Following success in the Court of Appeal, Edward Blakeney analyses the Judgment in Nectrus Limited v UCP Plc [2022] EWCA Civ 949. 28 July 2022
On 11 July 2022, the Court of Appeal (Sir Geoffrey Vos, Master of the Rolls; Lord Justice Underhill, Vice President of the Court of Appeal (Civil Division); and Lord Justice Lewison) handed down the Judgment of the Court in Nectrus Limited v UCP Plc [2022] EWCA Civ 949.
In allowing Nectrus’ second application to ‘re-open’ its appeal pursuant to CPR 52.30, the Court held that Lord Justice Flaux (now Chancellor Flaux) had the appearance of bias and he should have recused himself from hearing Nectrus’ first CPR 52.30 application.
The Background
UCP had sued Nectrus for circa £18 million for breach of an investment management contract. One of Nectrus’ defences was that the claim was barred by the principle of reflective loss – the loss (if any) was properly suffered by UCP’s wholly owned subsidiary whilst UCP only saw a corresponding reduction in share value, and UCP therefore had no entitlement to sue.
At first instance, Sir Michael Burton held that the principle of reflective loss did not apply to UCP – UCP Plc v Nectrus Ltd [2019] EWHC 3274 (Comm). Nectrus sought permission to appeal on three grounds, and Ground 2 submitted that Sir Michael Burton had erred in his application of the reflective loss principles.
At that point in time, the Supreme Court had heard argument in Marex Financial Ltd v Sevilleja [2020] UKSC 31 (in which the Court was reviewing the scope of the reflective loss principles) but had not yet handed down Judgment. Accordingly, Lord Justice Flaux granted (what he called) ‘contingent’ Permission to Appeal on Ground 2 alone i.e. permission was granted but he would review the matter following Marex.
Judgment in Marex was then given on 15 July 2020. Nectrus wrote a 2-page letter two days later asking for Permission to Appeal to be confirmed in light of Marex or, in the alternative, for directions if the Court would like further submissions. UCP wrote shortly after seeking the opposite i.e. permission should be refused, but in the alternative there should be directions for further submissions.
Lord Justice Flaux decided the matter on the papers and withdrew Permission to Appeal – he considered that, as Marex had confirmed reflective loss was of narrow application, Nectrus’ appeal was now unarguable.
What is CPR 52.30?
CPR 52.30 allows a party to ‘re-open’ an appeal that has been finally determined. This has two steps – permission to apply (CPR 52.30(4)) and the application itself (CPR 52.30(1)).
At their heart, these applications are concerned with correcting cases where the integrity of the litigation process has been fatally undermined. But it is frequently emphasised that applications under CPR 52.30 are exceptional – see the three limbs contained in CPR 52.30(1) and Municipio de Mariana v BHP Group Plc [2021] EWCA Civ 1156. The same point was made by the Court of Appeal in Nectrus.
Furthermore, if an application under CPR 52.30 is dismissed there is no right of appeal. It has, however, been confirmed in R (Wingfield) v Canterbury County Council [2020] EWCA Civ 1588 that a second CPR 52.30 application, invariably relying on different grounds to the first, can be permissible.
Round 1
Following the withdrawal of permission to appeal, Nectrus first applied under CPR 3.3(5) for the Court to reconsider its decision (this argument relied on PD23(11.2)). However, having consulted Lord Justice Flaux, the Court of Appeal refused to even issue that application.
Nectrus thus applied under CPR 52.30 to re-open the appeal. As part of that application they asked Lord Justice Flaux to recuse himself from determining the same, but he refused and listed the matter for an oral hearing before himself.
On 21 January 2021, Lord Justice Flaux gave Judgment and dismissed Nectrus’ application – Nectrus Ltd v UCP Plc [2021] EWCA Civ 57. He held that the integrity of the litigation process had not been fatally undermined as he had relied on the parties’ submissions and Nectrus had only offered further submissions if the Court wished (and it did not), and Nectrus’ arguments on reflective loss were in any event unarguable.
Round 2
On 9 August 2021, the Privy Council handed down their Judgment in Primeo Fund v Bank of Bermuda [2021] UKPC 22 and stated that Lord Justice Flaux was wrong on the question of reflective loss when dismissing Nectrus’ application.
Nectrus relied on this and made a second application under CPR 52.30, also arguing that Lord Justice Flaux should have recused himself from dealing with the first application as his conduct in withdrawing Permission to Appeal, and subsequently, gave rise to the appearance of bias.
The Court of Appeal allowed the application and granted permission to appeal on Ground 2:
- Lord Justice Flaux did have the appearance of bias when considering –
- The Judge’s refusal to call for full submissions before withdrawing permission to appeal, which was a significant procedural step (as CPR 52.18 made clear) with significant consequences.
- The Judge’s refusal to issue or extend time for Nectrus’ application under CPR 3.3(5), and the Judge’s imposition of a one-day deadline for Nectrus’ first CPR 52.30 application. This compounded the point above – it would appear to the fair-minded observer that the Judge was taking an “unorthodox and ever-harder line with Nectrus”.
- The fact that the Judge had decided the substantive point on the reflective loss argument, so that his mind was closed to the contrary argument.
- This was not a case where a Judge was being asked to reconsider an issue in light of new circumstances or new argument. Here, the Judge’s own conduct was central to the challenge.
- As a result, the fair-minded observed might reasonably have taken the view that the Judge had become unjustifiably antagonised by Nectrus’ persistence. The test for apparent bias was satisfied.
- Lord Justice Flaux should, in the very unusual circumstances of this case, therefore have recused himself from hearing the first CPR 52.30 application. His decisions were set-aside.
- As a result, the Court of Appeal was now considering Nectrus’ second CPR 52.30 application as if it was in fact the first application (there having been no proper determination on the first occasion).
- Largely for the same reasons given when finding that there had been the appearance of bias, the grounds for the CPR 52.30 application were made out. By reason of the process adopted by Lord Justice Flaux, the integrity of the litigation process had been critically undermined.
Conclusion
This Judgment is, of course, important reading for anyone making an application under CPR 52.30 or asking a Judge to recuse themselves from considering such an application. It is also somewhat of a unique Judgment as a result of it being the only successful second application under CPR 52.30 and as a result of the conclusions reached.
Although every application is fact sensitive, the Judgment provides guidance of general importance too: Judges should generally consider calling for further submissions when faced with diametrically opposed positions on something contentious; although the Court can deal with informal applications made by email, the appropriateness of doing so will depend on the nature of the application and sufficient reasons should always be given; and whilst stock answers from the Court Office are satisfactory, they are no substitute for proper judicial consideration of the matter at hand.
Finally, this Judgment serves as a reminder that care must always be taken, at all levels of the judicial system, to ensure that justice is done and is seen to be done.
Edward Blakeney, instructed by Hugh Cartwright & Amin, acted for Nectrus and was led by Paul McGrath QC and Andrew Legg of Essex Court Chambers. A full copy of the Judgment can be found here.
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