requiring allegations of fraud and dishonesty to be pleaded in the interests of fairness, and given the need for finality, the defendant’s failure to plead its case in full was equivalent to a deliberate decision not to advance the case which it now wished to advance. Looking at matters in the round and applying a broad, merits-based judgment to all the facts, the public interest in finality of litigation prevailed.
George Mallet (instructed by Girlings Solicitors of Ashford) appeared for the claimant; Philip Jones (instructed by Mackrell Solicitors) appeared for the defendant.
Eileen O’Grady, barrister
