The Royal Bank of Scotland Plc v Highland Financial Partners LP & Ors

A judgment obtained by fraud or dishonest concealment will be set aside only where the fresh material was operative in obtaining it and fundamentally changed the way the case was decided. Where the court can determine that the same result follows on the full evidence, setting aside is inappropriate.

An exclusive jurisdiction clause need not use the word exclusive. It may cover connected tortious claims, claims arising from related agreements, and claims brought by an assignee. Nevertheless, equitable relief to enforce the clause may be refused where the claimant’s continuing misconduct has an immediate and necessary relation to the relief sought. In that event, the foreign proceedings remain for the foreign court to address.

RBS had obtained summary judgment against the Highland Defendants in the 2009 Proceedings, followed by a quantum judgment for approximately €21 million. The Court of Appeal dismissed the liability appeal: [2010] EWCA Civ 809.

The Highland Defendants and Scott Law, an assignee of certain claims, later sought to set aside the liability judgment for fraudulent concealment. RBS also sought permanent anti-suit injunctions restraining proceedings brought in Texas, alleging fraud and unjust enrichment concerning extensions and termination of the CDO transaction.

The issues were whether the liability judgment had been fraudulently obtained, whether the Texas claims fell within exclusive English jurisdiction clauses, and whether unclean hands or strong reasons justified refusing injunctive relief.

1. Setting aside the liability judgment. The court found that Mr Griffiths had deliberately concealed the fact that 36 loans had been transferred to RBS’s banking book before the BWIC and had later given dishonest evidence. However, the relevant test required the concealed material to be operative in obtaining the judgment and to change fundamentally the way the court approached and decided the case. The evidence showed that the additional arguments would have failed and that, after the full quantum hearing, a substantial sum remained due. The liability judgment therefore was not set aside.

2. The argument that no Final Realisation Date had occurred was unarguable. The agreements had been lawfully terminated, the loans had been realised, and the consequence of RBS’s breach was an adjustment of the credit due, not the disappearance of the liability. The same conclusion followed from the equitable principles concerning a mortgagee’s sale.

3. Jurisdiction. The First Loss Deed contained an exclusive English jurisdiction clause, although it did not expressly use the word exclusive. The clause covered claims in tort and misrepresentation connected with the interlocking package of agreements. It also bound Scott Law when claiming under the Highland Defendants’ assigned rights.

4. The clause could extend to claims against Mr Hall and Mr Griffiths because those claims concerned the same alleged conduct and RBS had a sufficient interest in restraining them. Within the sphere of an exclusive English jurisdiction clause, comity did not prevent an injunction intended to enforce the parties’ contractual bargain.

5. Unclean hands and strong reasons. The court found serious continuing misconduct by RBS through Mr Griffiths, including dishonest evidence at the hearing. That misconduct had an immediate and necessary relation to the equitable injunction sought, because RBS relied on his evidence to resist the fraud and unclean-hands arguments. The misconduct therefore constituted both unclean hands and strong reasons for refusing equitable relief.

6. RBS’s applications for anti-suit injunctions were dismissed. The Highland Defendants’ application to set aside the liability judgment was refused, and Scott Law’s corresponding defence failed. The proposed undertaking concerning punitive or exemplary damages was incorporated in the order.

• High Court (Commercial Court): The liability judgment was given on 10 February 2010: [2010] EWHC 194 (Comm). The quantum judgment followed on 7 December 2010: [2010] EWHC 3119 (Comm). In the present judgment, the application to set aside the liability judgment was refused and RBS’s anti-suit injunction applications were dismissed.
• Court of Appeal: The liability appeal was dismissed on 14 July 2010: [2010] EWCA Civ 809. The appeal concerning the quantum judgment had been adjourned pending the present decision.