Broomhead v NatWest (grounds for setting aside for fraud)

Further guidance on setting aside a judgment obtained by fraud

In the recent case of Broomhead v National Westminster Bank plc and another [2020] EWHC 1005 (Ch) the High Court was asked to consider the grounds for setting aside a previous judgment on the basis of fraudulent conduct. 

Summary

  • In May 2020 the High Court provided further guidance on how the court will approach a request to set aside a judgment obtained through fraudulent presentation of facts.
  • When seeking to set aside an earlier judgment for fraud the court has made it clear that a party must demonstrate:
    • ‘conscious and deliberate dishonesty’ in relation to the relevant evidence given, or action taken, statement made or matter concealed i.e. a party has intended to deceive the court and the other parties;
    • that such evidence, action, statement or concealment (performed with conscious dishonesty of the party that obtained the original judgment) is ‘material’ e. the dishonest presentation of facts which are now alleged to be fraudulent must be a key factor for the original judge that gave judgment;
    • the materiality of fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision.
  • In terms of making this work in practice, we consider it is important to fully identify the source of any new information and drill down to precisely where and how such information has come to light.

Facts

In June 2018, judgment was handed down dismissing Mr Broomhead (the “Claimant”)’s claim against National Westminster Bank plc (the “First Defendant”) and The Royal Bank of Scotland plc (the “Second Defendant”) concerning the Claimant’s business banking relationship with the First Defendant. The Claimant claimed damages in the sum of £13.78 million for breach of an oral collateral contract between himself and the First Defendant which he alleged entitled him to continued banking support. Such support was subsequently withdrawn when the Claimant’s accounts came under the control of the Second Defendant. The Claimant’s application for permission to appeal the judgment was dismissed in December 2018.

The Claimant was ordered to pay the Defendants’ costs of the first claim and ordered to make a payment on account of £871,157.60. No payment was made, and the Claimant was served with a statutory demand followed by the issue of a bankruptcy petition on 19 June 2019.

The Claimant issued a new claim on 23 July 2019. On 6 November 2019, the bankruptcy petition was put on hold pending the outcome of the Defendants’ application for strike out / summary judgment in respect of the new claim.

In the new claim, the Claimant alleged that “… by reason of post-trial discoveries and revelations he can show by [the new claim] that the Defendants were guilty of conscious dishonesty in the presentation and pursuit of the Defence [in the first claim]” i.e. that the judgment in the first claim was obtained by the Defendants’ fraud.

Principles of determining a claim to set aside judgment on the basis of fraud

Chief Master Marsh recognised the tension between the principle that ‘fraud unravels all’ and the need for finality in litigation. This is something that was considered by the Supreme Court in Takhar v Gracefield Developments Ltd and others [2019] UKSC 13 and which we discuss here https://tenetlaw.co.uk/articles/fraud-unravels-all/

The principles to be applied by the court when assessing a claim to set aside an earlier judgment on the basis of fraud were not in dispute in this case. Chief Master Marsh referred to the summary of Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners LP [2013] 1 CLC 596 which was unequivocally approved by the Supreme Court in Takhar and which sets out such principles as follows:

  1. First, there has to be a ‘conscious and deliberate dishonesty’ in relation to the relevant evidence given, or action taken, statement made or matter concealed, which is relevant to the judgment now sought to be set aside.
  2. Secondly, that such evidence, action, statement or concealment (performed with conscious dishonesty) must be ‘material’, meaning that it must be shown that the fresh evidence would have entirely changed the way in which the first court approached and came to its decision.
  3. Thirdly, the materiality of any fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision.

Judgment

Chief Master Marsh considered that the Claimant’s Particulars of Claim “…fall a long way short of pleading a case of conscious and deliberate dishonesty that was material. The particulars do not justify a plea of fraud because they do not provide a plausible assertion of dishonesty and do not support a necessary inference of dishonesty, whether they are taken together or looked at separately. Furthermore, and importantly, materiality is merely asserted but is wholly unparticularised.” The conclusion was that, as currently pleaded, the claim was bound to fail.

However, Chief Master Marsh went on to consider whether there was any other reason that the court should not strike out the claim. He regarded the evidence of a former employee of the First Defendant (which indicated anomalies in the disclosure process including the possibility of document tampering and the withholding of information regarding a particular document retention system) as “troubling”. In light of this evidence, Chief Master Marsh considered that the Claimant should have the opportunity to replead his case as he could not be satisfied that the claim had no real prospect of success.

When drafting statements of case (particularly in relation to an allegation as serious as fraud) it is important to support any assertions made with full particulars and by reference to the evidence available.

Identifying sources of information

The Defendants’ application was supported by witness statements from a partner with Addleshaw Goddard LLP (representing the Defendants). His second statement contained evidence that was largely outside of his own knowledge. Where he was required to provide the source of his evidence, he stated he was “informed by the Bank” (meaning both Defendants). It was highlighted that stating the source of evidence as a named corporate party does not comply with the requirements of Practice Direction 32 paragraph 18.2(2). As a result, the court attached ‘significantly reduced weight’ to the witness statement.

Where evidence is put forward that is not within a person’s own knowledge it is vital to fully identify the source of that information or risk the court reducing the weight attached to such evidence.

Conclusion

There are times where judgment has been obtained and a party has a suspicion that the opponent has lied and deceived the court to get their judgment. This line of cases demonstrates that if evidence is identified to support those suspicions that the court was misled on important facts in the trial where judgment was made, then a party can look to these cases as a route to setting aside the judgment.

If you are interested to learn more about our experience or need guidance responding to fraud, please get in touch

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