Takhar (Appellant) v Gracefield Developments Limited and others (Respondents)
|Cite as:|| UKSC 13|
|Hand-down Date:||March 20, 2019|
Hilary Term  UKSC 13 On appeal from:  EWCA Civ 147
Takhar (Appellant) v Gracefield Developments Limited and others (Respondents) before
Lord Kerr Lord Sumption Lord Hodge Lord Lloyd-Jones
Lord Briggs Lady Arden Lord Kitchin JUDGMENT GIVEN ON 20 March 2019 Heard on 10 October 2018 Appellant Respondents John Wardell QC
Joseph Sullivan Tom Nixon (Instructed by Gowling WLG (UK) LLP
(Birmingham)) Andrew Mold
(Instructed by Tanners Solicitors LLP
LORD KERR: (with whom Lord Hodge, Lord Lloyd-Jones and Lord Kitchin agree)
Balber Kaur Takhar, the appellant, is the cousin of the third respondent, Parkash Kaur Krishan. For many years before 2004, they had not seen each other. In that year they became reacquainted. At the time, Mrs Takhar was suffering personal and financial problems. She had separated from her husband some five years previously. As part of the arrangements made between Mrs Takhar and her husband, she had acquired a number of properties in Coventry.
When Mrs Takhar and Mrs Krishan met again, according to Mrs Takhar, she confided in her cousin and grew increasingly to depend upon her. Mrs Takhar claims that Mrs Krishan exerted considerable influence over her.
The financial problems of Mrs Takhar arose mainly from the condition of the properties which she had acquired from her husband. Some were in a dilapidated condition. Payment for rates were in arrears. Bankruptcy for Mrs Takhar was in prospect.
The Krishans provided financial help to Mrs Takhar. Dr Krishan, the second respondent and the third respondent's husband, took on responsibility for negotiating with Coventry City Council over the rates arrears and the dilapidated state of some of the buildings. Then, in November 2005 it was agreed that the legal title to the properties would be transferred to Gracefield Developments Ltd, a newly formed company, of which Mrs Takhar and the Krishans were to be the shareholders and directors.
Mrs Takhar claims that it had been agreed between her and the Krishans that the properties would be renovated and then let. The rent would be used to defray the cost of the renovation, which, in the short term, would be met by the Krishans. Mrs Takhar would remain the beneficial owner of the properties.
The Krishans present a very different account. They claim that Gracefield was set up as a joint venture company. The properties were to be sold after they had been renovated. They were to be given an agreed value and this would be paid to Mrs Takhar after they had been sold. Any profit over would be divided equally
between Mrs Takhar and the Krishans. They explain that Mrs Takhar agreed to these arrangements because planning permission for development had to be obtained in order to realise the value of the properties and this was an area in which Dr Krishan had experience, having already successfully developed his own medical centre.
On 24 October 2008, Mrs Takhar, issued proceedings in the Birmingham District Registry of the Chancery Division. She claimed that the properties had been transferred to Gracefield as a result of undue influence or other unconscionable conduct on the part of Dr and Mrs Krishan. In a judgment delivered on 28 July 2010  EWHC 2872 (Ch), His Honour Judge Purle QC rejected that claim.
A significant item of evidence in the hearing before Judge Purle was a written profit share agreement dated 1 April 2006. It provided for an initial purchase price of £100,000 for the properties. This was to be placed on a loan account with Gracefield. Further sums totalling £200,000 as deferred consideration were also provided for. The total of £300,000 was to be paid to Mrs Takhar on completion of the sale of the properties. She was also to receive 50% of the profits on the sale of each property.
The circumstances in which this written agreement was discovered and Mrs Takhar's evidence about it were described by Judge Purle in paras 21 and 22 of his judgment:
"... no case of forgery is advanced. Only the last page of the version of the agreement signed by Mrs Takhar appears to have survived and that is in the form of a scanned copy, which has emerged in the files of Sue Bowdler's firm [the Krishans' solicitors]. It was misfiled, apparently. Sue Bowdler had not seen the copy with Mrs Takhar's signature on it before until it was found, misfiled. However, there is no doubt that the agreement was prepared for signature. There is no doubt also that the agreement was prepared for signature in or around April 2006 and there is no doubt, in my mind, that it faithfully reflects the oral agreement that had been made.
In the absence of Mrs Takhar giving a coherent explanation as to how her signature came to be on the scanned copy, I conclude that the Krishans' evidence, which I believe anyway, should be accepted and that Mrs Takhar took the copy
of the agreement that she was to sign away, which was returned, probably by her in some way, duly executed to Sue Bowdler's firm, which then ended up misfiled. At all events, I am satisfied that that was the agreement that was made. The properties were transferred by Mrs Takhar in to Gracefield's name before the written joint venture agreement was prepared, and the only credible explanation that I have heard is that they were so transferred on the terms subsequently set out in the joint venture agreement, which were previously agreed orally."
This was, therefore, powerful evidence in support of the Krishans' case. And it is unsurprising that it was heavily relied on by the judge. As the quoted passage shows, he found that the written agreement represented what had earlier been agreed orally between Mrs Takhar and the Krishans. The judge therefore held that Mrs Takhar had transferred the properties to Gracefield for the sum of £300,000 and that she was to receive 50% of the profits when the properties were sold. He dismissed Mrs Takhar's claim based on undue influence or unconscionable bargain and held that the properties had been transferred to Gracefield both legally and beneficially. That transfer was, he held, subject to the terms of the oral agreement made between the parties, as reflected in the written profit share agreement.
The original of the profit share agreement said to have been signed by Mrs Takhar has not been found. The Krishans claim that it was prepared by accountants at a time when Mrs Takhar was in India and then handed to her when she returned. She was asked to consider it and return it to the accountants. Mrs Takhar's case is that she did not sign the document and had never seen it until the dispute arose. The authenticity of the document and whether it had been signed by Mrs Takhar are central issues in the dispute between the parties, therefore.
In advance of the trial before Judge Purle, Mrs Takhar had sought permission to obtain evidence from a handwriting expert to examine the signature on the profit share agreement which had been attributed to her. That application was refused because it had not been made until the trial was imminent. On the trial, Mrs Takhar gave evidence that she could not say that the signature on the profit share agreement was not hers, but she was unable to explain how it had got there.
After the trial Mrs Takhar instructed new solicitors and asked them to obtain a report from a handwriting expert. Robert Radley is such an expert and he was engaged to inspect and report on various documents. His subsequent report stated conclusively that the signature on the profit share agreement which purported to be that of Mrs Takhar had been transposed from a letter of 24 March 2006 which she had sent to the Krishans' solicitors. He was also of the opinion that there was strong evidence that Mrs Takhar did not sign a 2006 bank inquiry form and that the
signatures of both the Krishans and Mrs Takhar on later 2011 bank inquiry forms had also been transposed from previous forms.
On foot of this report, Mrs Takhar claims that she can now advance a case of fraud against the Krishans. She also claims that she was not in a position to do so until she had received Mr Radley's report. The Krishans dispute both claims.
After receiving Mr Radley's report, Mrs Takhar issued proceedings in which she sought to have Judge Purle's judgment and order set aside. She claimed that she was entitled to this relief on the ground that it was obtained by fraud, the principal forgery relied upon being that of the copy of the profit share agreement. (Later Mrs Takhar applied for permission to amend her claim to allege an unlawful means conspiracy and deceit. That application was refused and no longer features in the appeal.)
The respondents served defences in which they pleaded that Mrs Takhar's claim is an abuse of process, inter alia because the documents on which Mr Radley's report was based were available to Mrs Takhar and her legal team since at least 12 July 2009 (approximately 12 months earlier than the trial before Judge Purle).
It was ordered that the question whether Mrs Takhar's claim amounted to an abuse of process be tried as a preliminary issue. That trial took place before Newey J in February 2015. In his judgment, ( EWHC 1276 (Ch)), Newey J held that a party who seeks to set aside a judgment on the basis that it was obtained by fraud did not have to demonstrate that he could not have discovered the fraud by the exercise of reasonable diligence. The present claim was therefore not an abuse of process.
The respondents appealed. The Court of Appeal (Patten, King and Simon LJJ) allowed the appeal in its judgment delivered on 21 March 2017 ( Ch 1;  3 WLR 853;  CP Rep 23). Patten LJ, delivering the leading judgment, said at para 30 that the appeal turned on whether Newey J was correct in holding that a due diligence condition did not...
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