- Proprietary injunctions: costs paid under order ‘procured by fraud’ not held on constructive trust (Taylor v Khodabakhsh)
- What are the practical implications of this case?
- What was the background?
- What did the court decide?
- Proprietary injunction
- Other remedies sought
- Case details
Dispute Resolution analysis: This case considers novel issues concerning the treatment of costs paid under a court order allegedly procured by fraud. The claimant, Mr Taylor, issued an on-notice application for (among other things) a proprietary injunction in respect of (as yet unpaid) costs due under a court order. The application was based on well-established equitable principles; and in particular that when property is obtained by fraud, equity will intervene to impose a constructive trust in favour of the victim of the fraud (Lord Browne-Wilkinson in Westdeutsche Landesbank Girozentrale v Islington London Borough Council  AC 669 at p 71). The judge did not consider that those equitable principles applied to funds paid pursuant to a court order. On payment, both legal and beneficial ownership would transfer to the recipient—so no constructive trust would arise. In any event, the judge determined that it is not for a litigant who believes they have been defrauded to elect to rescind an order made against them; they must persuade the court that this is what is required. Written by Chris Felton, partner and Katie Dyson, associate at Gardner Leader LLP.
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