NO VARIATION TO COURT ORDER BECAUSE OF CORONOVIRUS

It is probable that the Coronavirus epidemic is going to give rise to many issues in litigation.  Some of them unusual and unprecedented.   An example can be seen in the judgment today in Dinglis v Dinglis & Ors [2020] EWHC 1363 (Ch) (Adam Johnson QC sitting as a High Court Judge). A respondent to a case wanted a variation of an earlier order because, since that order was made, the position had changed because of  Coronavirus.   The judgment also contains an interesting discussion of the court’s powers to vary earlier orders.

 

“I am not persuaded that in this case it requires Andreas to be able to argue, even as a matter of law and principle, that adjustments on account of the Coronavirus pandemic should be taken into account.”

THE CASE

The petitioner brought proceedings for unfair prejudice. At an earlier hearing, after a trial, the date of valuation of the petitioner’s shares was determined to be 25th July 2019.

THE RESPONDENT’S APPLICATION FOR A VARIATION: “THE CORONAVIRUS APPLICATION”

The Respondent made an application for a variation on the grounds that the coronavirus epidemic meant that the value of the company would have decreased.
    1. Now comes the issue. I am invited to give further directions in connection with the intended valuation trial, and among them the Respondents seek a direction arising out of what the parties have referred to as the Coronavirus Application.
    2. That application was made by Application Notice dated 15 May 2020, and seeks relief in the following form:
“An order that the share purchase order of Adam Johnson QC (sitting as a Deputy High Court judge) dated 5 December 2019 … be varied so as to permit the… Respondents… (as a matter of law) to advance the case at the Valuation Trial … that for the purposes of the valuation of the Petitioner’s shares… the value DPL should be adjusted downwards to reflect such a reduction in the value of the properties held by DPL and/or or any other damage caused to DPL as may result from the effects of the Coronavirus (Covid-19) pandemic between 25 July 2019 (‘the Valuation Date’ …) and the date of commencement of the Valuation Trial … “.
    1. In practical terms, what this means is that the Respondents seek an addition to the Schedule of “Permitted Adjustments” annexed to the Order of 5 December 2019, to read as follows (proposed language underlined):
At the Valuation Trial, it shall be open to the Respondents (as a matter of law) to advance a case for the purposes of the valuation of the Shares:
The value of [DPL] be adjusted downwards to reflect such reduction in the value of the properties held by DPL and/or any other damage caused to DPL as may result from the effects of the coronavirus (COVID-19) pandemic between the valuation date and the date of the commencement of the Valuation Trial.”
  1. That proposed variation is strongly resisted by Paul.

THE DECISION

No judge determined that there should be no change to the original order. It was a final order and could not be varied because of subsequent events.

    1. I agree with Mr Peters that the correct starting point is the December Order. If there is no prospect of varying that Order, that creates logical difficulties for Mr Lightman in saying that an adjustment to reflect matters occurring after the Valuation Date is justified or even arguable.
    2. In his oral submissions, Mr Lightman initially put his case on the basis that he was not asking for any variation to the Valuation Date, but as matters developed, I understood him to be saying that he did, at least to the extent necessary for the purposes of making good his argument on the proposed adjustment. That reflects the formulation in his Skeleton for the hearing at paragraph 47.
    3. It is convenient to begin with the guidance in the authorities on CPR 3.1(7), whether directly applicable or by analogy.
    4. For the purposes of CPR 3.1(7), the White Book at paragraphs 3.1.17.1 and 3.1.17.2 draws a distinction between “interim orders” and “final orders“. Paragraph 3.1.17.1 indicates that interim orders:
” … do not finally decide anything as of right between the parties: they include case management decisions which govern the procedure by which those rights will be determined … and also all orders providing parties with some interim remedies or protections pending that the determination… .”
    1. Paragraph 3.1.17.2 describes “final orders” as follows:
“The term ‘final order’ is used in this paragraph to describe an order which determines between the parties the issues which are the subject matter of the litigation and which give rise to a cause of action estoppel between them.”
    1. Coming back to CPR rule 3.1(7), this has been described as an “omnibus provision“, and the authorities support the view that it is applicable both to interim and final orders. That said, the authorities also indicate that the jurisdiction is to be exercised much more sparingly in the case of final orders. An example is Roult v. Northwest Strategic Health Authority [2009] EWCA Civ 444[2010] 1WLR 487, in which the Court of Appeal affirmed the decision of Christopher Clarke J, who declined to vary the terms of a settlement approved on the first day of trial in a clinical negligence claim. A variation had been sought on the basis of a proposed change in the claimant’s long-term care arrangements. See also Kojima v. HSBC Bank Plc [2011] EWHC 611 (Ch)[2011] 3 All ER 359, in which Briggs J held that a judgment on admissions in respect of part of a debt claim was a final judgment, and refused to revoke or vary it despite the debtor claiming to have been advised of a defence which he was not previously aware of.
    2. In Roult, Hughes LJ said the following about CPR 3.1(7) at [15] (emphasis added):
“I agree that in its terms the rule is not expressly confined to procedural orders but … I am however in no doubt that CPR 3.1 (7) cannot bear the weight which Mr Grimes’ argument seeks to place upon it. If it could, it would come close to permitting any party to ask any judge to review his own decision and, in effect, to hear an appeal from himself, on the basis of some subsequent event. It would certainly permit any party to ask the Judge to review his own decision when it is not suggested that he made any error. It may well be that, in the context of essentially case management decisions, grounds for invoking the rule will generally fall into one or other of two categories of (i) erroneous information at the time of the original order, or (ii) subsequent events destroying the basis on which it was made. The exigencies of case management may well call for a variation in planning from time to time in the light of developments. There may possibly be examples of non-procedural but continuing orders which may call for revocation or variation as they continue – an interlocutory injunction may be one. But it does not follow that wherever one or other of the two assertions mentioned (erroneous information and subsequent) can be made, then any party can return to the trial judge and ask him to reopen any decision. In particular, it does not follow, I have no doubt, where the judge’s order is a final one disposing of the case, whether in whole or in part. And it especially does not apply where the order is founded upon a settlement agreed between the parties after the most detailed and highly skilled advice. The interest of justice, and of litigants generally, require that a final order remains unless such proper grounds for appeal exist.”
    1. Likewise, in Kojima, Briggs J at [30] thought that where the court has “finally determined a case, or part of a case” (my emphasis), the primary consideration (even accepting that in principle the jurisdiction in CPR 3.1(7) can be invoked) should be the ” … much larger, if not indeed overriding, public interest in finality, subject of course to the dissatisfied party’s right of appeal.”
    2. I did not read these earlier authorities as being inconsistent with the guidance given by Rix LJ in Tibbles v. SIG plc, because in a passage at [39(i)], immediately before the passage quoted by Mr Lightman and referred to above, Rix LJ said (emphasis added):
“[CPR 3.1(7)] … is apparently broad and unfettered, but considerations of finality, the undesirability of allowing litigants to have two bites at the cherry, and the need to avoid undermining the concept of appeal, all push towards a principled curtailment of an otherwise apparently open discretion. Whether that curtailment goes even further in the case of a final order does not arise in this appeal.”
    1. In my judgment, the December Order, so far as it concerns determination of the Valuation Date, was a final order. I reject Mr Lightman’s submission to the contrary. The Order was intended to, and substantively did, determine finally between the parties a principal and significant issue of contention between them, namely the appropriate date for the valuation of Paul’s minority shareholding. That was, in my judgment, a determination of a part of the case (cf the quotations from Roult and Kojima above). Moreover, it was a determination which the Respondents wanted.
    2. When eventually made, the determination came after the lengthy trial of the First Issues at which factual evidence concerning the history of the parties’ relationship had been examined at length and with some care. The hearing in October 2019 was held because by then both parties saw the good sense of the valuation date question being finally resolved before the Petition proceeded further. For Paul that involved a change of heart but for Andreas it had been his consistent wish. That is consequently what happened, following a further detailed hearing, and as Mr Lightman I think accepts, the determination was made balancing a number of factors in order to produce a final result which was designed to be fair and equitable in all the circumstances. There was no appeal from it, nor indeed was there any application for permission to appeal on either side. The Respondents were evidently happy with it, even to the extent of actively opposing Paul’s submission (see [12] above) that the logic of my Judgment required the Valuation Date to be pushed back to coincide with the Valuation Trial.
    3. In those circumstances, it seems to me that the interest in the finality of litigation is a, if not the, primary concern. True it is that the world has moved on since December 2019, and I accept it is fair to describe the impact of the Coronavirus pandemic as something out of the ordinary. But I do not think that in the circumstances of this case it justifies any variation to the terms of the final order made relating to the Valuation Date.
    4. Quite aside from other matters, Andreas is an experienced and successful businessman. He has been involved in the world of property development and management for many years. He must be well familiar – and indeed it is clear that he is given his experiences during the 2008 financial crisis – with the idea that property valuations can go down as well as up, and sometimes very materially so. He must have been well aware of that risk both during the trial in February 2019 and at the subsequent hearing in October 2019, when the Respondents asked me to determine the question of the valuation date, and to fix it at an early point. The logic of that position has always involved the Respondents assuming the risk that, subsequent to the chosen valuation date, the fortunes of DPL, and consequently perhaps Andreas’ own personal fortunes, might fluctuate, including downwards. It seems that was a risk they were willing to take, and indeed wanted to assume, confident as they were of Andreas’ abilities to manage the business of DPL successfully. I do not think it lies in their mouths now to say that circumstances have changed and that it would be unfair to expose them to the practical effects of that having happened.
    5. Consequently, and while accepting the broad nature of the discretion afforded by CPR 3.1(7), I do not consider that any factors come into play in this case which are sufficiently strong to displace the consideration of finality in litigation.
    6. I do not think the analysis changes even if I assume that the Order was not a final order, but instead an interim one, and that the approach is different. Looking at the Judgment of Rix LJ in Tibbles, point (b) of the guidance he gave at [39(ii)] obviously does not apply (” … the facts on which the original decision were (innocently or otherwise) misstated“), and so the case would have to fall within (a) ” … material change of circumstances since the order was made.” Finality is still a relevant and important factor: the disappointed litigant should not be given “two bites at the cherry.” Here, although it is true there has been a significant change in general social and economic conditions since the Order was made, in truth the real gist of the Respondents’ complaint is that there has been a change in the property market. For the reasons already given above, I think that was a risk they were willing to assume. Thus, I do not think there has been a change in circumstances of a type which produces unfairness or gives rise to inequity in the circumstances of this case. What has happened is that a risk which was inherent in the nature of the order made, and which the Respondents pressed for, has materialised (or at least, begun to materialise). That does not in my view affect the underlying logic of the order or the basis on which it was made. Accordingly, I do think it would be giving the Respondents “two bites at the cherry” now to be able to argue for their proposed adjustments.
    7. I am also unpersuaded that the analysis changes if I assume that CPR 3.1(7) is inapplicable, because the December Order was not made by the court in exercise of “a power of the court under these Rules” (i.e., under the CPR). Even if the power exercised was that under section 996 of the 2006 Act, it seems to me that just the same considerations would apply, namely (i) the importance attached to finality in litigation, and (ii) the fact that the change represents the realisation of a risk which was inherent in the nature of the order made and which, since the Respondents pressed for it, they willingly assumed.
    8. I therefore conclude that there is no basis for varying, whether directly or indirectly, the Valuation Date, an issue which has already been the subject of extensive and hard-fought litigation between these same parties.
    9. I then come on to the broad discretion afforded to me by section 996 of the 2006 Act.
    10. Here, it seems to me that Mr Peters must be correct. If there is no change to the Valuation Date, then Mr Lightman faces an insuperable logical difficulty in seeking to argue that the valuation of Paul’s shares as at the Valuation Date should be adjusted to take account of matters occurring after it. I do not consider that point to be properly arguable as a matter of law.
    11. I fully take on board Mr Lightman’s point that the jurisdiction under section 996 is a broad one, and of course I accept that in fashioning a remedy the Court must look at the “reality and practicalities of the overall situation, past, present and future” (to use the words of Patten J in Grace v. Biagioli, cited above). But in my view that is just what has already happened in relation to the Valuation Date. That being so, and the Valuation Date issue not having been appealed, and not being susceptible (as I have now held) to variation, I do not see how even the wide discretion afforded by section 996 can result in adjustments being required to reflect possible changes in value occurring after the Valuation Date has come and gone.
    12. To put it another way, whatever may happen to the value of DPL in periods after 25 July 2019 does not in my view alter in any way the fairness or equity of the order already made. Granted that there is still work to do, and indeed a further trial to be undertaken, and that in approaching the issues at that trial the Court will need to operate within the section 996(1) jurisdiction, and seek to achieve a result which is fair an equitable in all the circumstances. But I do not see anything unfair or inequitable in the idea that, under the structure arrived at, Andreas may be required following a trial in 2021 to pay a price for Paul’s shares calculated at a Valuation Date in July 2019, even if in the meantime the value of DPL has diminished because of the Coronavirus pandemic. That may be an unfortunate outcome, and an undesirable one, from Respondents’ point of view, but in all the circumstances described above, I do not think they can properly argue it is an unfair or inequitable one. After all, fairness is a two-way street, and from Paul’s point of view it would be profoundly unfair for the value of his shares now to be affected by matters occurring after the Valuation Date which the Respondents pressed to have determined, and which Paul resisted.
    13. In consequence, and even while accepting that the jurisdiction under s.996(1) is a very broad one, which in principle is to be exercised at all points (even after trial) until the Court’s Order is carried into full effect (see Caldero Trading Ltd v. Beppler & Jacobson Ltd (unrep, 14 December 2012)), I am not persuaded that in this case it requires Andreas to be able to argue, even as a matter of law and principle, that adjustments on account of the Coronavirus pandemic should be taken into account.
Conclusion
  1. In all the circumstances, I am afraid I am unpersuaded by Mr Lightman’s submissions, able and effective though they were, and consequently I dismiss the Respondents’ application.

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