UK: Supreme Court Clarifies Test For Re-Opening Judgment Before Order Is Sealed

It has long been established that a judge has the power to re-open their judgment or order at any time until the order has been sealed. In a recent decision, the Supreme Court has clarified the approach a judge should adopt if asked to exercise this power, finding that the essential task is to do justice in accordance with the overriding objective of the CPR: AIC Ltd v Federal Airports Authority of Nigeria [2022] UKSC 16.

The Supreme Court rejected the notion that the discretion is constrained by a need to show "exceptional circumstances" before a judgment can be revisited, as stated in the pre-CPR authorities. It also rejected the Court of Appeal's decision that a two-stage process is needed, with the judge first considering whether the application should even be entertained before going on to consider the application on its merits. That would be inconsistent with the flexible nature of the judge's task in weighing the relevant factors.

However, the Supreme Court emphasised that a judge considering such an application should not start from a position of neutrality. Sufficient weight must be given to the principle of finality in litigation, which is inherent in the overriding objective, and is particularly important where the order in question is a final order. The question for the judge will be whether the factors in favour of re-opening the judgment are sufficient to outweigh the finality principle, together with any other factors supporting the original order.

Background

The claimant, AIC, issued proceedings in the English court against the defendant, FAAN, to enforce a Nigerian arbitration award against it for some US$48 million plus interest. The enforcement claim was adjourned pending the outcome of a challenge to the award in Nigeria, but on condition that FAAN provide security of around US$24 million by bank guarantee by an extended deadline of 14 November 2019. AIC had permission to enforce the award if the guarantee was not forthcoming by that date.

The guarantee was not provided by the deadline. FAAN applied for a further extension, to 5 December, and AIC cross-applied for permission to enforce the award. At the hearing of both applications on 6 December, at which point the guarantee still had not been provided, the judge gave an oral judgment permitting AIC to enforce the award.

In fact the guarantee was issued later on 6 December and a copy was provided to AIC. On 8 December, before the enforcement order had been sealed by the court, FAAN applied to the judge to re-open her judgment, set aside the enforcement order and grant relief from sanctions imposed for the late provision of the guarantee. The judge granted these applications, and also adjourned the enforcement proceedings pending the outcome of the Nigerian proceedings. She considered that (i) the provision of the guarantee amounted to a sufficient change of circumstances to justify re-considering the enforcement order; (ii) there was sufficiently good reason for FAAN's delay in providing the guarantee to justify relief from sanctions; and (iii) it was just to set aside AIC's permission to enforce the award because by having both the guarantee and permission to enforce it would receive an unintended procedural windfall.

The Court of Appeal allowed AIC's appeal and reinstated the enforcement order. It concluded that: (i) the judge should have conducted a two-stage process, first considering whether the re-consideration application should be entertained at all, and only then (if appropriate) considering the application on its merits; (ii) had she done so, she should have concluded that the late provision of the guarantee was not sufficient reason for re-considering the enforcement order; and (iii) there was no sufficient explanation for the delay in providing the guarantee to justify relief from sanctions or to make it just to set aside the order.

AIC then obtained payment in full under the guarantee, but further enforcement of the award was stayed pending FAAN's appeal to the Supreme Court.

Decision

The Supreme Court allowed FAAN's appeal in part. Lord Briggs and Lord Sales gave the leading judgment, with which Lord Hodge, Lord Hamblen and Lord Leggatt agreed.

The court noted that there is no question that a judge has power to re-open a judgment or order at any time until the order has been sealed. The question raised by this appeal was by what process, and in accordance with what principles, a judge should decide whether or not to exercise that power.

The court referred to the previous leading case on the question, In re L [2013] UKSC 8, which concerned care proceedings. Each parent accused the other of being the sole perpetrator of injuries to one of their children. The judge gave an oral judgment which concluded that the father was the perpetrator but, before the order was sealed, she reconsidered and issued a second judgment in which she said that it could have been either of them. In the Supreme Court, Baroness Hale conducted a general review of the law in this area. She stated that a judge considering whether to re-open their judgment before it is sealed is not bound to apply the principles adopted in pre-CPR cases – which included a requirement for "exceptional circumstances" – but should seek to do justice in accordance with the court's overriding objective. The factors to take into account included the importance of finality of litigation, but the weight attached to this factor may vary from case to case. That factor was less important in In Re L, both because it was a case involving child welfare and because the order was made at a preliminary stage.

The Supreme Court noted that the present case is a commercial case, governed by the CPR, not (like In re L) a family case governed by the Family Procedure Rules, and that there is a strong public interest in the finality of litigation in this context under the CPR's overriding objective. The court expressed its agreement with the comment of Coulson LJ, in the Court of Appeal:

It followed that, on an application to reconsider a final judgment before the order has been sealed, a judge "should not start from anything like neutrality or evenly-balanced scales". It might even be appropriate for a judge first to consider whether the application should even be entertained, and to refuse it without a hearing if there is no real prospect that the application could succeed. But there is no requirement for a two-stage process, as the Court of Appeal had decided. That would be alien to the "essentially flexible nature of the judge's task when weighing competing considerations of potentially limitless variety against each other".

The finality principle will always be a weighty matter in the balance against making a different order, but the weight to be given to it will vary depending on the circumstances. It will be particularly important for final orders, and less so for case management and interim orders.

The Supreme Court said it was not feasible to state a bright-line test for when the finality principle can be overcome and a judgment or order reopened before sealing. However, the principle is not to be treated merely as one factor among many. As the court put it:

The court said it would also be wrong to attempt to identify a list of factors that would be sufficient to displace the finality principle, but some factors would have no significant weight, such as a desire to re-argue a point lost at trial in a different way.

In the present case, the Supreme Court concluded that the judge did not give the finality principle the central importance which it deserved, and her assessment that FAAN had good reasons for its delay in providing the guarantee also could not be supported on the facts. However, the Court of Appeal's re-exercise of the court's discretion was also flawed, both because of its insistence of a two-stage process and because it had concluded that there was no significant change of circumstance, when (in the Supreme Court's judgment) the late provision of the guarantee amounted to such a change.

The Supreme Court therefore re-exercised the discretion afresh. The question was whether FAAN should be granted relief despite it having committed a serious breach of the rules, for which it had no good reason.

The court noted that there were two large factors weighing against the re-opening of the enforcement order; the finality principle, and FAAN's delay in providing the guarantee in breach of the court's order. However, the fact that the guarantee was provided shortly after the enforcement order was made was an important change in circumstances, as AIC had been able to obtain payment under it. On balance, the court concluded that AIC should not retain the right to enforce the award, pending the outcome of the Nigerian proceedings, beyond the sums already recovered under the guarantee.

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