Daniel Terry v BCS Corporate Acceptances Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Hamblen |
| Judgment Date | 02 November 2018 |
| Neutral Citation | [2018] EWCA Civ 2422 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: A2/2017/2011 |
| Date | 02 November 2018 |
Neutral Citation Number: [2018] EWCA Civ 2422
Sir Geoffrey Vos, CHANCELLOR OF THE HIGH COURT
Lord Justice Hamblen
and
Mr Justice Henry Carr
Case No: A2/2017/2011
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
THE HONOURABLE MRS JUSTICE LAING DBE
Royal Courts of Justice Strand, London, WC2A 2LL
Simon Stafford-Michael and Sam Jarman (instructed by Martin Cray & Co) for the Appellant
David Mohyuddin QC and Professor Mark Watson-Gandy (instructed by Akin Palmer) for the Respondents
Hearing date: 16 October 2018
Judgment Approved
Introduction
This is the judgment of the Court.
This appeal concerns the appropriate procedure to be adopted where it is alleged that a judgment has been obtained by fraud.
It is well established that in such circumstances a fresh action may be brought to set aside the judgment – see, for example, Jonesco v Beard [1930] AC 298.
In an appropriate case, an appeal may also be brought seeking to rely on fresh evidence and to obtain an order for a retrial – see Noble v Owens [2010] EWCA Civ 224, [2010] 1 WLR 2491.
In the present case it is contended by the Appellant/Defendant that an alternative available procedure is an application to strike out the claim for abuse of process under CPR 3.4 and/or the court's inherent jurisdiction in reliance on the Supreme Court decision in Summers v Fairclough Homes Ltd [2012] UKSC 26, [2012] 1 WLR 2004.
Further or alternatively, it is contended that a first instance court may set aside a judgment allegedly obtained by fraud pursuant to CPR 1 and 3 and, in particular, CPR 3.1(7).
Factual and procedural background
The Claimants' claims
As set out in their Particulars of Claim issued on 30 November 2012, the first and second Claimants are companies in the business of providing commercial loans. The third Claimant is the director and sole beneficial owner of the first and second Claimants.
The Defendant held himself out as being a representative of various funding/securitisation organisations including Hardy & Bros. Pte Limited (“Hardy”) and Europa Investec Commercial Mortgage Section (“Europa”).
The Claimants paid premiums totalling £1,982,652.70 and Euro 578,701 to the Defendant for the procurement of corporate financial guarantee bonds and to secure a credit facility. These were never provided. It was further alleged that Hardy and Europa were sham organisations with no assets and that certified documentation emanating from them were forgeries.
The Claimants' claim was for the full amount of the premiums paid and damages for breach of contract, fraud and misrepresentation.
Default judgment
Despite the Defendant obtaining extensions of time for service of his defence, no defence was served and the Claimants obtained judgment in default of defence on 21 February 2013.
The Defendant applied to set aside the judgment, but this application was dismissed by Master Kay QC on 21 February 2014 on the grounds of (i) excessive delay and (ii) failure to put forward a defence with a real prospect of success.
Applications for permission to appeal against the decision of Master Kay QC were dismissed by Andrews J on 28 April 2014 and, following an oral renewal hearing, Hickinbottom J on 15 May 2014.
On 29 July 2015 Master Kay QC ordered the Defendant to pay damages assessed in the sums of £1,982,652.70 and Euro 578,701, together with costs.
On 17 December 2015 the Claimants obtained a worldwide freezing order against the Defendant. This was continued as against the Defendant by order of May J on 11 March 2016.
The Defendant's application
On 18 November 2016 the Defendant issued an application for “an order to strike out the Claimants' claims under CPR 3.4 and a stay of all proceedings for abuse of process ( Fairclough v Summers application)”. The application also sought a “consequential order” of setting aside the default judgment.
It is alleged that the Claimants' claim is “wholly fraudulent” and made to deceive the French courts before which the third Claimant is apparently being prosecuted for an advance fee fraud. It is said that Europa was the vehicle of the third Claimant and not the Defendant, that “nothing material to the claim is true” and that the “only real question” is who is behind Europa. A lengthy witness statement from the Defendant's solicitor, Mr Pullen, is relied upon.
The Claimants have not put in any evidence in response, but all allegations of dishonesty and fraud are denied by them.
The hearing and judgment below
On 8–9 May 2017 there was a hearing before Laing J. There were four applications before her:
(1) the Defendant's applications:
a) for directions in relation to his application to strike out the Claimants' claims;
b) to set aside
(i) the world-wide freezing order granted against him; and
(ii) the Claimants' application to commit him for contempt of court arising from alleged breaches of the freezing order of May J; and
(2) the Claimants' applications for security for the costs of the Defendant's strikeout application.
In a judgment dated 30 June 2017 the judge dismissed the Defendant's applications, including its application to strike out the claim. Had she not dismissed that application she would have ordered the Defendant to provide security for costs in the sum of £275,000.
The dismissal of the strike out application is mainly addressed in two paragraphs of the judgment as follows:
“41. I do not consider that the court can strike out a ‘claim’ after judgment has been given and any cause of action, and thus the claim, has merged in the judgment. Nothing in the reasoning in Summers begins to suggest that the court has such a power. This application is misconceived. This conclusion is consistent with the principle of finality. If the Defendant's submission is correct, a dissatisfied litigant can require the court to re-open any judgment, without any permission, or other filter, and the court would be required to conduct (as is envisaged here) a new trial of matters which have been settled in a judgment (albeit in this case, a judgment which was a consequence of the Defendant's failure to file a defence). The Defendant suggested that the application could be heard and decided without any oral evidence. I regard that as a fanciful suggestion, since the wide-ranging allegations against the third Claimant which the Defendant wishes to ventilate would require the cross-examination of the Defendant, of his witnesses, and of the Claimant. If oral evidence were given, the application could, it was agreed, take 12 days. I note that the Defendant has already spent over £1 million preparing it.
42. If the Defendant considers that he has fresh, credible evidence, which could not have been obtained with reasonable diligence for use at the application to set aside the judgment in default, and the evidence, if given, would probably have had an important influence on the result, it is open to him to apply to the Master for permission to appeal out of time, invoking Ladd v Marshall [1954] 1 WLR 1459. The Master would have to be persuaded that the material which the Defendant relies on arguably satisfies the Ladd v Marshall criteria. Mr Stafford-Michael accepted that this ‘alternative’ was open to the Defendant, but preferred to rely on the strike-out application, no doubt because (on his case) it could be made as of right, and was not conditional on the court's permission. He referred to ‘certain tactical reasons to do with the evidential filter in Ladd v Marshall, if one applies Ladd v Marshall ruthlessly’. I record that his case, however, is that none of the material on which he relies would be shut out by the decision in Ladd v Marshall.”
Permission to appeal
Permission to appeal was granted by Gloster LJ on 2 January 2018 who considered that it was arguable that the judge should have adopted a more flexible procedural approach to the applications. Gloster LJ also raised the possibility of an application to set aside the judgment being made under CPR 3.1(7).
Various ancillary applications have been made to the court, as a result of which it is clear that this court is not concerned with any of the factual issues raised by the Defendant's application. In an order dated 23 May 2018 Longmore LJ observed as follows:
“Gloster LJ only intended that the court on this appeal consider the issues of principle namely (1) whether the court has power to strike out a judgment which a defendant can show was obtained by fraud and (2) whether, if not, the Judge should have made any directions to progress the matter; she did not intend the court to become embroiled in deciding matters of fact and noted that Laing J had not concluded that the fraud allegations were unarguable.”
The issues on the appeal
The issues which arise on the appeal may be summarised as follows:
(1) Whether the judge was wrong to conclude that she had no jurisdiction to strike out a claim after final judgment.
(2) Whether an application to set aside the judgment could be made under CPR 1 and 3 and, in particular, CPR 3.1(7).
(3) Whether the judge should have made directions to progress the matter rather than simply dismissing the applications before her.
Means of challenging judgments allegedly obtained by fraud
There are well established procedures for challenging a judgment allegedly obtained by fraud.
The primary means of doing so is by bringing a fresh action seeking the equitable relief of setting aside the judgment – see Flower v Lloyd [1877] 6 Ch D 297; Hip Foong Hong v H Neotia & Company [1918] AC 888.
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