Elu v Floorweald Ltd

A party seeking to reopen a judgment on the ground that it was procured by fraud must rely on fresh evidence or facts which were unknown to that party at the time of the original trial. The rule in Takhar v Gracefield Developments Ltd does not permit a party that knew of the alleged fraud, possessed the supporting evidence, deliberately failed to plead or deploy it, and was refused relief from sanctions, to have a second opportunity to advance its case. Allegations of fraud and dishonesty must be clearly pleaded. A subsequent attempt to rely on evidence withheld or excluded in earlier proceedings may be barred by res judicata or constitute an abuse of process.

The defendant appealed an order made by HHJ Coltart in the Lewes County Court, which awarded the claimant damages for breaches of repairing obligations concerning her flat. The appeal was stayed so that the defendant could advance, as a preliminary issue, a claim that the order had been procured by fraud.

The claimant applied to strike out that case. She argued that the defendant had raised the substance of its allegations during the County Court litigation, had failed to plead them properly, had failed to comply with directions, and was seeking to rely on evidence already known and available at trial. The central issues were whether the fraud allegations had been litigated or should have been advanced earlier, whether the evidence was fresh, and whether the proposed challenge was abusive.

1. Application allowed. The Statement of Case seeking to reopen the County Court judgment on the basis of fraud was struck out.
2. An action to set aside a judgment for fraud is conceptually distinct from the underlying claim, but it requires fresh or new evidence showing that the party and the court were deceived. Evidence is not fresh merely because it was not admitted at the earlier trial. It must have been unknown to the party seeking to rely on it at the time of that trial.
3. The defendant knew of its allegations concerning the claimant’s honesty and the authenticity of documents well before trial. It possessed the principal evidence, including witness statements from Mr McDonnell, but chose not to plead a positive case of fraud and deliberately failed to comply with directions requiring exchange of witness statements.
4. Allegations of fraud and dishonesty must be pleaded clearly and with particulars. CPR 16.5(2) required the defendant to state its reasons for denying the claimant’s allegations and, where appropriate, to give its own version of events. CPR 16.5(4) did not permit the defendant to reserve an unpleaded positive fraud case.
5. The substance of the fraud issue was before HHJ Coltart. The claimant’s truthfulness and the authenticity of the principal documents were challenged at trial, and the judge resolved those matters in her favour. The defendant could not avoid the consequences of those findings by characterising its case as merely a challenge to reliability.
6. Takhar v Gracefield Developments Ltd was distinguishable. It concerned fraud and evidence not known to the claimant at the original trial, whereas the defendant here knew of the alleged fraud, had the evidence, and had elected not to deploy it properly. The principles in Johnson v Gore Wood & Co continued to apply. Allowing the proposed case would give the defendant a second bite of the cherry, unjustly harass the claimant, and undermine finality in litigation.
7. The fact that the defendant had been refused relief from sanctions was an additional reason not to permit the proposed case. Allowing reliance on the excluded evidence would amount to a collateral attack on the unappealed decision refusing relief.

• High Court (Queen’s Bench Division): the claimant’s application to strike out the defendant’s fraud case was allowed.
• Lewes County Court: HHJ Coltart awarded the claimant damages, interest and costs following trial. The High Court held that the defendant could not reopen that decision through the proposed fraud proceedings.