Practice and procedure – Strike out – Abuse of process – No reasonable grounds – Claimant applying to set aside judgments on ground that defendant obtained them by fraud – Defendant applying to strike out claim under CPR rule 3.4(2)(a) and (b) – Whether claim showing no reasonable grounds – Whether claim being abuse of process – Application granted
In 2012, the claimant’s company (MR) sold a newsagent’s shop trading as Newsline at 115 Week Street, Maidstone to the defendant. The business was intended to be operated by her husband.
In late 2014, the parties reached a further agreement for the business and premises to be sold back by the defendant to the claimant. The defendant subsequently brought a claim in the county court relating to the terms on which the resale of the business took place. The defendant’s case, about which there was no real dispute, was that the claimant had agreed to pay her £88,000 for the business in monthly instalments of £2,500.
The defendant sought £5,000 for unpaid instalments under a written agreement and a further £2,120.14 to reimburse her for accounts held with suppliers and £78,460.38 on the basis that the claimant had orally agreed to pay that sum for stock in addition to the purchase price. There were multiple claims and applications involving the parties and the defendant obtained four judgments in her favour.
In 2023, the claimant applied to set aside those judgments on the ground that they were obtained by fraud. The defendant applied to strike out the claim. The defendant principally relied on CPR rule 3.4(2)(a) (statement of case showing no reasonable grounds for bringing the claim) and (b) (claimant’s conduct of previous proceedings had been an abuse of the court’s process).
Held: The application was granted.
(1) The essence of an application to strike out a claim under CPR rule 3.4(2)(a) was that the court focussed upon the particulars of claim without regard to the defendant’s case. The claim stood or fell with the case pleaded in the particulars of claim. The only difference in this claim was that earlier proceedings lay at the heart of the claim and the court was entitled to look at what happened, and in particular at judgments delivered, by the court whose judgment was said to be tainted by fraud.
As to ground (b), although it was obvious that the claimant’s conduct of earlier proceedings had been abusive, hence the making of two civil restraint orders and numerous orders striking out applications, the issue of the 2023 claim might not be an abuse if the claimant could show reasonable grounds for bringing it. There was a danger of conflating his abusive behaviour in previous proceedings with whether the 2023 claim showed reasonable grounds.
(2) The cause of action to set aside a judgment in earlier proceedings for fraud was independent of the cause of action asserted in the earlier proceedings. It related to the conduct of the earlier proceedings, and not to the underlying dispute. There could therefore be no question of cause of action estoppel. Nor could there be any question of issue estoppel because the basis of the action was that the decision of the issue in the earlier proceedings was vitiated by the fraud and could not bind the parties. If the claimant established his right to have the earlier judgment set aside, it would be of no further legal relevance qua judgment. It followed that res judicata could not therefore arise in either of its classic forms: Takhar v Gracefield Developments Ltd [2019] UKSC 13; [2019] EGLR 19 applied.
It followed that the issue for the court in the present case was whether the 2023 claim was bound to fail. And that question largely needed to be answered putting aside the earlier abusive behaviour unless it was directly material to whether the particulars of claim in the 2023 claim showed a claim that was viable. The fact that the claimant had made allegations of forgery and dishonestly previously, which had been struck out, did not preclude him from pursuing the correct course of action which was to bring a fresh claim seeking to set aside the judgments. His cause of action was akin to a claim in fraud and had to be brought in a new claim. If the court concluded that the 2023 claim was bound to fail, the issue of the claim was clearly an abuse of the court’s process but it did not help to look at the position through the abuse lens.
(3) In modern terms, an action to set aside a judgment for fraud could be regarded as akin to an action for deceit. The only significant differences were that the court, rather than the opposing party to the first action, had to be shown to have been deceived, deliberate dishonesty was required, and materiality rather than simple reliance had to be shown. If the elements were made out (misrepresentation or misleading conduct, made or undertaken fraudulently, with reliance for deceit and materiality for an action to set aside a judgment), the contract or the judgment could be rescinded or set aside: Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA Civ 328 and Tinkler v Esken Ltd (formerly Stobart Group Ltd) [2023] EWCA Civ 655 applied. Hamilton v Al-Fayed (No 4) [2001] EMLR 15 considered.
However, the requirement of materiality did not extend to the second court having to re-try the question of the liability of the parties or to see whether the fresh evidence or new facts are material to the final result in the sense of influencing what the decision would be if the matter were to be retried with honest evidence; the second court should not undertake such an exercise. The purpose of a second action to set aside an earlier judgment was to take the parties back to the position as it was before the trial so that a new trial on honest evidence can then take place. Nonetheless, in practice it would be difficult for a judge in deciding the question of materiality not to trespass at least to some extent on to such matters.
(4) Considering the 2023 claim in the context of the earlier claims (as it was legitimate to do), the court was satisfied that the claimant’s claim was hopeless and was bound to fail. The additional allegations he made, to the extent they were coherent, did not allege dishonesty that was relevant or material. Therefore, the court would make an order striking out the claim.
Alper Riza KC (instructed by Direct Access) appeared for the claimant; Stephen Goodfellow (instructed by Direct Access) appeared for the defendant.
Eileen O’Grady, barrister
