Pugh v Cantor Fitzgerald International

On an assessment of damages following a default judgment, a defendant may raise any issue relevant to quantification, including mitigation, unless it contradicts an issue determined by the judgment on liability.

A default judgment, and a refusal to set it aside under Civil Procedure Rules, rule 13.3, creates an estoppel only as to matters necessarily and precisely determined. The court must scrutinise the pleadings, evidence and reasons before treating an earlier summary ruling as a conclusive factual finding. The same facts may support a distinct mitigation issue under another contract where that issue does not contradict the established liability.

The claimant obtained default judgment for damages to be assessed after the defendant admitted that it had terminated his employment before the contractual notice period expired.

The defendant's application to set aside that judgment was dismissed. At the subsequent assessment stage, the Master struck out allegations that the claimant's earlier conduct both justified dismissal and disentitled him to contractual payments under a separate partnership agreement. Smith J upheld the strike-out of the liability and causation allegations, but reinstated the mitigation allegation. The claimant appealed.

The central issues were whether the mitigation allegation contradicted the judgment on liability, whether the refusal to set aside the default judgment created a factual estoppel, and whether raising the point was an abuse of process.

1. Appeal dismissed. Ward LJ, with whom Evans-Lombe J agreed, held that Smith J had correctly allowed the defendant to advance the mitigation issue.

2. Following Lunnun v Singh & Ors., an assessment of damages leaves open every issue except one inconsistent with the liability established by the earlier judgment. A defendant may therefore raise a point going to quantification, including mitigation, if it does not contradict that judgment.

3. The default judgment conclusively established that the defendant had unlawfully terminated the employment contract. The proposed defence that the claimant's gross misconduct justified dismissal, and the corresponding causation case, could not be revived. They were inconsistent with the established liability.

4. The mitigation issue was different. It concerned whether the claimant's alleged conduct amounted to competitive activity under a separate partnership agreement with different parties and governed by Delaware law. If so, the claimant would already have lost the relevant termination payments and could have sought alternative brokerage work without sacrificing them. That question did not contradict the judgment that the employment dismissal was unlawful.

5. A default judgment, or a refusal to set it aside, can create an issue or factual estoppel only for what it necessarily determined with complete precision. Applying the cautious approach in Kok Hoong v Leong Cheong Kweng Mines Ltd. [1964] AC 993, the court examined the limited material before the Master and the absence of reasons for his earlier ruling. The finding of no real prospect of defending the claim did not necessarily decide the underlying allegations of fact. No factual estoppel therefore prevented their use on the distinct mitigation issue.

6. The late reliance on further evidence was not an abuse of process. Applying the all-the-circumstances approach explained in Johnson v Gore Wood & Co. [2001] 2 WLR 72, additional expense and hearing time did not bar a point which the defendant was otherwise entitled to run. The appeal was dismissed with costs agreed at £12,000, payable within 14 days.

• Court of Appeal (Civil Division): Dismissed the claimant's appeal and upheld Smith J's decision to permit the defendant to advance the mitigation issue.

• High Court, Queen's Bench Division (Smith J): Upheld the Master's strike-out of the liability and causation allegations, but allowed the defendant's appeal concerning mitigation and reinstated that part of its counter-schedule.

• Master Leslie: Refused to set aside the default judgment. At the later case management conference, struck out the defendant's causation and mitigation allegations as matters already adjudicated upon.