New decision on fraud and abuse of process
18th Jun 2025
Judgment has been handed down in the case of Bhandal v HMRC and Broad [2025] EWHC 1511 (Ch), where Michael Kent KC and Jack Macaulay represented the successful Defendants.
The case is notable as the only example of which we are aware of a finding that an action to set aside an earlier judgment on the grounds that it had been obtained by fraud would have failed as an abuse of process even had the fraud been established. In fact, though, the Claimant’s allegations of fraud were also rejected. The Defendants have thus been completely vindicated in this latest instalment of a very long-running dispute between the parties.
Background
The case has an extraordinary history. Around the turn of the millennium the Claimant was suspected of involvement in what was known as diversion fraud, whereby alcohol was removed from bonded warehouses duty unpaid and “diverted” onto the domestic market for sale. He came to the attention of HMCE (as was), and it was identified that he was living in the USA. On 18 July 2001 HMCE obtained a worldwide restraint order over his assets, and an arrest warrant in support of an attempt to extradite him. The following day HMCE conducted what the Claimant described as a “raid” on an enormous house in Surrey called Updown Court, which the Claimant had acquired as a development opportunity with the proceeds of his criminal activities. At the time Updown Court was thought to be the most expensive house ever offered for sale on the UK property market.
Unfortunately the attempts at extraditing the Claimant were unsuccessful and by the time he returned to the UK voluntarily in the mid-2000s the potential prosecution for diversion fraud had been abandoned.
The Claimant soon found himself in HMP Belmarsh, having been convicted of an unrelated charge of attempted kidnap. Undeterred he launched proceedings in the Chancery division against HMRC and a number of other defendants, alleging that the “raid” on Updown Court blighted its value, causing him massive losses when it was sold at (he said) an undervalue by the mortgage company. The claim was at one point valued at over £1.35 billion.
In 2008 HMRC obtained a stay of the Chancery action, on the grounds that the Claimant’s remedy lay in an application for statutory compensation under s.89 of the Criminal Justice Act 1988. Some years later the Claimant started an action under s.89. In 2015 the case came on for trial before Collins J. He dismissed the claim, finding that none of the HMRC officers involved in the investigation of the Claimant had been guilty of “serious default” (the threshold requirement for an award of compensation), and moreover that the claim would have failed anyway because Updown Court had been acquired with the proceeds of crime.
The present case
Having suffered such a devastating defeat the Claimant set about attempting to reverse it. He alighted on the allegation that the document purporting to be a copy of the 18 July 2001 arrest warrant was in fact a forgery, and that no such warrant had ever been obtained. That being so (he said), the court never had jurisdiction to hear and dismiss the s.89 proceedings, because the existence of criminal proceedings (commenced, for these purposes, by the issue of the warrant) was a precondition of the existence of the right to apply under s.89. He had raised questions over the authenticity of the warrant in the course of the s.89 proceedings, but was not permitted to pursue them while also maintaining his case under s.89. An attempt to resurrect the Chancery action on this basis was dismissed by HHJ Jarman QC in 2018.
The present action was a fresh claim to set aside the earlier adverse decisions on the grounds that they had been obtained by fraud, relying on Takhar v Gracefield [2019] UKSC 13 as authority for the point that the Claimant did not need to show that the alleged fraud (here, the forgery of the warrant) could not have been discovered with reasonable diligence before the impugned judgment(s).
The decision
Edwin Johnson J comprehensively rejected the central allegation that the warrant had been forged. He accepted the evidence of the HMRC officer who obtained it, Mr Broad, that the warrant had indeed been issued by a magistrate at the Uxbridge Magistrates’ Court on 18 July 2001.
The decision thus represents a significant vindication for Mr Broad, who has had serious allegations of dishonesty hanging over him for some years at a time when he should be freely enjoying his retirement.
Of perhaps wider legal interest is the finding that, even if the forgery had been established, the claim would have failed as an abuse of process. This possibility had been left open by Takhar. Johnson J referred to paragraphs 54 and 55 of the judgment of Lord Kerr JSC and paragraphs 60-63 of the judgment of Lord Sumption JSC and concluded:
“In my view what was said by Lord Kerr and Lord Sumption in Takhar does establish that a claim to set aside a judgment in previous proceedings, on the basis of fraud, can be an abuse of process. The circumstances in which such a claim can be an abuse of process are narrowly defined. It must be demonstrated that, in the earlier proceedings, the claimant made a deliberate decision not to investigate a suspected fraud or rely on a known fraud. If this deliberate decision can be established, the court then has a discretion to refuse the claim to set aside the previous judgment, on the basis that the claim is an abuse of process.” (para. 369)
Johnson J found that the Claimant had made a deliberate decision not to investigate further or pursue the allegations in the earlier proceedings. As such, the proceedings would have been dismissed as an abuse of process even if the Claimant had succeeded in proving that previous judgments had been procured fraudulently.
Johnson J recognised that this “may be thought a strong conclusion” (para. 404) but emphasized that this was an unusual case (para. 405).
Conclusion
This case provides an important interpretation of the principles in Takhar and the circumstances in which a claim to set aside a judgment procured fraudulently can nevertheless constitute an abuse of process.
A copy of the judgment can be found here.
