Chodiev & Ors v Stein

An action to set aside a final judgment for fraud is exceptional. The claimant must generally produce genuinely fresh evidence which could not have been obtained with reasonable diligence and which would probably have changed the result or entirely altered the case. Alleged evidence going only to credibility faces an especially high threshold. The court may summarily dismiss the challenge where it has no realistic prospect of success. The reasonable-diligence requirement applies without distinction between evidence directed to central issues, credibility, or an alleged fundamental deception. Interest orders will not be reopened unless the alleged fraud had operative effect on the order.

The claimants sought to set aside an earlier judgment in favour of the defendant, obtained after a contested trial concerning success fees arising from trade finance and an initial public offering. They alleged that the defendant had lied about his beneficial ownership of Aurdeley Enterprises Limited, had brought the original claim dishonestly in his own name, and had obtained interest and costs orders by fraud.

The defendant applied to strike out the claim or obtain summary judgment under Part 24. The claimants also sought to amend their pleading and rely on additional documents. The central issues were whether the alleged evidence was fresh, whether it satisfied the reasonable-diligence requirement, and whether it was sufficiently material to justify reopening the earlier judgment.

1. Application granted. The claimants’ claim was struck out and dismissed. The proposed amendments and additional documents could not save it.
2. The governing rule is that a judgment cannot ordinarily be impeached for fraud unless the claimant relies on evidence unavailable at the original trial and unobtainable with reasonable diligence, and the evidence is so material that it would probably have affected the result. The court treated the principles in Hunter v Chief Constable of the West Midlands Police [1982] AC 529 and Owens Bank Ltd v Bracco [1992] 2 AC 443 as binding and compelling.
3. The reasonable-diligence requirement applies equally where the proposed evidence concerns credibility or an alleged fundamental deception. The claimants had long known of Aurdeley and could have obtained the relevant information before trial. They had instead elected to pursue a different case.
4. Even assuming that the defendant had lied about Aurdeley, the alleged lies would not have altered the findings on the fixed success fee or the alleged compromise. Those findings rested on contemporaneous documents, independent corroboration, the burden of proof, and the claimants’ own seriously damaged credibility.
5. The proposed “Fundamental Deception” case was unarguable. The February 2010 letter did not establish that Aurdeley was entitled to pursue the relevant claims, did not terminate any authority to sue, and was itself available to the claimants.
6. The allegations concerning interest and costs also lacked operative effect. Statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998 and consequences under CPR 36.14 were not open to reconsideration on the pleaded case. The principles in Fattal v Walbrook Trustees (Jersey) Ltd [2009] 4 Costs LR 591 and Simcoe v Jacuzzi UK Group Plc [2012] 1 WLR 2393 supported awarding interest despite third-party funding.
7. The court expressly disagreed with Takhar v Gracefield Developments Ltd [2015] EWHC 1276 (Ch) on the reasonable-diligence issue, but stated that its conclusions were independently reached even without that requirement.

The judgment describes an earlier judgment in the same litigation, [2014] EWHC 1201 (Comm), against the claimants. Permission to appeal was refused by the Court of Appeal. The present claim to set aside that judgment was struck out and dismissed.