Tinkler v Esken Limited: was Mr. Tinkler swindled? Court of Appeal dismisses application to set aside a judgment alleged to be obtained by fraud

A challenge to a Court judgment on grounds of fraud brings into conflict two fundamental principles of English law: (i) the finality of judgments; and (ii) the principle that fraud unravels all. Given the importance of the former to their proper function, the English Courts set a high bar for judgments to be overturned on grounds of fraud.

The legal test was recently confirmed by the Supreme Court in Takhar v. Gracefield Developments Ltd [2019] UKSC 13. A party must demonstrate that:

1. the successful party had committed conscious and deliberate dishonesty; 
2. the dishonest conduct was material to the original decision; and 
3. there was "new" evidence before the court which does not involve re-litigation of the original decision. 

A central tenet of that test has now been addressed by the Court of Appeal in Tinkler v. Esken Limited [2023] EWCA Civ 655 – of the so-called "materiality" requirement: the new evidence must have been an operative part of the Court's decision. 

Tinkler emphasises the practical difficulties faced by the Court in distinguishing between fraudulent conduct in prior proceedings and whether that fraud was in fact material to the judgment. As the Court of Appeal's decision makes clear, a successful cause of action to set aside an earlier judgment must relate to the conduct of the earlier proceedings and not the underlying dispute. In determining the materiality of new evidence, judges must do so without retrying issues dealt with previously.

Factual and Procedural Background

The initial proceedings were concerned with the validity of two dismissals of Mr. Tinkler by the board of directors of Esken Limited, a British infrastructure, aviation and energy company. The first instance judge, HH Judge Russen QC upheld Esken's claims, including that it had been lawfully entitled to dismiss Mr. Tinkler.

Subsequent proceedings brought against Mr. Tinkler in the Employment Tribunal by a former colleague revealed that documents had not been disclosed by Esken in the case before the first instance judge. Consequently, Mr. Tinkler brought a separate action to set aside the judgment on the ground of fraud. Namely, Mr. Tinkler alleged that had the new evidence been disclosed, it would inevitably have changed the judge's approach to the evidence and the way he came to his decision. 

Mr. Tinkler's challenge was dismissed in the High Court by Mr. Justice Leech. Mr. Tinkler sought permission to appeal to the Court of Appeal.

Appeal to the Court of Appeal

Mr. Tinkler was granted permission to appeal in respect to whether Mr. Justice Leech had applied the above test in respect of "new" evidence correctly and on two additional grounds. Specifically, on grounds that Mr. Justice Leech:

1. incorrectly placed excessive reliance on HH Judge Russen QC's findings and excluded the ‘old evidence' that was before HH Judge Russen QC, which ought to have been considered in combination with the newly discovered evidence; and
2. incorrectly applied the test for materiality as outlined in Highland¹ and should have instead applied the test set out in Hamilton.² The test in Highland being that fresh evidence (a) must demonstrate that the concealment was "an operative cause of the court's decisions"; and (b) that it materially changed the way in which the court approached the decision. While under Hamilton, it has to be shown that there was a real danger that the dishonest conduct had affected the outcome. 

On the second ground, Mr. Tinkler argued that the approach taken by Mr. Justice Leech was wrong in law as it placed inappropriate reliance on what HH Judge Russen QC had decided, frustrating the purpose of the action, which was to prove that HH Judge Russen QC's findings were unsafe. Esken argued in response that Mr. Justice Leech appropriately considered the old evidence where necessary and correctly determined that HH Judge Russen QC's judgment was not vitiated by fraud.

As to the third ground of appeal, Mr. Tinkler argued that Mr. Justice Leech ought to have assessed the materiality of the non-disclosed documents by reference to the test in Hamilton, to the effect that it had to be shown that there was a real danger that the dishonest conduct had affected the outcome of the prior proceedings. Esken rejected Mr. Tinkler's argument, identifying that although the judge had preferred the Highland test, he expressly decided the matter on the basis of both tests.

Decision

The Court of Appeal unanimously dismissed Mr. Tinkler's appeal. In particular, the Court found that:

1. the issues before HH Judge Russen QC were not to be retried on different evidence and that Mr. Justice Leech's role was "to hear and evaluate the new evidence and then decide whether [HH Judge Russen QC's] findings could stand in the light of it"; 
2. "no harm was done" by Mr. Justice Leech's approach to use HH Judge Russen QC's findings as a starting point for each of the factual issues submitted by Mr. Tinkler. There was nothing to suggest Mr. Justice Leech felt bound by HH Judge Russen QC's findings in reaching his own decision; and
3. the test for "materiality" as set out in Highland was to be preferred over the test in Hamilton: new evidence before the court must demonstrate the alleged fraud was "an operative cause of the court's decision to give judgment in the way it did" or that the new evidence "would have entirely changed the way in which the first court approached and came to its decision". 

Key Takeaways

Any party which wishes to set aside a judgment on grounds of fraud needs an extremely strong case that the judgment has so been procured. In particular, a party must bear in mind that the Court must find that the fraud in question had a material, operative effect on the outcome of the case, rather than simply factoring into the considerations of the presiding judge.

Similarly, an application to set aside a judgment for fraud is akin to an action for deceit, save for the fact the Court, rather than the opposing party, must have been deliberately deceived. An application to set aside on grounds of fraud is a separate cause of action from the prior proceedings, and the prior proceedings will not be re-tried. An applicant must adduce new evidence which it must demonstrate passes the relevant materiality threshold. 

_{1 Royal Bank of Scotland plc v. Highland Financial Partners LP [2013] EWCA Civ 328, [2013] 1 CLC 596.
2 Hamilton v. Al Fayed (No. 2) [2001] EMLR 15.} 

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_{This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.}

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