The Supreme Court considered when a judge may reopen a judgment before the order is sealed. AIC obtained an enforcement order for a Nigerian arbitration award after FAAN failed to provide a required bank guarantee on time, but the guarantee arrived hours later. The Court partially allowed FAAN’s appeal, balancing finality against the windfall to AIC.
Background
AIC Ltd (‘AIC’) obtained a Nigerian arbitration award of US$48.13m plus interest against the Federal Airports Authority of Nigeria (‘FAAN’). AIC sought enforcement in England under the New York Convention and the Arbitration Act 1996. An initial without-notice enforcement order was made in February 2019. FAAN applied to set it aside, seeking adjournment pending Nigerian set-aside proceedings. The deputy judge, Veronique Buehrlen QC (‘the Judge’), set aside the without-notice order and adjourned enforcement, but on condition that FAAN provide a bank guarantee (‘the Guarantee’) of approximately US$24m.
Despite knowing since June 2019 that security might be required, and since August 2019 that it must be provided, FAAN repeatedly failed to meet deadlines for the Guarantee. At the hearing on 6 December 2019, FAAN’s counsel conceded he could not properly seek further time and the Judge made the Enforcement Order permitting AIC to enforce the Award. However, later that same afternoon, the Guarantee was issued and provided to AIC’s solicitors. FAAN applied to reopen the judgment before the order was sealed. The Judge set aside the Enforcement Order, extended time for the Guarantee, granted relief from sanctions, and re-adjourned enforcement. AIC appealed successfully to the Court of Appeal, which reinstated the Enforcement Order. FAAN then appealed to the Supreme Court.
The Issue(s)
The power to reopen a judgment before sealing
The central issue was by what process and according to what principles a judge should decide whether to reopen a judgment and order before the order has been sealed. In particular, the Court considered whether a mandatory two-stage process was required (as the Court of Appeal held), the proper weight to be given to the principle of finality, and whether the late provision of the Guarantee constituted a sufficient change of circumstances to justify reopening.
Relief from sanctions
A subsidiary issue was whether the Denton principles for relief from sanctions applied and, if so, how they should be applied in the context of FAAN’s serious delay in providing the Guarantee.
The Court’s Reasoning
The principle of finality and the Overriding Objective
Lords Briggs and Sales, delivering the unanimous judgment, conducted a thorough review of the applicable principles. They emphasised the centrality of the principle of finality in civil litigation, as reflected in the CPR Overriding Objective (CPR Part 1.1), noting in particular the 2013 amendment adding CPR Part 1.1(2)(f): ‘enforcing compliance with rules, practice directions and orders.’
The Court endorsed the general approach in Re L (Children) [2013] UKSC 8 that the judge’s task is to do justice in accordance with the Overriding Objective, but emphasised that the CPR Overriding Objective differs materially from that in the Family Procedure Rules, particularly given the absence of welfare considerations and the greater emphasis on finality and compliance in commercial litigation.
Litigation cannot be conducted at proportionate cost, with expedition, with an appropriate share of the court’s resources and with due regard to the rules of procedure unless it is undertaken on the basis that a party brings his whole and best case to bear at the trial or other hearing when a matter in dispute is finally to be decided (subject only to appeal).
The Court quoted with approval the observation of Coulson LJ in the Court of Appeal:
The principle of finality is of fundamental public importance … The successful party should not have to worry that something will subsequently come along to deprive him or her of the fruits of victory. The unsuccessful party cannot treat the judgment that has been handed down as some kind of rehearsal, and hurry away to come up with some new evidence or a better legal argument.
Rejection of a mandatory two-stage process
The Court rejected the Court of Appeal’s requirement that a judge must always adopt a two-stage process, first considering whether to entertain the application at all and only then considering it on its merits:
That would in our view be to impose a straitjacket upon the judicial exercise of a discretionary jurisdiction which is contrary to the way in which it was addressed in Re L and alien to the essentially flexible nature of the judge’s task when weighing competing considerations of potentially limitless variety against each other.
However, the Court recognised that it may often be a useful mental discipline for the judge to consider at the outset whether there is any real prospect of the application succeeding before troubling the other party:
It will often be a useful mental discipline, reflective of the strength of the finality principle, for the judge to ask herself whether the application should even be entertained at all before troubling the other party with it or giving directions for a hearing.
The weight of the finality principle
The Court held that the finality principle is always a weighty factor, especially for final orders, and that the scales are not evenly balanced at the outset:
The question is whether the factors favouring re-opening the order are, in combination, sufficient to overcome the deadweight of the finality principle on the other side of the scales, together with any other factors pointing towards leaving the original order in place.
The Court declined to prescribe a definitive test such as ‘exceptional circumstances,’ observing that:
It is not feasible to state such a test. An evaluative judgment has to be made, but it has to reflect and respect the importance in this context of the principle of finality.
Errors by the Judge and the Court of Appeal
The Court found that the Judge had seriously undervalued the finality principle, wrongly treating the starting point as an even balance. Her observation that finality is only achieved when an order is sealed was held to miss the point:
finality should ordinarily follow the giving of judgment and the making of an order in open court, whereupon it becomes immediately enforceable. Sealing is, as the Court of Appeal observed, only an administrative tail-piece.
The Judge’s assessment that there was good reason for FAAN’s delay was also found to be unsustainable on the evidence. The Court agreed with the Court of Appeal’s criticism that the Judge had focused only on the last few days of the delay, ignoring the much longer period from August 2019 during which FAAN had failed to take effective steps.
However, the Court disagreed with the Court of Appeal on two points: (i) the mandatory two-stage process was not required; and (ii) the late provision of the Guarantee was a genuine change of circumstances, measured against what the Judge had been told at the 6 December hearing, namely that the Guarantee had not been provided and counsel could not properly seek further time.
Re-exercise of discretion
Both courts below having erred, the Supreme Court re-exercised the discretion afresh. Applying the Denton framework by analogy, the Court found the failure to comply was very serious (stage (i)) and without good reason (stage (ii)). At stage (iii), the Court weighed the combined effect of finality and culpable delay against the ‘windfall’ to AIC of receiving both the right to enforce the Award and the Guarantee as an asset against which to enforce.
The Court gave real respect to the Judge’s trenchant view that the windfall to AIC should be undone, noting she was well placed to assess the justice of the matter. Ultimately, the Court was persuaded that AIC should not retain the full right to enforce the Award pending the Nigerian proceedings, but should retain the US$24m already obtained by calling on the Guarantee:
The fact that this outcome is less favourable to FAAN than the order that would have applied if the guarantee had been provided on time is an appropriate reflection of FAAN’s failure to comply with the deadline imposed by the court by its orders. It is a result which serves the Overriding Objective in its modern form.
Practical Significance
This decision provides important clarification of the principles governing a judge’s power to reopen a judgment before the order is sealed. It confirms that Re L applies in CPR proceedings but with proper weight given to the different formulation of the Overriding Objective, particularly the emphasis on finality and compliance with court orders. The case establishes that: (i) no mandatory two-stage process is required; (ii) the finality principle is always a weighty factor, especially for final orders, such that the scales are heavily loaded against the applicant from the outset; (iii) no exhaustive list of qualifying factors can be prescribed; and (iv) an evaluative judgment must be made which reflects and respects the importance of finality. The decision also illustrates the court’s willingness to fashion a nuanced remedy that reflects both the interests of justice and the consequences of a party’s culpable non-compliance with court orders.
Verdict: FAAN’s appeal was allowed in part. The Enforcement Order made by the Court of Appeal was set aside. AIC’s application for leave to enforce the Award was adjourned pending the outcome of the Nigerian set-aside proceedings, with liberty to apply if those proceedings did not progress. However, AIC was entitled to retain the proceeds of the Guarantee (approximately US$24m) already received. This outcome reflected a balance between the finality principle, FAAN’s culpable delay, and the windfall that would otherwise accrue to AIC.
Source: AIC Ltd v Federal Airports Authority of Nigeria [2022] UKSC 16
