Takhar (Appellant) v Gracefield Developments Limited and others (Respondents)  UKSC 13
This case concerns Balber Kaur Takhar (the Appellant) and her cousin Parkash Kaur Krishan (the third Respondent) who, having not seen each other for many years, became reacquainted in 2004. During this time, Mrs Takhar was suffering personal and financial problems, having separated from her husband five years previously. Mrs Takhar had acquired a number of properties in Coventry as part of the arrangements with her former husband. Financial problems arose from the dilapidated condition of some of the properties and, in 2005, it was agreed between Mrs Takhar and the Krishans that legal title to the properties would be transferred to a newly formed company Gracefield Developments Limited, of which Mrs Takhar and the Krishans were directors and shareholders.
Mrs Takhar claimed that it had been agreed that the properties would be renovated and then let. The rent would be used to fund the cost of the renovations, which until that point would be subsidised by the Krishans. Mrs Takhar was also to remain the sole owner of the properties. The Krishans, however, claimed that Gracefield was established as a joint venture, that the properties were to be sold upon renovation and that Mrs Takhar was to be paid an agreed sum after they were sold. Any additional profit was to be divided equally between Mrs Takhar and the Krishans.
In October 2008, Mrs Takhar issued proceedings for a declaration as to the ownership of the properties and claimed the properties had been transferred to Gracefield as a result of undue influence or other unconscionable conduct. The Krishans presented a profit share agreement (PSA), allegedly signed by Mrs Takhar, to prove her agreement to their terms. Mrs Takhar had applied before the trial for permission to obtain evidence from a handwriting expert who had produced a report stating that the expert could not say that the signature on the PSA was that of Mrs Takhar. Permission was refused. At the trial, Judge Purle QC held that the properties had been transferred legally and in accordance with the oral agreement made between the parties.
Following the trial, Mrs Takhar instructed new solicitors who consulted another handwriting expert who conclusively stated that the signature on the PSA had been transposed from a letter sent to the Krishans' solicitors in 2006. Mrs Takhar was advised that she had enough evidence to plead fraud against the Krishans. Mrs Takhar could not have pleaded fraud until she had received the second expert's handwriting report. Mrs Takhar applied to the court to set aside Judge Purle's judgment and order. The Krishans claimed that this was an abuse of process as the documentation was available to the first set of solicitors and they could therefore have pleaded fraud. The court ordered that the question whether Mrs Takhar's claim amounted to an abuse of process be tried as a preliminary issue. That trial took place before Newey J in February 2015. In his judgment Newey J held that a party who seeks to set aside a judgment on the basis that it was obtained by fraud does not have to demonstrate that he could not have discovered the fraud by the exercise of reasonable diligence. The present claim was therefore not an abuse of process. The Krishans appealed to the Court of Appeal who allowed the appeal. Mrs Takhar appealed to the Supreme Court.
The question posed to the Supreme Court was whether someone who applies to have an earlier judgment set aside because it was obtained by fraud is required to show that the evidence of fraud could not have been uncovered at the earlier trial via reasonable diligence (the 'reasonable diligence requirement'). The bench of seven judges held that there was no 'reasonable diligence requirement' necessary to set aside a previous judgment obtained through fraud.
Lord Kerr noted that a fraudulent person should not profit because their opponent did not act with reasonable diligence. A person who has obtained a judgment through fraud has enacted a deception on their opponent, the court and the rule of law. To think otherwise would be contrary to justice.
Lord Sumption agreed and argued that it was not folly for a reasonable person to assume honesty in those he/she dealt with in legal proceedings.
Takhar v Gracefield allows one to engage with a friction point in the law that is at the core of how we arrive at justice: whether the law ought to require reasonable due diligence to go forward with the reassessment of a judgment obtained through fraudulent deception. While from a procedural point of view, reassessing a judgment may appear to be an abuse of process, the court should do its utmost to arm itself against fraud even if it comes at the cost of re-litigation. While it does not apply to Mrs Takhar's case, it is worth considering whether parties might intentionally avoid exercising reasonable diligence in their initial dealings with their opponent(s) and claim fraud later on in proceedings. This is where one might argue that in order to avoid the needless waste of resources and discourage foul play, the unsuccessful party in a judgment must be obliged to provide a full explanation as to how the judgment was obtained via fraud to avoid needless reassessment of facts, for example.
Lord Sumption raised a contentious point in the judgment of this case. Namely, that it wasn't unreasonable for one to assume honesty in one's opponent. This notion came across as rather idealistic. Perhaps in an external transaction out of court one could reasonably expect honesty but it seems farfetched for a litigant to necessarily assume honesty and good faith from a legal opponent. While a clear modus operandi concerning dealing with claims of fraud moving forward is still up for debate, an assessment of Takhar v Gracefield allows us to contemplate not only the kind of evidence we should demand to reconsider judgments, but what that process should look like if we decide to.
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