Mrs Takhar sought to set aside a judgment dismissing her claim that properties had been transferred because of undue influence, relying on later handwriting evidence that a profit-share agreement treated as genuine by the trial judge carried a transposed signature. The Supreme Court held that, because fraud had not been alleged at that trial, she did not have to show that the alleged fraud could not have been discovered earlier by reasonable diligence. Her claim was therefore allowed to proceed to trial.
Mrs Takhar transferred several properties to Gracefield Developments. She said the company was to renovate and let them and that she retained beneficial ownership. The respondents said it was a joint venture under which the properties would be sold and the profits shared.
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Judge Purle QC dismissed the original claim in 2010. A scanned document apparently signed by Mrs Takhar supported the respondents’ account of a profit-sharing agreement. No original was found. The judge refused a late application for handwriting evidence. Mrs Takhar did not allege forgery at trial.
The claim to set the judgment aside
After the trial, handwriting expert Robert Radley reported that the signature on the agreement had been transposed from a letter sent by Mrs Takhar in March 2006. He also considered that there was strong evidence of transposition on certain bank inquiry forms. Mrs Takhar then claimed that Judge Purle’s judgment and order had been obtained by fraud, principally through the alleged forgery, and that she could not properly have advanced that case before receiving the report. A later application to add allegations of unlawful means conspiracy and deceit was refused and played no part in the appeal.
The respondents said that the new claim was an abuse of process. They pleaded that the documents examined by Mr Radley had been available to Mrs Takhar and her lawyers since at least July 2009, about a year before the trial. The abuse issue was tried first.
The decisions below
Newey J held that a party asking to set aside a judgment for fraud did not have to prove that the fraud could not have been discovered by reasonable diligence. The claim was therefore not an abuse of process.
The Court of Appeal reversed Newey J. It held that Mrs Takhar had to show she could not, with reasonable diligence, have put the new evidence before the first judge.
Why the Supreme Court disagreed
Lord Kerr, with whom Lord Hodge, Lord Lloyd-Jones and Lord Kitchin agreed, held that those authorities did not impose a reasonable-diligence requirement where the alleged fraud had not been raised or decided at the first trial. Henderson normally requires a party to bring forward the whole case, but it does not decide the position where the new point was not in issue and might have changed the result, or where the new allegation is that the judgment itself was obtained by fraud. Fraud had not been decided before Judge Purle. Mrs Takhar was not seeking to relitigate an identical claim or a point already determined; she now alleged that the written agreement was a forgery, whereas she had previously relied on undue influence and unconscionability.
Lord Kerr distinguished cases where a party sought to reopen an issue already decided. Here the alleged fraud was a separate wrong directed at the court itself. If established, it could undermine the judgment even if the victim might have discovered it sooner.
The general conclusion was therefore that, where no fraud allegation was raised at the trial leading to the judgment, the applicant need not show that the fraud could not have been discovered beforehand by reasonable diligence. If Etoile or Bracco required the contrary, they should not be followed. Two questions were expressly left open because they did not arise. Where fraud had been raised originally and further evidence was later relied on, the court might have a discretion whether to entertain the application. A discretion might also be appropriate if a party had deliberately decided not to investigate a suspected fraud. Mrs Takhar had suspected fraud, but she had not made a conscious decision not to investigate it: she had sought permission for expert evidence and had been refused.
The conditions stated by Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners lp remained applicable. There must be conscious and deliberate dishonesty relevant to the judgment; it must be material, meaning that the fresh evidence shows it was an operative cause and would entirely have changed the first court’s approach; and materiality is judged by its impact on the evidence supporting the original decision, not by predicting the result of a retrial on honest evidence. Lord Kerr agreed that Mrs Takhar’s application had the potential to meet those conditions and should not face an additional diligence hurdle.
Lord Sumption distinguished a new claim about dishonest conduct at trial from a second attempt to litigate the original dispute. The court could prevent abuse, but the fact that a point could have been raised earlier did not by itself show that it should have been raised.
Lord Briggs agreed that this appeal should be allowed, but preferred a fact-sensitive evaluation in every case, weighing the gravity of the alleged fraud against the seriousness of any lack of diligence and other circumstances, rather than a bright-line exclusion of diligence except in two categories. On these allegations, the claimed forgery was grave and specifically aimed at the court, while the suggested diligence failure was towards the less serious end because investigation had been attempted but left too late. The claim was not an abuse. He would interfere only if abuse were established, and would not describe that assessment as a discretion.
Lady Arden also held that failure to search diligently was not, of itself, a bar. She accepted that restrictions may be justified in particular situations, including collusion, immaterial fraud and some cases affecting innocent third parties, and she left other possible exceptions open. She noted matters in the limited material that might concern a court considering abuse, including the timing of Mrs Takhar’s suspicions and the handling of the first action, but said that the Supreme Court should not determine her precise state of knowledge. There was no blanket ban arising from want of diligence alone.
Verdict: The Court unanimously allowed the appeal and restored Newey J’s order. Mrs Takhar could take her fraud claim to trial. She still had to prove the alleged fraud and its material effect on the first judgment.
Source: Takhar v Gracefield Developments Limited and others [2019] UKSC 13
