Forging documents in litigation constituted an unlawful means conspiracy (Takhar v Gracefield Developments Ltd and others)
Dispute Resolution analysis: Having set aside an earlier judgment on the basis that the claim had been defeated by a forged document, the Claimant was able to use that same forgery to found a successful new claim for unlawful means conspiracy.
Takhar v Gracefield Developments Ltd and others [2024] EWHC 1714 (Ch)
What are the practical implications of this case?
Whilst this is undoubtedly an extreme and unusual case, it is interesting insofar as it considers comprehensively the potential consequences of forgery being used in the course of proceedings. In particular, it demonstrates not only that any judgment obtained by the deployment of a forged document may be set aside on the grounds of fraud, the forgery itself and its use in proceedings can give rise to a separate cause of action for unlawful means conspiracy. Furthermore, the findings of forgery in the set aside proceedings may give rise to an issue estoppel which effectively binds the Court and the Defendants in the proceedings in which the alleged unlawful means conspiracy is litigation. There was, however, a note of caution. At a trial in the new proceedings, the Court must still be mindful that the burden of proof lies with the Claimant to prove their case and that a holistic approach is still required to fact-finding. This is all the more difficult in such a case due to the weight of evidence and findings which will exist by that point which will tend to impact upon the Court’s assessment of witness credibility and honesty. Dishonesty in one instance ought not to be translated into a finding of dishonesty in all instances.
What was the background?
In 2004, whilst in a vulnerable financial and personal state, the Claimant entered into an arrangement with the Defendants (principally her cousin and the husband of her cousin) which involved the renovation of certain properties passed to her by her husband on their separation. There was a substantial dispute as to the legal character of that arrangement, however, the Claimant issued proceedings in 2008 arguing that properties had been transferred into a corporate vehicle as a result of undue influence and/or otherwise unconscionable conduct. That claim failed because the Defendants produced a profit share agreement which appeared to bear her signature. After judgment was obtained, the Claimant obtained an expert report which showed that the signature had been transposed from another document by the Defendants and the judgment was set aside. On appeal, ultimately to the Supreme Court, the Defendants argued (unsuccessfully) that the documents upon which the expert report relied had been available to the Claimant before the trial and she had failed to act with reasonable diligence to uncover the fraud by the time of the trial. Following that decision of the Supreme Court, there was then a retrial of the original claim, with the addition of new claims by the Claimant against the Defendants for conspiracy, arising out of the forging of the profit share agreement. The new trial raised a number of procedural and legal issues dealt with in a lengthy judgment.
What did the court decide?
Overall, the Court found (1) The 2006 property transfers were procured by undue influence (actual or presumed). (2) The Claimant was entitled to rescind the transfers and was awarded a sum of just over £420,000 including interest at Base Rate plus 3%. (3) The corporate vehicle held the properties on resulting trust for her until they were sold. (4) The corporate vehicle acted in breach of that resulting trust when selling the properties and became liable to the Claimant in a further sum of just over £473,000 as a result. (5) The Claimant succeeded in her claim for unlawful means conspiracy in respect of the forging of the signature on the profit share agreement. (6) The Claimant suffered loss as a result of the unlawful means conspiracy, albeit the calculation of that loss overlaps with the undue influence award. An issue discussed at some length was whether (and to what extent) the finding in the earlier proceedings that the Defendants had forged the Claimant’s signature on the profit share agreement was binding in these proceedings. A number of authorities such as Virgin Atlantic v Zodiac Seats [2014] A.C. 160 and practitioner texts were analysed. Because the forging of the document was integral to the set aside proceedings and to part of the new claim relating to conspiracy, the earlier finding could give rise to an issue estoppel. Nevertheless, a broad and holistic approach to the assessment of witness credibility and fact-finding was required. The burden of proof remained with the Claimant and the Court should be careful not to conclude that dishonesty in one respect meant inevitably that there had been dishonesty in all respects. As regards the resulting trust claim, it was the Claimant’s intention which was key and not the Defendants’. From her perspective, she had not intended to transfer away her beneficial interest in the properties and, accordingly it followed that the corporate vehicle held them on resulting trust. The most complex question for the Court (and apparently one on which no binding authority existed) was whether the use of fraud to procure a judgment gave rise both to an entitlement to set the judgment aside and a distinct liability for unlawful means conspiracy. The Court considered carefully and individually each part of the test for unlawful means conspiracy and held that the requirements were made out. The Defendants had intended to mislead the Court and interfere with the administration of justice. In those circumstances, the deployment of forgery in litigation could give rise to an unlawful means conspiracy.
Case details
- Court: Business and Property Courts in Birmingham
- Judge: His Honour Judge Tindal (sitting as a High Court Judge)
- Date of judgment: 3 July 2024
Article by Phillip Patterson – first published by LexisNexis
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