It is often said that “fraud unravels all”. In Lindsay et al v Outlook Finance Ltd and Butcher [2025] EWHC 3100 (KB) the High Court had to consider the true extent of that unravelling - when a judgment has been procured by fraud, should it be set aside only as against the party that defrauded the court, or can it also be set aside as against a non-fraudulent party? That is to say, can a non-fraudulent party be deprived of the benefit of a judgment in its favour if that judgment was procured by fraud committed by a different defendant? 

Background

The claimants were the Lindsay family. The Lindsays were Scottish dairy farmers, with farms in Lanarkshire and Cumbria. Seeking to address financial difficulties in 2008, the Lindsays and associated entities obtained loans from Outlook Finance Ltd (Outlook), the first defendant. The loans were secured on the two farms and some of their livestock. 

In 2012, Outlook alleged defaults and appointed a Mr Butcher as Law of Property Act 1925 receiver in relation to the farm in Cumbria and to take possession of the livestock. Mr Butcher did so, and went on to sell the farm and cattle. 

The Lindsays brought a claim challenging the validity of Mr Butcher’s appointment and, amongst other things, alleging that Outlook’s director, a Mr Fradgley, had breached an oral agreement and oral assurances that, the Lindsays said, created a waiver, estoppel or collateral contract. In June 2014, HHJ Bird handed down judgment dismissing that claim against all defendants. The judge had preferred the evidence of Mr Fradgley, notwithstanding that Mr Fradgley had admitted to having lied to the Lindsays in telling them he was backed by funding from a bank. As a result, the case against Mr Butcher’s appointment could not arise, so the judge dismissed it summarily.

The Lindsays did not give up, however. They brought further litigation in Scotland seeking to set aside the loan and security documents (which they had not challenged before HHJ Bird) on the basis that they had been obtained by fraudulent misrepresentation and undue influence. The Scottish Court found for the Lindsays and that Mr Fradgley had fabricated documents, invented facts and falsified records of a Lindsay family company.

In August 2023, the Lindsays brought the present claim against Outlook and Mr Butcher. The Lindsays claimed that the judgment of HHJ Bird from 2014 should be set aside because it had been procured by the fraudulent evidence of Mr Fradgley (who had died in 2017). The claimants asked for a retrial, at which they intend to demonstrate that Mr Butcher’s appointment as LPA receiver and agent had been invalid, meaning his conduct as receiver had been tortious and amounted to trespass and conversion.

When will a judgment be set aside for fraud?

As noted in our previous case update, the test for when a judgment will be set aside for fraud is that stated by Aikens LJ in Royal Bank of Scotland plc v Highland Financial Partners LP [2013] EWCA 328 as endorsed by the Supreme Court in Takhar v Gracefield Developments Limited [2019] UKSC 13. The following is required in the test.

• That there is fresh evidence of conscious and deliberate dishonesty in relation to relevant evidence given, or action taken, statement made or matter concealed, which is relevant to the judgment sought to be impugned.
• The relevant evidence, action, statement or concealment which was dishonestly given must be ‘material’.
• ‘Material’ means that the new evidence adduced demonstrates that the previous, fraudulently given evidence was “an operative cause of the court’s decision to give judgment in the way it did” or “would have entirely changed the way in which the first court approached and came to its decision”.
• 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.

The arguments

The key question for Kerr J was whether he could and should set aside HHJ Bird’s judgment as against Mr Butcher. Mr Butcher had not been party to the Scottish proceedings and so was not bound by its judgment. Moreover, it was not alleged that Mr Butcher himself had been dishonest. 

Kerr J noted that there was no prior authority on the question whether a judgment obtained by fraud could or should be set aside not just against the fraudster but also as against another party to the original proceedings. 

Mr Butcher submitted that unless Aiken LJ’s test was met in full, the judgment could not be set aside as against him. He therefore argued that, because it was not alleged that he himself had acted with conscious and deliberate dishonesty in the case before HHJ Bird, the judge’s decision in his favour should stand.

Mr Butcher did not try to persuade Kerr J that Mr Fradgley had been honest, but only that he (Mr Butcher) had had no reason to suppose otherwise at the relevant time, and that it would be unfair to reopen the claim against him that had failed before HHJ Bird a decade earlier. 

The claimants, however, said that in keeping with the view that transactions affected by fraud must be unravelled, the court should set aside in full any judgment which it is proven was brought about by fraud. Hence, having decided that Mr Fradgley had defrauded the court, the whole of HHJ Bird’s judgment was infected by that fraud and must be set aside. HHJ Bird had dismissed the Lindsay’s claim against Mr Butcher on a summary judgment basis because he had been convinced by the evidence of Mr Fradgley, such that the question of the validity of Mr Butcher’s appointment could not arise - the summary dismissal of the case against Mr Butcher flowed directly from acceptance of Mr Fradgley’s fraudulent evidence and so should not stand.

What did the court decide?

The judge said that there was no need for a direct precedent in case law establishing that the court could set aside a judgment in these circumstances. Equity is inherently flexible, and indeed, if an exact precedent were required, the law would be unable to develop. 

Kerr J concluded that Aiken LJ’s test is directed to a judgment itself, not to the parties to the case. This view fitted with the proposition that fraud unravels all, and that where it is established, fraud “spreads to and infects the whole body of the judgment” (in the words of Lord Buckmaster from the House of Lords case Jonesco v Beard [1930] AC 298).

The judge said that this did not indicate that innocence of the fraud was irrelevant, but rather that its relevance went to determining the remedy and whether to exercise the court’s discretion. In deciding whether to set aside a judgment against a non-fraudulent party, Kerr J stated the court should apply equitable principles in the usual way. The question should be whether it is fair and equitable to do so in all the circumstances.

In the circumstances of this case, the judge felt that it was fair and equitable to set aside the judgment as against Mr Butcher. While there was no criticism of his conduct in taking on the role of LPA receiver or failing to appreciate Mr Fradgley’s dishonesty, he had taken on the risks inherent in accepting that appointment, and may be expected to have professional indemnity insurance. Moreover, some of his conduct was questionable. For example, he had received legal advice that he should not force entry to the farm without a court order, but had done so anyway with what the judge described as “surprising insouciance…ignoring sensible objective legal advice to the contrary.”

Kerr J also dismissed the suggestion that the Lindsays had unreasonably delayed in bringing the set aside claim, describing the Linday’s efforts to uncover the truth of the fraud as “sustained and unrelenting” and agreeing that the time taken was “no fault of theirs”. 

The judge set aside the judgment of HHJ Bird as against both Outlook and Mr Fradgley, and ordered a retrial.

Comment

The judgment provides an interpretation of Aiken LJ’s test for when a judgment will be set aside for fraud that accords with established authority that fraud is insidious and must be dealt with robustly. Kerr J’s decision helpfully confirms that the test is directed to whether the judgment itself is impacted by fraud, and does not need to be applied on a defendant-by-defendant basis.

The balance the judge struck to mitigate the risk of any potential unfairness against a non-fraudulent party appears sensible – a court will assess all the circumstances to determine what remedy is appropriate once it is established the judgment was obtained by fraud. This is reflective of the flexibility of equity to do what is just in any given circumstances. Here, Mr Butcher had taken a number of risks in the way he carried out his purported LPA receivership that rendered it appropriate to deprive him of the benefit of a summary judgment procured by Mr Fradgley’s fraud.