Merito Financial Services Ltd v Yelloly

The claimant applied for default judgment under CPR r 12.11(1) in respect of a multi-headed claim that the defendant, a director of the claimant, had committed breaches of fiduciary duty, breach of trust and related wrongful acts between August 2011 and August 2014. The court analysed whether the particulars of claim pleaded specified sums such as to permit a default judgment for a specified amount, or whether the claims required further assessment of causation and quantum.

The judge categorised the pleaded heads and held that claims based on an unauthorised director's loan and claims pleaded as money had and received/unjust enrichment were pleaded in specified sums and supported default judgment for those sums (with interest). By contrast, claims that the defendant fabricated unauthorised client transactions and secreted commissions, and claims for accounts or equitable compensation in respect of diverted business, did not plead an unequivocal specified sum and therefore required an assessment of damages or equitable compensation (including issues of causation and quantum) at a further hearing.

This was an application by the claimant for default judgment after the defendant's defence was struck out for failure to comply with directions. The claim arose from the defendant's conduct as a director and comprised six heads: damages/equitable compensation for breach of fiduciary duty/trust; an account of sums caused to be paid or received in breach; an order for payment following an account; restitution/unjust enrichment; repayment of an unauthorised director's loan; and interest. The claimant sought judgment for specified sums in its particulars; the defendant accepted liability in principle but disputed that all heads were sufficiently liquidated to permit a money judgment without a further hearing to determine causation and quantum.

Issues:

• Whether the particulars of claim adopted together pleaded "a specified amount of money" for the purposes of CPR r 12.11 so as to permit default judgment for specified sums;
• Which pleaded heads were liquidated and which required an assessment of damages, equitable compensation or an account; and
• Whether the defendant could challenge causation and quantum at any damages assessment notwithstanding the default judgment on liability.

Reasoning: The court reviewed authorities on default and summary judgment, including cases decided under the former RSC and under the CPR, and explained that a pleaded claim can be a claim for a specified sum if the particulars clearly and unequivocally quantify the sums claimed. The judge analysed each pleaded category: (a) unauthorised client transactions causing the claimant to incur liabilities to clients; (b) misappropriations/benefits received; (c) an unauthorised loan to the director; (d) false expense claims; and (e) diversion of business/secret profits. The judge held that the unauthorised loan (category c) and the claims pleaded as money had and received/unjust enrichment (categories b and d) were pleaded as specified sums and entitled the claimant to default judgment for those sums (with interest). By contrast, the claims based on client transactions causing liability to clients (category a) and the diversion/secret profit and account claims (category e) were not pleaded as specified liquidated sums and therefore default judgment could only be entered that damages or equitable compensation be assessed (and an account taken), leaving causation and quantum open at the assessment.

The judge therefore granted default judgment in part: specified sums for categories b, c and d, and judgment for damages or equitable compensation to be assessed in respect of categories a and e.

Default judgment was granted in part. The court entered judgment for specified money sums (with interest) in respect of the unauthorised loan and the pleaded money-had-and-received/unjust enrichment categories (categories b, c and d). For the allegations of unauthorised client transactions and diversion/secret profits (categories a and e) the court ordered judgment that damages or equitable compensation and/or an account be assessed, because those heads were not pleaded as unequivocal specified sums; issues of causation and quantum remain open for determination at the assessment hearing.