Abuse of process and a clarification of the rules for setting aside judgments and settlement agreements for fraud (Winston Finzi v Jamaican Redevelopment Foundation (Jamaica))
This analysis was first published on LexisNexis® on 16 August 2023 and can be found on the website (subscription required).
Summary
The Privy Council has clarified the rules for setting aside a judgment or a settlement agreement on the basis that it had been obtained by fraud. Specifically, the focus of the Privy Council was on the situation where the claimant is seeking to rely on evidence that had not been adduced in the original proceedings. The Privy Council found that the claimant needed to show that the “evidence is new in the sense that it has been obtained since the judgment or settlement or … if the evidence is not new in this sense, any matters relied on to explain why the evidence was not deployed in the original action”: otherwise, if the evidence was not “new” then the claim would likely be seen as an abuse of process (para [72]). The Privy Council in particular reflected on the decision of the Supreme Court in Takhar v Gracefield Developments Ltd [2019] UKSC 13 and the obiter comments of Lord Sumption.
Finzi v Jamaican Redevelopment Foundation Inc [2023] UKPC 29
What are the practical implications of this case?
This decision will be of great interest to practitioners for its welcome clarification of the obiter comments in Takhar v Gracefield Developments Ltd [2019] UKSC 13 and for outlining the circumstances in which new evidence obtained after a judgment or settlement may be used to demonstrate fraud.
The Privy Council added that it may be relevant in certain cases to take account of the “apparent strength of the case of fraud” and whilst this did not involve holding a mini-trial on interim applications, if the “pleaded case of fraud is on its face conspicuously strong or conspicuously weak (even if not so weak that it cannot be said that the claim has no real prospect of success), this potentially affects the justice or otherwise of allowing the new claim to proceed to trial” (at para [73]).
As the Privy Council made clear in the present case, the basis for alleging fraud was not strong: in effect the circumstances of the case involved an appellant trying to challenge judgments/a settlement agreement that had concluded some years before on the basis of evidence which the Privy Council found he could have deployed at the time of the judgments (should he have considered it appropriate to do so).
What was the background?
In this case, the Appellant was alleging that a series of judgments and settlements which had been reached in a long-running litigation that had concluded some years before were obtained fraudulently. The essential questions for the appeal to the Privy Council was whether the lower courts, who had dismissed the claim as an abuse of process, were incorrect (as alleged by the Appellant and based on the Supreme Court decision in Takhar v Gracefield Developments Ltd [2019] UKSC 13) in “finding that failure to exercise reasonable diligence in uncovering and alleging fraud rendered his claim an abuse of process)” and whether the Appellant’s claim was based on any fresh evidence of fraud (para [1]).
The essential factual background of the case (as summarised below from para [3] – [31]) was that the Appellant (“Mr Finzi”) and the Respondent (“JRF”) had been engaged in litigation over the course of nearly 10 years where JRF was trying to recover loans that had been made to Mr Finzi. There were two different actions of note here: in the first, JRF had obtained judgment for the repayment of a loan following a successful application to strike out Mr Finzi’s defence (whereby he effectively conceded that there was a loan which had been made to him and which he had not repaid) (the “2004 action”); in the second claim, JRF had again obtained judgment against Mr Finzi for the repayment of a loan in the sum of nearly US$4 million (the “2005 action”). The parties then made a settlement agreement whereby JRF agreed to accept a lower amount in full and final settlement of its claim on the basis that it would be paid by 31 July 2013, otherwise the full figure of nearly US$4 million plus damages would be payable: Mr Finzi did not pay the lower amount and so the judgment for the full amount that was ordered in the 2005 action was entered against him (para [17] – [19]).
More than 4 years after the settlement agreement was concluded, Mr Finzi alleged that the judgments and settlements relating to the 2004 and 2005 actions were procured by fraud. JRF applied to strike this claim out and the first instance judge did so on the basis that it was “an abuse of the court’s process, as the allegations of fraud on which the claims are based could and should have been raised in the earlier proceedings before Mr Finzi entered into the settlement agreement which put an end to all outstanding claims” (para [23]).
The first instance judge had concluded (as summarised by the Privy Council at para [24]): “an action which seeks to have a settlement or judgment set aside on the ground that it was procured by fraud will be an abuse of process unless it satisfies two requirements: (i) the evidence of fraud must be new evidence in the sense of not having been previously available to the litigant at the time of the settlement or judgment (the fresh evidence condition); and (ii) the new evidence of the fraud must be evidence that could not have been discovered with reasonable diligence in advance of the settlement or judgment (the reasonable diligence condition)”. On the facts, the judge found that Mr Finzi’s claim in fraud did not satisfy either of these conditions and that when entering the settlement agreement, Mr Finzi had “all the information which he is now saying supports his claim for fraud” (para [26]).
The context of the appeal to the Privy Council was that the authority which the first instance judge had relied on for the “reasonable diligence condition” had been overturned by the UK Supreme Court in Takhar v Gracefield Developments Ltd [2019] UKSC 13. However, the Court of Appeal of Jamaica had dismissed the appeal and found that the first instance judge’s decision did not depend on the “reasonable diligence condition”.
What did the court decide?
The Privy Council took the opportunity to clarify the relevant principles as to when fraud could set aside a settlement agreement. At para [32], the Privy Council emphasised that there was a broad principle which “precludes a party from raising in subsequent proceedings matters which were not, but which could and should have been, raised in earlier proceedings”. Having reviewed the decision in Takhar, the Privy Council qualified the importance of Lord Sumption’s obiter comments in part because in Takhar, there was “no issue about whether the evidence in question was ‘new’ or about what constitutes ‘new’ or ‘fresh’ evidence for the purpose of a claim to set aside a judgment for fraud” (at para [61]). The Privy Council summarised the position at para [72]:
“The Board thus considers that, where a claimant relies on evidence not adduced in the original proceedings to allege that a judgment or settlement in those proceedings was obtained by fraud, the burden is on the claimant to establish (1) that the evidence is new in the sense that it has been obtained since the judgment or settlement, or (2) if the evidence is not new in this sense, any matters relied on to explain why the evidence was not deployed in the original action. Furthermore, where the evidence is not shown to be new in this sense, the claim is likely to be regarded as abusive unless the claimant is able to show a good reason which prevented or significantly impeded the use of the evidence in the original action.”
The Privy Council concluded that Mr Finzi (at para [76] but see also the comments at para [49]) “before he entered into what was meant to be a final settlement of all outstanding claims, Mr Finzi had all the material on which he now relies to allege fraud, and that he had ample opportunity to deploy it in the earlier proceedings if he had thought fit to do so. He has offered no explanation of any merit for the fact that he did not” (accordingly there was no realistic prospect of suggesting that the first instance assessment of abuse of process was wrong).
It is also worth noting that the Privy Council generally criticised the basis for Mr Finzi’s claim in fraud noting that his particulars of claim did “not articulate a clear or focused case, let alone give any proper particulars of matters relied on to justify accusing various individuals who acted for JRF of dishonesty” (para [21]) and that various assertions made by him were “not supported by any evidence” (para [22]).
Case details
• Court: Privy Council
• Judge: Lord Leggatt JSC
• Date of judgment: 27/7/2023
James Bradford is a barrister at 39 Essex Chambers. If you have any questions about membership of our Case Analysis Expert Panels, please contact caseanalysiscommissioning@lexisnexis.co.uk.
