Darren Finlay’s successful Court of Appeal case: Close Brothers Ltd v David Taylor [2022] EWHC (Ch) 2160
Park Square BarristersDarren Finlay (and Justin Kitson of Selborne Chambers) recently appeared in the Court of Appeal in the case of Close Brothers Ltd v David Taylor (2022) EWHC (Ch) 2160 and Darren reflects on how the case assists with late evidence of fraud being used to try and set aside a judgment.
1.How does the court deal with new evidence where the f word is used?
2. I mean fraud of course – and it competes with that other f word – finality.
3. In balancing the need for finality of litigation, with the need for justice the mantra “fraud unravels all” can be deployed by litigants to want to set aside a judgment : and they may do so at the dying breath of litigation where the use of the f word is one of the exceptional situations recognised by Thorpe LJ who commented in Shaw v. Shaw [2002] EWCA Civ 1298: that “The residual right to reopen litigation is clearly established by the decisions in Livesey v Jenkins and Barder v Caluori. But the number of cases that fall into either category is exceptionally small. The public interest in finality of litigation in this field must always be emphasised.”
4. A late fraud allegation has to be “material” to re-open a decision based on a three stage test set out in Tinkler v Esken Ltd [2022] EWHC 1375 (Ch) per Leech J that
- a. first, the successful party … committed conscious and deliberate dishonesty (“Limb 1”);
- b. secondly, the dishonest conduct was material to the original decision (“Limb 2”); and,
- c. thirdly, there was new evidence before the Court (which was either not given or not disclosed in the earlier proceedings) (“Limb 3”).
5. The normal protections to late deployment of new evidence were laid down as far back as Ladd v. Marshall [1954] 1 WLR 1489 (now informing the discretion expressed in CPR 52.21(2)(b) to allow an appeal by way of re-hearing based on new evidence) where Denning LJ said:
- i. “To justify the reception of fresh evidence or a new trial, three conditions must be fulfilled: First, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; Secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; Thirdly, the evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.”
6. But in Takhar v. Gracefield Developments Limited & Ors [2019] UKSC 13. the Supreme Court made clear the first limb (the diligence test) would not apply to block fraud allegations being deployed late [57] – deciding that where a judgment has been obtained by fraud, and a party subsequently seeks to introduce new evidence to establish the fraud, an application to set aside the judgment can still be made, even if the fraud could have been discovered with reasonable diligence at the time of the judgment. This is because (per Lord Briggs [68] “victims of a fraud should not be deprived of a remedy merely because they are careless.”
7. Takhar in disapplying the first part of the Ladd v. Marshall test to a late fraud allegation applies a set of different safeguards or criteria from Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA Civ 328, (para [106]). Per Aikens LJ
- i. “The principles are, briefly: first, there has to be a “conscious and deliberate dishonesty” in relation to the relevant evidence given, or action taken, statement made or matter concealed, which is relevant to the judgment now sought to be impugned. Secondly, the relevant evidence, action, statement or concealment (performed with conscious and deliberate dishonesty) must be “material”. “Material” means that the fresh evidence that is adduced after the first judgment has been given is such that it demonstrates that the previous relevant evidence, action, statement or concealment was an operative cause of the court’s decision to give judgment in the way it did. Put another way, it must be shown that the fresh evidence would have entirely changed the way in which the first court approached and came to its decision. Thus the relevant conscious and deliberate dishonesty must be causative of the impugned judgment being obtained in the terms it was. Thirdly, the question of materiality of the fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision, not by reference to its impact on what decision might be made if the claim were to be retried on honest evidence.”
8. These safeguards were summarised more succinctly in the case of Tinkler v Esken Ltd [2022] EWHC 1375 (see above) but in Takhar some important points of concern were left open by the main judgment of Lord Kerr (at [55]):
- i. “… where fraud has been raised at the original trial and new evidence as to the existence of the fraud is prayed in aid to advance a case for setting aside the judgment, it seems to me that it can be argued that the court having to deal with that application should have a discretion as to whether to entertain the application. Since that question does not arise in the present appeal, I do not express any final view on it.”
9. In other words just because the 3 stage Tinkler test was met a right to appeal should not necessarily be regarded as automatically passed.
10. Kerr LJ added a second observation [55] “the possibility that, in some circumstances, a deliberate decision may have been taken not to investigate the possibility of fraud in advance of the first trial, even if that had been suspected. If that could be established, again, I believe that a discretion whether to allow an application to set aside the judgment would be appropriate but, once more, I express no final view on the question.”
11. This point was applied in Brack v. Brack [2020] EWHC 2142 (Fam) where a “deliberate decision was ..taken not to investigate or rely on the material”. trial militated against the point being raised on a later application as something allegedly “new and decisive” [36-39]
12. Lord Briggs in Takhar (his being a minority judgment) went through some insightful thought experiments (from para [72-77]) and concluded that the court also needed to have some “evaluative power” [80] to guard against the f word being deployed in a way that was an abuse and [87] “the court must arm itself against always having to allow re-litigation,”
13. In Takhar the Appellant there came up with powerful (perhaps decisive [66]) handwriting evidence that her signature had in fact been exactly duplicated from a past letter onto one deployed against her [13] – which at trial she could not explain [12] She failed the Ladd v Marshall first limb as her handwriting evidence could have been sought earlier than it was. But in Takhar the power of the evidence persuaded the court to set judgment aside. Her case had consistently been one of undue influence and the new evidence plainly gave her a real prospect of success [89].
14. In David Taylor v Close Brothers Ltd [2023] EWCA Civ 533 (an asset recovery case where the Appellant was being sued on personal guarantees: and one in which I declare an interest of being involved) Mr Taylor originally put the lender to proof of his guarantees – but long after default judgment was entered (and after several applications to set it aside [29]) he deployed new evidence – including a handwriting report that the signature on the guarantee didn’t look like samples taken from him and his son, and witnesses that supported a “late to memory” recollection that he told the lender to “f*** off” when they asked him to sign guarantees [43].
15. Although the judgment speaks mainly of its facts it sheds some interesting light on the matters undecided in Takhar. The case is also a counterpoint to Takhar as the decision goes the other way: Mr Taylor’s attempt to set aside a final charging order obtained after the judgment was dismissed.
16. In paragraph 44 of the judgment the CA (Newey LJ) listed in 11 subparagraphs the ways in the which this late evidence and allegations strained credulity and was implausible. The result was that Mr Taylor had not demonstrated that he would have a reasonable prospect of success in a claim to set aside the default judgment against him (or any other order) for fraud – and the decision of HH J Cawson KC to dismiss an application to stay the charging order based on the default judgment against Mr Taylor was upheld and the appeal dismissed.
17. The interest here is that the Taylor decision accepts that Takhar indeed does involve a discretion [36/37/40/41] and the cases show how the sort of “qualitative analysis” or the “evaluation” of the prospects of the new allegations/evidence referred to by Briggs LJ in Takhar meant the result for Mr Taylor was different from that that for Ms Takhar (who won her set aside when it was redetermined [2020] EWHC 2791 (Ch))
18. Just using the f-word then won’t always buy you another bite of the cherry!
Darren Finlay’s core work includes a wide variety of contract and commercial disputes including litigation over land, boundary and neighbour disputes, chancery matters (including insolvency). Darren also deals with wills and probate matters and Court of Protection or Inheritance Act claims, disputes within companies (such as claims by oppressed minorities), the sale of companies and shares and property, insolvency matters, fraud claims and export trade claims involving letters of credit and contractual claims in respect of a wide variety of matters from large commercial transactions down to faulty goods and services. Darren is fully literate with ICT and experienced in mediation and arbitration.
If you would like to book Darren, please contact one of his clerks:
Senior Clerk – Andy Reeves on 0113 213 5252
Talia Webster on 0113 202 8609