21 Mar 2019

Fraud v Finality: a bare-knuckle fight?


The general rule in English litigation is that claimants have one chance to put their case:  they have one trial and need to use all their evidence and arguments at that point. Usually, new evidence and arguments cannot be raised at a later time. However, the Supreme Court has handed down an important judgment, clarifying that where a party wants to set aside a judgment on the basis that it was obtained by fraud, it does not have to demonstrate that the fraud could have been discovered at an earlier time by the exercise of reasonable diligence1.

In other words, a losing party can, in some circumstances, try to re-litigate a case if they can show the original judgment was obtained by fraud.

Takhar v Gracefield: the facts

When Mrs Takhar, the appellant, had separated from her husband, she had acquired a number of properties from him. In November 2005, it was agreed that legal title to the properties would be transferred to Gracefield Developments Ltd ("Gracefield"). Mrs Takhar and the defendants were to be the shareholders and directors of Gracefield.  The purpose of that transfer was disputed.

The proceedings

In October 2008, Mrs Takhar issued proceedings, claiming that the properties had been transferred to Gracefield as a result of undue influence or other unconscionable conduct on the part of the defendants. The Judge in that case rejected the claim. He relied in particular on a document described as a profit share agreement (the "Agreement"). Mrs Takhar said she had never signed that agreement, and asked the Court for permission to use an expert in handwriting to prove this. At trial, Mrs Takhar said that she could not say that the signature on the Agreement was not hers, but was unable to explain how it got onto the Agreement.

After trial, Mrs Takhar instructed new solicitors, who obtained an expert handwriting report.  The report concluded that the signature on the Agreement was a forgery. This meant that the first judgment had been obtained by the defendants in reliance on a fraudulent document.

Mrs Takhar's new claim

Mrs Takhar therefore issued new proceedings, asking the Court to set aside the first judgment on the ground that it was obtained by fraud.

The defendants argued that Mrs Takhar's claim was an abuse of process because, amongst other matters, the documents on which the expert reported were available to Mrs Takhar and her legal team approximately 12 months before trial.

The Judge held that a party who seeks to set aside a judgment on the basis that it was obtained by fraud did not have to demonstrate that he could not have discovered the fraud by the exercise of reasonable diligence2.

This judgment was appealed to the Court of Appeal, and then to the Supreme Court.  The Supreme Court has upheld Mrs Takhar's ability to bring a new claim. In summary, its conclusions mean that parties can, in some circumstances, try to set aside a judgment procured by fraud, even if they did not run that argument at trial.

The Court considered three scenarios:

  1. Cases where, (as here) an allegation of fraud is made on appeal, but where there has been no previous allegation of fraud. In these cases, the Court should not impose a requirement of reasonable diligence on the party seeking to set aside the judgment.  In other words, it is not necessary for that party to show that even with reasonable diligence, they could not have discovered the fraud;
  2. Cases where fraud has been raised at the original trial, but new evidence as to the existence of the fraud has come to light. In these cases, the court will have a discretion as to whether to entertain the application to set aside the judgment; and
  3. Cases where a deliberate decision is taken not to investigate the possibility of fraud in advance of the first trial, even if suspected. In these cases, the court will still have a discretion as to whether to allow an application to set aside the judgment.

Key points

This judgment is important, as it allows parties to argue that a judgment was procured by fraud – even if they did not argue this at the original trial. If there are suspicions of fraud (for example, suspicions that a counterparty has used forged documents), those should be considered carefully, even if a trial has already concluded.

If you think information has come to light which could affect an existing judgment, this may make it possible to appeal. We have an expert team who regularly advise clients on appeals, particularly where revelations of fraud are involved.

1 Takhar –v- Gracefield Developments Limited and Others [2019] UKSC 13 On appeal from [2017] EWCA Civ 147.

2 [2015] EWHC 1276 (Ch)



Ros Prince

Ros Prince

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Caroline Houghton

Caroline Houghton
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