Issue Estoppel between Liability and Disposal

Author: Simon Hill
In: Article Published: Saturday 04 November 2017


Some claims involve all elements of the claim being resolved at a contested trial. Some claims involve judgment being entered on liability, with quantum being resolved at a later point. The question arises in this latter scenario, as to what the interplay is between a judgment on liability and the types of issues that can be raised at the later disposal hearing?

One relevant concept here is Issue Estoppel. This article will consider Issue Estoppel’s operation within one set of proceedings, rather than in its perhaps more common application, as between an earlier and a later set of proceedings[1]. To put it another way, this article will consider Issue Estoppel’s operation as between the separate parts to the trial of a cause of action. It will look at how a judgment (judicial or administrative) on liability can affect what can and what cannot be argued on causation and quantum.

No Inconsistent Arguments 

In the pre-Civil Procedure Rules (‘CPR’) case of Lunnun v Singh, unreported, (1.7.99) Jonathan Parker J sitting in the Court of Appeal stated, at page 7, that the underlying principle in this scenario 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.’

Peter Gibson LJ in Lunnun stated at page 11:

‘In my judgment, 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.’

This ratio was quoted with approval by the Court of Appeal in Pugh v Cantor Fitzgerald International [2001] EWCA Civ 307, paragraphs 26-27. 

On the facts of Lunnun, the claimant and defendants owned respectively, adjoining land. The claimant sought relief against the defendants in respect of an alleged leakage of water and sewage from a cracked sewer forming part of the defendants' land, the leakage percolating into the claimant’s basement. When the defendants failed to file a notice of intention to defend, judgment in default was entered for damages to be assessed.

The Court of Appeal held at page 7:

‘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, [counsel for the defendants] 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.’ [author's bold]

The point is that a judgment on liability is conclusive that a wrong was committed. That the claimant has a complete cause of action. Damages are payable as compensation where a wrong has occured. To allow the defendants to argue at a disposal/damages hearing that no harm/loss at all had been caused, would be, in essence, to allow the defendants to argue that no wrong had been committed, which would have been an argument inconsistent with that judgment on liability  - something that was impermissible.  The defendants were however free to argue that the harm/loss caused by the wrong was significantly less than the claimant alleged, and so the award of compensation payable should be less. Such would permit the defendants to argue that any particular harm/loss was not caused by the wrong, but not that each and every harm/loss claimed for was not caused by the defendants' wrong. In Maes Finance Ltd v A Phillips & Co [1997] WL 1104736, Richard Scott V-C said at page 3:

'It is true that the causative effect of a defendant's acts or omissions must, at least to some extent, be established at the time the defendant's liability for those acts or omissions is established. The defendant cannot thereafter contend that his acts or omissions were not causative of any loss to the plaintiff. But he may still be able to argue, on the assessment, that they were not causative of particular items of the alleged loss.'

Returning to Lunnun, Clarke LJ helpfully summarised what this divide between liability, and assessment at a disposal hearing, meant in practice to the facts before him in Lunnun, explaining that it meant that the defendant was unable to challenge the allegation in the Statement of Claim that 'water and sewage had escaped into the basement of No 136 and damaged it', but that the defendant was entitled to challenge 'how much water and sewage leaked', 'how much damage such water or sewage caused', and 'what loss the plaintiff suffered as a result'. He stated that 'None of those questions is addressed in the statement of claim', before then adding this: 

'Moreover, insofar as the statement of claim makes any allegations of loss and causation... it is clear ...that it is open to the defendants to challenge them on the assessment.'

Lunnun is a pre-CPR case, but the Court in Pugh at paragraph 28 held, that the ratio of Lunnun continues to apply, notwithstanding the introduction of the CPR.

A defendant can also argue that the claimant is guilty of contributory negligence, depending on the issues thereby raised. In Maes Finance, Richard Scott V-C said at page 3 on contributory negligence:

'It... goes to the reduction of recoverable damages. The question whether contributory negligence can be raised for the first time on an assessment of damages, liability having already been established, cannot, in my judgment, now be answered simply by categorizing contributory negligence as a "defence". Whether it can be raised after judgment depends, in my opinion, on the nature of the issues that were settled by the judgment. It may be that the obtaining of a judgment for damages to be assessed, whether summary judgment or judgment at trial, would have settled some issue on which an allegation of contributory negligence would depend. If that were so, then contributory negligence could not be raised without first having the judgment set aside. But if the judgment had not settled any issue on which an allegation of contributory negligence would depend, I do not see any reason why contributory negligence should not be raised on the assessment of damages...

In principle, in my judgment, there is no reason of law why a contributory negligence plea should not be raised on an assessment of damages. The fact that it operates as a partial defence on quantum is, in my view, no bar. Indeed it is a reason why it is suitable to be raised at the assessment stage.'

In addition, a defendant may argue that a claimant has failed to mitigate his own loss. 

The existence of a judgment on liability will constrain the claimant too. In Carbopego-Abastecimento de Combustiveis SA v AMCI Export Corporation [2006] EWHC 72 (Comm); [2006] 1 Lloyd's Rep 736, at paragraph 14, Aikens J said:

'...where a judgment in default has been granted on the question of liability, that judgment is conclusive on the issue of liability of the Defendant to the Claimant, as pleaded in the Particulars of Claim. Therefore, if a Claimant has alleged that the Defendant was in breach of contract, that cannot be challenged after the default judgment has been entered. Equally, however, a Claimant cannot raise a new claim or a new way of putting the same claim in the proceedings to assess damages.'

Although a Privy Council case, of persuasive authority is the judgment of Lord Millett in Strachan v The Gleaner Co Ltd [2005] 1 WLR 3204 [2005] UKPC 33, where he said (delivering the judgment of the Privy Council) at paragraph 16: 

'In their Lordships' opinion these questions are easily answered if three points are borne in mind. The first is that, once judgment has been given (whether after a contested hearing or in default) for damages to be assessed, the defendant cannot dispute liability at the assessment hearing: see Pugh v Cantor Fitzgerald International [2001] EWCA Civ 307 citing Lunnon [sic] v Singh (unreported) 1 July 1999, EWCA. If he wishes to do so, he must appeal or apply to set aside the judgment; while it stands the issue of liability is res judicata. The second is that, whether the defendant appears at or plays any part in the hearing to assess damages, the assessment is not made by default; the claimant must prove his loss or damage by evidence. It is because the damages were at large and could not be awarded in default that the court directed that they be assessed at a further hearing at which the plaintiff could prove his loss. The third is that the claimant obtains his right to damages from the judgment on liability; thereafter it is only the amount of such damages which remains to be determined.'

A comprehensive review of the law was undertaken in Symes v St George's Healthcare NHS Trust [2014] EWHC 2505 (QB), paragraphs 28 to 46, which concluded that Lunnun is still good law and should be followed (see also Merito Financial Services Limited v Yelloly [2016] EWHC 2067, paragraph 23). Symes quoted from New Century Media Ltd v Makhlay [2013] EWHC 3556 (QB), Carr J. Symes at paragraph 44-46 set out:

'44...Carr J refused to allow a defendant to an employment claim to argue, at an assessment of damages hearing, a judgment in default of acknowledgement of service having been obtained by the clamant, that the claimant was in repudiatory breach or that the defendant was entitled to terminate the contract on notice (see [23]), since those were issues which went to the question of liability, a question which had been determined by the default judgment (see [35]). Carr J put the matter in the following terms, at [30]:

"A default judgment on liability under CPR Pt 12 is a final judgment that is conclusive on liability. The Particulars of Claim are, in effect, a proxy for the judgment, setting out the basis of liability. Once judgment is entered, it is not open to a Defendant to go behind it. Damages of course still have to be proved, and a Defendant can raise any issue which is not inconsistent with the judgment – see the White Book 2013 notes to CPR 12.4.4."

45. As Carr J went on to put it at [36], having reviewed Lunnun and Pugh:

"Mr Makhlay had a full opportunity to defend the claim on liability. If he disagreed with an aspect of liability that was relevant to quantum, it was for him to challenge the claim at the liability stage. He chose not to do so. He has not sought to set the judgment aside. He cannot now 'roam freely' across issues of liability as he wishes to do."

46. Carr J continued at [40] and [41]:

"40. Mr Makhlay's approach is tantamount to an abuse of process by way of a backdoor attempt to challenge the findings in the judgment. It offends not only a natural sense of justice, but also against the general rule that a party should not be allowed to litigate issues which have already been decided by a court of competent jurisdiction.

41. The consequences of Mr Makhlay's position being correct would be startling: a Defendant would benefit from failing to lodge a defence on liability and by simply submitting to a judgment in default, holding his powder dry until the quantum stage. He would then be able to mount, essentially unfettered, all and any arguments on liability at the quantum stage that he wished – probably, as has happened here, without any proper pleading or identification of the issues."

Underlying rational behind Issue Estoppel

The application of Issue Estoppel is guided by an underlying rational to do justice as between the parties. In Pugh, the Court of Appeal said at paragraph 42:

In all events, one should remember Lord Upjohn's observation in Carl Zeiss Stiftung v Rayner and Keeler Ltd. (No. 2) [1967] A.C. 853, 947 that:-

"All estoppels are not otiose but must be applied so as to work justice and not injustice and I think the principle of issue estoppel must be applied to the circumstances of the subsequent case with this overriding consideration in mind."

Issue Estoppel between a Disposal Trial and a Disposal Re-Trial

A separate, but interesting issue on Issue Estoppel arose in Ashdown v Griffin (also know as Re Addbins) [2017] EWHC 2601 (Ch). In Ashdown, a Deputy Judge of the High Court handed down judgment on liability. Later he presided over a further trial on quantum. Judgment on quantum was reserved. Prior to delivering his judgment, the Deputy Judge died. This necessitated a fresh trial on quantum, before a different judge (the 'New Judge'). On the question of what decisions of the Deputy Judge were binding on the New Judge, the New Judge said, at paragraphs 16 and 17:

'There is of course a potential question as to the principles upon which the court embarks upon the rehearing of a trial which has proved to be abortive. For example, the judge at the first trial may have made interlocutory decisions about the reception and admissibility of evidence, or about other procedural matters. To what extent are those decisions binding on the judge who deals with the retrial? There was no debate about this before me, but my view is that decisions made by the deputy judge at the original trial on quantum as respects interlocutory matters are not binding upon me as the judge dealing with the retrial of the quantum question. I am considering the matter of quantum from the beginning, just as the deputy judge originally did himself. It would be possible for either party to adduce different evidence in relation to the second trial on quantum (albeit at the cost of some forensic comment), and it does not follow that therefore that an interlocutory decision made by the judge on the first quantum re-trial should be authoritative or binding in relation to a similar question arising potentially on different material at the second trial. Obviously this is not a question affecting decisions on liability after the first trial, which are, as between the parties, a matter of res judicata. Here I am only concerned with matters which affect the question of quantum.

In his judgment on liability, the judge made certain findings of fact which are relevant, indeed important, in connection with this trial on quantum. These findings are binding on the parties.'

This makes it clear, that while the decisions on liability are binding on the parties as res judicata, the decisions made by the Deputy Judge on quantum are not binding on the New Judge hearing the retrial on quantum.  




NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.

[1] In Eberhardt & Co. Ltd. v Mair [1995] 1 W.L.R. 1180, Evans-Lombe J quoted with apparent approval the following description of Issue Estoppel from Halsbury's Laws of England , 4th ed., vol. 16 (1992), para. 977:

“A party is precluded from contending the contrary of any precise point which, having once been distinctly put in issue, has been solemnly and with certainty determined against him. Even if the objects of the first and second actions are different, the finding on a matter which came directly (not collaterally or incidentally) in issue in the first action, provided it is embodied in a judicial decision that is final, is conclusive in a second action between the same parties and their privies. This principle applies whether the point involved in the earlier decision, and as to which the parties are estopped, is one of fact or one of law, or one of mixed fact and law. The conditions for the application of the doctrine have been stated as being that: (1) the same question was decided on both proceedings; (2) the judicial decision said to create the estoppel was final; and (3) the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.”