Balber Kaur Takhar v Gracefield Developments Ltd

Hearing dates: 12 th, 13 th, 14 th 15 th, 18 th, 19 th, 20 th, 21 st December 2023 8 th, 9 th January and 12 th June 2024

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

HIS HONOUR JUDGE Tindal

HHJ

Introduction

This case is the sequel to Takhar v Gracefield [2020] AC 450, in which the Supreme Court held that where it was proved that a judgment had been obtained by fraud, a party seeking to set it aside did not have to show that they could not with reasonable diligence have uncovered and alleged that fraud before that judgment (which I shall refer to as ‘the Supreme Court Takhar Judgment’).

That decision opened the door to Mrs Balber Takhar (the Claimant as I shall call her) to seek to set aside for fraud the 2010 judgment of the late HHJ Purle QC sitting as a High Court Judge ( Takhar v Gracefield [2010] EWHC 2872 (Ch): (‘the Purle Judgment’). She alleged her signature on a key document HHJ Purle QC relied on had been forged by the Defendants – her cousin the Third Defendant (‘Mrs Krishan’) and the latter's husband the Second Defendant (‘Dr Krishan’), directors and shareholders of the First Defendant company (‘Gracefield’). In 2020 before Mr Gasztowicz QC sitting as a High Court Judge ( Takhar v Gracefield [2020] EWHC 2791 (Ch), ‘the Gasztowicz Judgment’)) the Claimant did prove fraud and the Purle Judgment was set aside. (Mr Gasztowicz QC's costs judgment is reported at [2020] Costs LR 1851).

This case is the retrial of the original action, but with two new causes of action: deceit and conspiracy. The former effectively duplicates one of the original claims, undue influence. The latter alleges fraudulent conduct of the previous action, as found in the Gasztowicz Judgment. The Defendants deny all claims on the merits and raise limitation on the new claims. This case raises three legal issues of wider relevance after judgments are set aside for fraud — not covered by much direct authority according to my research (‘the three wider questions’):

3.1 First, what approach should be taken to Res Judicata, credibility, memory (given cases since Gestmin v Credit Suisse [2013] EWHC 3560) and findings of fact on a re-trial after a judgment is set aside for fraud?

3.2 Second, can fraudulent misrepresentation amount to undue influence and if so, does it require a pre-existing ‘relationship of trust and confidence’?

3.3 Third, can fraud in procuring a judgment allow it to be set aside and amount to ‘unlawful means’ for the tort of conspiracy sounding in damages?

The second and third questions also link to limitation. Deceit is no longer pursued as a tort due to limitation, but it founds the argument that fraudulent misrepresentation also amounts to undue influence, not argued before HHJ Purle QC. Conspiracy is new, but raises the point that (following the Supreme Court Takhar Judgment) whilst reasonable diligence in discovering fraud is not necessary to set a judgment aside, it is highly relevant to whether a new claim arising from or concealed by fraud is limitation-barred, since s.32(1) Limitation Act 1980 states where an action is based on fraud, time does not start to run until the claimant ‘could with reasonable diligence have discovered it’.

In terms of the essential background to this case, initially, I very respectfully adopt the factual summary (albeit parts of it are in dispute before me) by Lord Kerr in the Supreme Court Takhar Judgment at [1]–[6]:

“Balber Kaur Takhar, the claimant, is the cousin of the third defendant, Parkash Kaur Krishan. For many years before 2004, they had not seen each other. In that year they became reacquainted. At the time, Mrs Takhar was suffering personal and financial problems. She had separated from her husband some five years previously. As part of the arrangements made between Mrs Takhar and her husband, she had acquired a number of properties in Coventry. When Mrs Takhar and Mrs Krishan met again, according to Mrs Takhar, she confided in her cousin and grew increasingly to depend upon her. Mrs Takhar claims that Mrs Krishan exerted considerable influence over her. The financial problems of Mrs Takhar arose mainly from the condition of the properties which she had acquired from her husband. Some were in a dilapidated condition. Payment for rates were in arrears. Bankruptcy for Mrs Takhar was in prospect. The Krishans provided financial help to Mrs Takhar. Dr Krishan, the second defendant and the third defendant's husband, took on responsibility for negotiating with Coventry City Council over the rates arrears and the dilapidated state of some of the buildings. Then, in November 2005 it was agreed the legal title to the properties would be transferred to Gracefield Developments Ltd, a newly formed company, of which Mrs Takhar and the Krishans were to be the shareholders and directors [as happened in 2006]. Mrs Takhar claims that it had been agreed between her and the Krishans the properties would be renovated and then let. The rent would be used to defray the cost of the renovation, which, in the short term, would be met by the Krishans. Mrs Takhar would remain beneficial owner of the properties. The Krishans present a very different account. They claim that Gracefield was set up as a joint venture company. The properties were to be sold after they had been renovated. They were to be given an agreed value and this would be paid to Mrs Takhar after they had been sold. Any profit over would be divided equally between Mrs Takhar and the Krishans. They explain that Mrs Takhar agreed to these arrangements because planning permission for development had to be obtained in order to realise the value of the properties and this was an area in which Dr Krishan had experience, having already successfully developed his own medical centre.”

Whilst I detail the full procedural history below, in short, in October 2008 the Claimant sued alleging on her version of the agreement was a trust or a contract, and on the Defendants' version, it was procured by undue influence or was an unconscionable bargain. However, the Defendants relied on a written ‘Profit Share Agreement’ (‘PSA’) consistent with their case the Claimant had apparently signed. Whilst she denied that, she did not claim forgery. HHJ Purle QC relied on that to dismiss the Claimants' claims in 2010. However, in 2013, she obtained expert evidence that her ‘signature’ was a forgery and applied to set aside the Purle Judgment. The Defendants sought to strike that out as an abuse of process, which failed in 2015. That result was confirmed by the Supreme Court in 2019, which held the Claimant could aside the judgment for fraud without proving she could not have discovered it beforehand. In October 2020, Mr Gasztowicz QC found her signature had indeed been forged – by the Defendants — and set aside the Purle Judgment. The proceedings before me were therefore a re-trial of those original allegations with the new cause of action of conspiracy (and deceit) added in March 2015. The two actions were consolidated by consent in 2021.

The case was (re-)listed for trial in December 2023 before me. Mr Halkerston was Counsel for the Claimant (showing total command of a bundle of 10,000 pages). Mr Graham and Mr Perring were for the Defendants (only instructed two weeks before trial, with faultless preparation at lightning speed). Owing mainly to the Claimant's evidence, the 8-day trial did not prove enough and we re-listed 2 days of submissions in January 2024. The break enabled the Claimant to indicate that she only pursued claims in undue influence, resulting trust and conspiracy, the latter narrowed to forgery in the earlier case. This also gave me the chance to raise various authorities on the three wider legal questions and Counsel to prepare extremely helpful submissions — Mr Graham on the facts, Mr Perring on the law, Mr Halkerston on both (assisted by Mr Lee Jia Wei on remedies). So, I have considered about 150 authorities in this judgment – the vast majority ventilated with Counsel. However, as I have written, I have referred to others cited in texts I was referred to as ‘worked examples’ of points. I have also analysed others in more detail on conspiracy (on the wider implications of the issue which Counsel left to me), resulting trust (which has risen in prominence in this case) and remedies. Indeed, in preparing my draft judgment, it became apparent I needed more submissions on remedies. So rather than a straightforward hand-down hearing, I had a further day of submissions on remedies and consequentials. This ended up rather delayed as although I circulated my draft judgment in March 2024, the Defendants were unavailable for a period of time as they were out of the country, so that hearing was listed in June 2024. Having heard submissions, I gave brief oral reasons for my conclusions (along with costs etc) and then after inviting brief further submissions on interest, I finalised this judgment, handing it down with an order reflecting my decision. As the Claimant raised a narrow application for permission to appeal on remedies and interest, for convenience I have addressed those points in this judgment right at the end.

With the focussing of the Claimant's case...