Practice and procedure – Abuse of process – Fraud – Respondent applying to set aside judgment on ground that appellants obtaining it by fraud – Whether application to be struck out as abuse of process – Whether respondent obliged to show that evidence of fraud could not have been discovered with reasonable diligence before judgment in earlier trial – Appeal allowed
The first appellant company was the registered proprietor of various properties in Coventry which had been transferred to it by the respondent, who, along with the second and third appellants, was a shareholder and director of the company.
The respondent claimed that the properties had been transferred as a result of undue influence or other unconscionable conduct on the part of the second and third appellants. The judge preferred the appellants’ evidence on that matter, finding that the transfer had been made on the terms of a written joint venture agreement which accurately reflected what the parties had orally agreed. The judge found that the respondent had effectively transferred the properties to the first appellant for a price of £300,000, with the properties then to be refurbished by the second and third appellants and the respondent to receive 50% of the profits on re-sale; he found that that was not an insufficient price and represented a fair return for the respondent.
The respondent later applied to set aside the judge’s order on the ground that it had been obtained by fraud. She claimed that her signature on the joint venture agreement had been forged and she sought to adduce the evidence of a handwriting expert to that effect.
The appellants sought to have the respondent’s application struck out as an abuse of process. They contended that the handwriting expert’s report was based on documents that had been available to the respondent well before the trial of the original claim. They also asserted that they were not responsible for any forgery.
The judge refused to strike out the application. He held that, if there had been deliberate dishonesty in relation to evidence which had been an operative cause of the court’s decision, then it was not necessary for the respondent also to show that the evidence establishing the fraud could not have been discovered with reasonable diligence before the judgment was delivered: see [2015] EWHC 1276 (Ch); [2015] PLSCS 145. The appellants appealed.
Held: The appeal was allowed.
In order to set aside a judgment for fraud, there had to have been conscious and deliberate dishonesty in relation to evidence given, action taken, statements made or matters concealed. That dishonesty had to be material in the sense that there was fresh evidence showing that it had been an operative cause of the court’s decision to give judgment in the way it did. It had to be shown that the fresh evidence would have entirely changed the way in which the first court approached and came to its decision: Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA Civ 328; [2013] 1 CLC 596 applied.
It was not disputed that evidence of forgery, if accepted by the judge, would have been highly material to his decision, even if not conclusive. However, where a party sought to rely on new evidence that was said to prove that the trial judge had been lied to, then, aside from issues of credibility, that party would need to show that the evidence, however probative, could not have been discovered with reasonable diligence before the judgment was delivered in the first trial. That was an established rule in the context of an appeal against the trial decision and it applied equally to an application to set aside a trial decision: Ladd v Marshall [1954] 1 WLR 1489 and Hertfordshire Investments Ltd v Bubb [2000] 1 WLR 2318 applied.
The obstacle faced by the respondent was not one of res judicata, or of cause of action or issue estoppel. The allegation about the respondent’s signature being forged had not been raised or decided at the earlier trial. However, the wider policy considerations applicable to such cases were engaged whenever a litigant sought to challenge an earlier decision of a competent court, whether directly or indirectly, by commencing new proceedings in which the same issues arose, or sought directly by way of appeal to challenge the judge’s decision on the basis of new evidence.
An action seeking to set the judge’s order aside on the ground that it was obtained by fraud would therefore amount to an abuse of process if the success of the action depended on evidence that could, with reasonable diligence, have been produced at the earlier trial. There was no exception from the “reasonable diligence” requirement in cases involving fraud. That requirement represented the balance struck by the English authorities between the two policy considerations of justice and finality in litigation: Henderson v Henderson (1843) 3 Hare 100, Arnold v National Westminster Bank plc [1991] 2 AC 93; [1993] 1 EGLR 23; [1993] 01 EG 94, Hunter v Chief Constable of the West Midlands Police [1982] AC 529, Owens Bank Ltd v Bracco [1992] 2 AC 443 and Owens Bank Ltd v Etoile Commerciale SA [1995] 1 WLR 44 applied.
It followed that the case should be remitted to the judge to determine whether the respondent had satisfied the “reasonable diligence” condition.
Avtar Khangure QC and Gavin McLeod (instructed by Gowling WLG (UK) LLP, of Birmingham) appeared for the appellants; John Wardell QC (instructed by Tanners Solicitors LLP, of Cirencester) appeared for the respondent.
Sally Dobson, barrister
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