In the recent case of Takhar v Gracefield Developments Ltd and others [2015], the High Court has dismissed the defendants’ application to strike out, as an abuse of process, a claim that a judgment obtained by the defendants in earlier proceedings should be set aside on the basis that it was obtained by fraud. He also dismissed the claimant’s application to amend her particulars of claim to introduce a claim for conspiracy and deceit against the defendants.
The defendants alleged that the claim was an abuse of process since the claimant could, and should, have raised the fraud allegation before the original trial. The judge held that the claim was not an abuse of process because, among other things, there was a seriously arguable case that an expert report obtained by the claimant post judgment, was fresh evidence for the purpose of her claim to set the judgment aside.
This decision is of interest because the judge decided that in order to set aside a judgment for fraud, a party only needs to prove that it was deceived and not that it acted reasonably when conducting its case. This is consistent with the well established principle that “fraud unravels everything”.
However, parties should remember that the principle has its limits, especially if its enforcement means undermining the principle of finality of litigation (as recently demonstrated by the Court of Appeal’s decision in Hayward v Zurich Insurance Co Plc [2015]). Although the judge considered that the decisions in Owens Bank Ltd v Braco [1992] and Owens Bank Ltd v Etoile Commerciale SA [1995] did not provide binding authority for the proposition that a party must also show that the fresh evidence of fraud could not have been obtained in time for the original trial, the fact is that both the House of Lords and the Privy Council have expressed the view that there is this further requirement.
If parties suspect that the other party is relying on fraudulent means to advance its case, they should take diligent steps to obtain evidence of any wrongdoing, and if appropriate, advance a positive case to reduce the risk of finding themselves bound by a judgment in the other party’s favour.
Chris Harper is a partner and head of the dispute resolution team in Exeter. He specialises in commercial litigation and is named as a leader in his field by independent guides to the legal profession Legal 500 and Chambers. To contact Chris please call 01392 210700 or email drx@stephens-scown.co.uk.