Master Matthews :
Introduction
- This is my judgment on an application by notice dated 4 February 2016 by the Claimant for default judgment against the Defendant. The application notice asks for an order "that, pursuant to CPR 12.4(2)(a), judgment be entered against the Defendant for a sum to be assessed by the Court and directions for the assessment of quantum". But the application has moved on, as I will explain. At the hearing on 11 July 2016 Max Mallin of counsel appeared for the Claimant and Richard Devereux-Cooke of counsel appeared for the Defendant. In addition to the usual skeleton argument in advance, after the hearing they each produced a further written submission a week later, on 18 July 2016. I am grateful to both for their submissions, written and oral.
- The application is made in a claim begun by Claim Form, with Particulars of Claim attached, issued on 16 January 2015. The Claim Form claims (1) damages and/or equitable compensation for breach of fiduciary duty and/or trust, (2) an account of all sums which the Defendant has caused the Claimant to pay and/or all sums which he had received in breach of fiduciary duty and/or trust, (3) an order for payment of all sums for which the Defendant is found liable upon the taking of the account, (4) further or alternatively restitution of all sums which the Defendant has received or is deemed to have received and by which he has been unjustly enriched, (5) restitution of sums advanced to the Defendant by way of unauthorised director's loan account, and (6) interest. All of these claims are alleged to arise from the Defendant's acts and omissions as a director of the Claimant between August 2011 and August 2014.
Procedure
- The Defendant originally served a detailed Defence in March 2015. The usual Form 149C requiring the parties to do certain things in preparation for a case management conference was sent out by the Court on 2 November 2015. On 3 December 2015 the Claimant issued an application notice for an 'unless' order requiring the Defendant to comply with the directions by 11 December or else his Defence would be struck out. On 18 December 2015 I made such an 'unless' order requiring the Defendant to file and serve required documents by 4 January 2016. The Defendant having failed to do so, the Defence was automatically struck out. The Claimant issued the present application for default judgment on 4 February 2016. It was listed for hearing on 7 March 2016.
- It was only on 2 March 2016 that the Defendant made an application by notice for relief from sanctions. In the light of that pending application, on 7 March 2016 I adjourned the Claimant's application due to be heard that day and gave directions for the hearing of the Defendant's application for relief. This was heard by Deputy Master Kaye on 6 June 2016, when it was dismissed. The dismissal has not been appealed.
- As a result, the Defendant accepts that he has a liability towards the Claimant, but says that there needs to be a hearing to consider causation and quantum issues before he can be ordered to pay a specific sum to the Claimant. On the other hand, the Claimant, notwithstanding the terms of the application notice of 4 February 2016, which contemplated an assessment of damages, now says that there is no need for a further hearing. This, it says, is because it is entitled to an order now for payment of the sums specified in the Particulars of Claim.
- The Claimant relies on CPR r 12.11(1), which provides:
"Where the Claimant makes an application for a default judgment, judgment shall be such judgment as it appears to the court the Claimant is entitled to on his statement of case."
This means that the court takes the factual allegations in the Claim Form and Particulars of Claim (and any other relevant statements of case) to be true, and then makes a judgment as to what, as a matter of law, the Claimant is entitled to. This is not the exercise of any discretion by the court. What the facts alleged justify in legal terms is a matter of law, and therefore the decision is one of legal judgment. It is therefore necessary to consider carefully the allegations in the statements of case, particularly the Particulars of Claim.
The allegations in the Particulars of Claim
- First of all, there are allegations that the Claimant was established in 2011 and operates a financial services business regulated by the Financial Conduct Authority. The Defendant was a director from August 2011 to August 2014. The Claimant was appointed as a representative to carry on business as financial advisors by TenetConnect Ltd, a company authorised to carry on certain investment, mortgage and non-investment insurance mediation work in the UK.
- Next it is alleged that the Defendant as a director owed fiduciary duties to the Claimant, including those under the Companies Act 2006 ss 171-176, and by reason of his control of the Claimant's assets and affairs was a constructive trustee of the Claimant's assets. It is then further alleged that, in breach of duty, the Defendant has
a. Dishonestly invented unauthorised transactions with clients resulting in the wrongful payment of commission of some £104,365.02 from client monies held by the Claimant;
b. Misappropriated monies from the Claimant in the total sum of £158,675.28;
c. Withdrawn various sums amounting to £54,231 as an unauthorised and unlawful loan (but all except £336 of this is subsumed within the sum of £158,675.28 under category b.);
d. Submitted false claims for business expenses in the sum of £264.49;
e. Secretly diverted business away from the Claimant, for which he has received payment.
- As to a., the Defendant is alleged (at para 13) to have secretly and dishonestly executed transactions on behalf of the Claimant's clients but without their knowledge or approval, or that of the Claimant, with the aim of securing fees and charges for the Claimant, "which [the Defendant] then diverted for his own benefit", thereby exposing the Claimant to liability to pay back those sums to the Claimant's clients, "after the Defendant had diverted part of the sums originally received from the clients". The three transactions pleaded concerned a Mr and Mrs Sweeney, a Mr Gooden and a Mr Ketley.
- As to Mr and Mrs Sweeney, it is alleged (at paras 14-18) that the Defendant forged documents by which Mr and Mrs Sweeney appeared to agree to invest £1.41 million in a particular fund, resulting in a commission payable to and received by the Claimant of £79,655.02. As to Mr Gooden, it is alleged (at paras 19-21) that the Defendant forged his signature on a document apparently creating an entitlement for the Claimant to charge the sum of £12,210, for which the Defendant procured the Claimant to raise an invoice to the trustee of Mr Gooden's SIPP, "which was paid out of Mr Gooden's SIPP fund". As to Mr Ketley, it is alleged (at paras 22-24) that the Defendant, having confirmed to Mr Ketley at his request that there would be no charge or commission for rolling over a maturing investment, dishonestly inserted a provision for charge amounting to £12,500 in a document already signed by Mr Ketley, and Mr Ketley's investment plan was debited with this sum.
- It is then alleged (at paras 25-27) that these unauthorised acts caused the Claimant to be liable to repay the sums paid by their clients to them, and that the Claimant "has agreed" to do so. It is not alleged that the money has actually been repaid. Nor is there any allegation as to how much exactly of the sums concerned was diverted to the Defendant's own use or how much (if anything) has been recovered from him or anyone else to whom it was paid. The allegations in each of these three cases amount to this, that the Defendant in breach of duty owed to the Claimant has caused the Claimant to incur a liability to pay sums to its own clients, which it has since agreed to do.
- As to b., it is alleged (at paras 28-50) that the Defendant in breach of duty or breach of trust procured the Claimant to make payments amounting in total to £158,675.28, without the knowledge or approval of the Claimant, and not in the ordinary course of its business This includes £53,895 by way of an unauthorised loan to the Defendant by the Claimant. There are detailed allegations as to how these figures break down.
- As to c., it is alleged (at paras 50-53) that the Defendant procured the debiting of various payments by the Claimant to third parties to an (unlawful) loan account between them, in the total sum of £54, 231. Of this, £53,895 is included in the pleadings under category b. The remaining £336 was a payment by the Claimant to Jerroms Accountants.
- As to d., it is alleged (at paras 54-55) that the Defendant in breach of duty and in breach of trust submitted receipts "falsely to support expenses claims in order to extract funds from the Claimant to pay for items of personal expenditure". The only three allegations pleaded concern payments of £70, £151.49, and £43 to various suppliers. It is alleged that the Defendant has received these sums.
- As to e., it is alleged (at paras 56-64) that in breach of duty the Defendant has diverted clients to make investments through other entities "thereby depriving the Claimant of the opportunity to earn commission or fees", has caused the Claimant to breach its agreement with TenetConnect Ltd "by directing clients to make investments with unauthorised entities", and has without the Claimant's authority earned commissions for himself "for arranging investments for clients other than via the Claimant". Two such cases are particularised, although neither particularises the value of the loss said to flow from the Defendant's actions.
- There follows a general allegation (at para 65) that "the Defendant's breaches of fiduciary duty and/or breach of trust and/or breach of duties under the 2006 Act" have caused loss and damage to the Claimant, giving rise to an obligation on the Defendant to compensate the Claimant "in damages and/or equitable compensation". There are alternative allegations that "the Defendant is liable to account in equity to the Claimant" (para 66), or "is liable to give restitution to the Claimant for the benefit he has received" on account of the Defendant's unjust enrichment (para 67), in respect of the various transactions pleaded. There is also an allegation (at para 68) that the Defendant is obliged under s 213 of the 2006 Act "to give restitution in the amount of the sums loaned without the Claimant's approval". This is a reference back to the sum of £54,231, included under head c. above.
The parties' positions
- In the Claimant's skeleton argument for the hearing (called a "Note") the Claimant puts the argument this way:
"12.2 The sums (and thereby the total sum) in respect of which [the Claimant] seeks judgment are clearly identified and claimed in the Particulars of Claim. The quantum of each component element of the claim is pleaded in the Particulars of Claim (as identified in the Schedule [to the Note] with cross-references to the relevant paragraphs of the Particulars of Claim) and causation of loss is pleaded in paragraph 65 of the Particulars of Claim.
12.3 Any challenge to causation and/or quantum would necessarily, therefore, be an impermissible challenge to the judgment on liability ordered on the basis set out in the Particulars of Claim."
I should say that of course the Schedule to the Note, whilst a helpful tool, is not a statement of case for the purposes of the CPR, including rule 12.11, and I do not treat it as such.
- In the Defendant's skeleton argument, on the other hand, the Defendant points out that the Particulars of Claim in paragraph 2 of the Prayer seek "an account of all sums", and that by the application notice of 4 February 2016 the Claimant sought judgment in default and "directions for an assessment of quantum". There is no separate witness evidence dealing with quantum of loss by the Claimant. The Defendant claims to be entitled to challenge both causation and quantum of the Claimant's claim, as long as the challenge does not involve disputing liability. There must therefore be a further hearing to assess damages at which the Claimant will need to present evidence.
- I simply make one comment here by the way on the question of evidence. Before the CPR there was no provision for statements of case to be treated as evidence of acts alleged. Now of course all statements of case must be verified by a statement of truth (CPR, rule 22.1(1)(a)), and accordingly may be relied on, at hearings other than a trial, as evidence of the facts stated: CPR rule 32.6(2)(a). So if the statements of case provided the relevant evidence of quantum, or anything else, and it was cogent enough, there might be no need for any 'separate' witness evidence.
The caselaw
- I was referred at the hearing to the comparatively recent decision of Mr Simon Picken QC, sitting as a deputy judge of the Queen's Bench Division of the High Court, in Symes v St George's Healthcare NHS Trust [2014] EWHC 2505 (QB). That was a claim of clinical negligence by a patient against a hospital in respect of its treatment of him. The claim included detailed particulars of causation and loss. The defendant did not acknowledge service and judgment was entered for the claimant on liability for damages to be assessed.
- Before the master there was an application to set aside the default judgment but this failed. On the appeal to the deputy judge the only live issue was whether the defendant was precluded by the default judgment from contesting causation issues that formed part of the 'liability case' as opposed to the 'quantum case'. At paragraphs [28] to [69] of this decision, the deputy judge sets out and analyses the relevant caselaw, which he then applies to the facts of that case.
- The cases reviewed included New Brunswick Railway Co v British & French Trust Corporation [1939] AC 1, Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993, Maes Finance Ltd v A Phillips & Co, The Times, 25 March 1997, John Turner v PE Toleman, unreported, 15 January 1999, CA, Lunnun v Singh [1999] CPLR 587, CA, Pugh v Cantor Fitzgerald International [2001] CP Rep 74, CA, Enron (Thrace) Exploration and Production BV v Clapp [2005] EWHC 401 (Comm), Carbopego-Abastecimento de Combustveis SA v AMCI Export Corporation [2006] EWHC 72 (Comm), Strachan v The Gleaner Co Ltd [2005] 1 WLR 3204, PC, New Century Media Ltd v Makhlay [2013] EWHC 3556 (QB).
- The deputy judge's conclusion was that the decision of the Court of Appeal in the pre-CPR case of Lunnun v Singh [1999] CPLR 587 was still good law and should be followed. In that case the Claimant sought damages for loss caused by a leakage of water and sewage from a neighbouring property. The Claimant obtained a judgment in default of intention to defend, for damages to be assessed. When the Claimant served a schedule of damage, the Defendant responded by counter-notice, indicating that not only quantum but also causation of the losses claimed were in issue. The judge held that the Defendant could not contest causation, because that was settled by the default judgment, and the Defendant appealed.
- The appeal was allowed. Jonathan Parker J (with whom Peter Gibson and Clarke LJJ agreed, though each also added some words of his own) said:
"The default judgment is conclusive on the issue of the liability of the defendants as pleaded in the Statement of Claim. The Statement of Claim pleads that an unspecified quantity of effluent escaped from the defendants' sewer into the basement of the claimant's property. In addition it is, Mr Exall accepts, inherent in the default judgment that the defendants must be liable for some damage, resulting therefrom. But that, in my judgment, is the full extent of the issues which were concluded or settled by the default judgment. It follows, in my judgment, that in the instant case all questions going to quantification, including the question of causation in relation to the particular heads of loss claimed by the claimant, remain open to the defendants at the damages hearing."
- Clarke LJ said that on the assessment of the damages the defendant might not take any point which was inconsistent with the liability alleged in the statement of claim, but subject to that might take any point which was relevant to the assessment of damages, including contributory negligence, failure to take reasonable steps to mitigate, and causation to the extent that the defendant's acts were not causative of any particular items of alleged loss. And Peter Gibson LJ said that
"the true principle is that on an assessment of damages any point which goes to quantification of the damage can be raised by the defendant, provided that it is not inconsistent with any issue settled by the judgment".
- Each of the three judges referred to the earlier decision of the Court of Appeal in Turner v Toleman, unreported, 15 January 1999, with approval. That was a case of permission to appeal from a decision on the assessment of damages in a personal injury claim. The plaintiff was involved in a road traffic accident which he alleged was the fault of the defendant. He claimed to have suffered not only a whiplash injury (which in fact was cured after a few months) but also a shoulder injury, developing into a frozen shoulder, which prevented him from working, resulting in considerable financial loss. He had obtained summary judgment, for damages to be assessed. At the assessment he argued that the summary judgment decided not just liability but also all questions of causation, and, in particular whether the frozen shoulder could be attributed to the accident.
- Simon Brown LJ (with whom Wilson J simply agreed) described this as "a startling proposition". He said:
"No doubt defendants must acknowledge some injury to a plaintiff before judgment could properly be entered against them, otherwise the cause of action is not complete. But, of course, here they were. That is a far cry from saying that they are necessarily liable for each and every aspect of loss and injury which the plaintiff in his pleaded claim asserts he suffered. Indeed, their defence expressly denied it. That has everything to do with quantification and nothing to do with basic liability."
- In Pugh v Cantor Fitzgerald International [2001] CP Rep 74, CA, a case decided after the introduction of the CPR, Ward LJ (with whom Evans-Lombe J agreed) referred to the principles as stated by the judges in Lunnon, and in particular to that cited above from the judgment of Peter Gibson LJ, and went on to say (at 28):
"In my judgment that view of the true principle survives the introduction of the new Common Procedure Rules."
As already stated, the deputy judge in the Symes case took the same view.
Transition from RSC to CPR
- As is clear from the judgment of the Court of Appeal in Pugh and the deputy judge's judgment in Symes, the relevant authorities straddle the period covered by both the old procedural rules, the Rules of the Supreme Court, which applied until 1999, and the new Civil Procedure Rules, which have applied since that date. Under the RSC, a distinction was drawn for the purposes of default judgments between claims for a liquidated demand, and claims for unliquidated damages. In the former case, in the state of the rules as they were in 1999, the plaintiff could enter a default judgment for the sum claimed and costs (Ord 13, r 1). In the latter case, the plaintiff could enter only an interlocutory judgment for damages to be assessed and costs (Ord 13, r 2).
- This distinction went back at least as far as the Common Law Procedure Act 1852. That Act provided that the plaintiff in a claim for a debt or a liquidated demand in money arising on a contract might make a special indorsement of the particulars of claim on the writ. After the Judicature Acts 1873-75 and the new rules for the unified High Court came into force, an indorsement on the writ was required in every case, but the distinction remained between a special and a general indorsement. In Knight v Abbott, Page & Co (1876) 10 QBD 11, for example, it was held that a claim for £50 under a contract to repurchase company shares was not a claim for a debt or a liquidated demand in money which could have been the subject of a special indorsement.
- In Lagos v Grunwaldt [1910] 1 KB 41, the Court of Appeal decided that a claim by a solicitor for professional charges under a retainer, essentially a claim for quantum meruit, amounted to a liquidated demand which could be specially indorsed on a writ so as to give rise to the possibility of seeking summary judgment under the then Order XIV. Cozens-Hardy MR said (at 45-46):
"[A]ll that is required by Order III, r 6, is that the plaintiff should be seeking to recover for a debt or liquidated demand of money. I think this is within the meaning of that rule. It is a liquidated demand for money, £1469, or something which could have been claimed under the old indebitatus count."
- Farwell LJ explained this in more detail (at 47-48):
"The first [objection by the defendant] is that Order III., r. 6, does not apply, because this is not a debt or liquidated demand arising under a contract. It is a claim on contract for quantum meruit. In my opinion that is within the rule. I think the words 'debt or liquidated demand' point to the old division of common law actions to be found in Bullen and Leake, 2nd ed., p. 28. The old indebitatus counts
'which have from time to time been rendered more and more concise are designated with little difference of meaning by the terms indebitatus counts, money counts or common counts; the expression common counts or common indebitatus counts being often used to designate those of most frequent recurrence, viz., where the debt is for goods sold and delivered, goods bargained and sold, work done, money lent, money paid, money received, interest, and upon accounts stated; and the expression money counts being sometimes used to particularize those for money lent, money paid, and money received. The most appropriate name seems to be indebitatus counts.'
And the learned authors go on to say,
'there were also formerly in use counts known as quantum meruit and quantum valebat counts, which were adopted where there was no fixed price for work done or goods sold, &c. These counts, however, have fallen into disuse, and have been superseded by the general application of the indebitatus counts.'
In my opinion that is the true view; everything that could be sued for under those counts comes within the description of debt or liquidated demand."
- Under the CPR the old terms liquidated demand and unliquidated damages are no longer used. Instead the rule (CPR r 12.4(1)) refers to claims for "(a) a specified amount of money", and "(b) an amount of money to be decided by the court". The CPR constitute, as rule 1.1(1) makes clear, "a new procedural code" to promote a new "overriding objective". The notes to the CPR in Civil Procedure say, at para 12.4.3, that the phrase 'a specified amount of money' clearly "covers the case where the claim is for a debt". I respectfully agree.
- But the notes also go on to say (later in the same paragraph):
"However, it appears that [the phrase] covers any case where the claimant puts a figure on the amount of their [sic] claim whether it is debt, damages or any other sum. If the claimant chooses to put a value on their claim in a specified sum, the claimant can request a default judgment in that sum."
- No authority is cited in support of this proposition. Yet in my judgment the new language used in the CPR must at a minimum mean that it is open to the court to construe the new terms in their own context, without the need to go back to the cases on the old RSC. As Cooke J said in Nomura International plc v Granada Group Ltd, [2007] EWHC 642 (Comm), [25],
"It is clear from numerous authorities that the CPR represents a departure from the Rules of Court previously in existence and that detailed reference to decisions on particular provisions of the RSC are of little value in interpreting provisions of the CPR where the wording and substance of a particular rule is different."
Discussion
- In my judgment the notion of a claim for "a specified amount of money" is prima facie apt to cover the case of a claimant who in his particulars of claim alleges, with full particularity, that the defendant negligently caused him pain and suffering to the value of £X, loss of earnings in the sum of £Y, and damage to property in the sum of £Z, and then claims the specific sum of £(X+Y+Z). Of course, in the usual case of a road traffic or clinical negligence claim, it would be unusual that the claimant was in a position to particularise all the losses caused in such a precise fashion at so early a stage. But I am testing the position, and the present is not a case of a road traffic or clinical negligence claim.
- Moreover the notes to Civil Procedure themselves say (still at para 12.4.3):
"One example, where the new rule is proving useful in practice, is a claim for the cost of repairs arising out of a road traffic accident where no personal injury ensued. Claiming the cost of the repairs and any ancillary claim, such as hire-car charges as 'a specified sum [sic] of money' enables a claimant to obtain a default judgment for that sum thus avoiding a 'disposal hearing' held in accordance with the Practice Direction supplementing Pt 26 para 12.8. It is the better practice to claim a specified sum in such cases."
- As against that, however, I note that in Lunnun v Singh Clarke LJ said this:
"[I]nsofar as the statement of claim makes any allegations of loss and causation (which it only does to a very limited extent in the particulars at paragraph (6) which have been quoted by Mr Justice Jonathan Parker) it is clear from Turner v Toleman that it is open to the defendants to challenge them on the assessment."
It is not easy to assess the significance of this statement. Neither of the other two judges made the same point, which also appears strictly to be obiter on the facts of the case.
- Moreover, in the case on which Clarke LJ relies, Turner v Toleman, what Simon Brown LJ actually said (in a passage which I have already quoted) was put in negative rather than positive terms:
"That is a far cry from saying that they are necessarily liable for each and every aspect of loss and injury which the plaintiff in his pleaded claim asserts he suffered."
Even taken at its highest, this statement is concerned with causation issues, not with valuation of particular loss. I conclude that the statement of Clarke LJ in Lunnun in a case decided under the old rules does not prevent a claim valuing loss and damage caused by breach of duty at a particular sum from being "a claim for a specified amount of money" for the purposes of the current rules on default judgments.
Examination of the allegations of the Claimant
- The acts complained of in the present case are the acts of a company director vis-à-vis the company itself. So, unlike several of the cases discussed by the deputy judge in the Symes case, which were cases of negligence, the causes of action relied on here are breach of fiduciary duty, breach of trust, and breach of statutory duty (ie under the Companies Act 2006), as well as unjust enrichment/restitution.
- It is not necessary for the Claimant actually to prove his case. The nature of a default judgment is that his allegations are unchallenged, and therefore must be accepted as true for the purposes of the judgment: CPR 12.11. It is therefore necessary to examine the particular allegations made, to see if they amount to a claim for "a specified amount of money", or on the other hand an allegation of a breach of some duty which requires loss and quantum to be assessed before the court can award damages or equitable compensation.
- There are three aspects to this enquiry. One is how the claim is formulated in summary terms in the Claim Form. The second is how it is set out in detail in the body of the particulars of claim. The third is what remedy is or remedies are sought in the prayer at the end of the particulars of claim. Each of these must be considered. I have already set out the substance of the claims in the Claim Form (see para 2 above). In my judgment it is not necessary that the prayer itself should contain an express claim to a specific sum of money, as long as the statements of case taken together do so. It is simply a question of what the Claimant's "statement of case" appears to the court to justify.
- In carrying out this exercise, I bear in mind that, by the time of the hearing, the focus of the opposition on behalf of the Defendant to the application by the Claimant for a default judgment for a money sum was very much on category a. There was not much real opposition in relation to the other categories. Indeed, my note of the hearing records Mr Devereux-Cooke for the Defendant as saying that, although the Claimant was not entitled to a money judgment in respect of category a., the Claimant "may be entitled to the rest". Certainly, the Defendant's post-hearing written submission was restricted to the claim in category a.
Category c.
- In my judgment the claims asserted in the Particulars of Claim under category c. above are to a loan (albeit unauthorised) from the Claimant to the Defendant. In the prayer, the claimant asks for "Restitution of the sums advanced to the Defendant as the Unlawful Loan." In substance it is the same as in the Claim Form. "Restitution" is not the right word, but it would be excessively technical to treat that as anything but a claim to the repayment of the loan. On the basis of the facts alleged, judgment is for a specified amount of money. Accordingly there can be default judgment for that sum, ie £54,231 and interest to date.
Categories b and d.
- As to categories b. (excluding c.) and d., the claims are also to specified sums, but rather as money had and received, or in old-fashioned terms for indebitatus assumpsit, rather than as compensation for wrongs committed. In the prayer, the Claimant asks for "restitution of all sums which the Defendant has received or is deemed to have received and by which he is unjustly enriched". The wording in the Claim Form is more or less the same.
- As Farwell LJ made clear in the citation from Lagos v Grunwaldt [1910] 1 KB 41, above, many of the different causes of action now subsumed within the theory of unjust enrichment/restitution were historically grouped under the old heading indebitatus assumpsit. A cause of action which gave rise to what was called an indebitatus assumpsit, if proved, resulted in a judgment for a money sum, and similarly therefore, in the case of a default judgment. Many of these causes of action were pleaded as "money had and received to the use of the plaintiff" or "money paid at the request of the defendant".
- In my judgment, if before the development of the unified theory of restitution a particular cause of action would have justified a default judgment for a sum of money rather than a judgment for damages to be assessed, it should and does not cease to justify that judgment merely because a group of academic lawyers (and, to a more limited extent, judges) have regrouped such claims under the banner of a different theory, namely unjust enrichment, which may include claims which have to be assessed. That would be the worst kind of academic interventionism. Litigants' rights and remedies must not depend on the state of academic discourse from day to day. And any cause of action giving rise to a liquidated demand under the RSC will now give rise to a claim for "a specified amount of money", because this expression is at least as wide, and probably wider.
- Accordingly, the default judgment in relation to categories b. and d. is also for a specified amount of money, ie £104,780.28 for category b. (ie £158,675.28 less £53,895), and £264.49 for category d., in each case with interest to date.
Category e.
- As to category e., on the other hand, the claims asserted are either to damages for breach of duty or to an account for secret profits. Moreover, there is no allegation in the statement of case as to either the actual loss caused or the particular profit made. In the prayer, the claimant asks for
"1. Damages and or equitable compensation for breach of fiduciary duty and/or trust.
2. An account of all sums which the Defendant has caused the Claimant to pay and/or all sums which the Defendant has received in breach of fiduciary duty and trust.
3. An order for payment of all sums for which the Defendant is found liable upon the taking of the account."
These mirror the first three heads set out in the Claim Form.
- Here there is no claim to a specified amount or amounts of money. So far as it is for damages for breach of duty, the amount of those damages has to be ascertained before it can be ordered to be paid, at least unless it is liquidated in the particulars. Here it is not. And the whole point of an account is to hold a further proceeding for the express purpose of ascertaining what (if anything) is due, because at that stage you simply do not know and have no basis for an allegation of a specific amount. If you could liquidate it, you would not be claiming an account at all. The default judgment in respect of this category (e.) therefore cannot be for a specified amount of money. Given that the claim is either for damages to be assessed or an account, in the alternative, the default judgment must be for one of these, as the claimant chooses. It cannot be for a sum of money.
Category a.
- That leaves category a., invented unauthorised transactions with clients resulting in the wrongful payment of commission. The claim alleged in the particulars of claim is that the Defendant caused the Claimant to incur a liability to its own clients to repay specified sums of money to those clients. This could fall under two heads. In the prayer paragraph 1 is "Damages and/or equitable compensation for breach of fiduciary duty and/or trust", and paragraph 2 (so far as material) is "An account of all sums which the Defendant has caused the Claimant to pay … in breach of fiduciary duty and/or trust"). The Claim Form is in similar terms. I have already dealt with the claim to an account, and decided that so far as a claim falls under that head it cannot be treated as a claim for a specified amount of money for the purposes of default judgment. The same reasoning applies here.
- So far as the claim for damages or equitable compensation is concerned, this again might suggest that it is not a claim for "a specified amount of money". However, as I have said, there seems to be nothing wrong with a claim for damages being liquidated in the particulars of claim so as to be for a specified sum, as indeed the notes to Civil Procedure already referred to suggest. The question for me, therefore, is whether any such claim has been so liquidated.
- By way of an introductory aside, I mention the alternative formulation of the remedy in the prayer (and in the Claim Form) of "Damages and/or equitable compensation for breach of fiduciary duty and/or trust". Except where awarded in lieu of an equitable remedy such as injunction, and possibly also where there is a breach of an equitable duty of care, damages are a common law remedy. Equitable compensation is, as its name suggests, an equitable one. But the latter is not an equitable version of the former. As Sir Peter Millett once wrote extra-judicially,
"It is misleading … to speak of equitable compensation for breach of fiduciary duty as if it were common law damages masquerading under a fancy name" ((1998) 114 LQR 214, 225).
- Whereas the common law orders damages as a secondary remedy for breach of a primary obligation, equity generally requires a primary remedy for the same breach, ie that the thing that ought to be done actually be done. The trustee must account for what he has received, and if he has taken something from the trust fund in breach of trust he must restore it. For all practical purposes in a case like the present, equitable compensation represents the value placed on a thing which cannot be restored in specie. It therefore does not value a loss to the claimant (like damages), but instead a gain by (although often simply imputed to) the defendant.
- This means that the expression "Damages and/or equitable compensation" must be approached with caution. These two concepts are not equivalents of each other, but operate in quite different ways, in different areas of the law. Be that as it may, the claim is made to a remedy in respect of unauthorised actions by the Defendant causing liability on the part of the Claimant to its customers in stated amounts: £79,655.02 to Mr and Mrs Sweeney, £12,210 to Mr Gooden and £12,500 to Mr Ketley.
- In Bishopsgate Investment Management Limited (in liquidation) v Maxwell (No 2) [1993] BCLC 814, the Court of Appeal held that a company (acting as trustee of pension schemes) whose director had improperly signed forms of transfer of company assets to third parties was entitled to summary judgment against the director for the value of the assets. It was argued for the director that there was a triable issue on causation, and that an inquiry as to what if any loss had been caused should have been ordered. But Hoffmann LJ (with whom Ralph Gibson and Leggatt LJJ agreed) held that in the case of breach of fiduciary duty the improper transfer caused the loss and the necessary causal connection was established. (This was recently accepted as still representing the law in Madoff Securities International Ltd (in liquidation) v Raven [2013] EWHC 3147, [291], although on the facts it was not necessary to apply it.)
- As to the value of the loss, Hoffmann LJ said:
"[Counsel for the director] says it does not follow that the company's loss would be the full value of the shares. It might be able to get something back from [the third party]. But the company held the shares as trustees for the pension funds and its liability as trustee was to restore the fund. Prima facie, therefore, its loss was its liability to make good the value of its shares…"
- Maxwell was a case of summary judgment, not default judgment, but I do not think that that in itself matters in the context of this application. On the face of it, the present case may be thought if anything a fortiori. If the loss of the company in Maxwell was its liability to restore the fund dissipated by the director, the loss of the Claimant must surely be its liability to repay sums to its clients, caused by the wrongdoing of the Defendant.
- Mr Devereux-Cooke, for the Defendant, challenges this. At the hearing he accepted that the Defendant caused the Claimant to become liable to its own clients, but he queried what the Claimant might be entitled to. He submitted that the liability to repay the clients was cancelled out by the receipt of money from the clients. There was no clear allegation that the sums received by the Claimant were then diverted to the Defendant.
- As to the latter point, Mr Mallin for the Claimant argued that para 13 of the particulars was clear that the Defendant was alleged to have diverted the monies paid to the Claimant to himself. But there is a tension in that paragraph as to whether all or only part of the funds received from the clients were so diverted: see para 9 above.
- In my judgment the liability of the Defendant crystallised at the moment that he caused the clients to pay fees and charges to the Claimant so that it came under a liability to pay back the sums concerned. The problem for the Claimant is that, unlike the Maxwell case, where the company's assets were transferred away from the company, here the company received fees and charges from the clients (to which it was in reality not entitled) and it was that receipt that caused the liability to arise to repay.
- The real complaint of the Claimant is not that it had to repay those fees and charges. If that were all there were, the Claimant would have lost nothing. Instead, however, the complaint is that (as it alleges) the Defendant diverted the fees and charges (or part of them) so that the Claimant has ended up with a liability to pay back money which on its case it no longer has. In my view that is a different kind of claim, perhaps a part of category b., or perhaps a claim based on misrepresentation by the Defendant to the Claimant, or even simple mistake by the Claimant.
- In my judgment, the Claimant cannot make a claim based on the Defendant having created a liability for the Claimant to pay a third party in circumstances where the creation of that liability depends upon the payment of money to the Claimant. The two cancel each other out, as Mr Devereux-Cooke argued. To my mind, the fact that the Defendant diverted at least some of that money (as I must assume for these purposes that he did) does not change matters.
- But, even if I am wrong about that, in order for the Claimant to succeed in its argument that it should obtain a money judgment and not one for damages to be assessed, the Claimant at best still needs an unequivocal allegation in its statement of claim as to how much of the receipts from the clients that D diverted to himself. Yet paragraph 13 of the Particulars of Claim is not unequivocal. It implies under paragraph 13.2 that it was all of them. But in 13.3 it says it was only a part of them, without specifying how much. This is not a claim for a specified amount of money. Accordingly, in my judgment the default judgment under this head must be for damages or equitable compensation to be assessed.
The assessment of damages
- At the assessment of damages or equitable compensation (as the case may be) in relation to categories a. and e., the Defendant will inevitably be able to challenge questions of causation for whatever losses are claimed, notwithstanding the allegation (which for present purposes I am bound to assume is true) in paragraph 65 of the Particulars of Claim. This is because paragraph 65 only alleges that the Defendant's breaches have caused some loss and damage, and not necessarily the heads put forward at the assessment. Such a challenge would not be inconsistent with the default judgment awarded by me: cf Lunnun v Singh [1999] CPLR 587, CA.
Decision
- I will therefore grant default judgment to the Claimant under categories b., c., and d in the sums claimed, but under categories a. and e. only for damages or equitable compensation to be assessed. I would be grateful if counsel could agree a minute of order to give effect to this judgment and submit it to me for approval.
