England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
EMPLOYMENT APPEAL TRIBUNAL
(MR JUSTICE HART)

		Royal Courts of Justice Strand London, WC2 Wednesday, 5 February 2003

1. LORD PHILLIPS, MR: On 12 March 2002 Deputy Master Joseph made an order dismissing the defendants' appeal in this matter. He did so on the application of the defendants. The conduct of the proceedings on behalf of the defendants was in the hands of the Solicitors' Indemnity Fund, which had an interest in the matter as insurers of the defendants. More particularly, Mr Jeremy Salt, an employee of the Fund, was taking the decisions. The facts that I am about to set out have been provided by him in a witness statement. The defendants now apply to set aside the order dismissing their appeal so that it can proceed.
2. The action arose out of the sale by the claimants of two related delivery businesses. One, Izmatho Limited, was incorporated, the other Bristol Delivery Service ("BDS") was not. The purchaser was Nationwide Maintenance Service Systems Limited ("NMS") a company controlled by Mr David Cutler, a chartered accountant. The defendants are the solicitors who acted for the claimants in the transaction.
3. The terms of the transaction, as eventually concluded, were, first, that the business of BDS would be transferred by the claimants to Izmatho in exchange for 10,000 shares in that company; and, secondly, that the claimants would sell the entire holding in Izmatho (10,1000) to NMS for a total consideration of £150,000 payable over three years. Both agreements were concluded on 14 July 1995.
4. The payment of that consideration was divided into two parts. The first of £73,000 was expressed to be in respect of the sums owing to the claimants by Izmatho. It was to be paid as to £50,000 from the factoring of its debts as soon as possible and, as to the balance, by nine monthly instalments beginning on 20 August 1995 and ending on 20 April 1996. The second of £77,000 was expressed to be in payment of the shares and was payable in 28 monthly instalments beginning on that date and ending on 25 July 1998. The relevant point is that payment of the purchase monies was deferred and the deferred payments were guaranteed by Mr Cutler.
5. NMS defaulted in October 1995, having made payments totalling only £7,000. The claimants then sued Mr Cutler on his personal guarantee. They obtained judgment against him on 19 March 1996. He was then made the subject of a bankruptcy order so that they recovered nothing from him. All that they have received is the £7,000.
6. The claimants then sued the defendants, alleging that they ought to have ensured that there was further security for NMS' obligations and ought to have inquired as to Mr Cutler's means.
7. On 15 February 2001 Hart J gave judgment in favour of the claimants. He found that the defendants had indeed been negligent in failing to advise them that inquiries should be made as to the value of Mr Cutler's personal guarantee. If such advice had been given, inquiries would have disclosed that Mr Cutler was not a man of substance because his only evident asset, his house, was encumbered and in the circumstances the claimants would then have withdrawn from the sale. Hart J gave judgment for damages to be assessed on the basis that, but for the defendants' negligence, the sale would never have gone ahead and the claimants would have retained possession of the shares.
8. The judge refused permission to appeal, but permission was the granted by this court. The notice of appeal advanced two grounds: (i) that the judge had been wrong to find a breach of duty; and (ii) that his finding on causation was in error.
9. In the meantime, directions were given for an assessment of damages, which included a direction that experts' reports should be exchanged by 15 October 2001. Exchange, in fact, did not take place until 12 November 2001, the claimants being the party in delay. At this point the assessment was fixed to be heard on 29 January 2002, a month before the date fixed for the appeal. Accordingly, the defendants expected to know the result of the assessment of damages before the appeal and thus to be in a position to decide whether or not it was worth pursuing the appeal.
10. The issue on damages was substantial. The defendants' expert, Mr Bolton, valued the claimants' shares at only £6,066. That is less than the £7,000 consideration they had received, so that on his view there was no damage. On the other hand, the claimants' expert, Mr Mould, quantified the claimants' damages, including interest, at some £209,000, based on the premise that the shares fell to be valued according to the best evidence, which was the £150,000 that Mr Cutler had agreed to pay to them. The view of Mr Salt, advising the fund at this stage, was that Mr Mould's approach to damages was unlikely to be accepted. All the court would have to go on would be Mr Bolton's assessment and the defendants would succeed in showing that there was no, or very little, damage. In that event, plainly, there would be no point in pursuing the appeal.
11. The assessment of damages was then adjourned on the ground that Mr Mould was unavailable for the hearing. It was adjourned to a date after the date fixed for the appeal. This put Mr Salt advising the fund in a dilemma. He had to decide whether or not to pursue the appeal, notwithstanding that the assessment of damages was not determined. He decided, on the basis of the reports that had been disclosed, that the prospects of success on the assessment of damages were so good that it made sense to abandon the appeal. It was in these circumstances that the defendants applied to Deputy Master Joseph to dismiss the appeal.
12. The hearing of the assessment of damages was refixed for 11 December 2002. On 18 November the claimants served a supplementary report from Mr Mould, which advanced an alternative basis for supporting his valuation of the shares by a calculation based on the profits that the companies purported to have been earning. Part of the evidence of these purported profits was an earlier draft set of accounts and other documents which had not previously been focused upon in relation to the assessment of damages and in some instances which had not even been in the trial bundle.
13. In these circumstances Mr Crawford, for the defendants, has submitted that justice requires that the defendants be permitted to reopen the appeal so that their liability to the claimants can be challenged.
14. The application raises two issues:

(1) Has this court jurisdiction to set aside its order dismissing the appeal, thus permitting the appeal to proceed? (2) If it has jurisdiction, should it exercise that jurisdiction?

15. Mr Sen for the claimants, in his skeleton argument, has challenged Mr Crawford's submission that this court has jurisdiction. He has founded his challenge on a decision of this court in Ogwr Borough Council v Knight, which is briefly reported in 1994 Times Law Reports at page 22, and a transcript of which has been provided to us. In that case Ogwr Borough Council had been defendant to an appeal by way of case stated from a decision of a Commons Commissioner that a parcel of land should be registered as common land. The appeal succeeded and the judge refused to confirm the registration. In so doing, he relied upon a decision of the Court of Appeal in Re Box Hill Common [1980] Ch 109. Ogwr gave notice of appeal (in those days permission was not required), but subsequently, by letter, informed the Civil Appeals Office that it no longer wished to continue with the appeal, but wished to apply for the appeal to be dismissed with costs. The Registrar of Civil Appeals acceded to that request and an order dismissing the appeal was drawn up and entered.
16. On 10 May 1990 the House of Lords, in the case of Hampshire County Council v Milburn [1991] 1 AC 325, held that Re Box Hill Common had been wrongly decided. After a lengthy delay, Ogwr sought to revive their appeal. The procedure they chose was to apply for leave to appeal out of time. The opposing parties in the proceedings applied to strike out this application as an abuse on the grounds that the court had no jurisdiction.
17. I pick up the story in the leading judgment of Peter Gibson LJ at page 6 of the transcript:

"Mr Campbell, for Ogwr, contended that the court has inherent jurisdiction to reinstate an appeal that has been struck out or dismissed. He submitted that where there has not been a hearing of an appeal of any kind, this court is not functus officio but retains a general discretion to reinstate an appeal, or, where an order of dismissal has been entered, to allow a new notice of appeal to be served. He relied on the note in paragraph 59/1/55 of the 1993 Supreme Court Practice to the effect that this court has inherent jurisdiction to reinstate an appeal which has been struck out or dismissed for non-appearance of the appellant, and contended that there was no reason why this court should not similarly be able to allow an appeal to be brought after an earlier appeal has been dismissed without their being a determination on the merits.

I am unable to accept Mr Campbell's submission. The general rule, as I see it, is that once an order dismissing an appeal has been perfected the court has no jurisdiction to revive the appeal or to allow a fresh appeal to be brought. That was the view expressed by Lord Greene MR, with whom du Parcq and Morton LJJ agreed, in Re Samuel [1945] Ch 364."

Later in his judgment, Peter Gibson LJ continued:

"In the light of the observations of the Master of the Rolls in Re Samuel it seems to me it is a matter of jurisdiction, and that this court cannot reinstate an appeal unless the matter falls within an exception which has been recognised by this court. One such exception is where an appellant has not appeared and the appeal has been dismissed without a hearing or determination of the appeal. In such a case this court has jurisdiction to reinstate the appeal (see for example Brooksbank v J C Rawsthorne & Company [1951] 2 All ER 413). The exceptions are in all in my judgment distinguishable from the facts of the present case where the appellant himself has sought the dismissal of this appeal and that has been acted upon and the order dismissing the appeal has been perfected. If one seeks a policy reason as to why this should be the case, it is readily to be found in the fundamental principle that there should be finality in litigation."

In a short judgment in characteristic terms, Staughton LJ agreed. He said:

"...we have no power to hear and determine an appeal by the Borough Council today. The appeal has been determined already by this Court, when at the Borough Council's request an order dismissing the appeal was drawn up and sealed on 25 August 1989. Once that was done the moving finger had written. Not all Mr Campbell's piety and wit can lure it back to cancel half a line; nor, for that matter, could all his tears wash out one word of it. It is a case that does not fall within any recognised exception."

Also concurring, the Master of the Rolls, Sir Thomas Bingham, said:

"For nearly have a century, since the decision of the Court of Appeal in Re Samuel, it appears to have been accepted in this court that if an appellant asks that his appeal should be dismissed with costs, and an order of the court is formally drawn up dismissing the appeal with costs, that is final and the court cannot allow the appeal to be pursued under that notice of appeal or revived by another notice of appeal. I can see no reason to question the general correctness of that understanding which is reflected in the current practice of the court. It is unnecessary to consider the extent to which in different circumstances an appeal can be pursued or revived, despite dismissal, since this appeal seems to me to fall squarely within the ruling of the Court of Appeal in Re Samuel. I, therefore, think that Chapman is right in submitting that the Court of Appeal has no jurisdiction to entertain this appeal. If, however, that conclusion is wrong then it is in my view plain that to allow a further appeal to be pursued in these circumstances would be contrary to the practice of the court and would require demonstration of extraordinary circumstances to justify what would otherwise be an abuse of the process."

It is to be noted that the Master of the Rolls envisaged the possibility that it might not be correct to say that the court had no jurisdiction. For myself I find it a little hard to see how, if this court has properly allowed orders to be set aside in certain exceptional cases, the decision whether or not to do so turns on jurisdiction rather than discretion.

18. The observations in Ogwr in relation to jurisdiction must now be considered in the light of the decision of this court in Taylor v Lawrence [2002] EWCA Civ 90, reported in [2002] 3 WLR 640. The issue in that case was whether the Court of Appeal had jurisdiction to allow an appeal to be reopened after the original order had been sealed when, after the appeal, fresh facts had come to light which cast doubt on the decision. The court decided that it did. For present purposes, the most relevant passage in the judgment of the court, delivered by the Lord Chief Justice, begins at paragraph 52 where he was in the course of citing a passage from the speech of Lord Diplock in Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corpn Ltd [1981] AC 909 at 977, which stated:

"The power to dismiss a pending action for want of prosecution in cases where to allow the action to continue would involve a substantial risk that justice could not be done is thus properly described as an 'inherent power' the exercise of which is within the 'inherent jurisdiction' of the High Court. It would I think be conducive to legal clarity if the use of these two expressions were confined to the doing by the court of acts which it needs must have power to do in order to maintain its character as a court of justice."

Lord Woolf continued:

"In our judgment the final words of Lord Diplock, 'the doing by the courts of acts which it needs must have power to do in order to maintain its character as a court of justice' express the situation here under consideration exactly. If more authority is required, reference may be made in a very different context to the speech of Lord Morris of Borth-y-Gest in Connelly v Director of Public Prosecutions [1964] AC 1254, 1301 where Lord Morris said:

'There can be no doubt that a court which is endowed with a particular jurisdiction has powers which are necessary to enable it to act effectively within such jurisdiction. I would regard them as powers which are inherent in its jurisdiction. A court must enjoy such powers in order to enforce its rules of practice and to suppress any abuses of its process and to defeat any attempted thwarting of its process'.

Earlier judgments referring to limits on the jurisdiction of this court must be read subject to this qualification. It is very easy to confuse questions as to what is the jurisdiction of a court and how that jurisdiction should be exercised. The residual jurisdiction which we are satisfied is vested in a court of appeal to avoid real injustice in exceptional circumstances is linked to a discretion which enables the court to confine the use of that jurisdiction to the cases in which it is appropriate for it to be exercised. There is a tension between a court having a residual jurisdiction of the type to which we are here referring and the need to have finality in litigation. The ability to reopen proceedings after the ordinary appeal process has been concluded can also create injustice. There therefore needs to be a procedure which will ensure that proceedings will only be reopened when there is a real requirement for this to happen.

One situation where this can occur is a situation where it is alleged, as here, that a decision is invalid because the court which made it was biased. If bias is established, there has been a breach of natural justice. The need to maintain confidence in the administration of justice makes it imperative that there should be a remedy. The need for an effective remedy in such a case may justify this court in taking the exceptional course of reopening proceedings which it has already heard and determined. What will be of the greatest importance is that it should be clearly established that a significant injustice has probably occurred and that there is no alternative effective remedy. The effect of reopening the appeal on others and the extent to which the complaining party is the author of his own misfortune will also be important considerations. Where the alternative remedy would be an appeal to the House of Lords this court will only give permission to reopen an appeal which it has already determined if it is satisfied that an appeal from this court is one for which the House of Lords should not give leave.

Today, except in a few special cases, there is no right of appeal without permission. The residual jurisdiction which we have been considering, is one which should only be exercised with the permission of this court. Accordingly, a party seeking to reopen a decision of this court, whether refusing permission to appeal or dismissing a substantive appeal, must apply in writing for permission to do so. The application will then be considered on paper and only allowed to proceed if after the paper application is considered this court so directs. Unless the court so directs, there will be no right to an oral hearing of the application. The court should exercise strong control over any such application, so as to protect those who are entitled reasonably to believe that the litigation is already at an end."

19. In my judgment, that passage applies aptly and properly to a case such as the present. I can see no reason, where the question of jurisdiction is in issue, to draw a distinction between a situation where an order has been entered without a hearing on the merits and one where it has been entered after a hearing on the merits. It follows that I would hold that this court has an inherent power to allow an appeal to be reopened after the order of the court has been perfected, whether the order is made after a hearing or is an order dismissing the appeal without a hearing. In either case, the exercise of that discretion will be very rare. Indeed, the circumstances in which there is even an issue as to whether it should be exercised will also be rare.
20. Accordingly, I would direct that the procedure laid down by this court in Taylor v Lawrence should also be followed in a case such as that before us. So far as the exercise of discretion is concerned, the doctrine of precedence applies when considering the circumstances in which it is or is not proper to exercise that discretion. Ogwr demonstrates that the fact that an appellant has consented to the dismissal of an appeal because of a misapprehension as to the relevant law, is not a valid reason to permit him to reopen the appeal, even where the misapprehension is reasonably based on a binding decision of the Court of Appeal, which is, after the appeal, reversed by the House of Lords. Even in those circumstances, the requirement for finality carries greater weight in the interests of the administration of justice than does any hardship than the appellant may suffer.
21. Mr Crawford has submitted that the facts of this case can be distinguished from those of Ogwr. At one point in his submissions he suggested that the claimants, in putting in evidence a subsequent expert's report and additional documents, were abusing the procedure, but on further consideration he withdrew that suggestion.
22. Mr Crawford puts his case in this way. In accordance with the rules, the time for the claimants to put in their expert's report had passed, and their expert's report had been put in. Time had progressed until very shortly before the date for hearing the assessment of damages. At that point the assessment was adjourned. In these circumstances the defendants could reasonably assume that all the cards were on the table and that the evidence that would be considered at the hearing of the assessment of damages would be limited to that which had already been produced.
23. In these circumstances, he submits, it would be entirely unjust if, having acted on that reasonable assumption and withdrawn their appeal, the defendants were not now permitted to revive it. He further submits that their conduct in withdrawing their appeal in the circumstances then prevailing was one that should be commended as in accordance with the spirit of the new rules.
24. I do not consider that there is a valid distinction between the circumstances of this case and the circumstances in Ogwr. The possibility that additional evidence might be adduced in relation to the assessment of damages was always inherent. The experts had not, as I understand it, met to exchange views at the time that this appeal was withdrawn. If there had been injustice in permitting the claimants to add to their case on the assessment of damages, in circumstances where the defendants' appeal had been abandoned, the remedy lay with the trial judge.
25. We have been told that the application to adduce additional evidence was resisted before Peter Smith J on the very ground that it was unjust that such evidence should be allowed in after the defendants had withdrawn their appeal. Peter Smith J did not accept that submission. It was open to the defendants, if so advised, to seek permission to appeal against his decision. They have not done so.
26. In these circumstances, it does not seem to me that "a significant injustice has probably occurred", or that there was "no alternative effective remedy" available. I find that this case falls within the principle laid down by this court in Ogwr as to the proper exercise of discretion.
27. For these reasons, I would dismiss this application.
28. LORD JUSTICE BROOKE: I agree. This application serves to highlight the significance of the judgment of the five-judge decision of this court in Taylor v Lawrence [2002] 3 WLR 640, notwithstanding what was said about the previous practice of the court in Ogwr Borough Council v Knight, Court of Appeal transcript 11 January 1994. I am satisfied that the court does possess jurisdiction to entertain, under the Taylor v Lawrence jurisdiction, an application such as that made by Mr Crawford today.
29. However, I wish to stress that this jurisdiction will only be exercised in what Sir Thomas Bingham MR described in Ogwr Borough Council as "extraordinary circumstances". The exercise of the jurisdiction will involve the court in taking what Lord Woolf described in Taylor v Lawrence at paragraph 55 as an exceptional course where it has been clearly established that a significant injustice has occurred and where there is no alternative effective remedy.
30. Yesterday was the first anniversary of the decision of this court in Taylor v Lawrence. I understand from the staff in the Civil Appeals Office that more than 200 applications have been made to the court during the intervening year seeking to invoke this jurisdiction. This appears to suggest a widespread misunderstanding by litigants of the quite exceptional nature of the residual jurisdiction identified by this court in Taylor v Lawrence. The fact that the jurisdiction has been identified for the purposes of avoiding significant injustice in extraordinary circumstances must not be shown as giving any form of green light to the kind of applications that we have received today, unless those making it are completely satisfied that it does indeed fall within this particular rubric.
31. For the reasons given by the Master of the Rolls, with which I agree, I am satisfied that this present application gets nowhere near satisfying the required test. I, too, would dismiss the application.
32. LORD JUSTICE LAWS: I agree with both judgments.
Order: Application dismissed with costs.