Thevarajah & Anor v Riordan & Ors

In a default judgment, the court must determine the relief to which the claimant is entitled solely by reference to the pleaded case. Deemed admissions cannot extend beyond the allegations made in the statement of case. A struck-out defence cannot supply, cure or support an inadequately pleaded claim. Specific performance may be ordered only in accordance with the agreement as pleaded and proved; the court cannot create an unpleaded obligation to discharge or reimburse liabilities. For damages measured by the difference between the agreed price and current market value, valuation must reflect the realistic development potential of the property, including appropriate allowances for planning risk, development costs, finance and profit.

The first claimant sought judgment following the defendants’ defence and counterclaim being struck out and the defendants being debarred from defending. The claim concerned an agreement for the acquisition of shares in companies owning three North London properties. The claimant sought specific performance in relation to The Jewel, repayment of an alleged overpayment, orders concerning secured indebtedness and damages relating to The Jester and The Devonshire.

The court had to determine the relief available on the pleaded case and, for the two properties not acquired, the appropriate measure and amount of damages.

1. Default judgment and pleaded case. The defendants’ failure to maintain a defence gave rise to deemed admissions under Civil Procedure Rules 1998, rules 16.5 and 16.4, subject to the limits of the allegations actually pleaded. Under rule 12.11, judgment had to be such judgment as the claimant was entitled to on his statement of case. The court could not grant relief based on an agreement, obligation or liability that the Particulars of Claim did not allege.
2. Struck-out defence. The former Defence and Counterclaim could not be relied upon to supply, cure or support a claim that was absent or inadequately pleaded. In particular, an allegation in that pleading that the parties had agreed that the defendants would discharge borrowing went further than the Particulars of Claim, which referred only to an envisaged method of paying the purchase price. The claim for a declaration and monetary order concerning PPD’s indebtedness therefore failed.
3. Specific performance. The claimant was entitled to an order transferring the remaining 50% of the shares in PPD, with a corresponding transfer of The Castle, and to repayment of £72,000. The court declined to make transfer conditional on payment of PPD’s indebtedness or the £72,000 because no pleaded or reasoned basis for that condition had been established.
4. Damages and valuation. The parties agreed that damages for The Jester and The Devonshire were measured by the difference between the relevant purchase price and current market value. Market value had to reflect the realistic prospect of residential redevelopment rather than the obsolete practical use as public houses. The valuation required appropriate deductions for development costs, finance, profit, deferred receipts and planning risk. On the evidence, neither property was worth less than its relevant purchase price, so damages were assessed at nil.
5. The court made only the orders identified above.

The judgment records that the defendants’ second application for relief from sanctions was granted by Andrew Sutcliffe Q.C. sitting as a Deputy Judge on 23 October 2013, but that order was reversed by the Court of Appeal on 13 December 2013. The defence and counterclaim therefore remained struck out and the defendants were debarred from defending.