Elu v Floorweald Ltd

It is worth outlining the framework of the law relating to res judicata and abuse of process before I go on to consider their application where it is said that a judgment has been procured by fraud. The decision of the Supreme Court in Virgin Atlantic Airways Ltd v Zodiac [2013] UKSC 46, [2014] AC 160 contains a survey by Lord Sumption, at paragraphs 16-26, on which I am not capable of improving and which I will not repeat in full. However, using this as my guide it may be useful to highlight certain points.

The famous dictum of Sir James Wigram V-C Henderson v. Henderson (1843) 3Hare100, 114–115, is an important statement of the underlying principle:

“In trying this question, I believe I state the rule of the court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

In Virgin Atlantic Airways Ltd v Zodiac (supra), at paragraph 17, Lord Sumption said that this principle “precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones.” (emphasis added).

In Arnold v National Westminster Bank plc [1991] 2 AC 93 Walton J had ruled on the construction of a rent review clause in earlier litigation between the same parties. The question was whether the tenants were bound by that construction in litigation concerning subsequent rent reviews. The Court of Appeal had, in subsequent cases, cast doubt on Walton J’s construction and the House of Lords therefore approached the case on the basis that, in effect, the law had changed since the earlier litigation.

Lord Keith defined cause of action estoppel as follows at 104E:

“Cause of action estoppel arises where the cause of action in the later proceedings is identical to that in the earlier proceedings, the latter having been between the same parties or their privies and having involved the same subject matter. In such a case the bar is absolute in relation to all points decided unless fraud or collusion is alleged, such as to justify setting aside the earlier judgment”

At 105D-E he defined issue estoppel as follows”

“Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to reopen that issue.”

At 106B Lord Keith noted that, like cause of action estoppel:

“Issue estoppel, too, has been extended to cover not only the case where a particular point has been raised and specifically determined in the earlier proceedings, but also that where in the subsequent proceedings it is sought to raise a point which might have been but was not raised in the earlier.”

At 107D he said:

“It thus appears that, although Henderson v. Henderson, 3Hare100, was a case of cause of action estoppel, the statement there by Wigram V.-C. has been held to be applicable also to issue estoppel. That statement includes the observation that there may be special circumstances where estoppel does not operate. The instant case is concerned with the nature of such special circumstances.” (emphasis added)

Lord Keith then noted that the cases suggested that special circumstances may exist where there is a default judgment and where there has been a material change in the factual circumstances. At 108 he rejected an argument that, like cause of action estoppel, in the case of issue estoppel the bar should be absolute where the point at issue had actually been raised and decided in the earlier proceedings, unless it was a case of fraud. At 109 he said:

““the underlying principles upon which estoppel is based, public policy and justice, have greater force in cause of action estoppel, the subject matter of the two proceedings being identical, than they do in issue estoppel, where the subject matter is different”

So issue estoppel is a more flexible concept. He went on to say:

“Once it is accepted that different considerations apply to issue estoppel, it is hard to perceive any logical distinction between a point which was previously raised and decided and one which might have been but was not. Given that thefurther material which would have put an entirely different complexion on thepoint was at the earlier stage unknown to the party and could not by reasonablediligence have been discovered by him, it is hard to see why there should be a different result according to whether he decided not to take the point, thinking ithopeless, or argue it faintly without any real hope of success.” (emphasis added)

Nor did Lord Keith accept that any exception should only be available in the case of the earlier judgment being a default or a foreign judgment. He therefore formulated an additional exception in the case of issue estoppel as follows:

“In my opinion your Lordships should affirm it to be the law that there may be an exception to issue estoppel in the special circumstance that there has becomeavailable to a partyfurther material relevant to the correct determination of a point involved in the earlier proceedings, whether or not that point wasspecifically raised and decided, being material which could not by reasonablediligence have been adduced in those proceedings. One of the purposes of estoppel being to work justice between the parties, it is open to courts to recognise that in special circumstances inflexible application of it may have the opposite result.” (emphasis added)

The House of Lords held that such further material was not confined to matters of fact but that, where a judge made a mistake and a higher court overruled him in a subsequent case, justice required that the party which suffered from the mistake should not be prevented from reopening that issue when it arose in later proceedings. It will be noted, however, that the material in question had to be material which was not available to the parties at the time of the first proceedings and which could not by reasonable diligence have been adduced in those proceedings.

In Virgin Atlantic Airways Ltd v Zodiac (supra) the Supreme Court analysed Arnold in the context of a plea of res judicata in relation to a determination of the validity of a patent. At paragraph 21 Lord Sumption said that Arnold held that the difference between cause of action and issue estoppel was that:

“in the case of cause of action estoppel it was in principle possible to challenge the previous decision as to the existence or non-existence of the cause of action by taking a new point which could not reasonably have been taken on the earlier occasion; whereas in the case of issue estoppel it was in principle possible to challenge the previous decision on the relevant issue not just by taking a new point which could not reasonably have been taken on the earlier occasion but to reargue in materially altered circumstances an old point which had previously been rejected”.

At paragraph 22 Lord Sumption said:

“Arnold v National Westminster Bank plc.. is accordingly authority for the following propositions. (1) Cause of action estoppel is absolute in relation to all points which had to be and were decided in order to establish the existence or non-existence of a cause of action. (2) Cause of action estoppel also bars the raising in subsequent proceedings of points essential to the existence or nonexistence of a cause of action which were not decided because they were not raised in the earlier proceedings, if they could with reasonable diligence and should in all the circumstances have been raised. (3) Except in special circumstances where this would cause injustice, issue estoppel bars the raising in subsequent proceedings of points which (i) were not raised in the earlier proceedings or (ii) were raised but unsuccessfully. If the relevant point was not raised, the bar will usually be absolute if it could with reasonable diligence and should in all the circumstances have been raised.”

It is apparent from this formulation in the context of the reasoning in Arnold that the overarching test, if an exception is to be made in a case of issue estoppel, is whether there are special circumstances which mean that the operation of the principle would cause injustice. In cases where the point was not raised, the question whether the point could with reasonable diligence and should in all the circumstances have been raised will usually (but not always) be decisive of this overarching question.

Lord Sumption then rejected an argument that recent case law had recategorized the principle in Henderson v Henderson as being concerned with abuse of process, rather than res judicata, so that Arnold could no longer be regarded as the law. At paragraph 25 he said:

“Res judicata and abuse of process are juridically very different. Res judicata is a rule of substantive law, while abuse of process is a concept which informs the exercise of the court’s procedural powers. In my view, they are distinct althoughoverlapping legal principles with the common underlying purpose of limitingabusive and duplicative litigation. That purpose makes it necessary to qualify the absolute character of both cause of action estoppel and issue estoppel where theconduct is not abusive. As Lord Keith put it in Arnold v National WestminsterBank plc [1991] 2AC93, 110g, “estoppel per rem judicatam, whether cause of action estoppel or issue estoppel, is essentially concerned with preventing abuse of process”. (emphasis added)

As to abuse of process more generally, the classic statement of the modern position is that of Lord Bingham in Johnson v Gore Wood & Co [2002] 2 AC 1:

“Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that thereshould be finality in litigation and that a party should not be twice vexed in thesame matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should havebeen raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much moreobviously abusive, and there will rarely be a finding of abuse unless the laterproceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takesaccount of the public and private interests involved and also takes account of allthe facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.”

See, also, the helpful summary at paragraph 83 of the judgment of HHJ Bowsher QC in Time Group Ltd v Computer 2000 Distribution Ltd [2002] EWHC 126 (TCC) which emphasises, amongst other things, that it is a serious matter to dismiss a claim on the basis of abuse of process.

As noted above, it is well established that the principles applicable to res judicata and abuse of process generally are modified where it is said that the judgment was obtained by fraud. In Takhar the Supreme Court considered the relationship between the public interest in finality of litigation and the public interest in litigants and the courts not being deceived. Lord Briggs strikingly described the case as follows at paragraph 68:

“68 This appeal turns on the outcome of a bare-knuckle fight between two important and long-established principles of public policy. The first is that fraud unravels all. The second is that there must come an end to litigation. I will call them the fraud principle and the finality principle”

Mrs Takhar brought proceedings in the Chancery Division in which she alleged that certain properties had been transferred by her to Gracefield as a result of undue influence or other unconscionable conduct on the part of Dr and Mrs Krishan. One of the pieces of evidence relied on by the Krishans in defending her claim was a written profit share agreement which set out the terms as to payment of Mrs Takhar for the transfer of the properties. In summary, she was to be paid the sum of £300,000 and to receive 50% of the profits when the properties were sold. Mrs Takhar’s signature appeared on a scanned copy of the last page of the agreement and it was alleged that the document reflected what had genuinely been agreed orally between the parties.

Mrs Takhar had concerns about the authenticity of the signature attributed to her and she applied for permission to obtain expert evidence from a handwriting expert, but this was refused. At trial, she gave evidence that she could not say that the signature was not hers, but nor could she explain how it got there. The trial judge (Judge Purle

Mrs Takhar subsequently obtained a report from a handwriting expert whose opinion was that the signature on the profit share agreement had been transposed from a letter which she had sent to the solicitors for the Krishans, rather than her having in fact signed the agreement. On the basis of this expert report she issued proceedings in which she sought to have Judge Purle’s judgment set aside on the grounds that it had been obtained by fraud. The defendant objected on grounds of abuse of process and this question was decided as a preliminary issue. Newey J held that the claim was not abusive: a party who seeks to set aside a judgment on the basis that it was obtained by fraud does not have to demonstrate that they could not have discovered the fraud by the exercise of reasonable diligence. The Court of Appeal disagreed, holding that, even in fraud cases, the matter could not be reopened if the alleged fraud could with reasonable diligence have been discovered.

The Supreme Court agreed with Newey J. Four judgments were given. The first was by Lord Kerr, with whom Lords Hodge, Lloyd-Jones and Kitchin agreed, and the second was by Lord Sumption, with whom they also agreed. There were then judgments given by Lord Briggs and Lady Arden who concurred in the result. The majority disagreed with the approach advocated by Lord Briggs.

It will be necessary to consider these judgments in detail given the arguments in the present case but it is clear from all of the judgments that the ratio of the decision, is accurately stated in the headnote in the Weekly Law Reports:

“where it could be shown that a judgment had been obtained by fraud, and noallegation of fraud had been raised at the trial which led to that judgment, a party seeking to set aside the judgment was not required to show that the fraud could not have been uncovered with reasonable diligence in advance of the obtaining of the judgment; that, therefore, an absence of reasonable diligence was not of itself a reason for staying as an abuse of process a claim to set aside a judgment on the grounds of fraud” (emphasis added)

In the light of the comparison which Mr Jones seeks to make between the relevant facts of Takhar and the facts of the present case, it is necessary to look more closely at Mrs Takhar’s approach to the question whether she had signed the profit share agreement. These are set out more fully in the judgment of Newey J at first instance.

Proceedings were issued on 24 October 2008 and disclosure took place on 13 July 2009. Mrs Takhar’s solicitors asked to inspect the originals of the profit share agreement and an account enquiry form on the basis that “she cannot be sure that the said documents contain her signature”. Mrs Takhar said, in a witness statement dated

The application for permission to obtain the evidence of a handwriting expert was made on 31 March 2010 and was supported by a witness statement of her solicitor which stated that she had a “genuine concern” that the signatures on several documents. “were not hers and could potentially have been forged”. An attendance note of the hearing of the application recorded that Judge Purle “felt the instruction of a handwriting analysis and a forensic linguist would not assist the Court a great deal and also the timing of the application considering the number of witnesses that would be required at trial is late.” .

The transcript of the exchanges at the trial, between leading counsel for Mrs Takhar and the Judge, about why handwriting expert evidence had been applied for recorded leading counsel as saying that it was because Mrs Takhar could “not remember” signing the documents. “She has never said for sure. That is one of the reasons why it failed.” The Judge responded, “That was one of my reasons, was it not? There is no positive case asserted.” The response was “My Lord, yes. Yes, indeed.”

After Mrs Takhar had given oral evidence at trial her leading counsel had said “from her cross examination now, Mrs Takhar accepts it is her signature on the document.” (emphasis added). In fact, she was right to do so - it was her signature – her subsequent claim was on the basis that her signature had been transposed from another document which she had genuinely signed.

There were then the following exchanges between leading counsel and the Judge in closing submissions:

“[COUNSEL FOR MRS TAKHAR]: … The [Profit Share Agreement], my lord, is a very odd document…. Mrs Takhar is adamant that she saw it for the first time in disclosure. My lord noted in the failed application for forensic handwriting experts that Mrs Takhar had been very candid, that she had not suggested thatdocuments had been forged when she was not able to do so, and that is one of the reasons why her application for forensic handwriting evidence failed. She said she could not remember. She may have signed it. It might be her signature. It could not be her signature but on this one it is different. This one, she says, ‘No, I did not see this’ and being the amateur sleuth that I am, I have looked at her signature on this and on others and it does look a bit suspect but we do not have forensic document examination evidence and that is that, but we do have clear evidence from Mrs Takhar. She will not deny and allege a forged signature if she does not feel she is entitled to. She says she saw this for the first time. It is highly believable.

…

THE JUDGE: Your case is that your client did not sign anything?

[COUNSEL FOR MRS TAKHAR]: Did not sign anything, yes. I know. My lord, I am bound by Mrs Takhar’s evidence. Her evidence is that this is the first time she saw it. I have not put things to the Krishans I did not feel entitled to put.

THE JUDGE: Well, you are not bound by her evidence. You are entitled to say she cannot remember it.

[COUNSEL FOR MRS TAKHAR]: Yes. That is what she said.

THE JUDGE: Assuming that she has forgotten it, then what?

[COUNSEL FOR MRS TAKHAR]: Well, happily, it is not a problem for her case because, as you rightly identified, if she was willing to sign the TR1s, she–

THE JUDGE: No. If she has forgotten it, then you say it is just another exampleof signing whatever is put before her without reading it.

[COUNSEL FOR MRS TAKHAR]: My lord, it is but it just seems so odd…”

In her evidence in the subsequent proceedings before Newey J Mrs Takhar accepted that:

“Mr Peter Matthews, from whom she received advice from 2008, suspected fraud.”

She went on to say:

“However, [Mr Matthews] is not a document examiner, nor an accountant, nor a valuer. He was merely a financial adviser. Whilst he had suspicions, he had noproof of fraud, as he was forced to accept in his evidence at the trial. For my part, I too was suspicious but had no proof and could not get any proof until after disclosure and receipt of a copy of the Profit Share Agreement with my signature on it together with the other suspect signatures produced by the Defendants.” (emphasis added)

The picture is therefore a mixed one. Clearly Mrs Takhar was not in a position to allege fraud and nor did she do so. She had her suspicions but ultimately her position at the trial was that she accepted that it was her signature on the scanned page but did not remember signing it. The possibility of transposition of her signature from another document does not appear to have been raised at all. The question whether she did sign it was, however, not necessarily of decisive importance as it was consistent with her case of undue influence and entering into an unconscionable bargain that she had signed whatever was put in front of her rather than truly agreeing to any of the transactions which were said to be evidenced by the documents.

Lord Kerr considered Arnold and the Virgin Atlantic case and held that the principles stated in those cases did not determine the issue in Takhar:

On the basis of this, third, point Lord Kerr then distinguished three decisions which appeared to support the proposition that there was a reasonable diligence requirement in fraud cases where the issue of fraud had been raised and determined in earlier proceedings. These cases were Phosphate Sewage Co Ltd v Molleson (1879) 4 App Cas 801, Owens Bank Ltd v Bracco [1992] 2 AC 443 and Owens Bank Ltd v Etoile Commerciale SA [1995] 1 WLR 44 PC. Lord Kerr also held that the relevant passage in Etoile was obiter dicta (in fact both cases concerned foreign judgments, in relation to which the due diligence condition does not apply in any event) and he distinguished Hunter v Chief Constable of the West Midlands Police [1982] AC 529 on the basis that this case concerned a collateral attack on a criminal conviction and therefore engaged distinct policy considerations.

Lord Kerr then considered the cases on the effect of fraud, starting with the dictum of Lord Bingham in HIH Casualty and General Insurance Ltd v Chase Manhattan Bank[2003] 1All ER (Comm)349 at paragraph 15:

“..fraud is a thing apart. This is not a mere slogan. It also reflects an old legal rule that fraud unravels all … once fraud is proved, ‘it vitiates judgments, contracts and all transactions whatsoever’: Lazarus Estates Ltd v Beasley [1956] 1QB702, 712 per Denning LJ. Parties entering into a commercial contract will no doubt recognise and accept the risk of errors and omissions in the preceding negotiations, even negligent errors and omissions. But each party will assume the honesty and good faith of the other; absent such an assumption they would not deal.”

Lord Kerr emphasised the point that:

“This reflects the basic principle that the law does not expect people to arrange their affairs on the basis that others may commit fraud”.

He also cited Commonwealth authorities from Australia and Canada which rejected the reasonable diligence test in cases where it was alleged that a judgment had been procured by fraud. One such authority was the decision of the New South Wales Court of Appeal in Toubia v Schwenke [2002] NSWCA 34 which declined to follow the dicta in the Etiole and the Bracco cases. Lord Kerr cited paragraphs 37 and 38 of the judgment of Handley JA with approval:

“37.

I would not follow the dicta in Owens Bank Ltd v Bracco, Owens Bank Ltdv Etoile Commerciale SA … because, with respect, the dicta are contrary to principle and earlier authority. The assumption is that the court and the losing party were successfully imposed on by the fraud of the successful party, but relief should nevertheless be denied and the judgment allowed to stand because the defrauded party was careless or lacked diligence in the preparation of his case … Contributory negligence is not a defence to an action for fraud whether the relief claimed is rescission or damages. As Brennan J said in Gould v Vaggelas (1985) 157CLR215, 252: ‘A knave does not escape liability because he is dealing with a fool.’

Means of knowledge of the falsity of the representation without actualknowledge is no defence and a representee has no duty to make inquiries to ascertain the truth …” (emphasis added) 125.Handley JA also said at paragraph 41:

“In an action for fraud, a plaintiff must prove that he was deceived but need not prove that he was diligent. Where the action seeks the judicial rescission of ajudgment, the plaintiff must prove that he and the Court were deceived and hecan only do this by showing that he has discovered the truth since the trial. Where this is done, and the fresh facts are material, fraud is established. Lord Buckmaster said [in Hip Foong Hong v H Neotia and Co [1918] AC 888] that if fraud was proved the judgment was vitiated, and he can only have meant that nothing else had to be proved apart from fraud. That means there is no need to prove due diligence as well.” (emphasis added)

Lord Kerr held that the principle that ‘A knave does not escape liability because he is dealing with a fool.’ is antithetical to a requirement to exercise reasonable diligence in relation to the risk of fraud when conducting litigation, which would be implicit if the reasonable diligence condition applied. At paragraph 52 he also emphasised the public interest in the court not being deceived:

“The idea that a fraudulent individual should profit from passivity or lack of reasonable diligence on the part of his or her opponent seems antithetical to any notion of justice. Quite apart from this, the defrauder, in obtaining a judgment, has perpetrated a deception not only on their opponent and the court but on the rule of law.”

At paragraph 54 he therefore rejected the proposition that:

“in cases where it is alleged that a judgment was obtained by fraud, it may only be set aside where the party who makes that application can demonstrate that thefraud could not have been uncovered with reasonable diligence in advance of the obtaining of the judgment” (emphasis added) 128. He added:

“In my view, it ought now to be recognised that where it can be shown that a judgment has been obtained by fraud, and where no allegation of fraud had been raised at the trial which led to that judgment, a requirement of reasonable diligence should not be imposed on the party seeking to set aside the judgment.” 129. At paragraph 55, however, he said this:

“55 Two qualifications to that general conclusion should be made. Where fraudhas been raised at the original trial and new evidence as to the existence of thefraud 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. The second relates to the possibility that, in some circumstances, a deliberatedecision may have been taken not to investigate the possibility of fraud inadvance 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. In Mrs Takhar’s case, she did suspect that there may havebeen fraud but it is clear that she did not make a conscious decision not toinvestigate it. To the contrary, she sought permission to engage an expert but, asalready explained, this application was refused.” (emphasis added)

Finally, Lord Kerr approved Aikens LJ’s statement of the principles which govern applications to set aside judgments for fraud in Royal Bank of Scotland plc v Highland Financial Partners lp[2013] 1 CLC 596 at paragraph 106:

“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” (emphasis added)

Lord Sumption’s judgment began by agreeing with Lord Kerr “Subject to what follows..” .

He recalled that an action to set aside an earlier judgment for fraud is a cause of action rather than a mere procedural application:

“.. A party to earlier litigation was entitled to bring an original bill in equity to set aside the judgment given in that litigation on the ground that it was obtained by fraud. Such a bill could be brought without leave, because it was brought in support of a substantive right. If the fact and materiality of the fraud were established, the party bringing the bill was absolutely entitled to have the earlier judgment set aside…...After the fusion of law and equity in the 1870, the procedure by way of original bill was superseded by a procedure by action on the same juridical basis.” (paragraph 60)

The cause of action to set aside a judgment for fraud is independent of the cause of action asserted in the earlier proceedings:

“It relates to the conduct of the earlier proceedings, and not to the underlying dispute. There can therefore be no question of cause of action estoppel. Nor can there be any question of issue estoppel, because the basis of the action is that the decision of the issue in the earlier proceedings is vitiated by the fraud and cannot bind the parties…. If the claimant establishes his right to have the earlier judgment set aside, it will be of no further legal relevance qua judgment. It follows that res judicata cannot therefore arise in either of its classic forms.” (paragraph 61)

In relation to Henderson v Henderson Lord Sumption reiterated what he had said at paragraph 25 of his judgment in the Virgin Atlantic case and added:

“Since the decisions of the House of Lords in Arnold v National WestminsterBank plc[1991] 2AC93and Johnson v Gore Wood & Co[2002] 2AC1it has been recognised that where a question was not raised or decided in the earlier proceedings but could have been, the jurisdiction to restrain abusive relitigation is subject to a degree of flexibility which reflects its procedural character. This allows the court to give effect to the wider interests of justice raised by the circumstances of each case.” (paragraph 62)

He explained that he rejected the reasonable diligence condition or a variant of it proposed by Lord Briggs because:

“proceedings of this kind are abusive only where the point at issue and the evidence deployed in support of it not only could have been raised in the earlierproceedings but should have been: see Johnson v Gore Wood [2002] 2AC1, 31 (Lord Bingham of Cornhill) and the Virgin Atlantic case [2014] AC160, para 22 (Lord Sumption JSC). As Lord Bingham observed in the former case, it is “wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive.” The “should” in this formulation refers to something which the lawwould expect a reasonable person to do in his own interest and in that of theefficient conduct of litigation. However, the basis on which the law unmakes transactions, including judgments, which have been procured by fraud is that a reasonable person is entitled to assume honesty in those with whom he deals. Heis not expected to conduct himself or his affairs on the footing that other personsare dishonest unless he knows that they are. That is why it is not a defence to anaction in deceit to say that the victim of the deceit was foolish or negligent toallow himself to be taken in..” (paragraph 63, emphasis added) 136.He added:

“It follows that unless on the earlier occasion the claimant deliberately decidednot to investigate a suspected fraud or rely on a known one, it cannot be said thathe “should” have raised it.” (paragraph 63, emphasis added)

Lord Sumption did not refer specifically to Phosphate Sewage but he did distinguish Hunter on the basis that it did not apply to applications to set aside civil judgments. He said that the relevant passages in the Etoile and Bracco cases were both obiter and “mistaken”. It appears that even where the issue of fraud had been determined in earlier proceedings, he did not agree that the reasonable diligence test would apply. This disagreement was explained as follows:

“None of these judicial statements sufficiently distinguishes between (i) theproposition that an action to set aside a civil judgment must be based on newevidence not before the court in the earlier proceedings, and (ii) the proposition that that evidence must not have been obtainable by reasonable diligence for the earlier proceedings. The first proposition is well established. The second is not supported by any authority earlier than [Hunter].. and appears to me to be an insufficient answer to an allegation that a civil judgment has been obtained against the claimant by the deliberate fraud of another party” (paragraph 65, emphasis added)

However, at paragraph 66 Lord Sumption said this:

“66 I would leave open the question whether the position as I have summarised it is any different where the fraud was raised in the earlier proceedings but unsuccessfully. My provisional view is that the position is the same, for the samereasons. If decisive new evidence is deployed to establish the fraud, an action to set aside the judgment will lie irrespective of whether it could reasonably have been deployed on the earlier occasion unless a deliberate decision was then taken not to investigate or rely on the material.” The analysis of Lord Briggs.

Lord Briggs characterised Lord Kerr’s ruling as follows

“69 Basing himself on that obvious principle of justice, Lord Kerr JSC proposes a clear rule that a judgment may always be set aside for fraud without regard either to the gravity of the fraud or to any lack of reasonable diligence by the alleged victim, unless either (i) fraud was actually alleged in the earlier proceedings, or (ii) there was a deliberate decision not to investigate a suspected fraud. Only in those cases should the finality principle either prevail, or at least give rise to a judicial discretion to apply it.”

The view of Lord Briggs, which he summarised at paragraph 68, was that the approach should be more flexible:

“But I have been unable to follow him all the way down a path which seeks to erect a reliable bright-line boundary between types of case where one principle or the other should clearly prevail. There will be too many cases where that supposed bright line is either invisible, or so technical that it fails to afford a basis for choosing between the two principles which accords with justice, common sense or the duty of the court to retain control over its own process, and thereby protect it from abuse. I would have preferred a more flexible basis upon which, recognising that many cases will straddle any bright line, the court can apply a fact-intensive evaluative approach to the question whether lack of diligence in pursuing a case in fraud during the first proceedings ought to render a particular claim to set aside the judgment in those proceedings for fraud an abuse of process. This approach would in particular seek to weigh the gravity of the alleged fraud against the seriousness of the lack of due diligence, always mindful of the principle that victims of a fraud should not be deprived of a remedy merely because they are careless.”

The facts of the present case tend to demonstrate the prescience of these remarks. But Lord Sumption disagreed with this approach at paragraphs 63 and 64 and, as I have noted, Lords Hodge, Lloyd-Jones and Kitchin agreed with Lord Sumption’s judgment, as well as that of Lord Kerr.

I drew the decision of the House of Lords in Phosphate Sewage Co Ltd v Molleson

Earl Cairns LC said:

“As I understand the law with regard to res judicata, it is not the case, and it would be intolerable if it were the case, that a party who has been unsuccessful in a litigation can be allowed to re-open that litigation merely by saying, that since the former litigation there is another fact going exactly in the same direction with the facts stated before, leading up to the same relief which I asked for before, but it being in addition to the facts which I have mentioned, it ought now to be allowed to be the foundation of a new litigation, and I should be allowed to commence a new litigation merely upon the allegation of this additional fact. My Lords, the only way in which that could possibly be admitted would be if the litigant were prepared to say, I will show you that this is a fact which entirely changes the aspect of the case, and I will show you further that it was not, and could not by reasonable diligence have been, ascertained by me before.”

At first blush this passage seemed to me to be potentially binding authority on the position where the issue of fraud is raised and adjudicated but further evidence comes

This observation is relevant to the arguments in the present case about what constitutes fresh evidence. I also note that Phosphate Sewage was not a case where there was an attempt to set aside the original decision in the Scottish bankruptcy proceedings. It was, therefore, a case in which the question of res judicata potentially arose.

The position is therefore that where the issue of fraud has not been raised or determined in earlier proceedings:

Where the issue of fraud has been raised in the earlier proceedings, but unsuccessfully, the Supreme Court left the position open:

As noted above, the case which the defendant wishes to run is set out in the Statement of Case. At the heart of the fraud issue is a contention that the claimant’s oral evidence was fraudulent, and the Judge ought to have found that she was an untruthful witness. Similarly, it is said that certain of the documents on which she relied to support her evidence, and to prove the costs which she said she incurred were forgeries. The Judge therefore ought not to have found that they were genuine (in so far as he did so) and therefore helped to prove her case. On the contrary, if he had appreciated that they were forgeries it is highly likely that he would have rejected her case on causation and loss as the claimant’s credibility would then have been irretrievably damaged and she would have no proof that she had incurred the costs which she sought to recover.

In his skeleton argument, Mr Jones helpfully analyses the fraud issue by reference to the issues in the Application. His starting point is that no question of issue estoppel arises because, he says, no allegation of fraud was pleaded, made or adjudicated at trial and no final decision was made on this allegation at the interlocutory hearings which I have described. The Application, he says, is therefore based on an alleged abuse of process if it is anything whereas the decision of the Supreme Court in Takhar is fatal to such an argument. There is no requirement on him to show that the additional evidence on which he wishes to rely could, with reasonable diligence, have been put before the court. Nor, he argues, was there any deliberate decision not to investigate the matter or not to put that evidence before the County Court. Rather, the defendant was prevented from doing so.

Recognising the relevance of the question whether the fraud issue is based on “new” or “fresh” evidence, he identifies four allegations of fraud with particular emphasis on the impugned supporting documents, which he places in corresponding categories.

Mr Mallet relied on the fact that virtually all of the evidence on which the defendant now wishes to rely was known to it and in its possession at the time of the trial. This, he said, meant that it was not “fresh” or “new”, whereas this is an essential requirement if the judgment of HHJ Coltart is to be set aside.

The starting point is that, as Lord Sumption pointed out in Takhar, an action to set aside a judgment on the basis that it has been obtained by fraud is a cause of action in itself. In the present case, the question whether the cause of action should proceed

Second, a key ingredient of the cause of action is that the party and the court were deceived by the fraudulent evidence of the other party. For this reason the court requires “fresh” or “new” evidence or facts. Mr Jones submitted that evidence or facts which were not before the court in the earlier proceedings will be sufficient, but I do not accept this. In my judgement, the facts or evidence relied on must be materials which were not known, at the time of trial, to the party now alleging that it was deceived:

This point is strictly about the validity of the cause of action pleaded in the Statement of Case but the considerations which underpin the requirement for fresh evidence overlap with those which underpin arguments of res judicata and abuse of process, namely the need for finality of litigation. In the present case, from mid-September 2017 Mr Fischer was sufficiently clear that the Claim was fraudulent to report the matter to the police and, by time of the trial, he had virtually all of the material on which the defendant now seeks to rely to prove its allegations. This, in my view, is fatal to the defendant’s case based on the witness statements of Mr McDonnell and the documents which he exhibited as this evidence was known to, and in the possession of, the defendant at the time of the trial before HHJ Coltart. Mr Jones also accepted that his point on the Babatunde letter stands or falls with his arguments based on Mr McDonnell’s evidence. The material on which he wishes to rely in relation to the check-out inventory was also in the possession and knowledge of the defendant at the time of trial. The only arguably “new” or “fresh” evidence is that of Mr Weedon in relation to the Fleetwood Invoices.

I appreciate that this conclusion may not sit comfortably with how Lord Sumption put the matter in some passages in his judgment in Takhar. In particular, he referred to evidence not being “deployed” (see e.g. paragraphs 63 and 66) rather than not being “known”. It is arguable that his reference to “new evidence not before the court in the earlier proceedings” in paragraph 65 refers to evidence which is both new to the claimant and not before the court but it could equally mean that the evidence should be regarded as new if it was not before the court on the previous occasion. Moreover, the references at the end of paragraphs 63 and 66 to the possibility that a party would or might be barred from bringing the second claim if he “deliberately decided… not to rely on a known fraud” (emphasis added) arguably support Mr Jones’ submission that there may be cases where the fraud is known but the litigant is prevented from raising it and the fraud issue is nevertheless then permitted to proceed because there was no deliberate decision not to rely on it.

I do not rule out the possibility that there may in law be exceptional cases where the evidence of fraud is known to a party and in its possession, but cannot be deployed, and the second action is then permitted to proceed (e.g. because of threats to the litigant or for reasons related to the prevention of crime or national security or because it emerges at a very late stage e.g. during the trial: compare Playboy Club London v Banca Nazionale Del Lavoro Spa [2018] EWCA Civ 2025, although this was not an application to set aside a judgment). But, I do not think that these passages from the judgment of Lord Sumption should be read as establishing a general rule that it is only when there has been an entirely free choice not to rely on known evidence of fraud that the second claim will be prevented from proceeding:

As far as issue estoppel is concerned, this argument should be approached with caution given Lord Sumption’s observations at paragraphs 60 and 61 of his judgment in Takhar. In Toubia Handley JA also pointed out, at paragraph 5, that:

“Such proceedings are equitable in origin and nature…and in fact are proceedings for the judicial recission of the judgment....Such proceedings, when successful, do not result in the ‘scandal of conflicting decisions’…. because if the second action succeeds the first judgment is set aside”

Spencer Bower and Handley also say in ‘Res Judicata’ at paragraph 17.04:

“Proof that an English decision was procured by the fraud or collusion of the successful party is an answer to reliance on that judgment as an estoppel or for any purpose, including an action or proceeding such as an application for bankruptcy. The principle applies to an ex parte judgment, and one entered by consent which can be set aside on any ground, including fraud, on which a court can set aside a contract.”

There is therefore the risk of circularity in being asked to strike out a claim that the judgment of HHJ Coltart was procured by fraud on the basis that he has already decided the matter. If the claim is sound then res judicata does not arise because the judgment is set aside; if, on the other hand, the claim is unsound res judicate does not arise either because the claim will be dismissed in an event.

However, Mr Jones did not raise this objection to the argument based on issue estoppel, presumably on the basis that Lord Sumption cannot have had in mind a case where the issue of fraud was in fact raised and determined and/or there is no question of new or fresh evidence i.e. typical fraud litigation. Lord Briggs also said that “if noallegation of fraud was made in the proceedings leading to the impugned judgment, there is no question of …issue estoppel” (paragraph 82, emphasis added). Mr Jones’ argument, as noted above, was that the issues had not been determined because no positive case of fraud had been advanced at trial and that, in any event, there was fresh or new evidence.

The question whether the issue of fraud was raised at trial is also important to the application or otherwise of Takhar. I will therefore address the arguments of the parties.

I do not accept Mr Mallet’s argument that there was any final determination of the issues in the interlocutory stages of the County Court proceedings. Ultimately, the only case which he advanced in this regard was that the authenticity of the McDonnell invoices and the Santander bank statements was decided by DDJ Maughan and/or when permission to appeal from her decision was refused. However:

As far as trial is concerned, however, I do accept that the issues of the truth of the claimant’s evidence and the authenticity of the impugned documents were before HHJ Coltart, that with one minor exception it was necessary that he decided these issues given the way that the case was argued and that he did decide these issues. As I have highlighted more detail above:

I do not consider that it is an answer to this point, whether in the context of res judicata or abuse of process more generally, to say that the issue of fraud was not pleaded, or to point to a small number of passages where Mr Harris said that he was merely questioning the reliability of the claimant’s evidence given that he was not in a position to advance a positive case. Nor, in my view, does it matter that he did not in terms call the claimant a fraudster at trial or put to her, in terms, that she was dishonest or a liar. He did say in terms that she was untruthful and that he challenged the authenticity of the documents on which she relied. The implication of dishonesty in his case was clear and was clearly understood by the Judge who was also alive to the allegations of fraud which had been made in the course of the interlocutory proceedings. It was also necessary for the Judge to address these questions in order to determine the case given that they went directly to the issues of damage to the flat, cost of repair and the amount of her other alleged losses.

As far as the question to which documents the bar applies in this case, the Judge explicitly found that the documents relied on by the claimant were “entirely genuine and have not been tampered with” and then made specific findings to the effect that the McDonnell invoices and the Santander bank statements were genuine. He also relied on the Fleetways Invoices and the check-out inventory in coming to his decision from which it may be inferred that, insofar as their authenticity was in issue, he determined that issue in the claimant’s favour. Insofar as their authenticity was not in issue, that is because the challenge was abandoned, which is a point I shall return to below. I accept that the Judge expressly did not decide the authenticity of the 6 October 2015 email. He did, however, effectively decide that the content of the Babatunde letter was true in that he relied on as corroborating the claimant’s evidence.

Assuming res judicata applies in this context, then, it seems to me that the defendant is barred from running its case that the claimant gave false evidence and relied on certain documents which were forged to make good her case before HHJ Coltart, subject to its arguments that it should be permitted to rely on evidence in relation to these issues which was not before the court. The question would then be whether there are “special circumstances” in this case where to refuse to allow him to do so

“would cause injustice” (per Lord Sumption’s summary at paragraph 22 of his judgment in Virgin Atlantic) having regard to the need for finality in litigation and the particular considerations which apply where it is alleged that a judgment has been procured by fraud. Similarly, insofar as the defendant did not raise issues or deploy materials before HHJ Coltart the question would be whether he should be permitted to do so having regard to essentially the same considerations.

Insofar as there is any difference between the approach to these questions in the context of a plea of res judicata, as opposed to abuse of process, where the claim is to set aside an order on the grounds that it has been procured by fraud, I do not consider that there are special circumstances which mean that it would be unjust to refuse to allow the defendant to reopen the issues which were before HHJ Coltart. On the contrary, I consider that it would be unjust to the claimant to allow the defendant to do so, for the reasons stated below in relation to abuse of process, and that the finality principle should prevail in this case.

As to whether the case of fraud which the defendant now wishes to advance is abusive, I am persuaded that it is for the reasons given above and the following reasons.

Takhar should not be regarded as detracting from the guidance as to the general approach to abuse of process in Johnson v Gore Wood (supra). Instead, as discussed above, the Supreme Court was looking at the application of that guidance in the particular situation where there is a claim that an earlier judgment was procured by fraud and that claim is said to be abusive, albeit that the Supreme Court held that a rule could be derived in relation to this type of case. Furthermore, the issue which the Supreme Court decided was as to the application or otherwise of a reasonable diligence condition where the alleged fraud and the evidence to support it were not known to, or in the possession of, Mrs Takhar and the issue of fraud was not raised in the earlier proceedings for determination at trial.

As I have pointed out, in the present case the questions whether the claimant’s evidence was truthful, and the impugned documents were authentic, were raised at the outset in the County Court proceedings and were litigated before the Court in the interlocutory stages and at the trial. The honesty of her claim was in substance challenged. The majority of the impugned documents were central to the court’s decision on the claim for the costs of repair and redecoration, particularly those documents which evidenced the fact and amount of the payments which she said she had made. The Judge also explicitly determined these issues. The defendant’s true complaint is essentially that it did not put forward the whole of its case at trial. I therefore consider that Takhar can be distinguished from the present case and that the present case is not subject to the ratio of Takhar.

Mr Jones argued that there are parallels with Takhar given that, as set out in more detail above, Mrs Takhar said that she did not recall signing the profit share agreement etc and there was evidence that she and her advisers suspected that the signature attributed to her was not genuine. If this meant that fraud was not “raised” for the purposes of the Supreme Court’s analysis, he argued, it must follow that it was not raised in the relevant sense in the present case. In my view, however, in drawing its distinction between cases where the issue of fraud was raised and cases where it was not raised, and bearing in mind that the issue was as to abuse of process and the need for finality, the Supreme Court intended an approach based on substance rather

Second, as I have discussed above in relation to the issue of fresh or new evidence, almost all of the evidence on which the defendant wishes to rely in its claim to set aside the judgment of HHJ Coltart was known to it and in its possession at or before the trial. This is a second basis for distinguishing Takhar. Furthermore, it is a relevant factor in the context of arguments about abuse of process, where there may also be greater flexibility than where the issue is as to the existence of a cause of action to set aside a judgment. The greater the ability of the litigant to deploy the relevant evidence, the greater the weight of the argument based on the principle that parties should put forward the whole of their cases and should not normally be given a second bite of the cherry if they don’t.

I appreciate that the defendant applied unsuccessfully for relief against sanctions but I have concluded that, nevertheless, that the materials “should have” been deployed and that, in the words of Lord Sumption in Takhar, “the law would expect a reasonable person to do this in his own interest and that of the efficient conduct of litigation”. This is for the following reasons.

First, as I have noted, this is not a case where the argument of the alleged fraudster is that they could have been discovered by the victim. The claimant’s argument is that since the defendant considered that it had discovered the alleged fraud and that it could prove it, the defendant should have put its whole case to the test when it raised the issue before HHJ Coltart.

Second, there was nothing to prevent the deployment of the relevant materials provided that the defendant complied with the rules and directions of the Court. As highlighted above, the Court also made directions and gave other clear indications as to what was required, but the defendant chose to ignore them.

Third, the defendant could and should have pleaded its case based on Mr McDonnell’s evidence once it had his witness statement of 19 October 2017 at the latest. I consider that it was obliged to do so if it wished to advance a positive case based on the evidence of Mr McDonnell and agree with HHJ Simpkiss in this regard.

In interpreting these requirements, well established common law principles require allegations of fraud and dishonesty to be pleaded. Reflecting these principles, for example, the Chancery Guide provides that:

“10.1... a party must set out in any statement of case:

The reasons for this requirement are obvious and well known. Allegations of this sort are serious and damaging. It is a basic tenet of fairness that, if they are to be made, they should be made clearly and on cogent grounds so that the other party is clear as to the case they have to meet in what is a public process. Provided the allegations are made clearly, the person accused has a fair opportunity to marshall such evidence as they can to meet them including, for example, expert evidence. There is no sensible reason why this would not apply to a case in which the remaining issues are whether the loss and damage alleged were caused by the defendant’s breach of duty and whether the losses allegedly incurred by the claimant were actually incurred.

But it seems to me that whether or not the defendant was obliged to plead this aspect of its case in full if it wished to pursue it in full, it was able to plead its case in full but chose not to do so, for reasons which are unexplained in the evidence but which appear from Mr Harris’ exchanges with the Court to reflect a strategy which had been consciously decided upon. Moreover, the defendant persisted in choosing not to do so despite warnings from the Court in the interlocutory hearings to which I have referred. Insofar as that led to difficulties in developing its case or advancing the whole of its case at trial, that was a situation of its own making. It also means that Mr Jones’ skilful arguments that the defendant did not raise the issue of fraud and that therefore res judicata does not apply, and this cannot be a case of abuse of process are, on analysis, highly unattractive. In effect, he contends that the defendant was entitled to choose to limit its pleaded case to a challenge to the honesty of the claimant’s evidence and the authenticity of the documentary evidence based on some of the incriminating materials in its possession and then, when that was unsuccessful, to choose to plead, in full, the case which it chose not to plead “first time around” and to rely on all of those materials.

I have taken the view that Lord Sumption’s remarks in Takhar should not be construed as a statute or regarded as an exhaustive account of what will amount to an abuse of process in this type of case. But it does seem to me that the defendant’s failure to plead its case in full should be regarded as equivalent in this context, from an objective standpoint and given the rules of pleading and the need for finality, to a deliberate decision not to advance the case which the defendant now wishes to advance. By contrast, Mrs Takhar was not in a position to plead fraud or make an effective challenge to the authenticity of the profit share agreement, and therefore her case was not one in which she deliberately chose not to do so.

Fourth, the defendant could and should have exchanged the first witness statement of Mr McDonnell on 3 November 2017. This view is not just based on the fact that he could have done so: it is what the EJ Russell’s directions, in terms, required him to do if he intended to rely on it. Those directions also specified the sanction for noncompliance, as I have noted. Again, Lord Sumption does not appear to have had this sort of situation in mind but, insofar as it is necessary to fit the case within his formulation, the defendant’s decision not to comply with the directions of the EJ Russell was a deliberate decision with knowledge of the alleged fraud, taken for tactical reasons. The fact that ultimately it could not rely on Mr McDonnell’s evidence results from the application of EJ Russell’s direction to that decision, albeit the court subsequently refused relief against sanctions.

Mr Jones sought to rely on the fact that the decisions made by the defendant were unwise or bad decisions and to argue that the Supreme Court in Takhar held that deliberate but negligent decisions would not be held against the party alleging fraud unless they were decisions not to rely on a known fraud. I do not agree. In my view the Supreme Court held that negligence on the part of a litigant, who was therefore unaware of the fraud or the evidence which he now sought to adduce, should not be held against them. It did not hold that a litigant which knew of the alleged fraud and raised the honesty of the other party’s case, but chose not to comply with the rules and directions of the court and behaved “disgracefully” in the course of the litigation, could nevertheless have a second bite of the cherry.

Nor, therefore, do I consider that my approach is tantamount to allowing the claimant to rely on the negligence of the defendant in the relevant sense. In any event, the conduct of the defendant was more serious than mere negligence given that it persisted in making its allegations of fraud having been made aware of the court’s requirements if it was to do so, but without complying with those requirements, apparently as part of a misguided strategy.

An additional reason for holding that the Statement of Case is abusive is that, in deciding whether to grant relief against sanctions HHJ Simpkiss was aware that the defendant was seeking to deploy evidence of fraud. He therefore was aware of the risk that the effect of refusing relief was that the claimant would procure a judgment in her favour by fraud. But he considered that it was not in the interests of justice, or consistent with the overriding objective, that the defendant should be permitted to rely on the McDonnell evidence. That decision has not been appealed. To allow the defendant now to rely on that evidence would, in my view, permit a collateral attack on the decision of HHJ Simpkiss and, indeed, be contrary to the rationale for the decision in Gentry v Miller (supra) which was that the rules of court apply in the same way to fraud claims as they do to other types of claim, and that there is the same public interest in the efficient and economic conduct of the litigation of such issues.

The fact that the County Court was aware of the defendant’s wish to make allegations of fraud also addresses the point that there is also a public interest in courts not being deceived. In relation to the concern that, although the defendant was aware of the alleged fraud, the County Court may have been deceived (I do not say it was) HHJ Simpkiss was aware of this risk when he refused relief against sanctions. Moreover, as I have pointed out, HHJ Coltart was also aware of the defendant’s allegations of fraud and forgery when he made his decision, and he specifically decided the issues in relation to the truthfulness and authenticity of the claimant’s evidence.

Mr Jones argued that there were parallels between the present case and Mrs Takhar’s case in that she was prevented from obtaining expert evidence by a decision of the court. However, in the context of arguments based on abuse of process there seems to me to be a highly material difference between a party which chooses not to comply with the rules and orders of the court and suffers the consequences of which it was warned, and a party which seeks the permission of the court to obtain expert evidence but is not permitted to do so. Moreover, although Lady Arden had some concerns about Mrs Takhar’s approach to the litigation in the Chancery Division (see paragraph 105) this had none of the “disgraceful” features which are present in the history of the litigation between the claimant and the defendant which I have summarised above.

These are all reasons why the defendant’s attempt to rely on the McDonnell evidence should be denied. In relation to the Babatunde letter, as I have noted, Mr Jones accepted that this item stands or falls with his case on the McDonnell material. Mr Bermant raised a point based on the supplementary report of Mr Stimpson but this was available on the second day of the trial, as was Mr Stimpson, and no attempt was made to deploy it or to call him. In other words, there was a deliberate decision not to rely on it. In my judgement it there should have been an application to the Judge if that material was to be relied on at all.

In relation to the Fleetwood Invoices, here the defendant believed that they were suspect and raised this issue, but decided not to pursue the matter at trial although it had some materials on which to do so and deployed them in cross examination. That was apparently a deliberate decision not to pursue what it believed to be a fraudulent claim. The position is similar in relation to the check-out inventory where the defendant had all of the materials on which it now relies, raised the issue, but then abandoned the point.

More generally, in my view it is relevant that the defendant’s conduct of the County Court litigation was, as HHJ Simpkiss characterised it, disgraceful. This is very much a case in which it can be said that the claimant will be twice vexed in the same matter if the fraud issue is allowed to proceed and in circumstances where there is no acceptable reason why the defendant did not raise the issues before HHJ Coltart as fully as it now wishes them to be raised.

I also consider that it can be said that the defendant would be permitted unjustly to harass the claimant if the fraud issue were to proceed further. I do not say this without appreciating the seriousness of what is alleged against the claimant, or on the basis that there never was any case to answer. I do so on the basis that the allegations against the claimant are very serious, and there was a case to answer, but it has been answered. Fairness to the claimant is a relevant consideration, as is the use of public resources. The defendant persisted in repeatedly challenging the claimant’s integrity and honesty in a number of hearings and in the course of protracted litigation in the

Looking at matters in the round, then, and applying a broad, merits based, judgment to all of the facts, as required by Johnson v Gore Wood, I do consider that the public interest in finality of litigation should prevail in the circumstances of this case.

For completeness I note that, in addition to this the arguments addressed above, Mr Mallett argues that the 6 October 2015 email and the Babatunde letter were not material to the decision of HHJ Coltart in the sense required by the guidance given by Aikens LJ in the Highland Finance case, cited above. I think that this is a somewhat artificial exercise given that, in effect, both points relate to the evidence of Mr McDonnell, which covers a number of matters and which would undoubtedly be material if ultimately it were accepted.

For all of these reasons I grant the Application.

On the day before the hearing, 23 April 2020, my clerk was contacted by email by a DC Garbett. Mr Bermant had apparently forwarded her my clerk’s details. She said that she wanted to make me aware that Kent Police were investigating the claimant for submitting fraudulent documents during the County Court proceedings. She said that she had a folder of evidence which she would be happy to share with me at an arranged date and time should I wish. She said the investigation was ongoing but this evidence might have a bearing on my decision.

I asked my clerk to notify DC Garbett that it would not be appropriate for me to receive any materials or rely on any communications from her without the knowledge of the parties and that I would therefore show her email to them and ask for their views. My clerk duly forwarded her email to counsel for their comments and they said that they did not wish to take the matter further. DC Garbett responded that she understood that I needed to make all parties aware but that she felt that it would be unfair to produce the evidence in a public setting given that the claimant was not aware of the case which the police were building against her.

The hearing proceeded without any further mention of this matter but DC Garbett then contacted my clerk by telephone and by email on 28 April 2020. I asked him not to inform me of what she had said and to email her as follows:

“Dear DC Garbett, I have informed Mr Justice Linden that you have made contact with me today by telephone and by email. As I said in my email on 23 April 2020, however, in fairness to the parties to the application before him, he cannot take into account or act on any information which has not been shown to them. He has therefore asked me not to reveal or send the contents of your communications to him unless and until you notify me that you are content for him to provide the same information to the parties so that they are in a position to comment. He has also asked me to encourage you to take legal advice if you have concerns and to take any further steps formally, using the court’s processes, rather than informally. You should also bear in mind that the hearing of Ms Elu’s application has taken place and Mr Justice Linden intends to send a draft judgment to the parties late this week or at the beginning of next. “197.I also asked him to email counsel as follows:

“Further to my previous emails on this subject, Mr Justice Linden has asked me to let you know that DC Garbett has been back in contact with me by telephone and email today. He has asked me to send her an email in the following terms, and I have done so: [MESSAGE ABOVE]”

At the time of handing down this Judgment, nothing further has been heard. I hope that my view about these events is self-explanatory but, for the avoidance of doubt, the determination of the Application did not involve me deciding whether or not fraud had been committed by the claimant. It also required me to determine the issues on the arguments and evidence which the parties put before the court. Such evidence as the police have was therefore likely to be irrelevant. But if the parties or the police took a different view it was open to them to deal with the matter by way of formal application. In any event, it would have risked serious unfairness to the parties if I were to receive information of which they were unaware and which might affect my decision, whether because it was relevant or merely prejudicial, and whether on analysis it supported the position of the claimant or the position of the defendant.