Momenta Holdings (PPI) Limited v Cheval Legal Limited & Ors

On an assessment following default judgment, pleaded allegations operate as a proxy for the judgment establishing liability, but causation must still be proved for each head of loss. Where the alleged beneficial outcome depends on what other parties or a court would have done, loss is assessed as a lost chance. A discount is unnecessary only where success is a racing certainty, conventionally assessed at 90 per cent or more. Direct losses caused by the breach, such as adverse costs and client compensation, may be recoverable in full. Expenditure paid for services never provided may be recovered as wasted expenditure or for failure of consideration. A claim for future potential liabilities may be adjourned with permission to restore.

Momenta outsourced the conduct of Plevin payment-protection-insurance claims to Cheval, a litigation entity. Cheval obtained default judgment on its counterclaim for breach of contractual duties, including duties as to skill and care, with damages and interest to be assessed. Momenta entered voluntary liquidation and did not participate in the assessment hearing.

Cheval claimed losses across grouped underlying claims, including claims struck out or abandoned because of procedural failures, adverse costs, client compensation, funding and court fees, acquisition costs, administration fees and potential future professional-negligence liabilities. The court had to determine the proper causation methodology, the scope of the pleaded counterclaim and the amount recoverable under each group.

1. Assessment after default judgment. The pleaded Counterclaim stood as a proxy for a judgment establishing Momenta’s liability, but Cheval still had to establish causation for each head of loss. The court applied the approach stated in Celebrity Speakers Limited v Daniel [2023] EWHC 2158 (KB) at [38], [40] and [41].
2. Loss of a chance. Where recovery depended on what the opposing parties in the underlying claims or the County Court would have done, the loss was to be assessed as a lost chance. This followed the distinction stated in Perry v Raleys [2019] UKSC 5 at [20]: matters depending on the claimant’s own conduct are proved on the balance of probabilities, while outcomes depending on others are assessed as chances.
3. Discount for risk of failure. Although it was argued that the underlying claims were certain to succeed, the evidence included rogue claims and claims failing the funding eligibility criteria. The court assessed the average chance of failure at 27.5 per cent and the lost chance of recovering relevant costs at 72.5 per cent. The racing-certainty principle in Assetco plc v Grant Thornton UK LLP [2020] EWCA Civ at [206] did not apply.
4. Pleading of ineligible claims. The Counterclaim pleaded negligent management and failure to issue claims, but did not sufficiently allege that Momenta had wrongly approved, issued or run ineligible claims. The court therefore excluded losses based solely on that unpleaded case.
5. Heads of loss. Funding, counsel fees, court fees, acquisition costs and administration fees were discounted by 27.5 per cent where recovery depended on successful underlying claims. Adverse costs and compensation paid to clients were recoverable in full because they were direct consequences of the breaches. Payments for thousands of claims never issued were recoverable in full as wasted expenditure or repayment for failure of consideration. Renewal fees were reduced by 50 per cent because they reduced the profit otherwise shared equally between the parties.
6. Disposition. Judgment was entered for Cheval against Momenta on the counterclaim for £4,192,764.46. The Group 7 claim was adjourned with permission to restore. Momenta was ordered to pay Cheval’s counterclaim costs, to be assessed if not agreed.

First-instance disposal and assessment hearing. No appellate history is stated in the judgment.