James Bickford Smith
discusses Coral Reef Ltd v Silverbond Enterprises Ltd and another
 EWHC 874 (Ch) and the status of masters’ decisions.
The first instance decision in Sarpd Oil International Ltd v Addax Energy SA and another
 EWHC 2426 (Comm) (see Legal update, Security for costs: Part 20 claims and relevance of approved costs budget (High Court)) marked a significant departure in commercial court practice regarding the circumstances in which security for costs would be ordered. Some practitioners and judges viewed that departure negatively. Accordingly, it led to renewed interest in the run of decisions concerning the circumstances in which High Court judges might decline to follow earlier High Court authorities. The question that arose in Coral Reef Ltd v Silverbond Enterprises Ltd and another  EWHC 874 (Ch) was whether High Court masters found themselves in a different position from High Court judges when considering this issue.
Coral Reef’s Argument
That question arose in the context of a security for costs application brought against Coral Reef, a $1 Hong Kong company that had filed no financial information and likewise chose to file no evidence as to its ability to provide security. Coral Reef was relying on Andrew Smith J’s decision in Sarpd Oil International Ltd v Addax Energy SA and another  EWHC 2426 (Comm) that no inferences could be made on such grounds against a respondent to a security to costs application.
Unfortunately for Coral Reef, on the day before the security application was due to be heard by a Chancery master, the Court of Appeal reversed Andrew Smith J in an important decision discussed in last month’s column: Sarpd Oil International Ltd v Addax Energy SA and another  EWCA Civ 120 (see Legal update, Court of Appeal makes important observations on costs budgets and clarifies security for costs issues) and Article, Security for costs where a company is reticent to reveal its financial position: a practical view from the Bar (www.practicallaw.com/6-626-1286)). This left Coral Reef highly exposed. It therefore developed the argument that no inferences about its finances could be drawn because when choosing to put in very limited evidence it had been relying on advice based on the first instance decision in Sarpd Oil International Ltd v Addax Energy SA and another  EWHC 2426 (Comm). This argument was rejected. In the course of rejecting this argument, the master had to address the submission that Coral Reef had been entitled to assume that it would prevail and that Andrew Smith J’s decision would be applied because “a Master is bound by the decision of a High Court Judge, even if the Master is convinced that the judge is wrong.” That raised a point as to the application of the doctrine of precedent to masters not resolved in any reported decision.
The Master’s Reasoning
The analytical starting point is that High Court judges will follow each other’s decisions out of comity unless persuaded they are wrong: Huddersfield Police Authority v Watson  KB 842. As such, and as is surprisingly often forgotten, while they are not “bound” by previous High Court decisions, the question is not whether they agree with a previous decision but rather whether they are persuaded that decision is wrong: Lornamead Acquisitions Ltd v Kaupthing Bank HF  EWHC 2611 (see Legal update, Stay of English proceedings against insolvent Icelandic bank refused again (High Court)).
The ensuing question is whether masters find themselves in a different position. As the jurisdiction they exercise is a co-ordinate jurisdiction, the only basis for such a finding would be that masters hold inferior offices to High Court judges. That contention, however, falls to be considered in a context where successive procedural reforms have steadily whittled down the list of matters that can only be dealt with by a judge. Accordingly «masters can now hear and try more or less the same cases as the High Court judges (Coral Reef v Silverbond Enterprises, at paragraph 34). Nevertheless, “in practice most of their work involves procedural disputes, as before.”
Given that the difference between the powers of a judge and a master is now far less notable than before, the argument from status is plainly less powerful than it once was:
As against previous views based on status, another strand of authority focuses on the question not of the identity of the judicial office holder but rather on the status of the jurisdiction being exercised. Thus, in examples noted by Master Matthews, where a Court of Appeal judge sits at first instance, the status of the decision is simply that of an ordinary High Court judgment (Bartlett v Barclays Bank Trust Co Ltd (No 2)  Ch 515), or where law lords used to sit in the Court of Appeal, their decision was simply one of the Court of Appeal (Stockton v Mason  2 Lloyd’s Rep 430).
The decision in Coral Reef v Silverbond Enterprises would not seem an easy one to appeal. One reason for that lies in the fact that, by the time the application came to be heard, the Court of Appeal had already overturned the decision on which Coral Reef was relying. As such, while the master’s decision is not obiter, the fact remains that Coral Reef seems not to have open to it an appeal based on the point of principle that a master has refused to follow a binding decision.
The real question lies in whether, in a future case, the Court of Appeal or a High Court judge, may take a different view. That question is best considered after addressing the practical ramifications of the decision
The decision in Coral Reef v Silverbond Enterprises is timely, given that procedural reforms have steadily reduced the number of matters reserved to a High Court judge to the point where there are now very few applications that cannot be brought before a master. An obvious exception relates to injunctions, and there are further discrete exceptions of note (for example, in the Patents Court). Generally, however, there remains surprisingly little guidance on what applications are suitable for disposal by masters.
What follows, narrowly, from Coral Reef v Silverbond Enterprises
is that there will no longer be a need to apply for the listing of an application before a judge, rather than a master, simply because part of the application in question turns on a contention that a previous High Court decision should not be followed. As such points can have a tendency to emerge only late in the life of an application (and notably following exchange of skeleton arguments), this is to be welcomed. There will, in any event, be nothing to stop applications for a re-listing before a judge on general case management grounds.
The broader questions that remain are:
- Whether masters as a body will take the recent procedural changes and the decision in Coral Reef v Silverbond Enterprises as a cue for them to take a slightly more expansive view of their role than has hitherto been the rule (albeit a far from universal rule) in practice. A particular problem is that highlighted by Master Price, namely the traditional view that masters should not vary High Court judge’s orders except by consent. This can have a serious practical impact in cases brought before masters primarily because timetables or other arrangements laid down in earlier orders have broken down.
- Whether, if masters decisions are now to be afforded the same status as High Court judge’s decisions, the former will become as available as the latter. This was a point Master Matthews addressed as follows: “I accept that in the past masters’ decisions have not been commonly available. But, as HHJ Mackie QC noted in O’Brien v Seagrave, all that means is that, if a judge does not have the master’s reasons for judgment, he or she cannot take them into account. A judge reaching a different decision from that of the master in the absence of the master’s reasons is all the more likely to be convinced it is wrong. But in modern times, with the growth of computer databases (both proprietary and free), searchable over the internet, important masters’ decisions are now readily available. Given the specialist skills that masters have, and the important role that they play in the procedure of Queen’s Bench and Chancery litigation, this can only be an advantage” (Coral Reef v Silverbond Enterprises, at paragraph 48). This reasoning is persuasive. Nevertheless, it remains a challenge to find masters’ decisions on legal databases systematically. Plainly, if masters’ decisions are to be afforded greater weight, greater efforts should be made to disseminate them.
The firm submissions made by leading counsel for Coral Reef about the subordinate position of masters reflect a traditional view about the role and significance of masters and their decisions. It is likewise the case that practitioners may be divided on the merits of masters taking on a greater and more expansive role. For that reason, it would be unwise to assume that Coral Reef will definitely be approved as and when the point reaches the Court of Appeal. In this author’s view, however, such debates now have a distinctly stale air about them. In any event, the time and place for them was before the previous restrictions on the role of masters were largely removed. It makes very little sense for masters to have a wide range of powers but to be stymied in their application of them.
This point of principle ties in with the practical point that masters often have greater experience of particular procedural applications than judges, for the simple reason that that is the focus of their work. Likewise, and again as a matter of practice, it might be asked whether it is necessary to trouble the Court of Appeal on each occasion one wishes to challenge a fundamentally procedural decision. That, as matters stand, is the position if that decision is made by a judge rather than a master. It is in turn productive of very significant delay unless a cogent case for urgency can be made out.
All of these factors point to the conclusion that the decision in Coral Reef v Silverbond Enterprises is not simply a correct analysis of the law but also one to be welcomed in practice. The question that remains to be resolved is whether it marks the start of a shift towards masters being sent a greater range of applications than has been the case in practice. The real problem with such a trend would seem more practical than principled: were masters to take on a substantially greater breadth of work, there would be a likely need to increase their number.