ELENI KONSTANTINIDOU - 2024
I. INTRODUCTION
Following the recent Supreme Court decision in Takhar V Gracefield Developments Ltd[1], the legal debate behind the landmark case of Abouloff V Openheimer & Co[2] has resurfaced, cementing the later decision to its landmark status. Both decisions consider whether fraud should be a defence to the enforcement of a judgment, yet they do so in different contexts; Abouloff considers fraud as a defence in the enforcement of a foreign judgment and Takhar considers fraud as a defence in the enforcement of an English judgment.
The Supreme Court’s consideration in Takhar circles around two contested legal principles; first, that fraud unravels all, and second, that litigation must come to an end. Fraud, once proved, can vitiate any transaction or judgment, yet this comes in direct contradiction with the principle of finality. It was this point that materialised the debate around the Abouloff principle, considering fraud as a defence in the enforcement of a foreign judgment. The question which still stands is, has Takhar upheld Abouloff’s landmark, yet contested, status, or has the law moved forward and is in need of reform?
​
​
II. THE DECISION IN ABOULOFF
The proposition that fraud can be raised as a defence to a foreign judgment even when this requires interfering with a final judgment – considering evidence that was or could have been adduced at trial – is attributed to Abouloff V Openheimer.
The claimant was Sophia Abouloff, the wife of a trader at Tiflis (Tblisi, Georgia), and the defendant was David Oppenheimer & Co, a London-based partnership engaged in trading activities of various kinds. In 1877, the claimant obtained a judgment in the District Court of Tiflis (in the empire of Russia) against the defendant that the defendant should return certain goods to the claimant, or, failing which, pay the claimant their full value totalling 10,000 roubles (around £1,000). The defendant instead argued, without admitting the judgment, that the goods in question were in the possession of the claimant or her husband, who had concealed that fact from the District Court of Tiflis. With respect to the fraud defence, the claimant’s contention in summary was that the defendant could not be released from its obligation to comply with the judgment without pleading any such fact, as its allegations were consistent with the proposition that the Court was mistaken without having been misled, the relevant facts having been put in evidence before it.
By the time Abouloff was decided, Godard V Gray and Schibsby V Westenholz had already established that English courts can and should enforce obligations created by foreign judgments.[3] However, here lied the conflict between the principle of finality and comity; the enforcement of the foreign judgment suggesting that as a final judgment had already been reached in Russia, this judgment should be enforced without the English courts reconsidering the merits in the dispute.
However, the Court of Appeal took a different view, the judgment being neatly captured by Lord Coleridge CJ in that no man can take advantage of his own wrong. It was submitted that it is a principle of law that no action can be maintained on the judgment of a court either in this country or in any other, that has been obtained by the fraud of the person seeking to enforce it, upholding the defendant’s fraud defence. His lordship’s reasoning relied on two interlocking propositions. The first rested on the wrongful character of the claimant’s conduct in procuring the judgment, and the second rested on the general legal principle denying the effectiveness of judgments procured by fraud. Thus, the Abouloff principle was established. In the context of recognition and enforcement of foreign judgments at common law, a foreign judgment may be impeached for fraud even though no newly discovered evidence is produced and even though the evidence of fraud might have been produced, or even was produced and rejected, in the foreign court.[4]
​
III. CRITICISMS ON THE ABOULOFF PRINCIPLE
It has been argued that the law relating to the regard that should be paid to foreign courts has moved on, and with it the Abouloff principle is an old one.
In House of Spring Gardens Ltd v Waite, the court noted that the Abouloff principle had gained increased criticism over the last years and was decided during a time where the English courts paid minimal attention to foreign jurisprudence. Indeed, in Owens Bank Ltd v Bracco, the House of lords commented that it may be time to reassess the principle, noting that if the issue was governed by common law, then they would have considered the basis for the rule in detail. Nevertheless, the judgment at issue was one covered by the statutory regime of the Administration of Justice Act 1920 (‘the 1920 Act’), and as the 1920 Act was intended to reflect the rule in Abouloff, any review would have to be by Parliament.
The Privy Council in AK Investment CJSC v Kyrgyz Mobile Tel Ltd carried out a more detailed review of the Abouloff principle. The case concerned the enforcement of a Kyrgyz judgment in the Isle of Man High Court, where the defendants resisted the enforcement of the judgment on various grounds including that the judgment of the Kyrgyz court had been procured by fraud. The Privy Council thus considered the correctness of the decision of Abouloff as well as whether it should be applied by the Isle of Man courts. They noted considerable criticism around the Abouloff principle and summarised that it ignores the doctrine of cause of action and issue estoppel and the nature of the doctrine of obligation. Additionally, the Privy Council held that the policy underlying Abouloff is objectionable and wrong and is inconsistent with judicial comity, as well as stated that the rule should be the same as that applied to setting aside English judgments.
Ultimately, the Pricy Council concluded that simply to apply the English rules to foreign judgments might lead to real injustice and that extremely important rules of policy would be involved in deciding whether to change a rule which has stood for almost 120 years. The Privy Council noted that the facts of this case show that a nuanced approach might be required, depending on the reliability of the foreign legal system, the scope for challenging in the foreign court, and the type of fraud alleged.
IV. THE DECISION IN TAKHAR
A consistent criticism of the principle has been that it is said to be at odds with the approach taken to the fraud defence in the context of domestic English judgments. It is important to note that there are reasons why a different approach might be preferred in foreign judgments, such as in foreign arbitration awards or the judgments from different jurisdictions needing to be considered separately, but we focus here on how the approach to English judgments has been clarified by Takhar.
The Court of Appeal in Takhar[5], overturning the judgment of Newey J, had held that for an English judgment to be set aside on the basis of fraud, either party had to establish that there was evidence of fraud which was not available at the time of trial and could not have been discovered with reasonable diligence. In other words, the fact that fraud was alleged, did not affect the normal reasonable diligence requirement for relying on new evidence.
The Supreme Court overturned the decision of the Court of Appeal, Lord Kerr distinguishing the descriptions of the position in relation to English judgments as presented by Lord Bridge and Lord Templeman in Owens Bank v Bracco. The Supreme Court held that where it could be shown that a judgment had been obtained by fraud, and where no allegation of fraud had been raised at the trial, a requirement of reasonable diligence should not be imposed on the party seeking to set aside the judgment on the basis of new evidence. As per Lord Kerr, it is not necessary for the claimant in such a position to show that the fresh evidence could not have been discovered with reasonable diligence prior to the trial and judgment.[6] However, as suggested in the case, the court has a discretion to refuse the application if (a) the issues of fraud has been raised at trial, or (b) the claimant took a deliberate decision not to investigate the fraud in advance of the trial.[7]
Essentially, the Supreme Court in Takhar held that where fraud is involved, questions of finality are sometimes trumped by the fact that fraud, potentially at least, unravels all.[8] It can be said that the basis on which law unmakes transactions, including judgments, procured by fraud rests on the principle that a reasonable person is entitled to assume honesty in those with whom he deals.[9]
Takhar thus clarified the position in relation to English judgments: a judgment can be challenged for fraud on the basis of new evidence, even if the evidence of fraud might have been discovered earlier and specifically there is no due diligence requirement. It seems likely after the Takhar decision that the part of the Abouloff principle which encompasses this principle will be reinforced by the decision in Takhar.
​
V. FOLLOWING TAKHAR
The impact of Takhar on the more extreme parts of the Abouloff principle, such that the principle applies even when fraud has already been raised and there is no new evidence, is less clear. Indeed, the Supreme Court left open two issues where the facts could be distinguished from those in Takhar.
First, the Supreme Court in Takhar distinguished the situation where fraud had actually been raised and rejected in earlier proceedings. Lord Kerr held that in such circumstances where fraud has been raised at the original trial and new evidence as to the existence of fraud is prayed in aid to advance a case for setting aside the judgment, it seems that the court has a discretion on whether or not to deal with such an application. Lord Sumption on whether the position would be different if fraud was raised in earlier proceedings but unsuccessfully, was also left open, giving the provisional view that the position is the same with that of new evidence. Both Lords were of the view that if decisive new evidence is relied on, it may not matter that fraud has already been raised and determined in the earlier proceedings. In other words, the foreign court’s decision as to fraud cannot be decisive.
Second, the Supreme Court in Takhar left open whether the position might be different if the defendant had deliberately not investigated the fraud at an earlier stage. Lord Kerr once again considered that in such a situation it would be the court’s discretion whether to allow an application to set aside the judgment, yet, expressing no final view. Lord Sumption also refers to a possible exception where a deliberate decision was taken not to investigate or rely on the material. This can again be contrasted with the position in relation to foreign judgments. As described above, the application of the Abouloff principle does not depend on there being new evidence and if the defendant shows a prima facie case that the court was deceived, he is entitled to have that issue tried even though the court may have to go into defences which could have been raised at the first trial.
VI. CONCLUSION
The ruling in Takhar has somewhat restored the principle established in Abouloff and reinforced its significance. However, unlike the approach outlined in Takhar, challenging a foreign judgment does not require adducing new evidence. This distinction remains a key reason why foreign judgments are not automatically given binding status. Any potential modification to the Abouloff principle might necessitate a more nuanced approach.
​​
​​​​
​
[1] Takhar v Gracefield Developments Ltd [2019] UKSC 13, [2020] AC 450 [68].
[2] Abouloff v Oppenheimer & Co (1882) 10 QBD 295
[3] Godard v Gray (1870–71) LR 6 QB 139 (QB) and Schibsby v Westenholz (1879–71) LR 6 QB 155 (QB).
[4] AK Investment CJSC v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804 [109] per Lord Collins
[5] Takhar v Gracefield Developments Ltd [2019] UKSC 13
[6] Ibid [54]
[7] Ibid [55]
[8] Ibid [52]
[9] Ibid [43]