Commercial

Finality and Fraud.

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]

AC 160 Lord Sumption made this clear, telling us that “where the existence or non-existence of a
cause of action has been decided in earlier proceedings, to allow a direct challenge to the outcome,
even in changed circumstances and with material not available before, offends the core policy against
the re-litigation of identical claims.”

However, the Supreme Court has now confirmed that the strict rules as to finality do not apply when
a party seeks to set aside an earlier judgment because it was obtained by fraud. In Takhar v Gracefield
Developments Limited [2019] UKSC 13 the Supreme Court considered a claim concerned with a forgery
that went to the heart of the original trial. The court found that the “existence or non-existence” of
fraud had not been decided in the original proceedings but was a new issue. The second case did not
involve the re-litigation of an identical claim. The court went on to point out that the law does not
expect people to arrange their affairs on the basis that others may commit fraud.

Significantly, this will be the case even if the fraud could have been discovered before the original
trial. The forgery in Takhar had taken place before the original trial but the Supreme Court
emphasised that the issue of fraud had not been before the trial judge. It follows that the fact that the
fraud could have been discovered by the claimant in the second action did not prevent her bringing a
claim to set aside the original judgment.

There may be two potential exceptions to this rule. First, if fraud was considered at the first trial,
then further proceedings may not be permitted based on new allegations (although Lord Sumption
appeared to cast some doubt on this). Although not suggested by the court, it might be envisaged
that the discretion against setting aside the original judgment would be exercised more sparingly if
the new allegations could have been discovered before the original trial. The second potential
exception would be the situation where a party makes a deliberate decision not to investigate the
possibility of fraud in advance of the first trial, even if fraud had been suspected.

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Our Expertise

Commercial

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]

Construction

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]

Insolvency

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]

International

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]

Personal Injury

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]

Property

Finality of judgment lies at the root of our legal system. In Virgin Atlantic Airways v Zodiac Seats [2014]