UCP Plc v Nectrus Ltd
| Jurisdiction | England & Wales |
| Judge | Sir Geoffrey Vos,Lord Justice Underhill,Lord Justice Lewison |
| Judgment Date | 11 July 2022 |
| Neutral Citation | [2022] EWCA Civ 949 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Appeal Numbers: CA-2020-000025-B, CA-2020-000071-B, and CA-2020-000094-B |
[2022] EWCA Civ 949
Sir Geoffrey Vos, MASTER OF THE ROLLS
Lord Justice Underhill, VICE PRESIDENT OF THE COURT OF APPEAL
(CIVIL DIVISION)
and
Lord Justice Lewison
Appeal Numbers: CA-2020-000025-B, CA-2020-000071-B, and CA-2020-000094-B
Case No: CL-2017-000542
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice, Strand
London WC2A 2LL
Huw Davies QC and Felix Wardle (instructed by Skadden, Arps, Slate, Meagher & Flom (UK) LLP) appeared on behalf of the Claimant/Respondent (UCP).
Paul McGrath QC, Andrew Legg, and Edward Blakeney (instructed by Hugh Cartwright & Amin) appeared on behalf of the Defendant/Applicant (Nectrus)
Hearing date: 30 June 2022
Sir Geoffrey Vos Master of the Rolls, Lord Justice Underhill and
Introduction
This case raises issues about the circumstances in which judges should accede to an application to recuse themselves, and the process adopted in the Court of Appeal when parties apply to set aside permission to appeal and, separately, to re-open the final refusal of permission to appeal under CPR Part 52.30.
In the briefest outline, UCP brought these proceedings against Nectrus for breach of an investment management agreement. UCP claimed the losses it had suffered, in effect, resulting from the diminution in value of its shares in its subsidiary, Candor. After the quantum trial, on 29 November 2019, Sir Michael Burton, sitting as a High Court Judge, gave judgment awarding UCP some £7.8 million in damages, rejecting Nectrus' defence that the loss claimed was not recoverable by UCP as it was reflective loss that only Candor could recover. The most significant fact for present purposes is that UCP had sold Candor to a third party at a reduced value between the losses being incurred and the commencement of the proceedings.
Nectrus applied for permission to appeal Sir Michael's decision. On 29 May 2020, Lord Justice Flaux (the judge), as he then was, granted permission to appeal the reflective loss decision on a single ground (called Ground 2). The “information for or directions to the parties” on the permission to appeal (PTA) form read: “[w]hen the judgment(s) of the Supreme Court [from the Court of Appeal's decision in Marex v Sevilleja [2019] QB 173 ( Marex CA)] have been handed down, the matter is to be referred back to me [the judge] for further directions. As will be apparent from the Reasons, the grant of permission to appeal on Ground 2 is a contingent one”. The judge's written reasons included the following:
On the basis of the law as it stands set out in my judgment in [ Marex CA], it is arguable that the judge [Sir Michael Burton] erred in not concluding that UCP was precluded from recovery by the reflective loss principle. Whether my judgment does correctly state the law will depend upon the outcome of the appeal to the Supreme Court from that decision. Unfortunately the judgment(s) of the Supreme Court have not yet been handed down, so it seems appropriate to grant permission to appeal on Ground 2 on the contingent basis that the matter is referred back to me for further consideration when the judgment(s) of the Supreme Court have been handed down.
It seems clear that the judge's decision on this permission to appeal application (the PTA decision) was to grant permission, whilst directing that, once the Supreme Court had dealt with the appeal from Marex CA, the papers were to be returned to him to consider making further directions. Whilst it would have been open to the judge to grant permission to appeal subject to conditions under Part 52.6(2)(b), it does not appear that that is what he did.
Following the PTA decision, the Supreme Court's decision in Marex v. Sevilleja [2020] UKSC 31, [2021] AC 39 ( Marex SC) was handed down on 15 July 2020, reversing Marex CA. On 17 July 2020, Nectrus' solicitors wrote to the Civil Appeals Office (the 17 July letter) saying: “[f]ollowing [ Marex SC], we write to request that permission to appeal now be confirmed unconditionally”. The 17 July letter explained why Nectrus said that Marex SC supported its case on appeal, and argued that UCP's appeal in the same case should be stayed pending the resolution of its own appeal. It invited the Court of Appeal to “remove the contingent basis of its grant of permission to appeal”, and to stay UCP's appeal. The 17 July letter concluded “[i]n the alternative, if the Court of Appeal would like further submissions from Nectrus or both parties on the issue of [reflective loss] before revisiting its decision to grant contingent permission to appeal, Nectrus asks the Court to make directions accordingly”.
UCP's solicitors quickly informed the Civil Appeals Office that the parties were not in agreement, and wrote substantively on 21 July 2020 (the 21 July letter). The 21 July letter requested the “converse” of Nectrus' request “that permission to appeal now be confirmed unconditionally”, namely that “permission to appeal now be refused on the basis of [ Marex SC]”. Having addressed the possibility of directions for further argument, the 21 July letter reiterated its request that Nectrus should be refused permission to appeal, concluding: “[a]lternatively, if the Court is not minded to adopt that course, the Court is requested to provide directions for the filing of further argument by the parties”.
Thus, after the 17 and 21 July letters, the judge was faced with conflicting requests. Neither the parties nor the judge mentioned CPR Part 52.18 which provides that the appeal court may only set aside permission to appeal or vary the conditions upon which an appeal may be brought “where there is a compelling reason for doing so”.
In the event, the judge decided the matter on paper on 24 July 2020 (the second PTA decision) as follows:
Decision: This application has been referred back to me at my direction to consider whether permission to appeal on Ground 2 should still be granted in the light of [ Marex SC]. I consider that permission to appeal on Ground 2 should now be refused.
Reasons 1. In view of the limitation placed by the majority of the Supreme Court who considered that the rule against “reflective loss” should be maintained but only to the extent recognised by the Court of Appeal in Prudential Assurance v. Newman Industries (No 2) [1982] Ch 204 [ Prudential] where the claim in question was by a shareholder, I consider that the judge in the present case was right to conclude that the rule did not preclude the claim by UCP in the present case. 2. Given the reasoning and conclusion of the Supreme Court, Ground 2 is not arguable.
On 28 July 2020, Nectrus' solicitors wrote to the Civil Appeals Office saying that they considered that the second PTA decision was made on the judge's own initiative and that they intended to apply to set it aside under CPR Part 3.3(5). They sought an extension of the 7-day time limit for such an application, expiring on 31 July 2020, under CPR Part 3.3(6)(b), and said that they also intended to apply in the alternative under CPR Part 52.30 to re-open the refusal of permission to appeal. On 30 July 2020, the Civil Appeals Office emailed Nectrus' solicitors saying that the judge had directed that “any application [was] to be served by 4 pm on 31 July and he will if necessary deal with [it] before going on vacation”. That direction manifestly applied to both intended applications.
Nectrus then applied on 31 July 2020 for the second PTA decision to be set aside under CPR Part 3.3(5) as an order made on the court's own initiative. On 3 August 2020, the Civil Appeals Office informed the parties by email that the judge had directed that the second PTA decision “was not made on his own initiative, but in response to [the 17 July letter]” to which UCP had responded. The email indicated that the application under CPR Part 3.3(5) would not be issued on the basis that it was not appropriate, and directed Nectrus to apply under CPR Part 52.30 if it wished to set aside the second PTA decision.
Ultimately, on 28 September 2020, Nectrus applied to re-open Nectrus' appeal under CPR Part 52.30 and to set aside the second PTA decision (the first Part 52.30 application), requesting on the form that the application be heard by a judge other than Flaux LJ. The skeleton argument accompanying the application argued at [24]–[26] for the judge's recusal on the basis of criticism levelled at the procedure the judge had adopted as to submissions and the CPR Part 3.3(5) application. Nectrus relied also on Zuma's Choice Pet Products Ltd v. Azumi Limited [2017] EWCA Civ 2133 ( Zuma's Choice), where the Court of Appeal had said at [29]–[30] that a recusal might be appropriate where “in the past the judge has expressed a final, concluded view on the same issue as arises in the application”.
On 1 October 2020, Nectrus' solicitors emailed the court reminding it that Nectrus was seeking that its first Part 52.30 application be considered by a judge other than Flaux LJ. On 2 October 2020, the Civil Appeals Office emailed to say that: “[a] Lord or Lady Justice as a professional judge will have no difficulty changing his or her mind if grounds are shown — typically, new material or arguments — justifying such a reconsideration. If the Lord or Lady Justice is of the opinion that he or she cannot fairly determine the application, it will be referred to another judge”. On 5 October 2020, Nectrus' solicitors emailed the Civil Appeals Office noting the position and saying that Nectrus “will of course respect the decision of whichever Lord or Lady Justice of Appeal is asked to determine [its] application”. On 3 November 2020, the Civil Appeals Office emailed Nectrus'...
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