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Civil litigation brief

Gordon Exall looks at the effects of judgments on liability in relation to issues of quantum

25 July 2003

It is tempting to think a judgment on liability brings the difficult aspects of a case to an end, or that once liability is determined the claimant can relax. Some practitioners feel a judgment determines virtually all the issues relating to damages. It is not unusual to see a trainee solicitor turn up at an assessment with a short statement, a few receipts and no witnesses, demanding that judgment be entered for the full amount in the schedule. It was seeing such a scenario recently that motivated this month’s column. However, a number of cases illustrate the dangers involved.

Water in the cellar: Lunnun v Singh
The first time the effect of a judgment was considered by the Court of Appeal was in Lunnun v Singh [1999] CPLR 587; (1999) The Times, 19 July. The facts of Lunnun were unusual. The defendants were the trustees of a Sikh temple. The claimant owned an adjacent property in which the cellar was being flooded. The claimant issued proceedings against the defendants, claiming water was flowing from a cracked sewer on their premises and was causing the flood. Judgment in default was entered on 27 June 1991. For reasons too complex to explain, no application was made to set aside judgment.

Claim for damages
There was some delay after 1991. However, in 1998 a schedule of damages was served for the costs of repairing the cellar. The costs amounted to £33,140.
The counter-schedule admitted that it was not open to the defendants to argue the plaintiff had not suffered damage as a result of water flowing from a cracked sewer on its premises. However, it was claimed that it was open to the defendants to dispute that the water flowing from their property was the cause of any particular head of damages. It was also stated that the fact a judgment had been entered on the issue of liability did not reverse the burden of proof – the burden was still on the claimant, in relation to each individual head of loss, to prove causation and quantum. It was the defendants’ case that any damage caused by the cracked pipe was miminal, and the plaintiff was only entitled to nominal damages.

Decision at first instance
When the matter came for assessment before the circuit judge, the judge decided a preliminary point of law. He held it was not open to the defendants to seek to reduce the damages claimed on the grounds that some part of the damage suffered by the claimant was attributable to a source other than the defendants’ sewer.

Court of Appeal
Parker J held the judgment was conclusive on the issue of the liability as pleaded in the statement of claim. That is that an unspecified quantity of effluent escaped from the defendants’ sewer into the basement of the claimant’s property. The defendants were liable for some damage. However, this was the extent of the issues which were concluded or settled by the default judgment. Parker J added:
“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.”
The underlying principle is that on an assessment of damages, all issues are open to a defendant save to the extent that they are inconsistent with the earlier determination of the issue of liability, whether such determination takes the form of a judgment following a full hearing on the facts or a default judgment.

Damages after service of the writ
The court also held the judgment meant the claimant was only entitled to recover damages in respect of escapes which took place before service of the writ.

Points the defendant was entitled to take
Clarke LJ set out the principles that apply when there is a judgment with no judicial determination of the issues.
1) On the assessment of the damages, the defendant may not take any point which is inconsistent with the liability alleged in the statement of claim.
2) However, subject to this, the defendant may take any point which is inconsistent with the liability alleged in the statement of claim. Such points include:

  • (a) Contributory negligence;
  • (b) Failure to take reasonable steps to mitigate;
  • (c) Causation (while the defendant cannot contend that his acts or omissions were not causative of any loss to the plaintiff, he can still argue, on the assessment, that they were not causative of any particular items of alleged loss);
  • (d) Quantum.

Further, the defendant could raise these points even if the statement of claim alleges that a particular item was caused by the tort.
The judgment did not resolve the issue as to what damage the water had caused. The claimant had to prove this.

What happened afterwards?
The reports on these matters do not tell the story of what happened afterwards. The matter went to a full trial on damages which lasted three days. At the end of the three days the claimant obtained damages of £400 by way of nominal damages and a few pounds for the cost of dye tests. The defendants had paid £1,000 into court a considerable time before. The judge made no order for costs at all up to the date of the payment into court, with the claimant to pay the defendants’ costs after the payment into court.

Does the CPR make a difference?
The Lunnun decision was, of course, made before the CPR. However the principles set out in that case survive. This was confirmed by the Court of Appeal in Pugh v Cantor Fitzgerald International [2001] EWCA Civ 307; (2001) 145 SJLB 83. This was a claim for wrongful dismissal where judgment had been entered in default and an application to set aside judgment was refused.
However, the defendant filed a counter-schedule which alleged that the claimant was not entitled to damages “as a matter of causation” because the defendant was entitled to terminate the claimant’s contract of employment, or the losses did not flow from the defendant’s breach because of the claimant’s repudiatory breach of the terms of the contract.
The counter-schedule also dealt with issues relating to failure to mitigate loss, some of these allegations related to a repetition of the points relating to liability.
Striking out the counter-schedule
At a case management conference the Master struck out those parts of the counter-schedule that dealt with issues of causation and mitigation. The High court judge allowed an appeal on the mitigation point. She held the causation issues that the counter-schedule attempted to raise were inconsistent with the judgment on liability but should be struck out. However, the mitigation point, although relating to identical facts, related to different issues.

Court of Appeal
The Court of Appeal made it clear that the principles in Lunnun survived the CPR. On an assessment of damages, all issues were open to a defendant except to the extent that they were inconsistent with the earlier determination of the issue of liability. This applies whether the determination takes the form of a judgment following a full hearing on the facts, or a default judgment.
The court rejected the argument that there was any estoppel or determination of the issues caused by the fact an application to have judgment set aside was dismissed. Ward LJ observed:
“The central question is whether the same issue is being raised in mitigation of damages as was raised in establishing liability or in holding that there was no reasonable prospect of establishing a defence to the claim. The judgment on the claim determined the issue that the defendant had unlawfully terminated the contract. The issue raised by the proposed defence and rejected by the Master was that the claimant was guilty of gross misconduct disentitling him to any damages. Those issues cannot be raised again. But what the defendant now seeks to aver in mitigation of the damages that flow from its now indisputable unlawful termination of the contract is that the claimant should not be entitled to argue that he did not have to obtain alternative work as a broker because, if he did so, he would thereby disentitle himself to any of the termination payments due to him under the partnership agreement. The defendant wishes to contend that because the claimant had engaged in competitive activity, he was from that time onwards no longer entitled to those payments, and thus there was no fetter on his going out immediately after his dismissal and finding other work. That issue is quite different from the issues relating to no liability at all or to no causation as pleaded in the schedule of damages. The mitigation issue relates to a wholly different contract between different contracting parties... the issue is whether the claimant had engaged in a competitive activity as widely defined in that partnership agreement. The issue is whether or not he was entitled to the termination payments under the partnership agreement. I am quite satisfied that the judge was right in concluding that the mitigation issue was quite different from the no liability and no causation issues.”

Conclusion: judgment does not end your problems
It is clear a judgment on liability does not end a claimant’s problems. The claimant still has to prove damages and the burden of proof normally remains the same. However, there are some procedural steps that should ensure the claimant is not taken by surprise.

1) Allegations such as contributory negligence and failure to mitigate loss have to be pleaded.

2) In the absence of a defence these matters should be clearly set out in the counter schedule. In both Lunnun and Pugh detailed counter-schedules were lodged setting out the defendant’s contentions in some detail.

3) The case management procedure should ensure that, at the very least, the issues are isolated and set out in clear terms before trial.

A claimant must be wary of being taken by surprise at the assessment of damages. If a defendant is allowed to raise these points without setting them out beforehand the claimant could be in a worse position than if a judgment had not been obtained at all.
Further the judgment is no guarantee of success. The eventual result in Lunnun shows the fact there is a judgment does not lead, inevitably, to substantial damages.

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Children Procedures Vulnerable Clients