The doctrine of precedent is based on the principle of stare decisis, which requires lower courts to take account of and follow the decisions made by the higher courts where the material facts are the same, and states that as a general rule, courts follow earlier decisions of themselves or of other courts of the same level. In this post we examine whether it is the status of the judges or the status of the courts that is relevant for the purposes of the doctrine.
In Coral Reef Limited v Silverbond Enterprises Ltd and Another [2016] EWHC 874 (Ch), Master Matthews sitting in the Chancery Division of the High Court considered whether and how far a master is bound by the decision of a High Court judge, a question on which there is little authority. He concluded that a master exercising the jurisdiction of the High Court is bound by relevant decisions of the Court of Appeal and the Supreme Court, but is not bound by a relevant decision of a High Court judge. His route to this conclusion gives a useful of overview of the doctrine of precedent in light of modern developments in civil procedure, bearing in mind that important masters’ decisions are now easily accessible online, facilitating the level of certainty required for the operation of the doctrine of precedent in this way.
Facts
The issue arose in the context of an application by the two defendants for security for their costs of a claim brought against them by the claimant Coral Reef. The claim concerned the beneficial ownership of issued shares in the first defendant Silverbond Enterprises Ltd, a company registered in England and Wales. The claimant, a private company incorporated in Hong Kong in 2008, with a paid-up share capital of HK$1, claimed to have 9.99% shareholding in the first defendant, based on an alleged allotment of shares pursuant to the terms of a subscription letter dated 18 December 2012, recorded in signed minutes of the company’s board of directors and in other documents. The defendants had denied the authenticity or provenance of the various documents relied on by the claimant and the time and circumstances in which they were executed and denied that the claimant had any beneficial interest or any right to rectification of the company’s register of members. Proceedings had been transferred from the County Court to the High Court and the case was listed for hearing on 4 March 2016 to consider the defendants’ application for security of costs (the main trial of the claim having been listed for hearing over seven days in early 2017).
The application for security of costs was made on the basis that there was reason to believe the claimant would be unable to pay the defendants’ costs if so ordered, within CPR rule 25.13(2)(c). The claimant had not supplied any information to the defendants, claiming reliance on the decision of Andrew Smith J in Sarpd Oil International v Addax Energy SA [2015] EWHC 2426 (Comm), to the effect that a respondent to a security application:
- Has no duty to volunteer evidence about its financial position, nor to explain why it is unwilling to do so.
- Is entitled to exploit the resulting forensic advantage, so that no adverse inference may be drawn from the failure to disclose financial information.
However, on 3 March 2016, the day before the hearing of the security costs application, the Court of Appeal had reversed Smith J’s decision, holding that if a company is given every opportunity to show that it can pay a defendant’s costs and deliberately refuses to do so, there is every reason to believe that if and when it is required to pay a defendant’s costs, it will be unable to do so. The Court of Appeal also said that the court’s practice that security for costs will often be granted against a foreign company, which is not obliged to publish accounts, has no discernible assets and declines to reveal anything about its financial position, is a sound one.
Counsel for the claimant in Coral Reef argued that as he had only found out about the Court of Appeal’s decision that morning, the court should not draw an inference from the claimant’s refusal to volunteer information because it had been acting on advice based on the decision of the High Court judge in Sarpd Oil, which had only been reversed the day before.
Master Matthews did not accept this argument. He said that the claimant’s representatives would have been aware that judges in similar situations had taken the opposite view, drawn an inference and ordered security for costs. He observed that a High Court judge will as a matter of judicial comity usually follow the decision of a fellow High Court judge unless convinced that the first decision is wrong but the claimant, proceeding in the Chancery Division, could not have had Smith J (from the Commercial Court) as the judge deciding the defendants’ security application. At the very least there would have been doubt as to what the judge hearing the application would have decided, and whether the decision of Smith J would or would not have been followed. Indeed Lewison LJ gave permission to appeal in September 2015 on the footing that this was an important point of practice which should either upheld or rejected at appellate level. The claimant was taking an obvious and significant risk in refusing to provide any information. The appeal might well have been allowed, as indeed it was.
The claimant’s counter-argument was that by proceeding in the Chancery Division, they could realistically expect that (as normally happens in that division) the application would be heard in the first instance not by a High Court judge, but by a master. According to the claimant, a master is bound by the decision of a High Court judge, even if the master is convinced that the judge is wrong. The claimant contended that decisions of High Court judges are binding on other judges below them in the hierarchy of authority, not because of the destination of appeals, but because of the status of the decision as the decision of a High Court judge. Further, that a master can perform nearly all judicial functions of the High Court, but occupies an office at a lower level than a High Court judge in the hierarchy of authority. A master was therefore automatically bound by the decision of the High Court.
The defendants, taking the opposite view, argued that the rule for judges of first instance is that such judges will usually follow the decision of another judge of first instance unless convinced that it was wrong. However it is not the seniority or status of the judge that is relevant, but the superiority of the court. On that basis, the decisions of High Court judges and masters exercising the jurisdiction of the High Court are decisions of a court of co-ordinate jurisdiction. Therefore the rule that a first instance judge follows the decision of another first instance judge, except where the second judge is convinced that the earlier decision is wrong, applies as between decisions of High Court judges and masters.
Analysis of the doctrine of precedent
Master Matthews acknowledging that apart from one case, there was little authority on this particular issue, had to decide this point because if affected the weight he should give to the claimant’s failure to provide information for the purposes of the application for security. That case in question was Randall v Randall [2014] EWHC 3134 (Ch), where Deputy Master Collaco Moraes had to consider two conflicting cases in the Chancery Division, on the question whether a claim under the Inheritance (Provision for Family and Dependents) Act 1975 could amount to an interest in an estate. In Green v Briscoe [2005] EWHC 809 (Ch), Master Bragge had decided that it did not. However, in O’Brien v Seagrave [2007] EWHC 788 (Ch), HHJ Mackie QC sitting as a High Court Judge decided that it did. The claimant in Randall argued that the judge’s decision should be preferred to that of Master Bragge under the rules of precedent. Deputy Master Collaco Moraes rejected this argument. In his view, a decision of a master and a judge of the High Court are of the same standing in terms of the doctrine of precedent. They are both judges of the High Court exercising the same jurisdiction, though the jurisdiction of masters is subject to certain restrictions. He noted that a master has greater experience of certain types of disputes and that it was of particular relevance that the masters of the Chancery Division are likely to have a greater familiarity with the issue of an “interest in an estate” than a judge of the same division.
Counsel for the claimant in Coral Reef argued that the decision of Deputy Master Collaco Moraes in the Randall case was wrong because:
- It was not open to a master to develop the English doctrine of precedent by holding that, in the absence of authority on the point he can treat the judgments of masters exercising the jurisdiction of the High Court as having the same status as judgments of High Court judges.
- Masters were not judges they were simply “officers” of the court pursuant to section 19(3)(b) and 89 of the Senior Courts Act 1981.
- There is no routine reporting of masters’ decisions, therefore there could be no certainty of the kind required for the operation of the doctrine of precedent.
- Anomalies would arise if the decisions of masters were to be treated as of equal precedent status as those of High Court judges.
Master Matthews rejected these arguments. He said that:
- Just because there was no other instance of a master deciding on the status of a master’s decisions within the doctrine of precedent did not mean that it was wrong. The position facing him in the instant case was such that he was now required to decide the point one way or another.
- The world had moved on since the days, when the ‘off the cuff’ view of most High Court judges would have been that masters were obviously inferior to, and therefore bound by the decisions of judges. There is no longer an automatic right to ask the judge to rehear any application made to the master. An appeal must be brought, and permission obtained. It was therefore necessary to reconsider the matter on principle, and under the civil procedure system as it is at the present day.
- He was assisted by the Court of Appeal’s observations in Howard de Walden Estates Ltd v Aggio [2008] Ch 26, which did not put the rule of stare decisis in terms of the status of judges, but on the basis if status of the courts, and treated the decision of a deputy High Court judge as of the same status as a High Court judge for precedent purposes. The same principle applied where judges having a particular status temporarily sat in in a court lower than that in which they would normally sit and he cited examples where this had happened (including instances when Scott Baker LJ and Hallett LJ had both sat as assistant deputy coroners, the lowest rank of coroner at the time, in important coroners inquests). The decisions made in those cases had no more value for the purposes of the doctrine of precedent than they would have if the judges had been regular judges of the courts in question.
- In practice, a High Court judge would not in today’s world ignore reasons for a decision of a master that was in point. If they thought the decision was wrong, then they would say so, and would be free to decide differently. That is what happens between High court judges and there is no reason why the same should not happen between a High Court judge and a master.
- Masters and High Court judges were both judicial officers, of the court and there is no reason why the description in the 1981 Act should have any impact on the rules of precedent in the absence of statutory or case-law rules for doing so.
- If a judge does not have the master’s reasons for his judgment, all it means is that those reasons cannot be taken into account. However in modern times, with the growth of computer databases easily searchable over the internet, important masters’ decisions are now readily available.
Decision of the High Court
Master Matthews therefore rejected the decision of the High Court judge in Sarpd Oil for the reasons given by the Court of Appeal in the same case in reversing him. The upshot of this was that it was open to the master to draw the same inference from the claimant’s failure to disclose information about its financial position in the same way that the Court of Appeal did in Sarpd Oil when reversing the decision of the High Court judge.
The master granted the defendants’ (assuming there are two defendants) application and ordered security for costs, the claimant’s failure to provide information playing no small part in that decision.
Comment
This case provides a useful analysis of the doctrine of precedent, particularly as it relates to the status of masters and their parity with High court judges in terms of hearing and deciding cases. It is particularly helpful in the sense that it takes into account changes to the civil procedure system, reflects the more modern view that is taken by High Court judges in relation to the decisions of masters, and bears in mind that important decisions of masters can be readily accessed online. As Master Matthews points out in his judgment, given the specialist skills that masters have and the role that they play the procedure of Queen’s Bench and Chancery litigation, it could be argued that this can only be an advantage.