The claimant was the former leaseholder of a flat. She brought a claim in the County Court against the defendant freeholder for breach of its obligations to keep the building in a reasonable state of repair, alleging that an issue with damp had made it necessary for her to redecorate and repair the interior of the flat, that she had been unable to rent it out for more than a year, and that she had had to sell the property at auction to mitigate her losses. The defendant denied the claimant’s case and challenged the “authenticity” of items on the claimant’s schedule of loss but did not plead a positive case of fraud, declining to accept the view of the court that it ought to plead its allegations of fraud if it wanted orders to be made on that basis. Although the defendant sought to rely on witness statements in support of its case, as indicating that certain invoices for the work were forgeries and that the claimant had not made the payments she alleged, it failed to comply with directions for service of such documents and its application for relief from sanctions was refused with the consequence that it was not permitted to rely on witness evidence at trial. The judge allowed the claim and awarded damages. The defendant appealed on the ground that the claim had been dishonest, having been based on false evidence given by the claimant and on forged or doctored documents, and that the judge’s order had therefore been procured by fraud. The appeal was ordered to be stayed pending the trial of a preliminary issue on fraud and the defendant was ordered to serve a statement of case as if it were making a fresh claim to set aside the County Court judge’s order. The claimant applied to strike out the statement of case on the grounds that it raised matters which were res judicata and/or was an abuse of process, on the basis that the allegations of fraud set out in the statement of case had already been made in the course of the proceedings before the County Court and had either been abandoned by the defendant at or before trial or adjudicated in the claimant’s favour at trial; and, further, that the fraud issue was not based on fresh evidence since virtually all of the evidence on which the defendant wished to rely had been within its knowledge at the time of trial, albeit it had not been permitted to deploy all of that evidence at trial.
On the claimant’s application—
Held, application granted. (1) The principles applicable to res judicata and abuse of process generally were modified where it was said that the judgment had been obtained by fraud. Where the issue of fraud had not been raised or determined in earlier proceedings, a judgment could be set aside even if the fraud could, with reasonable diligence, have been discovered in the earlier proceedings. However, there might be a discretion to refuse to entertain an application to set aside judgment where there had been a deliberate decision not to investigate the possibility of fraud in advance of the first trial, even if that had been suspected, or a deliberate decision not to rely on a known fraud. An action to set aside a judgment on the basis that it had been obtained by fraud was a cause of action in itself and there was no difference of principle in that regard where the issue arose in the context of an appeal from the original decision, rather than a fresh claim. Except in cases where the fresh evidence relied on in the appeal was conclusive of fraud, an appellate court ought usually to order a trial of the fraud issue rather than simply order a retrial of the case as a whole on the basis that there was a prima facie case that the judgment which was sought to be set aside had been obtained by fraud. A key ingredient of the cause of action was that the party and the court had been deceived by the fraudulent evidence of the other party. For that reason, the court required “fresh” or “new” evidence or facts. It was not sufficient for that purpose that the evidence or facts had not been before the court in the earlier proceedings and there had to be materials which had not been known, at the time of trial, to the party now alleging that it had been deceived. While the requirement for fresh evidence was strictly about the validity of the cause of action pleaded in the statement of case, the considerations which underpinned that requirement overlapped with those which underpinned arguments of res judicata and abuse of process, namely the need for finality of litigation. There might in law be exceptional cases where the evidence of fraud was known to a party and in its possession, but could not be deployed at the first trial, and where the second trial would be permitted to proceed. However, there was no general rule that the second claim would be prevented from proceeding only where there had been an entirely free choice not to rely on known evidence of fraud (paras 105, 146, 152–154, 156).
(2) The issues of the truth of the claimant’s evidence and the authenticity of the impugned documents had been before the County Court judge. Given the way the case had been argued, it had been necessary for him to decide those issues, which went directly to the issues of damage to the flat, the cost of repair and the amount of the claimant’s other alleged losses, and he had decided them. Therefore, assuming that res judicata applied in the present context, the defendant was barred from running its case that the claimant had given false evidence and relied on forged documents to make good her case before the County Court judge, subject to its arguments that it should be permitted to rely on evidence in relation to those issues which had not been before the court. In the present case, there were no special circumstances that would make it unjust to refuse to allow the defendant to reopen the issues which had been before the County Court judge, and it would be unjust to the claimant to allow the defendant to do so. Virtually all the material on which the defendant now sought to rely to prove its allegations had been known to it and in its possession by the time of the trial and the materials in question ought to have been deployed at trial, there being nothing to prevent such deployment provided the defendant had complied with the rules and directions of the court rather than choosing to ignore them. Further, had the defendant wished to advance a positive case based on its witness evidence, it could and should have pleaded that aspect of its case in full but had chosen not to do so. Given the rules of pleading requiring allegations of fraud and dishonesty to be pleaded in the interests of fairness, and given the need for finality, the defendant’s failure to plead its case in full ought in that context to be regarded as equivalent to a deliberate decision not to advance the case which it now wished to advance. In light of those and other matters, including the disgraceful manner in which the defendant had conducted the litigation, the case of fraud which it now sought to advance was an abuse of process and the public interest in finality of litigation ought to prevail (paras 154, 164–167, 168, 175–180, 185, 188, 189, 191).
Per curiam. With regard to res judicata, there is a risk of circularity in being asked to strike out a claim that a judgment was procured by fraud on the basis that the judge has already decided the matter. If the claim is sound then res judicata does not arise because the judgment is set aside; if, on the other hand, the claim is unsound res judicata does not arise because the claim will be dismissed in any event (para 159).
George Mallet (instructed by Girlings Solicitors, Ashford) for the claimant.
Philip Jones (instructed by Mackrell.Solicitors) for the defendant.