Nectrus Ltd v UCP PLC

The jurisdiction under the Civil Procedure Rules 1998, rule 52.30, to reopen a final appeal or refusal of permission is residual and exceptional. It requires real injustice, exceptional circumstances and no effective alternative, together with critical undermining of the earlier process and a powerful probability that the result would have been different. A merely arguable legal error, an important point requiring appellate clarification, or concern about precedent is insufficient. The application must also be prompt. The Supreme Court’s limitation of reflective loss to claims by shareholders suing in that capacity means that the rule does not bar a distinct claim by an ex-shareholder for loss crystallised on sale of the shares.

Nectrus applied under CPR 52.30 to reopen Lord Justice Flaux’s order of 24 July 2020 refusing permission to appeal against quantum findings made by the Commercial Court. The underlying claim concerned damages for breach of an investment management agreement, measured by the reduction in the price obtained when UCP sold its subsidiary.

The High Court held that the reflective-loss rule did not bar UCP’s claim as an ex-shareholder. Permission to appeal on that issue had initially been granted on a contingent basis pending the Supreme Court’s decision in Sevilleja v Marex [2020] UKSC 31. After that decision, permission was refused. Nectrus alleged procedural unfairness and argued that the Supreme Court had left the ex-shareholder issue open.

1. Applicable test. The application of CPR 52.30 is a tightly constrained residual jurisdiction. Following Goring-on-Thames Parish Council v South Oxfordshire DC [2018] EWCA Civ 860, In re Uddin (A Child) [2005] 1 WLR 2398 and Lawal v Circle 33 Housing Trust [2014] EWCA Civ 1514, the applicant had to show real injustice, exceptional circumstances, no alternative effective remedy and critical undermining of the earlier process. Even then, there had to be a powerful probability that the decision would have been different. The same stringent approach applies to reopening a refusal of permission.
2. No procedural unfairness. Nectrus had made written submissions explaining why permission should be granted after Sevilleja v Marex [2020] UKSC 31. It had not asked the court to defer determination pending further submissions. UCP’s response expressly sought refusal without further argument. The order was therefore not made of the court’s own initiative under CPR 3.3(4), and CPR 3.3(5) did not apply. Nectrus had an opportunity to request further submissions but failed to do so. The litigation process was not corrupted or critically undermined.
3. Underlying reflective-loss argument. The Supreme Court majority confined the rule to the principle in Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204: a claim by a shareholder, in that capacity, for diminution in share value or distributions reflecting loss suffered by the company. Other claims are dealt with ordinarily. Reflectiveness is assessed when the claim is made, after the loss has crystallised. Once UCP had sold its shares, it had no continuing unity of economic interest with Candor and its contractual claim was separate from the company’s claim. The rationale based on Foss v Harbottle (1843) 2 Hare 461 did not justify extending the rule to ex-shareholders. Any risk of double recovery could be managed through ordinary procedural mechanisms.
4. Delay and disposition. An application to reopen must be made promptly. Nectrus waited nearly two months, disregarded the court’s deadline and provided no legitimate excuse. That delay weighed heavily against reopening and was inconsistent with the public interest in finality. The application under CPR 52.30 was dismissed.

1. Court of Appeal (Civil Division). Permission to appeal had been refused on 24 July 2020 after the Supreme Court’s decision in Sevilleja v Marex [2020] UKSC 31. The present CPR 52.30 application to reopen that refusal was dismissed.
2. High Court, Commercial Court. The court found breach of the investment management agreement in relation to the Aten Group investments and awarded approximately £5.8 million in damages in its Quantum Judgment dated 29 November 2019. It held that the reflective-loss rule did not bar UCP’s claim as an ex-shareholder.