Estate of Euan McIntyre Lindsay (Deceased) v Outlook Finance Ltd:
The decision of the King’s Bench Division in Estate of Euan McIntyre Lindsay (Deceased) v Outlook Finance Ltd represents a significant and rare example of a long-standing judgment being set aside for fraud nearly a decade after it was handed down. It also breaks new ground by confirming that the court’s equitable jurisdiction to unravel a judgment obtained by fraud is not confined to fraudulent parties alone but may extend to innocent parties who benefitted from that fraud.
Background: A farming family and a fraudulent financier
The claimants were members of the Lindsay family; Scottish dairy farmers who owned Harperfield Farm in Scotland and Metal Bridge Farm in Cumbria. Following financial difficulties and bankruptcies affecting some family members in 2008, the Lindsays entered into loan arrangements with Outlook Finance Ltd, secured over both farms and livestock.
Outlook was controlled by its director, Mr Derek Fradgley. As later findings would reveal, he was also the architect of a long-running and elaborate fraud.
In 2012, Outlook appointed Mr Butcher, a licensed insolvency practitioner, as LPA receiver over the Cumbria farm and as agent to take possession of livestock. Despite legal advice to seek a court order, Mr Butcher took possession of the farm and assets in November 2012. The farm was subsequently sold.
The 2014 Manchester judgment
In 2013, the Lindsays brought proceedings in the Chancery Division in Manchester, challenging Mr Butcher’s appointment and alleging breaches of oral assurances by Mr Fradgley. At trial in June 2014, HHJ Bird preferred Mr Fradgley’s evidence, relying heavily on documentary records.
The claims against all defendants were dismissed with costs.
That judgment would stand unchallenged for years. But it was built on false foundations.
The Scottish proceedings: fraud exposed
Whilst the Manchester proceedings had failed, litigation continued in Scotland, where Outlook sought to enforce its security over Harperfield Farm. The Lindsays countered by seeking to set aside the loan agreements and securities.
In August 2021, the Outer House of the Court of Session delivered devastating findings. It held that Mr Fradgley had:
- Fabricated documents;
- Invented facts;
- Falsified accounting records; and
- Systematically misrepresented the level of the family’s indebtedness.
The court found that the true debt in 2009 was no more than £900,000, rather than the £1.8–£2.6 million repeatedly asserted by Mr Fradgley. The loans and legal charges were reduced and Outlook was ordered to repay over £180,000. Outlook later entered voluntary liquidation without paying.
Crucially, these findings demonstrated that the very documents and evidence relied upon in Manchester were themselves fraudulent.
The 2023 claim: setting aside a judgment for fraud
Armed with the Scottish findings, the Lindsays brought fresh proceedings in April 2023 seeking to set aside the 2014 Manchester judgment on the ground that it had been obtained by fraud.
The claim raised two central legal issues:
- Whether the threefold test for setting aside a judgment for fraud (from Royal Bank of Scotland v Highland Financial Partners) was satisfied; and
- Whether a judgment could be set aside against a party who was not personally dishonest but had benefitted from another party’s fraud.
The legal framework
The court drew together a line of authority including:
- Royal Bank of Scotland v Highland Financial Partners – the threefold test for fraud;
- Takhar v Gracefield – no requirement to show fraud could not have been discovered earlier;
- Hip Foong Hong – the need for a miscarriage of justice; and
- Lazarus Estates v Beasley and Jonesco v Beard – fraud “infects” the whole judgment.
The threefold test required the claimants to show that:
- The evidence was fraudulent;
- It was material; and
- It caused the judgment to be entered in the way it was.
Findings against Outlook Finance Ltd
The court had little difficulty concluding that the test was met in relation to Outlook.
Mr Fradgley’s evidence had been dishonest. His fabricated documents and false representations were central to persuading HHJ Bird that Outlook had behaved honestly and that the documentary record was reliable. The fraud was therefore material and causative.
The Manchester judgment against Outlook was set aside.
The novel question: what about an innocent party?
The more controversial issue concerned Mr Butcher.
He was not found to have been dishonest. He argued that:
- A judgment could only be set aside against a party personally guilty of fraud;
- Applying the fraud jurisdiction to him would be unfair and inequitable; and
- Delay and the death of Mr Fradgley gave rise to a defence of laches (i.e. where a party has unreasonably delayed, he should be prevented from proceeding) and abuse of process.
The court rejected these submissions.
Fraud attaches to the judgment, not just the fraudster
The court held that the equitable jurisdiction is directed at the integrity of the judgment itself, not merely the conduct of individual parties. The tests in RBS v Highland are concerned with whether the judgment has been procured by fraud.
A party’s innocence of fraud goes to remedy, not jurisdiction.
Equity, benefit and risk
The court then considered whether it was equitable to set aside the judgment against Mr Butcher. Several factors were decisive:
- He voluntarily participated in the plan to take possession of the farm for reward;
- He ignored legal advice to obtain a court order before taking possession;
- He was warned of the risk of liability for conversion of goods;
- He had information suggesting the wrong entity was supplying milk; and
- He benefitted directly from Mr Fradgley’s deception, as it led to the claim against him being dismissed.
The court found that Mr Butcher had taken business risks of the kind typically covered by insurance and indemnities and that it was not inequitable for him to bear the consequences of a retrial.
Laches and delay rejected
The defence of laches also failed. The court accepted that:
- The Lindsays had pursued evidence of fraud relentlessly;
- The delay was inherent in uncovering complex, concealed dishonesty; and
- The Scottish proceedings provided a compelling explanation for the passage of time.
The death of Mr Fradgley did not render a retrial unfair where the original trial itself had been corrupted by fraud.
The outcome
The court:
- Set aside the 2014 judgment against both Outlook Finance Ltd and Mr Butcher;
- Ordered a retrial of the claims against them; and
- Declined to set aside the judgment against a third defendant who was not a party to the present proceedings.
How can we help?
Amrik Basra is an Associate in our Private Litigation team.
At Nelsons, our team specialises in these types of disputes and includes members of The Association of Contentious Trust and Probate Specialists (ACTAPS). The team is also recommended by the independently researched publication, The Legal 500, as one of the top teams of specialists in the country.
If you have concerns about the above subject, don’t hesitate to get in touch with Amrik or a member of our expert Dispute Resolution team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
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