Merito Financial Services Ltd v Yelloly

On an application for default judgment, the court must accept the pleaded facts as true and decide what remedy those facts establish as a matter of law. A claim is for a specified amount of money where the statements of case sufficiently identify a fixed sum, even if the claim is framed in restitution or unjust enrichment. Claims for damages, equitable compensation or an account remain subject to assessment where the loss or gain is not unequivocally quantified. At an assessment, the defendant may challenge causation and quantification, provided the challenge is not inconsistent with the liability established by the default judgment.

The claimant sought default judgment against a former director following the automatic striking out of his Defence under an unless order. Relief from sanctions was refused and that decision was not appealed.

The claim concerned alleged breaches of fiduciary and statutory duties, breach of trust, unauthorised loans, unjust enrichment and diversion of business. The claimant sought immediate judgment for the sums pleaded. The defendant accepted liability but argued that causation and quantum required a further hearing. The central issue was whether the pleaded claims were for specified amounts of money or required assessment.

1. Default judgment. Under CPR r 12.11(1), the pleaded factual allegations were accepted as true. The court then determined, as a matter of legal judgment, what remedy those allegations justified. The Claimant’s statement of case had to be considered as a whole, including the Claim Form, Particulars of Claim and prayer.
2. Specified sums. The CPR’s reference to “a specified amount of money” was to be construed in its own procedural context. The categories pleaded as money received by, or advanced to, the Defendant were claims for fixed sums. Default judgment was therefore entered for £54,231 under category c, £104,780.28 under category b, and £264.49 under category d, in each case with interest to date.
3. Claims requiring assessment. Category e involved damages for breach of duty or an account of secret profits. The amount of loss or profit was not pleaded. It could not therefore attract judgment for a specified sum. Category a likewise required assessment. The alleged client payments created a liability to repay, but the receipt of those payments by the Claimant substantially counterbalanced that liability. In any event, the pleading did not unequivocally state how much the Defendant had diverted.
4. Equitable compensation. Damages and equitable compensation were distinct remedies. Equitable compensation valued the defendant’s gain, or the value of property that could not be restored, rather than simply valuing the claimant’s loss.
5. Assessment and causation. At the assessment under categories a and e, the Defendant could challenge causation for the particular losses claimed. The general allegation that the breaches caused loss did not settle causation for every head of loss. Such a challenge was consistent with the default judgment.