Terry v BCS Corporate Acceptances Ltd & Ors

A final judgment alleged to have been procured by fraud must be challenged through the established procedures. Unless fraud is admitted or the evidence is incontrovertible, it must be properly particularised and proved, normally in a fresh action. An appeal based on fresh evidence remains available subject to the applicable conditions.

CPR 3.4 is a case-management power and does not permit a first-instance court to strike out a claim after final judgment. CPR 3.1(7) does not provide a general route to reopen a final ordinary civil judgment or to circumvent the self-contained regime for setting aside default judgments.

The claimants obtained default judgment against the defendant for substantial sums arising from alleged fraudulent commercial-finance transactions. The defendant's earlier application to set aside that judgment, and his attempts to appeal its refusal, had failed.

He later alleged that the whole claim had itself been fraudulent. He applied under CPR 3.4 to strike out the claim as an abuse of process, relying on Summers v Fairclough Homes Ltd [2012] UKSC 26, and sought consequential setting aside of the default judgment. He also relied on CPR 3.1(7).

Laing J dismissed the applications: [2017] EWHC 1176 (QB). The appeal concerned whether a first-instance court could strike out a claim after final judgment, reopen the judgment under the CPR, or instead should have directed a trial of the alleged fraud.

1. Appeal dismissed. The established means of impeaching a judgment allegedly obtained by fraud are a fresh action to set it aside, or an appeal seeking to adduce fresh evidence. Save where fraud is admitted or its proof is incontrovertible, fraud must be specifically pleaded and proved. A fresh action will normally be required, although an appellate court may in an appropriate case direct trial of the fraud issue under its specific powers.

2. The court rejected the submission that Summers v Fairclough Homes Ltd [2012] UKSC 26 authorises strike-out after final judgment. That decision concerned the choice, at the end of a trial but before final determination, between striking out for abuse and determining the claim on its merits. Its recognition of a highly exceptional power did not extend to a perfected judgment.

3. Strike-out under CPR 3.4 is a case-management power. Once final judgment has been entered, the first-instance court is functus officio; there is no extant case to manage and the parties' CPR rights are rights of appeal. The court did not need finally to resolve the precise operation of merger or cause-of-action estoppel, but those doctrines confirmed why the suggested post-judgment power could not be inferred.

4. CPR 3.1(7) could not bear the weight placed upon it. Its discretion is strongly curtailed by finality, particularly for final orders, and cannot permit a judge effectively to hear an appeal from the judge's own final decision. In this ordinary civil case there were no exceptional grounds for reopening the default judgment. Further, CPR 13 is the self-contained regime for setting aside default judgments and cannot be circumvented through rule 3.1(7).

5. Laing J was therefore entitled, and bound, to dismiss the strike-out application. The allegations were disputed and could not realistically be resolved without the full evidential process that a fresh fraud action would require. There was no jurisdictional basis to direct a trial of fraud within proceedings that had already reached final judgment.

• Court of Appeal (Civil Division): Dismissed the defendant's appeal in [2018] EWCA Civ 2422, upholding the refusal to strike out the claim or reopen the default judgment.
• High Court, Queen's Bench Division: Laing J dismissed the defendant's applications, including the application to strike out, in [2017] EWHC 1176 (QB).
• Master: Master Kay QC had dismissed the defendant's earlier application to set aside the default judgment, principally for delay and lack of a defence with a real prospect of success.