Tue, 30 May 2023
Dealing with Late Allegations of Fraud
Finality is an obvious tenet of our justice system. In Close Brothers Limited (trading as Close Brothers Asset Finance) v Rooster Trucking Company Limited and ors  EWCA Civ 533, the Court of Appeal had to decide how issues of finality interplayed with late allegations of fraud.
Hire purchase agreements were concluded between Close Brothers Limited (“Close”) and Rooster Trucking Company Limited (“Rooster”). On Close’s case, Mr Taylor and Mr Luke Taylor gave guarantees in relation to Rooster’s obligations.
Close claimed against Rooster for the delivery up of the items which were the subject of the hire purchase agreements and damages. Close claimed against Mr Taylor and Mr Luke Taylor pursuant to the alleged guarantees.
Close obtained default judgment.
Mr Taylor and Rooster applied to set aside the judgment on the basis that Close had failed to make disclosures regarding payments in respect of the hire purchase agreements. A draft defence was filed which, amongst other matters, pleaded that it was neither admitted nor denied that the guarantees on which Close relied had been executed by Mr Taylor and Mr Luke Taylor.
An employee of Close gave evidence that he had seen Mr Taylor and Mr Luke Taylor sign the guarantees.
The applicants later sought to persuade the Court that they had strong evidence of fraud in respect of the alleged guarantees than hitherto and assert a positive case that they had not signed the guarantees.
Where there are late allegations of fraud, the considerations at play are as per Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners LP  EWCA Civ 328 at paragraph 106:
“The principles are, briefly: 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 impugned. Secondly, the relevant evidence, action, statement or concealment (performed with conscious and deliberate dishonesty) must be ‘material’. ‘Material’ means that the fresh evidence that is adduced after the first judgment has been given is such that it demonstrates that the previous relevant evidence, action, statement or concealment was an operative cause of the court's decision to give judgment in the way it did. Put another way, 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. Thus the relevant conscious and deliberate dishonesty must be causative of the impugned judgment being obtained in the terms it was. Thirdly, the question of materiality of the fresh evidence is to be assessed by reference to its impact on the evidence supporting the original decision, not by reference to its impact on what decision might be made if the claim were to be retried on honest evidence.”
Close also shows is that the Court will look at the merits of the evidence – in short, does it show a reasonable prospect of successfully setting aside the judgment? In Close, the Court of Appeal undertook a minute examination of the evidence before it (paragraph 44). The Court of Appeal concluded that the evidence did not show a reasonable prospect of success and declined to revisit the allegations of fraud.
Impact of Close
The most interesting aspect of Close is that it demonstrates how, in an application to rely on late evidence of fraud, there is a review of the merits of the evidence. In Close, the Court of Appeal undertook a review of the strength of the late evidence which the applicants wished to rely upon. The review concluded that the evidence was not plausible enough to suggest that there was a reasonable prospect of successfully setting aside the judgment. Close reaffirms that it is by no means a given that a Court will permit late evidence to support allegations of fraud.