Foreign judgment obtained by fraud: the principle

If property, pecuniary advantage, services, gifts, legacies, or anything else, has been obtained by fraud, it is obvious that the law should deprive the fraudster of his ill-gotten gain and undo the wrong. It is equally obvious that if a judgment has been obtained by fraud, effect should not be given to it. This is as true of English judgments as it is of foreign judgments; and for this reason the common law refuses to recognise a foreign judgment obtained by fraud. The common law also holds that if a foreign judgment is otherwise entitled to recognition, the court will not re-examine the merits of the claim which gave rise to it, even if it is alleged that the judgment was wrong in fact or law or both; and it is the collision between these two broad principles which gives rise to the problems examined here.

However, if an English judgment is shown to have been obtained by fraud, it will be set aside and deprived of effect;^[1] something similar must be true when a foreign judgment has been obtained by fraud: that is to say, if there had not been fraud, the judgment would have been different. The devil lies in the detail of the law.

The issue will usually arise when the judgment creditor brings proceedings to obtain a judgment and applies for summary judgment on the basis that there is no defence to the claim. The defendant may plead that the judgment was obtained by fraud. If an allegation of operative fraud is credible, that is, there appears to the court to be a prima facie case of fraud having caused the judgment in the terms in which it was given, the English court will order that issue to be investigated and ruled on in a separate trial. Even if - as will commonly be the case - the investigation of whether there was fraud will involve a re-examination of the merits of the original judgment, this furnishes no objection to the order that the issue of fraud be tried. Fraud unravels most things, and certainly unravels the obligation created by a foreign judgment. A person may not take advantage of his own wrongdoing. If it appears that his wrongdoing may be characterised as the commission of fraud, the allegation must be investigated by the English court; the particular policy of defeating fraud prevails over the general policy favouring the finality of litigation or the conclusiveness of foreign judgments.

The seriousness, separateness, of fraud has been observed on many occasions. In HIH Casualty and General Insurance Ltd v Chase Manhattan Bank™ Lord Bingham of Cornhill restated the seriousness with which the common law treats a credible allegation of fraud. He said:

For as Rix LJ observed more than once in his judgment, fraud is a thing apart. This is not a mere slogan. It reflects an old legal rule that fraud unravels all: fraus omnia corrumpit. It also reflects the practical basis of commercial intercourse. Once fraud is proved "it vitiates judgments, contracts and all transactions whatsoever": Lazarus Estates Ltd v Beasley, per Denning LJ. Parties entering into a commercial contract will no doubt recognise and accept the risk of errors and omissions in the preceding negotiations, even negligent errors and omissions. But each party will assume the honesty and goodfaith of the other; absent such assumption they would not deal. What is true of the principal is true of the agent, not least in a situation where, as here, the agent, if not the sire of the transaction, plays the role of a very active midwife. As Bramwell LJ observed in Weir v Bell: "I think that every person who authorises another to act for him in the making of any contract, undertakes for the absence offraud in that person in the execution of the authority given, as much as he undertakes for its absence in himself when he makes the contract".’

If fraud vitiates what would otherwise be a binding commercial obligation, as Lord Bingham says it does, then fraud will vitiate the obligation arising from a foreign judgment as well.

The only remaining question is what is comprehended by ‘fraud’. On this, the common law on the recognition of foreign judgments was until recently open to greater objection, on the basis that it appeared to be more difficult to impeach an English judgment for fraud than it was a foreign judgment. Since the realignment of the law of fraud in relation to English judgments, in Takhar v Gracefield Developments Ltd,¹¹⁶ that is no longer an accurate view of the law. We will therefore examine the law relating to fraud and foreign judgments without looking over our shoulder, but will compare it with the law relating to English judgments at the end.

In the context of foreign judgments, the meaning of fraud is neither narrow nor precise: it extends to encompass ‘every variety of mala fides and mala praxis whereby one of the parties misleads and deceives the judicial tribunal’.^[2] Examples drawn from the cases illustrate the duplicity of fraudulent litigators. If the allegations are to be believed, in Abouloff v Oppenheimer, a claimant suing for the delivery of goods concealed from the court that he already had them; in Vadala v Lawes, a claimant suing on bills of exchange falsely claimed they were mercantile when they had been given for gambling debts; in Syal v Hayward,²²⁰ a claimant sued for a debt, concealing from the court that half the sum was a usurious interest charge upon the other half; in Jet Holdings Inc v Patel,²²' the claimant lied about the fact that he had terrorised the defendant into not appearing at the trial to tell his side of the story; in Owens Bank Ltd v Bracco,²²² the claimant obtained judgment by forging documents and giving perjured testimony; and in AK Investment CJSC v Kyrgyz Mobil Tel Ltd,²²* there was simply nothing good to be said about the foreign proceedings; nothing at all. In none of these cases could the allegations of fraud made before the English court be summarily dismissed as implausible,^[3] which meant that there had to be an English trial of the allegation of fraud.

• [1] The law in respect of English judgments alleged to have been obtained by fraud was comprehensively restated by the Supreme Court in Takhar v Gracefield Developments Ltd [2019] UKSC 13, [2020] AC 450 (in relation to which, see also Toubia v Schwenke (2002) 54 NSWLR 46). As a result of that decision, much of the heat has gone out of the debate about the effect of fraud on the conclusiveness of foreign judgments. 2 Gelley v Shepherd [2013] EWCA Civ 1172. It had been assumed without argument prior to this judgment; it is now necessary to spell it out. 3 Gelley v Shepherd [2013] EWCA Civ 1172 (after all, misrepresentations are not actionable at common law unless they are operative, which in turn requires them to have been relied on). 4 In Codd v Delap (1905) 92 LT 810 it was said that the issue should be tried, and summary judgment refused ‘unless it is obvious that the allegation of fraud (impeaching the foreign judgment sued on) is frivolous and practically moonshine’, per Lord Lindley. For cases in which the assertion of a pretended defence of fraud was rejected as incredible, see JSC VTB Bank v Skurikhin [2014] EWHC 271 (Comm); OJSC Alfa Bank v Trefilov [2014] EWHC 1806 (Comm). 5 [2003] UKHL 6, [2003] 2 Lloyd’s Rep 61. 6 At [15].
• [2] [2019] UKSC 13, [2020] AC 450. See for comparison Toubia v Schwenke (2002) 54 NSWLR 46; Clone Pty Ltd v Players Pty Ltd [2018] HCA 12. 2 Jet Holdings Inc v Patel [1990] 1 QB 335. 3 (1882) 10QBD295. 4 (1890) 25 QBD 310. 5 [1948] 2 KB 443. 6 [1990] 1 QB 335. 7 In effect, made him an offer he could not refuse. 8 [1992] 2 AC 443. 9 [2011] UKPC 7, [2012] 1 WLR 1804.
• [3] The standard required is that imposed by CPR r. 24.2. As the judgment creditor will usually apply for summary judgment, he will succeed if the defence can be rejected as having no real prospect of success, but if not, it will be ordered to go to trial: Jet Holdings v Patel. It is plausible that the weight of evidence which will be required to establish a prima fade case, or a defence that is more than shadowy, will vary in accordance with the perception which the English court has of the adjudicating court. In this way a judgment from a court with which the English court is very familiar may require a substantially greater weight of evidence to be brought before the allegation of fraud is thought to be well founded enough to be tried again than if the judgment is that of a court the strength and impartiality of which is less well established. This may also be the point made by the Privy Council in AK Investment CJSC v Kyrgyz Mobil Tel Ltd[20 1] UKPC 7, [2012] 1 WLR 1804, [116]. 2 Owens Bank Ltd v Bracco [1992] 2 AC 443. 3 AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804. 4 Rubin v Eurofinance SA [2012] UKSC 46, [2013] 1 AC 236. 5 In Mengiste v Endowment Fund for the Rehabilitation of Tigray [2017] EWCA Civ 1326, it was suggested that the issue of fraud in relation to a foreign judgment was only ever a defence to a claim to enforce a judgment, and that it was not independently or otherwise justiciable: sed quaere. 6 Keele v Findley (1991) 21 NSWLR 444, but regarded as wrong in Yoon v Song (2000) 158 FLR 295; Hong Plan Tee i' Les Placements Germain Gauthier Inc [2002] 2 Sing LR 81; Beals v Saldanha [2003] 3 SCR 416. And see Owens Bank Ltd v Bracco [1992] 2 AC 443 ((1992) 108 LQR 549); Owens Bank Ltd v Etoile Commerciale SA [1995] 1 WLR 44 (PC, St Vin). See also Garnett (2002) 1 J Int & Comm Law 1. 7 This represents the standard which operates when seeking to set aside an English judgment on the ground of fraud: Hunter v Chief Constable of the ¡Vest Midlands [1980] QB 283. 8 Notably the Supreme Court of Canada in Beals v Saldanha [2003] 3 SCR 416; see also Briggs (2004) 8 Singapore Year Book of International Law 1. 9 [2019] UKSC 13, [2020] AC 450 (cfToubia >- Schwenke (2002) 54 NSWLR 46). However, for the case in which a party had the material which would provide a proper basis for an accusation of fraud but did