Case No: HQ 0101191
Neutral Citation Number: [2002] EWHC 776 (Ch)
IN THE HIGH COURT OF JUSTICE
QUEEN’S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 03.05.2002
Before :

THE HONOURABLE MR JUSTICE HART

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Between :

	William John Henry JOHNSON	Claimant	
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	GORE WOOD & CO (A FIRM)	Defendant	

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Mr Roger Ter Haar QC & Mr Simon Howarth (instructed by Shoosmiths, Solicitors) for the Claimants
Mr Alan Steinfeld QC & Miss Elizabeth Ovey (instructed by instructed by Beachcroft Wansbroughs, Solicitors) for the Defendants

Hearing dates : 16.01.2002 - 22.02.2002
Judgment Handdown: Friday 03.05.2002
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JUDGMENT

I direct pursuant to CPR Part 39 P.D. 6 that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic. 	

Signed:  ......................................................		The Honourable Mr Justice Hart

Date:     ......................................................

This judgment will be made available on the Court Service web site: 
http://www.courtservice.gov.uk/sitemap.htm under the heading “judgments” on the homepage 

Mr Justice Hart: 

INTRODUCTION
1.	The claimant Mr Johnson is a businessman who conducted his business affairs through a number of companies.  One of his businesses was property development, which he carried on through a company, WestWay Homes Limited (WWH), of which he was managing director and holder of all but two of the 1000 issued shares.  
2.	Acting on behalf of WWH, Mr Johnson in 1987 instructed the defendants Gore Wood & Co.  (GW), through a partner in the firm named Robert Wood, to act as solicitors for WWH in connection with a proposed purchase of land at Burlesdon in Hampshire (the Sunnyfields site) from a Mr Moores.  WWH had, in 1986, acquired an option to purchase Mr Moores' land for £175,000.  WWH planned to develop the land, but various difficulties had first to be overcome:  access to the land was dependent on acquisition of a “ransom” strip of land owned by a third party, and Mr Moores had only a possessory title to part of the land.  Prior to September 1987 WWH had used the services of a Mr Skitch as a solicitor to deal with these matters.
3.	By the middle of February 1988 these problems had been overcome and WWH had obtained outline planning permission for development of the land as sheltered housing.  The site was by then considerably more valuable than it had been at the date the option had been granted, being worth perhaps some £600,000.  The property market had also risen appreciably since that date and appeared to be on a continuing rising trend.  By this time, after a number of extensions, the period for the exercise of the option had become fixed to expire on 19 February 1988.
4.	On 15 February 1988, the day fixed for completion of the purchase of the  ransom strip, GW were instructed by Mr Johnson to exercise the option.  Pursuant to those instructions GW wrote two letters to McCarrahers, the solicitors acting for Mr Moores, one dated 15 February and the second dated 18 February 1988.
5.	Mr Moores refused to recognise that there had been a valid exercise of the option agreement upon the basis that under the terms of the option agreement service should have been upon him personally.
6.	Having obtained the advice of counsel (Mr Owen Rhys), GW were instructed by Mr Johnson to issue proceedings against Mr Moores for specific performance of the contract created by the exercise of the option and damages in lieu of or in addition to specific performance.  This was done in March 1988 (the Chancery proceedings).  An alternative claim was made against McCarrahers claiming damages for breach of warranty of authority.  However, Mr Johnson was advised by GW and by counsel from March 1988 onwards that WWH had a potential claim against GW in respect of the allegedly negligent exercise of the option, in respect of which it ought to seek independent advice.  In June 1988, Mr Johnson on behalf of WWH retained Paris Smith & Randall (PS&R) for that purpose.  Privilege has not been waived by WWH as to the advice received from PS&R.  The result, however, was that GW continued for the time being to act for WWH in the proceedings.  It did so on the basis that it would render no bills for its profit costs until the conclusion of the proceedings.  By the end of November 1989, with the trial by then imminent, GW came to the conclusion that it could no longer continue to act.  PS&R at that point went on the record for WWH.
7.	The Chancery proceedings came on for trial before HHJ Blackett-Ord Vice-Chancellor on 15 January 1990.  Judgment, delivered on 18 January 1990, resulted in an order for specific performance being made against Mr Moores and an inquiry as to damages was also ordered.  The alternative claim against McCarrahers was dismissed with costs.  Mr Moores had been legally aided from an early stage of the litigation and from October 1989, because of his mental condition, had been acting through a guardian ad litem.  He appealed against the judge's decision, but his appeal was dismissed by the Court of Appeal on 20 February 1991: see WestWay Homes Ltd v Moores and Anr 63 P&CR 480.
8.	There was further delay before the land was conveyed to WWH.  It was April 1992, more than four years after the exercise of the option, before the conveyance was completed.  By this time WWH had suffered substantial loss because of the cost of the Chancery proceedings, the inability of WWH to recover damages and costs from Mr Moores, who had no assets save for the balance of the purchase price of the Sunnyfields site, the collapse of the property market and the high interest charges borne by WWH.  On 8 January 1991 WWH started proceedings for professional negligence against GW.  In those proceedings GW admitted that it owed WWH a duty to exercise reasonable care in connection with the exercise of the option, but denied that that duty had been broken or that the damages claimed were recoverable.  WWH applied for summary judgment.  This application succeeded at first instance on 19 April 1991 but failed on appeal on 12 June 1991.  
9.	WWH's action against GW came to trial before Raymond Kidwell QC, sitting as a deputy judge, on 26 October 1992.  The hearing, although estimated to last 10-12 days, lasted a good deal longer.  In the sixth week of trial, WWH’s evidence on liability had been completed and Mr Wood was in the course of giving evidence for GW when the action was compromised upon payment by GW to WWH of £1.48m and costs in the agreed sum of £320,000.  That represented a substantial proportion, but not all, of the sums claimed by WWH.  By the settlement agreement GW agreed to pay those sums with no admission of liability, in full and final satisfaction of all claims of WWH against GW.  The sum of £1 million which GW had paid into court was to be paid out to WWH's solicitors.  WWH undertook that any of its liabilities personally guaranteed by Mr Johnson would be discharged out of the sums received under the settlement agreement.  Clause 3 of the settlement agreement provided for a cap on damages recoverable by Mr Johnson in any action such as the present.  It was in the following terms:
“Mr Johnson undertakes that the amount of any claim made by him personally in any action against [GW] in respect of any losses suffered by him by reason of loss of income, dividends or capital distribution in respect of his position as a shareholder of [WWH] will not exceed £250,000 not including interest accruing in respect of any period after the date of this agreement nor costs.  This undertaking does not limit any other of Mr Johnson's rights against [GW].”
10.	In these proceedings (commenced on 7 April 1993) Mr Johnson claims that GW owed him as well as WWH a duty of care in contract and tort in relation to (i) the exercise of the option, (ii) the advice which Mr Johnson contends was given by GW concerning the prospects of success in and the likely duration of the Chancery proceedings and (iii) the conduct of the Chancery proceedings.  He claims that GW breached that duty and so caused him substantial loss.  
11.	In November 1997 a date for the trial of this action was fixed for January 1999.  GW then had the idea of applying to strike out the proceedings on the ground that they were an abuse of the process of the court, and also of seeking the court’s ruling on certain preliminary issues.  The application to strike out failed before Pumfrey J (25 May 1998) but succeeded in the Court of Appeal whose judgment was handed down on 12 November 1998: reported at [1999] Lloyds Rep. PN 91.  Further delay then occurred while the matter went to the House of Lords.  Its decision, given on 14 December 2000, was that the proceedings should continue to trial:  see Johnson v Gore Wood & Co [2001] 2 WLR 72.  My summary of the history of the proceedings in this action in paragraphs 1 to 10 above essentially repeats (with some additions) the opening passages in Lord Bingham’s speech.
12.	The precise nature of the damages claimed by Mr Johnson in this action is dealt with in detail below.  At this stage the general nature of his loss may be simply indicated by comparing his personal position on 18 February 1988 on the footing that the option had then been incontrovertibly exercised, and the position in which he found himself on 30 April 1993 after WWH had established, by judgment, its rights against Mr Moores and, by compromise, its rights against GW.  From being a comparatively wealthy man with net assets approaching £½m with the opportunity to make profits from the development of the Sunnyfields site, Mr Johnson was reduced to a net asset position which was barely positive, and the prospects of any profit from the site had been much reduced.  Putting crude figures on the respective positions produces the following picture at the two dates:
(1)  Position in February 1988 had option been incontrovertibly exercised:
Assets:
(a)  Matrimonial Home (86 Chalk Hill) 
net of mortgage £55,000			£150,000

(b)  Investment properties (Flats 1&2 
St Peters Court) net of £63,000 mortgage	£ 17,000

(c)  100% shareholding in WWH 
taking site at			£600,000

Less borrowings		£295,000

(d)  interest in pension 
scheme				£    5,000
						£310,000
						£477,000
(2)  Position at 30 April 1993:
Assets.
86 Chalk Hill net of £55,000 mortgage	£150,000
Flat 17 Albany Court net of mortgage	Nil
87.5% shareholding in WWH			£214,375
Interest in pension scheme 			£  55,000
								£419,375
Liabilities

Bank borrowings				£100,000
Personal borrowings				£250,000	£350,000
								£ 69,375
These figures are intended as no more than a crude illustration of the comparative position and the second set of figures may well overstate Mr Johnson’s wealth.  The principal changes in Mr Johnson’s net asset position resulted from the collapse of the property market (impacting on the Sunnyfields site value and possibly also on 86 Chalk Hill), the fact that Mr Johnson had parted with a 12.5% shareholding in WWH and, last but by no means least, the massive increase in his personal indebtedness.  In addition, as a result of his marriage having broken down, Mr Johnson had acquired for himself the flat at 17 Albany Court.  A central issue in this case is whether the personal indebtedness was in fact as large as the figures represent and whether all or part of it was caused by any negligence of GW for which they are liable.  
13.	The claim now made in respect of the personal indebtedness is the most astonishing feature of the case.  Mr Steinfeld for GW described it as “large almost to the point of being grotesque”.  Mr Ter Haar, for Mr Johnson, acknowledged it at one point as being “crazily high”.  The almost ludicrous nature of the liability being asserted can be illustrated by the fact that the claim itself is based on borrowings made by Mr Johnson of sums totalling approximately £130,000.  The claim is (subject to minor qualification) only in respect of the cost of the borrowing.  By 30 April 1993 that was a cumulative cost roughly equivalent to the amount of capital outstanding (i.e. some £120 - 130,000).  The amount claimed had, however, grown to some £1.2m as at 30 September 1998, had risen to some £2.7m by the end of June 2001 and to some £3.4m by 28 February 2002.
The Principal Issues
14.	So far as liability is concerned the issue is whether, in respect of any of the conduct complained of, GW owed any duty to Mr Johnson independent of the duty which they clearly owed to WWH; and, if so, whether GW were in breach of that duty.  So far as damages are concerned, a central issue is whether any of the losses allegedly suffered by Mr Johnson were caused by the breach or breaches of duty; and, if so, whether the loss in question is irrecoverable as being too remote.  Further questions also arise as to the extent to which recovery of the whole or any part of losses may be limited by reason of the cap (see paragraph 9 above).
The Witnesses
15.	The principal witness for the claim was Mr Johnson himself.  He had composed a 300 page witness statement and a further 60 page supplemental witness statement.  He had also supplied Mr Tovell, his expert accountant witness, with the raw data from which the latter’s reports were compiled, as well as himself having composed a substantial appendix to Mr Tovell’s supplemental report included by Mr Tovell as part of his own evidence.  All these productions showed him to be a master of detail, with a command over the documentary material made all the keener by the substantial period of time spent litigating as a result of GW’s conduct of his and WWH’s affairs.  
16.	In defending his claim, GW (through Mr Steinfeld) considered it appropriate, while acknowledging Mr Johnson’s eye for detail, his intelligence and his articulacy, to make an attack both on his personal honesty and on his financial prudence.  The foundation for the former was the way in which he had financed the purchase by himself from WWH of two of the flats at St Peter’s Court and the manner in which, at one point, he had been proposing to obtain finance from Westpac for the Sunnyfield development.  In addition there was an episode, touched on below, when he had pretended to a Senor Gines that AdFocus had offices of its own.  The foundation for the latter lay largely in the actual business decisions he took in relation to CPV and AdFocus, but also in, for example, the decision he made to purchase the flat at Albany Court.
17.	So far as his personal honesty was concerned, criticisms can certainly be made of the three matters which I have mentioned.  In particular, in relation to the Westpac financing, it must be mentioned that, while Mr Johnson was keen to stress to me that he had withdrawn from the proposal once he had appreciated the degree of deception which it potentially entailed, his original witness statement in the Company action had conveyed a very different impression (see paras 181 and 272 of that witness statement).  This shows, at the very least, that Mr Johnson’s memory of events is capable of being coloured or distorted by the passage of time and his perception of how he would like to have behaved.  In relation to the central issues raised by this action, however, Mr Johnson appeared to me an honest witness and one who justified the contemporary testimonials which emerged in evidence (including from Mr Wood) as to his personal integrity.  Having said that, allowance has to be made for a substantial degree of reconstruction and some exaggeration in his account of events, inevitably caused by the lapse of time and welter of detail involved.  In particular I have difficulty in accepting without qualification his repeated assertions in his written evidence that, as he took every significant step in the development of his businesses, he kept Mr Wood fully informed.  A good deal of exaggeration appeared to me in this respect to have found its way into his evidence, both written and oral.  A striking example of this was his assertion (subsequently qualified) in oral evidence that “... every step I took in relation to any of my business interests I took in tandem with Rob Wood.  We discussed it together.  We did so against the background of the litigation in which WestWay Homes had become involved” (Day 8, p. 71, line 38).  I found Mr Wood’s account in this respect altogether more credible.
18.	So far as his financial prudence is concerned, the matters relied on all took place against a background in which Mr Johnson’s financial affairs had been thrown into chaos by GW’s failure effectively to exercise the option.  The proposition advanced by GW that some inherent defects of character “were the sole and substantial cause of all the ...  heads of claimed loss, save for any diminution in value of his pension fund” (see page 24 of their written opening) was not in my judgment made out.  That is not, however, to prejudge the particular issues which arise as to causation of the particular items of loss claimed.
19.	In addition to Mr Johnson I heard oral evidence from Mr Gillis (who assisted Mr Johnson in his efforts to finance his video-technology projects), Mr Hunt (at one time Mr Johnson’s accountant), Mr Candy, Mr and Mrs Maynard, Mrs P F Johnson (Mr Johnson’s mother), Mrs M Johnson (Mr Johnson’s wife), Mr Windust, Mr Rubinstein (WWH’s solicitor in the Company action and for a time in the present proceedings) and Mr Tovell (who has also acted as Mr Johnson’s accountant).  I also had the benefit of written evidence from Mr Ridout who was too ill to attend court.  No attack was made on the honesty of these witnesses, and it is unnecessary for me to make any general comments on their evidence.
20.	For GW, I heard from Mr Wood and, as an expert accountant, Mr Bolton.  Some criticisms were made of Mr Wood’s evidence on the footing that, in a number of respects, his evidence was skewed to meet the requirements of the way in which those now representing GW wished to present its case.  There was some justification in these general criticisms.  However, none of them in my judgment cast doubt on the general picture presented by him of his relationship with Mr Johnson.  In particular I accept his evidence that he was not consulted in any meaningful sense by Mr Johnson in relation to the personal borrowings (page 220 of his first witness statement and paragraph 10 of his supplemental witness statement), and that he had very little awareness of the AdFocus project (ibid para 222 and para 21 of his supplemental witness statement), that while he was often informed by Mr Johnson in general terms of his business dealings he did not concern himself with their detail except where relevant to a specific task on which he was engaged (paragraphs 6 and 16 of his supplemental witness statement), that his general awareness of the personal borrowings arose in the context of preparing the quantum claim in the Chancery action (para 7 ibid).  Paragraph 10 of his supplemental witness statement, in denying the allegation that GW had “actively or impliedly encouraged WWH Ltd to incur further debt” states that:
“It was Mr Johnson who decided upon such matters and it was not for me as his solicitor to tell him what to do.  I can see now that some of my comments at the time about the timing of the litigation (detailed elsewhere) might have mistakenly given Mr Johnson confidence in taking on short term debt, whether personal or corporate, but I did not endorse such borrowing, or suggest to him that he should incur it.  That was a business decision only he could make.”
On all the evidence I heard that seemed to me a fair description of the position.
21.	Mr Bolton’s evidence was principally directed towards the question of the prudence of Mr Johnson’s investments in CPV and AdFocus.  Since he approached this question in the abstract, without regard to the significance of Mr Johnson’s expectations from the Chancery action, his evidence (through no fault of his own) rather missed the point and I did not find it of any particular assistance.
The negligence alleged
22.	The negligence alleged is of three distinct kinds: 
(1)  negligence in relation to the exercise of the option;
(2)  negligence in relation to advice given as to the likely duration and outcome of the Chancery proceedings; and
(3)  negligence in relation to the conduct of the proceedings. 
It is necessary at this stage to say something more of each.
Negligent exercise of the option.
23.	In the Company proceedings GW denied any negligence in relation to the exercise of the option.  They continued to do so in these proceedings until the beginning of 2001.  At that time they re-amended their defence to make the limited admission that:
“the defendant was in breach of its retainer by and its duty of care in tort owed to WestWay Homes in that it did not serve notice under clause 3 of the option agreement in a manner which would have ensured that the validity of the notice was not challenged and its conduct in not serving notice in such a manner fell below that of a reasonably competent solicitor given instructions by an option holder to exercise the relevant option.”
The failure of GW to make this admission at an earlier stage has, quite understandably, given rise to indignation on the part of Mr Johnson and those representing him.  Had the admission been made earlier the Company proceedings would either have been unnecessary or would have taken a shorter and different course.  With the benefit of the admission it can be seen that the appeal against the Order 14 judgment in the Company proceedings ought not to have succeeded.  Huge sums in costs, not to mention the stress and anxiety involved in carrying the Company proceedings through, could have been avoided.  For reasons which will become apparent an earlier resolution of the Company’s claim might have rendered it unnecessary for these proceedings ever to have been brought.  It is not difficult to see that the belated admission has been correctly made.  GW’s failure to serve the option notice on Mr Moores personally, and the service of it on McCarrahers without first establishing their authority to receive it, was courting trouble.  No satisfactory explanation has ever been given as to why the risk was taken in a situation where it was known that Mr Moores was looking for a means of escape from the option (the explanation given apparently depending on a construction of the Option Agreement which cannot be supported).  
24.	GW were enabled to deny any negligence because of the finding by HHJ Blackett-Ord, Vice-Chancellor, and by the Court of Appeal that the option had in fact been exercised validly by service on McCarrahers.  But the (different) grounds upon which those courts reached that conclusion (neither of which turned on the construction of the Option Agreement apparently relied on by GW at the time) could not remove the argument that GW had chosen, negligently, to exercise the option in a manner which rendered its effectiveness debatable.
25.	The issue here, therefore, is only whether in exercising the option GW owed a duty of care to Mr Johnson separate from that which it is conceded that they owed to WWH and which it is conceded they breached.
Negligent advice in March 1988 as to the duration and outcome of the Chancery proceedings
26.	This is not a claim which was made in the Company proceedings.  In essence the claim is that, at an early stage in the Chancery proceedings, GW advised Mr Johnson that WWH was in a “no lose” situation and that the position would be resolved within about six months, and that this advice continued to be repeated throughout the period while GW were retained to act for WWH in the Chancery proceedings.  There are issues here as to exactly what advice was given, although it is accepted in broad terms that advice of the kind which I have described (“no lose and trial within 6 months”) was given.  It is also accepted on behalf of GW that the advice given as to the duration of the Chancery proceedings was wrong and, at least as regards the initial advice on that question, negligently so.  It is not accepted that the advice as to the “no-lose situation” was either negligent or wrong.  An over-arching issue is as to whether the advice was given to Mr Johnson simply in his capacity as the director of WWH or whether it was given to him also in his personal capacity.
27.	It is convenient at this stage to set out my findings of fact as to what advice was given, and when.  As will become apparent the issues of primary fact, even after all these years, are comparatively narrow ones.
28.	Mr Johnson’s diary entries record a conversation which he had with Mr Wood on 2 March 1988 in which Mr Wood reported to him the results of an initial telephone conversation which his assistant Mr Tudor Rees had had with counsel who had received the papers two days beforehand.  Mr Wood was, according to Mr Johnson’s oral evidence before me, entirely reassuring: they had a good case, and would be bringing proceedings against both Mr Moores and McCarrahers.  The possibility that McCarrahers might have acted in some way unprofessionally was touched on.  Mr Johnson learned that Mr Moores was no longer being represented by McCarrahers but had instructed another firm (Lamport Bassett) in their place.  In his witness statement Mr Johnson also says that in this conversation he was told by Mr Wood that the case would get to court in about six months time and that WWH was in a “no lose situation”: either WWH would succeed against Mr Moores and McCarrahers or, if not, WWH would have a clear claim against GW.  There is in fact no reference to the “six months time” advice in Mr Johnson’s diary entry: that records advice that it would be unlikely that a court date would be available for a month.  Mr Wood however, accepts that, either then or at an earlier meeting, he had referred to the possibility of a claim against GW and had adverted to the possibility of WWH seeking independent advice as to that, and that in the course of the conversation on 2 March he expressed himself satisfied that GW had acted validly.  He told Mr Johnson that work would need to be done to establish the damages to be claimed against Moores or McCarrahers.
29.	On 10 March 1988 GW received from Counsel his opinion and a draft Statement of Claim.  Mr Wood and Mr Rees met Mr Johnson that afternoon to go through the papers received from counsel and, in particular, to consider the figures to be inserted in relation to the damages claim.
30.	So far as the damages claim was concerned, there were seen to be two relevant heads, costs of delay and loss of profit.  The latter, immediately relevant only to the alternative claim for breach of warranty of authority against McCarrahers, was agreed to be put in at £700,000.  So far as costs of delay were concerned Mr Johnson had prepared figures on the basis that the claim under this head would include the normal overheads of the company during the period of delay.  These included the cost of the company’s existing borrowings, the normal running costs of the company and the costs of paying the directors’ salaries.  As to the latter, Mr Johnson had been drawing a modest salary (some £12,000 per annum) in the previous year.  The costings and development finance which had been obtained for the proposed development had, however, allowed for a “management fee” at the rate of some £36,000 per annum during the development period.  Mr Johnson wanted WWH to include a claim for this amount of salary during the period of delay.  A calculation was done which produced a daily cost of (initially) £208.00 per day as the measure to be claimed for the costs of delay.  It was a preliminary figure in the sense that it did not allow either for the effect of compounding in relation to WWH’s existing borrowings nor for the cost which WWH might incur in financing the payment of the normal running costs and of the salary.
31.	Mr Wood agrees that he did say that WWH was in a no lose situation, it being his opinion that “if, contrary to my expectation, the proceedings against Mr Moores failed, there was the claim against McCarrahers and the potential claim against GW.”  He also expressed the view that the matter would get to court in about six months’ time unless it settled earlier.  At that stage he was envisaging the claim against GW as only arising in the event of a failure of the action against Mr Moores.  In that event he envisaged that there would either be a good claim against McCarrahers or, if not, against GW.  In either event his assumption was that the matter would quickly be settled because of the involvement of the same insurers on behalf of both McCarrahers and GW.
32.	On the written evidence there is a dispute as to whether at this stage the further advice was given that, in the event of WWH succeeding against Mr Moores but Mr Moores not being good for the damages claimed against him, those damages would be recoverable against McCarrahers.  It is clear that such advice was received by Mr Johnson at a later stage both from GW and from PS&R.  The advice appears to have been based on the theory that McCarrahers’s advice to Mr Moores that the exercise of the option was invalid would give Mr Moores a claim over against McCarrahers which would be capable of being exploited by WWH.  I consider it unlikely that this eccentric advice was in fact given on this occasion.  At this stage the perception was that WWH had security for its damages claim against Mr Moores by virtue of WWH’s outstanding obligations in relation to the purchase price in the sum of £175,000.  This became referred to in the course of the trial as “the buffer”.  (In fact the buffer turned out to be less than this because Mr Moores had charged the land).  In oral evidence Mr Johnson was inclined to accept that attention did not become focused on the consequences of Mr Moores’ relative impecuniosity until this buffer became exhausted.  Taking the damages claim at £208.00 per day, the buffer must in March 1988 have looked a very comfortable one against a projected trial date of September or October of that year.  Accordingly, while I accept that on 2 March 1988 there had been some discussion of McCarrahers’s conduct, it seems to me unlikely that this particular advice was given in March 1988.  Indeed the correspondence a full year later appears to show that it was only in March 1989 that Mr Johnson first raised with Mr Wood the query “what recourse, if any, will we have if we succeed against the First Defendant and we face a shortfall?”  (see his letter to Mr Wood dated 3 March 1989).  The emphasis in March 1988 was on the probability of a successful suit for specific performance against Mr Moores, with a fall-back claim for damages for breach of warranty against McCarrahers should the exercise of the option be held to have been invalid.  Only if both those claims failed was it envisaged that GW would be held liable, and its liability in those circumstances was regarded by Mr Wood (probably rightly) as being unlikely to be controversial.
33.	It was in that sense that Mr Wood advised that WWH was in a no lose situation:  WWH was bound to win against someone.  The remaining dispute as to the content of the advice is essentially as to two matters.  The first is the extent to which the advice that WWH was necessarily going to succeed against someone entailed, either expressly or by implication, that when it did so it could expect to make full financial recovery in respect of all its claimed loss and would do so on the conclusion of the Chancery proceedings..  The second is whether the advice was either in such terms, or in such a context, that Mr Johnson was entitled to rely on it when he came to incur the expenditure and the liabilities in respect of which he now claims.  The two questions are inter-related.  The expenditure and liabilities concerned all in fact relate to other business interests of Mr Johnson (“CPV” and “AdFocus” described more fully below).
34.	On the first question, Mr Johnson’s evidence was that Mr Wood had said in terms that WWH could not lose “in financial terms”.  There is evidence from other witnesses that Mr Johnson so reported the advice to have been at the time.  For his part Mr Wood insists that he never gave Mr Johnson any assurance that the damages being claimed would in fact be held to be recoverable.  His belief was that he had advised Mr Johnson that the heads of damage being claimed were capable of being argued for but that recovery could not be regarded as being certain.
35.	Insofar as Mr Johnson’s account seeks to give the impression that Mr Wood advised him that WWH had a copper-bottomed claim to damages based on the measure underlying the calculations being pleaded in the Chancery action, it seems to me that Mr Wood’s account is to be preferred.  It seems to me inherently improbable that any lawyer in Mr Wood’s position would have offered something approaching a guarantee that damages of the order sought would be recovered.  Not only was the claim to recover in respect of the “salary” obviously likely to be controversial, but Mr Wood would have been (and on his evidence to me was) conscious of the delicate situation he was in in advising bullishly on a quantum claim that might one day have to be met by his own firm’s insurers: see his evidence under cross-examination at Day 10, page 55 passim.  At the same time I accept Mr Johnson’s evidence that Mr Wood’s overall tone was calm and always very reassuring.  Mr Wood genuinely believed at that stage that the likely outcome was that Mr Moores and/or McCarrahers would back down in the near future.  He was dealing with a “client” (i.e. Mr Johnson) who was having to cope with the emotional see-saw of having advanced from the position of a man of very modest means on 18 February to one who believed on 19 February that he now had a net asset base of some £½m with the prospect of earning a substantial profit through the development and back again to a position of financial instability and uncertainty on 23 February (when the exercise notice was formally rejected).  So long as Mr Wood continued to act he had every motive for seeking to be as reassuring as he could reasonably be, and I am satisfied that the terms in which he advised reflected that motive.
36.	In the result I am satisfied that when Mr Johnson left the meeting on 10 March he had been advised in terms which reassured him that, from a business point of view, what WWH faced was in the nature of a temporary cash flow problem, and that the period during which WWH was likely to face that problem was of the order of six months.  Mr Wood in his evidence effectively accepted this: see Day 9 page 44 line 19.
37.	On the second question, the difference in recollection is even narrower although its significance is argued to be enormous.  The issue turns on what understanding Mr Johnson gave to Mr Wood of why there was a need for WWH to claim in respect of the director’s salary.  Mr Wood’s evidence is that the question of the salary “loomed very large” in the discussion of the damages question: see paragraph 141 of his witness statement in these proceedings.  His evidence was that, when questioned as to why the salary needed to be paid, Mr Johnson had referred to his need to have the salary in order to meet his family living expenditure including the costs of the mortgage on the matrimonial home.  Mr Johnson’s account is to similar effect, save that he insists that he mentioned that the salary was also needed in order to enable him to support his other business ventures, by which Mr Wood was either given to understand or would have understood that Mr Johnson meant his interest in a video-juke box venture by that time being contemplated by the CPV entity.
38.	Mr Wood was not able positively to deny from recollection that he had been told this.  His reason for regarding it as unlikely lies in his view that, had this subject been mentioned, it would have increased all his underlying doubts about the recoverability of the salary as a head of damage as against Mr Moores: if the money was not really needed to cover the necessary WWH overheads in relation to the delayed development, but was really needed to finance other businesses the whole claim to recover it as “salary” might be regarded as flawed: see Mr Wood’ evidence in cross-examination at Day 10 pp 52 line 44 to 53 line 12.  On the other hand Mr Wood accepted, on the hypothesis that Mr Johnson had been counting on the receipt of the salary for the purposes of the CPV business, that he probably would have mentioned it at this meeting and in this context: see Day 10 p 34.  
39.	On this point I prefer the evidence of Mr Johnson.  For reasons which I develop below it is probable that Mr Johnson had been counting on the receipt of salary for this purpose and he had no reason not to mention the fact in a context which raised the question of why he needed to include the salary as part of the claim against Mr Moores and McCarrahers.  Mr Johnson would not have appreciated the legal pitfalls potentially exposed by giving this straightforward explanation of his needs.  Equally, while Mr Wood would no doubt have expressed reservations about the prospects of success of the salary claim, once the argument for including it at all was accepted, the question of how Mr Johnson proposed to spend the salary was logically irrelevant to the question of its recoverability.
40.	In summary, on this issue I think that the evidence establishes that Mr Johnson was advised on 10 March 1988 that WWH was in a “no lose situation”, that there was a respectable argument which would probably, but could not be guaranteed to, succeed for including in its costs of delay claim its daily running costs (including directors’ salaries), and that the matter would come on for trial within six months or so if there was no earlier settlement.  It also establishes that Mr Johnson had indicated to Mr Wood the importance to him of the salary element in the claim in the context of his other business interests.  In the context of the relatively short time-scale envisaged it is important not to overstate the significance at the time of the last item.  The salary claim being envisaged would have been for a gross sum of £18,000 only a fraction of which would have been perceived as relevant to other business interests of Mr Johnson as opposed to his need to defray normal living expenses.  The larger prize was the development profit (put in at £700,000) which would be achieved either by winning against Moores and completing the development, or short of that recovered against McCarrahers or GW.
Subsequent advice as to duration and outcome
41.	Mr Johnson wrote a plaintive letter to Mr Wood on or about 9 May 1988.  The letter appears to have been prompted by a need to deal with fees owed to GW for two pieces of work they had done for Mr Johnson personally, including the execution of a second charge over the St Peter’s Court flats (“the Bullivant loan”).  So far as concerns work done for WWH in connection with the site and with the litigation, the letter is silent: this is because it had been agreed in March that GW would render no bill in respect of such work until the conclusion of the litigation.  The passages in the letter material for present purposes read as follows:
“Your firm are currently dealing with various matters for me and as you will see I am generally up to date with payments in respect of your firm’s costs.

This has not been easy since Moores and McCarrahers decided to reject the Notice served by yourselves exercising the Option to purchase Sunnyfields and to call it invalid.

As a consequence the adverse effect to my financial position has been serious and as you are aware I have had to completely restructure my financial arrangements as best I could.

For four days, the 18th February to the 22nd February 1988, the period between you giving notice and the other side rejecting it, I was in equitable terms approximately £350,000 to £400,000 better off at the bank.  At about 4pm on Monday 22nd February this financial advantage was wiped out.

Whilst you cheerfully remind me that situations like this are character building, and I’m sure they are, the last eleven weeks have been extremely hard going.  I do not complain for me but I do complain for my family.  In restructuring my finances I have had to –

1.	Instruct Agents to sell two investment properties which I had always previously treated as pensions.

2.	Arrange an expensive short-term loan secured against these properties until they are sold.

3.	Attempt to secure an offer of a re-mortgage on 86 Chalk Hill so as to take out the Nat West, who you will recall were in place as a bridging facility until PLT came in upon completion, and to introduce much needed working capital for WestWay Homes Ltd, and to keep alive other projects to which I was previously committed.  Other projects with potential have reluctantly had to be shelved.

4.	Sell my Wife’s car – not as funny as it may sound to some.

It is to my credit that during the last eleven weeks I have kept all the balls in the air, with the exception of mine which tend from time to time to drag along the floor.

Who knows when this matter will be resolved but hopefully sooner rather than later and to my advantage.  Perhaps we will have a better idea after our meeting with Counsel this coming Thursday.

Lord knows Moores didn’t need any encouragement in his attempt to thwart the Agreement and everyone regrets that he was presented with real bullits [sic] to fire back at us.  I know these things happen and you have told me that I am in a “no-lose situation” and, indeed, that Gore Wood themselves are in the firing line.

Whilst I am confident, like yourself, that when this matter gets to trial Counsel will protect both of us and we will win the day, I would prefer to arrive there not looking like a skeleton.”
42.	The letter indicates that Mr Wood already had some knowledge (“... as you are aware ...”) of the steps Mr Johnson had been taking to restructure his financial arrangements.  It is also clear that these included not only the introduction of working capital for WWH but also the keeping “alive other projects to which I was previously committed.”  These passages in the letter support my finding that Mr Johnson probably did mention his other business projects during the course of the meeting on 10 March 1988.  Mr Johnson’s evidence was that this point had arisen again at a meeting on 11 March when the terms of a supply agreement to be entered into between CPV and a company called Colour Leisure Ltd (“CL”) had been discussed.  The letter is consistent with that as well.
43.	The passage “who knows when this matter will be resolved but hopefully sooner rather than later and to my advantage.  Perhaps we will have a better idea after our meeting with Counsel” might suggest that the question both of the likely time-scale of the proceedings and of the financial result was completely up in the air in Mr Johnson’s mind at that time.  I am satisfied however that nothing had been said by GW which put their six month estimate in doubt.  Mr Johnson had no previous relevant experience of High Court litigation.  The question was posed in a context which envisaged the delay as being a matter of months rather than (as happened) a period of years.
44.	At the conference with Counsel on 12 May the next steps in the litigation were discussed, and consideration given to the question of timing.  The relevant passage in GW’s attendance note reads 
“John Johnson will supply detailed figures of losses incurred to date because these are not currently specified in the claim.  At the Summons for Directions we will request leave to amend so as to include these figures and also, if appropriate, to refer to John Johnson’s letter of intent.
We would also consider the possibility of transferring to London later in the action since this might facilitate an earlier Hearing date.  The earliest however would be three months after setting down.”
45.	It was put to Mr Johnson in cross-examination that this discussion must necessarily have provoked him to enquire what was meant by “setting down” and when that step would probably be taken.  This may well be so, but nothing in the note of the conference or in what subsequently transpired persuades me that he was then given any indication that the six month time projection might be seriously adrift.  In his evidence to me Mr Wood candidly said (in relation to a later stage of the proceedings): 
“.... most solicitors tend to bottle up a certain amount of their knowledge of the legal process and give to lay people a feeling of what is going on.”  [See Day 9, p69 lines 37-39] ”
Mr Wood’s own knowledge was limited.  He was not a litigation specialist.  What was said at the conference is quite consistent with Mr Johnson’s account that, while he was necessarily aware from time to time of slippage in the projected timetable, it was always being held out to him that he was just six months away from trial.  Eventually of course the prediction became true, but in May 1988 there were (as events turned out) a further 20 months to wait before the trial at first instance (in January 1990) and a further year from then until the position as against Mr Moores was finally resolved on appeal.
46.	At the conference on 12 May counsel re-emphasised the need for WWH to seek independent advice as to its rights against GW, but subject to that saw no objection to GW continuing to act in the litigation.  In due course WWH (in June 1988) retained PS&R accordingly and they thereafter held a watching brief in relation to the proceedings until December 1989 when they took over from GW.
47.	The same picture emerges when one considers Mr Johnson’s state of mind in the autumn of 1988.  By that time a summons for directions had been issued, and heard on 11 October 1988.  Agreed directions then provided for the matter to be set down not before February 11 1989.  It seems unlikely that Mr Johnson had been consulted before these agreed directions were sought from the court.  He wrote to GW on 31 October 1988, relaying to them the suggestion of GW’s insurers (of which he had learned through PS&R) that a hearing date be obtained before Christmas 1988.  He was disabused of the notion that this was a possibility by a telephone conversation with Mr Proctor (the litigation executive at GW) which left him with the impression that the trial would be on or before 11 February 1989.  In fact, on the basis of the agreed directions and counsel’s advice, a trial could not then be expected until, at the earliest, May 1989.  I find that this was not at that stage made clear to Mr Johnson.
48.	In fact at this stage GW were themselves only beginning to embark on the process of discovery, and Mr Johnson was only at this stage invited to turn his attention to the selection of an expert for the purposes of the damages claim and to production of detailed figures in relation to the claim for the costs of delay.  In that connection it appears that Mr Johnson produced figures relating to both his and WWH’s borrowings for inclusion in the claim.  He was advised later by Mr Wood that the claim should be limited to those borrowings (whether by himself or WWH) which could be demonstrated as having been applied for the benefit of WWH.  As he put it in evidence (Day 7 pp 49-50):
“..... I think you draw my attention to a letter I had written to the Morris Walder Partnership in December 1988, I had naively assumed during the course of 1988 that any loans I had obtained, the full value could be incorporated in WestWay’s claim.  Mr Wood soon put me right, and he policed the division of those loans as they were incorporated in the company [sic] action.”
49.	By January 1989 there is evidence that Mr Johnson was pressing Mr Wood urgently for a progress report on the litigation.  To answer this Mr Wood had to enquire of his litigation assistant Mr Proctor, and learned that no inquiry could be made of the court for a hearing date until various other steps (service of lists, and of experts’ reports) had taken place.  The upshot was a conference with counsel held in February 1989 at which, inter alia, the decision was taken to apply for a trial of the issue of liability only.  The conference was attended not only by Mr Wood and Mr Johnson but also by a representative of GW’s insurers’ solicitors (Mrs MacLennan of Willey Hargrave).
50.	From a letter from Mr Johnson to Mr Wood dated 3 March 1989 it is apparent that he had persuaded himself, and believed that he had persuaded counsel against the latter’s preliminary view, that the claim for costs of delay could include the overheads of WWH during the period of delay.  The letter also drew attention to the fact that the time would soon arrive when the “buffer” of £175,000 would be exceeded.  Mr Johnson was then calculating the cumulative costs of delay as £117,000 increasing at the rate of approximately £2000 per week, so that the assumption lying behind the query must have been that questions of quantum might well not be resolved for at least six months.  In fact the letter, in discussing the possibility of financing WWH by selling a slice of the deal to a lender, adopted a timescale of “say 9 months” until the matter was resolved in court.  It seems to have been at around this point that Mr Johnson did receive the eccentric advice from PS&R that, in the event of Mr Moores not being good for the damages claim, Mr Moores would have a claim over against McCarrahers which WWH would be able to exploit.  Either at the conference with counsel, or in a subsequent telephone conversation, counsel had dissented from this view.  Mr Johnson wrote again to Mr Wood on 9 March 1989 saying:
“I have also discussed with Paris Smith & Randall, Owen Rhys’ view that if [Moores] is defeated he would have no recourse against [McCarrahers] or their insurers.  Malcolm Le Bas [a partner in PS&R] does not concur with this and we would be grateful for your opinion.”
Mr Wood accepted in evidence that it was his belief, and he so advised Mr Johnson in March 1989, that the Le Bas view was correct.  He was not able in the witness box to give a convincing rationale for this.  The advice was to grow in potential significance as the year progressed, since the flattening out (summer 1989) and subsequent decline (autumn 1989) of the property market made it increasingly unlikely that the development would now be profitable or that the site in its undeveloped state could be realised at a profit.  This necessarily increased the size of the damages claim against Mr Moores and drew further attention to the inadequacy of the buffer.
51.	In March 1989 an order was obtained for a split trial.  In April 1989 Mr Wood attended with Mr Johnson on Mr Stiling, the manager of the NatWest bank branch at which both WWH and Mr Johnson banked.  By that time it was known to all concerned that, as Mr Wood put it in a letter to Mr Stiling dated 4 April 1989:
“[d]espite efforts it is now extremely unlikely that this case will be heard much before the autumn ...”
WWH had effectively run out of funds to continue with the action.  The same letter represented that:
“....the action must eventually be successful.  At the very worst, a compensatory payment for loss of profit would be achieved through the courts.  Our client, therefore, has a temporary cash flow problem ....  On a conservative estimate the company’s claim could be in the region of £500,000.”
52.	The purpose of the visit was to persuade the bank to increase the facilities both of WWH and of Mr Johnson.  A further meeting was held at the bank on 4 May 1988 attended also by Mr Johnson’s accountant Mr Tovell.  By this time WWH’s overdraft at the bank (which had been negotiated in February 1988 simply as a bridging facility pending receipt of the PLT financing) stood at some £104,000.00 and Mr Johnson’s overdraft at £1,700.00.  Mr Stiling recorded at the first meeting that:
“... Rob outlined the basis of their claim and his own satisfaction that ultimately WestWay Homes could not lose, which - as we know - has been supported by Paris Smith & Randall.  That said, the claim is against Moores and McCarrahers first and then if that fails will be against Gore Wood, although their opinion is that they have acted correctly.  The solicitors funds will eventually pay but there is no indication that settlement out of Court will be achieved and, indeed, Gore Woods advisors have told them to prosecute the claim.  I told them that we were unwilling lenders at the present level and had been as helpful as we felt possible but there was a limit and certainly an unsecured advance had no attractions for us.  Even if we were to assist on a secured basis the problem could still arise that claim had not gone to trial and there will be a further requirement for assistance.  There is no further security available from an outside source but John will arrange for forced sale valuations to be given on Chalk Hill and the ransom strip in order that we can see the extent of our margin.  Whilst Gore Wood anticipate that the claim for liability should be heard by the end of the autumn.  When I questioned him what would happen if it went to appeal, he had to admit there could be a further delay of up to a year.  We know that the claim is split between liability and the extent of amount but there still appears to be every likelihood of considerable delay.”
53.	At the second meeting (on 4 May) more optimistic noises were made as to the date of the trial.  Mr Stiling recorded:
“The present position is that all parties are now co-operating to bring the 2 day appeal forward as quickly as possible and they hope to have a date in the next week/10 days.  It is hoped that they can have the Hearing before the long recess which starts on the 1 August to end September, although pessimistically [sic] it could go on into October.  I questioned whether, if liability was given in favour of WestWays, whether there could be appeal but I was assured that in Gore Wood’s view there was virtually no likelihood of this, bearing in mind that if Moores was found liable he would have to put in place the completion of the sale of the land within one month and if McCarrahers were, well obviously then the indemnity fund would pay up.  When I questioned whether there was any recourse to the Law Society the view was that whilst the indemnity fund only represented two of the parties, defending, there is no likelihood of an intervention because, effectively, the third defendant - Moores - could be found liable, in which case both solicitors, and indeed the fund, would be absolved from any costs.”
and
“...  If the Co went into liquidation if was Rob Wood’s opinion that the liquidator would prosecute the claim as, in his view, it was ‘blue chip’......  
...  We also have Paris Smith & Randall’s written opinion that the WestWay Homes is in a ‘no lose’ situation and this was confirmed verbally to me yesterday by Malcolm Le Bas, one of the senior partners.”
54.	Mr Wood then wrote to the bank on 17 May 1989 a long resumé of the situation in which the following passages occur:
“The Company has been advised by Gore Wood that it has good prospects of success in its action against both Mr Moores and Mc, and this view is supported by Counsel.
It is Counsel’s view that the case against Mc for damages for breach of authority is also good should Mr Moores be able to successfully demonstrate to the Court that he had not given Mc authority to exchange Option Agreements.
Of course the Company has also its ultimate action should Counsel’s opinion be wrong in its remedies in damages against Gore Wood.
We understand that the Bank has already received an opinion from Messrs Paris Smith & Randall on this particular aspect of the matter.
High Court litigation is of its nature protracted and particularly so in Chancery matters where the arguments contain a mixture of fact and points of law.  This case, however, turns on essentially simple questions of fact but it is expected that a substantial amount of the court’s time (the case is anticipated to last between two and three days to establish liability alone) will be devoted to legal argument on the essential terms of the Option Agreement itself and the mechanics of its exercise.
Gore Wood are seeking to obtain a trial date prior to the summer vacation (which commences on the 1 August and ends on the 30 September) and it is hoped that the trial date will be obtained from the Listing Officer within the next two weeks.
Unfortunately, it is not possible to realistically speculate on a Court date at this time as only the Listing Officer has any idea of the volume of cases and their length, etc. but we would not expect the case to be heard later than the end of this year and indeed it ought to be listed for October/early November.”
............
“The Company has also been advised both by Gore Wood and Counsel that the prospects of an Appeal by any party to this action are unlikely.”
............
“The Bank is being asked by the Company to provide additional finance to assist the Company (or more particularly its director, John Johnson and his family) to survive financially until such time as the Court determination has been obtained and either the land successfully transferred to the Company or damages in lieu agreed against one or other of the parties or potential parties to this action.
The action itself has been described as an “asset” of the Company in view of the quality of the parties to the proceedings and this is an essential fact that should be borne in mind by the Bank in considering its “security”.
It is inconceivable that the Company would not have a successful action against one of the parties to this action and the essential difficulty for the Company has been in bringing the matter to trial.”
...........
“The Bank has received previous indications from Gore Wood as to the value of the damages claim and they are likely to be approximately 1.2 million pounds and even allowing for argument as to interpretation as to the basis of this calculation, it would be realistic to assume that the claim would still not be reduced to less than £700,000.  This sum would comfortably redeem all of the current borrowings of the Company from both the Bank and individual lenders who have provided unsecured loans on the strength of the Company’s case.”
55.	Mr Wood accepted that the representations there being made to the Bank reflected the advice which was then being given by GW to Mr Johnson.  The letter contains no express reference to the possible situation which would arise if WWH succeeded against Mr Moores but that he was not good for the damages.  Indeed the letter, although mentioning earlier the existence of a damages claim against Mr Moores in addition to specific performance, speaks in the quoted passage of the Bank’s assistance being required until “either the land [is] successfully transferred to the Company or damages in lieu agreed against one or other of the parties or potential parties to this action”.  That strongly suggests that the pitch being made to the Bank was that, if there was success against Mr Moores, the development would then proceed with the finance already arranged, thus enabling the Bank to be taken out at that stage (as originally contemplated).  That in turn suggests that it was not appreciated at that stage that the property market had altered in such a way as to make the original profit projections unrealistic.  This is confirmed by Mr Johnson’s evidence that the thinking in June 1989 was still that it would need to “swing into a development mode if it won at trial”: see paragraph 526 of Mr Johnson’s witness statement.
56.	What the passage also indicates is that, if the action should not succeed against Mr Moores, it was not being emphasised to the Bank that it might be necessary to litigate against the alternative targets (McCarrahers and GW): hence the reference to damages in lieu being “agreed”.  Mr Johnson, however, appreciated by then that the effect of a split trial was that there might have to be a later assessment of damages stage: see paragraph 532 of his witness statement.  In summary the prospect being held out to the Bank was that the claim should be regarded as an asset of WWH, that the trial on liability would take place at best before August 1989 and at worst by the end of the year, and that a successful conclusion was inevitable.  Mr Tovell wrote a letter to the bank dated 18 May 1989 to similar effect, which also supports the inference which I have drawn that at that stage it was still thought that a development profit would be realisable if specific performance was obtained.  Thus his equation was either (a) land plus (unspecified) damages against Moores or a £1m damages claim against McCarrahers or (b) damages against GW.  In addition he was holding out to the bank the possibility of a further development profit being achieved in respect of a plot at 86 Chalk Hill.  No emphasis was placed on the quantum of the damages claim against Moores.
57.	So far as timing was concerned this advice was not far out, and certainly not negligent.  A date for the trial was in due course obtained for December 1989.  The fact that the trial in the event had to be postponed for a month was the result of the collapse of Mr Moores into dementia and the need for a guardian ad litem to be appointed.  The view expressed that an appeal was unlikely was a view which could have been legitimately held.
58.	In the meantime a combination of factors had led Mr Wood to become increasingly anxious about the position of GW in the litigation.  A warning shot across his bows had been fired in March 1989 by Mrs MacLennan following the conference with counsel which had taken place in February.  She had written as follows:
“....  I think it detracts from your professional position for you to be seen to “trade” your position vis-à-vis your insurers and your clients’ position vis-à-vis the Defendants.  If you put yourself in an arena where you are balancing on the one hand the clients’ chances of success together with the impetus you believe you can create by getting your insurers involved at this stage, then there is a conflict of interest which can be seen immediately.  If you are weighing up for your client the chances of his success in the present litigation, together with his chances of success against you, you are in fact giving a view on two pieces of litigation and not one and you are considering your own interests alongside those of your client.”
59.	By July 1989 Mr Wood had formed the view that WWH’s interest would best be served by GW itself being joined as an additional defendant to the proceedings.  There are indeed traces of that view in the letter to Mr Stiling of 17 May 1989 where GW are referred to variously as “parties” and as “potential parties”.  A note by Mr Johnson of his discussions with Mr Wood at this period (July 1989), prepared it seems for the purposes of obtaining advice from PS&R, appears at H5A/4-5.  The note is instructive since it shows that Mr Wood had been warning of the dangers of placing too much reliance on the damages claim against GW.  It was plainly not his advice at that stage that the Chancery action was bound to produce a favourable result for Mr Johnson (“what Rob feels is essential in the circumstances is that there is a cast iron arrangement for WWH on the day.  We shouldn’t go through that Court door without being able to get a judgment against one of the 3”).  The note incidentally also reveals that it was appreciated at that stage that Mr Moores’ mental capacity was weakening (“may have some grey matter left now in 3/6 months time not”).  Mr Wood’s fear, made explicit at a conference with counsel on 12 October 1989, lay in the possibility that WWH might lose the action against both Mr Moores and McCarrahers and be left only with a cause of action against GW which it would be without resources to prosecute.  It was perceived that GW’s insurers might be hoping for precisely this result.  Mr Johnson was accordingly advised at that conference in the strongest terms that he should instruct PS&R to “take the necessary action to join GW as an additional defendant to the proceedings”.
60.	In the event this did not happen.  The ensuing weeks were occupied in continuing the preparations for trial and in abortive attempts to stimulate some interest from the defendants in a possible settlement.  GW became increasingly concerned about their own position, while Mr Johnson maintained the view that he preferred that they should continue to conduct the litigation.  His view (informed by the discussion which had taken place) was that to add another defendant at this stage would cause the trial date to be lost.  Moreover WWH was currently prosecuting the litigation on a credit basis with GW and could simply not afford to change solicitors.  Eventually, after a good deal of to-ing and fro-ing, GW themselves decided on 1 December 1989 that they would have to come off the record.  That same day the files prepared by GW for the purposes of the Chancery action were passed by GW to PS&R who thereafter acted for WWH in those proceedings.  At that stage the proceedings were still expected to enter the warned list and potentially come on for trial in December 1989.  
61.	No further advice was given by GW to Mr Johnson following the termination of the retainer.  He continued to believe that, if the action was successful against Mr Moores, he would be able to recover any shortfall in damages through the route of the claim over against McCarrahers.  What his belief was as to the timing of the receipt of those damages is another matter to which I must return.  Also unclear is what his belief was as to his prospects of success against GW in respect of any such shortfall.  I do not know what advice he was receiving in this respect from PS&R although they had written a letter on 13 September 1989 reserving the position against GW in the event of a WWH  successful claim against Moores.  What is clear is that by the end of December it had become apparent that the question of the recoverability of damages had now assumed great significance.  On 14 December 1989 Mr Johnson learned from Mr Tovell that the costs of delay claim now amounted to some £215,000.  At about the same time he received a valuation of the site (other than the ransom strip) of only £235,000.  The collapse in the property market had by then rendered the original sales projections of the development totally inapplicable.
62.	Shortly before the commencement of the trial on 15 January 1990 Mr Johnson was firmly advised by Counsel and Mr Thomson of PS&R that the view that a defeated Mr Moores would have a claim over against McCarrahers was wrong.  On that footing Mr Johnson realised that, if WWH succeeded against Mr Moores, the result could be financially catastrophic.  When he saw Mr Wood in court he passed him a note indicating this.  The writing on the note then reveals the following exchanges:
“[Mr Wood]:	Why
[Mr Johnson]:	You and PS&R have always advised me that if we defeat 1st Defendant and awarded damages any shortfall would come by way of an indemnity (Moores) against McCarrahers
[Mr Wood]:	There should be a claim against McCarrahers for the shortfall due to their wrongful advice to Moores not to accept exercise was valid.
[Mr Johnson]:	I have been told that doesn’t get me home.  JEK [the partner in McCarrahers] was only attempting to protect the interests of his client by bringing to his attention that the exercise was possibly bad - it was then up to the client whether to take such advice or not.
[Mr Wood]:	I consider that arguable.”
63.	This exchange confirms that Mr Wood had given the advice in question and its importance at that stage in Mr Johnson’s mind in the no-lose equation.  Once the scales had fallen from Mr Johnson’s eyes in that respect, it was apparent that the optimum result in the proceedings might well be to lose against Moores, leaving as targets McCarrahers (on the claim for breach of warranty of authority) and GW (on a claim for negligent failure to exercise the option).  Since the latter claim would have been straightforward on liability (and McCarrahers and GW might be assumed to have the same insurers) an early financial resolution might still legitimately then be hoped for.  That, however, was not to be.
Negligent conduct of the proceedings
64.	This claim has two quite separate aspects.  The first is a claim of a more or less conventional kind that, had GW’s litigation department operated with greater efficiency, the proceedings could have been brought to trial much more quickly.  The paradox of this claim is that, had that happened, and WWH won against Mr Moores, it might well have done so at a time when it was not yet obvious that the property market had turned (so that there would have been no substantial claim for loss of profit against Mr Moores) but WWH would in fact not have completed the development before the decline set in.  It would then have been left to seek its remedy in respect of that against GW.  The second aspect of the claim is paradoxical in another sense.  This is the claim that, but for certain negligence or other breach of duty on GW’s part, the proceedings would have taken a different course and had a different outcome.
65.	I will deal first with this second aspect.  It depends essentially on two propositions: first, that HHJ Blackett-Ord’s decision was not supportable on the ground relied on (namely that the option had been validly exercised not by the letter dated 18 February served on McCarrahers, but by the earlier letter dated 15 February 1987 which had also been served on McCarrahers but the contents of which had been notified to Mr Moores personally by McCarrahers before the expiry of the option); and secondly, that had proper disclosure been made in the proceedings (and had counsel been fully instructed as to the negotiations which had led to the grant of the option and its various extensions) it would have been apparent both to counsel and the courts that the view that McCarrahers had implied authority to accept service of the notice on behalf of Moores was probably unsustainable.
66.	As to the letter dated 15 February 1988, it was a very late starter in the proceedings.  It had been misfiled by its author (Mr Tudor Rees of GW) and completely overlooked and forgotten about when counsel was first instructed.
67.	Its existence was not discovered by GW until November 1989, and it was only after its discovery that Mr Rees “remembered” that it had been his intention by this letter actually to exercise the option.  Given its terms (it was headed “subject to contract”, spoke of a “proposal” to exercise the option and enclosed no fee) and its late arrival on the scene of the litigation, WWH and its advisors can have had no great expectation that this letter and Mr Rees’ evidence would get them home.  Somewhat to their surprise it did before HHJ Blackett-Ord V-C, and the Court of Appeal did not express a view as to whether his judgment in that respect had been right or wrong.
68.	The Court of Appeal took a different route to the conclusion that Mr Moores was bound.  As I read its decision (reported at 63 P&CR 480), it held that McCarrahers’s authority to accept service of the notice was incidental to the authority which the inter-solicitor correspondence indicated that they had to deal with all matters concerned with Mr Moores’ title which were relevant to the proposed development (see Dillon LJ ibid. at pp 487-8 and Nourse LJ at p 490).  In coming to that conclusion the Court of Appeal did not ignore the evidence before it of the dealings which had taken place in the past directly between Mr Skitch and Mr Moores without the intervention of McCarrahers, although that evidence was admittedly limited.  What it regarded as critical was the nature of the correspondence between GW and McCarrahers from September 1987 onwards.  It is Mr Johnson’s contention in these proceedings that had the full picture of the Skitch/Moores dealings been before the Court of Appeal it would have reached a different conclusion: it would have been apparent that McCarrahers’s role during the earlier period had been extremely limited, and that the principal dealings had always been with Mr Moores, either by Mr Johnson, his co-director Mr Burden, or Mr Skitch.
69.	In his opening written submissions Mr Ter Haar elaborated this point by a detailed exposition of these dealings.  Nothing, however, persuades me that any of the relevant evidence would or should, as a matter of logic, have changed the approach of the Court of Appeal.  The thrust of their judgments turns on the direct dealings between GW and McCarrahers in the period from September 1987 onwards and in particular McCarrahers’s role from 14 January 1988 onwards.  Assuming (which I must) the correctness of their conclusions on that correspondence in that period, painstaking investigation of the earlier period was logically irrelevant.  
70.	The point has assumed great importance in Mr Johnson’s mind because of failure by GW either to disclose in the Chancery proceedings the Skitch files relating to this earlier period or to furnish them to PS&R when their retainer was terminated.  Given the ordeal to which Mr Johnson has been subjected by GW’s insurers, he can be forgiven for suspecting that GW’s motive in these actions was the dark one of suppressing material which would have destroyed their position.  I do not find that proved.  I accept that GW did not disclose the material in the proceedings from a belief that it was legally irrelevant and did not pass it to PS&R from a belief (perhaps not thought through) that Mr Skitch had a lien on the papers which they were bound to preserve.
71.	Accordingly I am unable to accept that any breach of duty by GW (to whomsoever owed) led to the Chancery proceedings being won rather than lost.
72.	I turn to the question whether negligence in the conduct of the proceedings led to them being more delayed than they need have been.  As to this, in a context where the client was pressing for, and the solicitor was forecasting, an early trial, the proceedings do appear to have been conducted with a comparative lack of grip or sense of urgency.  Defences had been received from both defendants by the end of April 1988.  Following the conference with counsel in May 1988, a request for further and better particulars was drafted but GW overlooked the need to serve this until July 1988 when an enquiry from Mr Johnson provoked action.  GW also rejected at this period a suggestion from McCarrahers’s solicitors (Blake Lapthorn) for early discovery of relevant attendance notes, and exchange of proofs, an odd judgment to have made in a case which depended (on one view) on what express instructions had been given by Mr Moores to McCarrahers.  GW did not feel in a position to issue a summons for directions until 12 August 1988 by which time the earliest appointment obtainable was for 11 October.  Mr Wood (although not himself a litigator) accepted in evidence that greater diligence would have enabled that appointment to have been obtained before the long vacation.  No thought seems to have been given to seeking on that summons directions for a speedy trial.  It was left to the defendants’ solicitors to propose a date for setting down (the February 11 1989 date) which was consented to by GW without apparent demur.  GW were themselves not in a position at that date to press for any more stringent timetable having by then themselves made no preparations in relation to either discovery or the assembly of expert evidence.  The order dated 11 October provided for discovery by lists within 14 days and the valuation evidence to be exchanged by 11 January 1989.  GW appear not to have started work on the preparation of their list before 31 October 1988, and it was not in fact served on the defendants until 7 February 1989.  Mr Moores’ solicitors in their turn dragged their heels over discovery to such an extent that an order had in due course to be applied for to compel this.  Once that obstacle was out of the way (and the need for experts’ reports obviated by the order for a split trial) the problem became essentially one of obtaining a hearing date.  It is not clear to me why this was still in the air on 17 May 1989 when Mr Wood wrote the letter to the bank to which I have already referred (see paragraph 54 above), and possible that the whole period from March 1989 to the eventual trial in January can be accounted for by difficulties not of GW’s own making.
73.	More diligent prosecution of the proceedings should in my judgment have resulted in the case being ready for trial (on liability and quantum) in late 1988 or the Spring of 1989 and should have resulted in such a trial taking place at least by the end of June 1989.  Although the contrary was suggested by Mr Ter Haar, I think it highly improbable that such a trial could have been achieved within the six month forecast originally given by Mr Wood.
Duty to Mr Johnson Personally
74.	Mr Wood was first consulted by Mr Johnson in April 1987.  At that time the solicitor acting for WWH in relation to the Sunnyfields site was Mr Skitch, and Mr Johnson was disenchanted with the progress he was making.  Mr Johnson also on that occasion sought Mr Wood’s advice on behalf of a company called Berkeley Video Limited.  So far as the Sunnyfields site was concerned, it was agreed that Skitch should continue to be retained to complete the work he then had in hand but that Mr Wood would be available, in the background, to monitor progress.  Mr Johnson’s belief was that WWH would in due course be rendered a bill by GW for this service.  In evidence Mr Wood accepted, however, that he would have regarded himself at this stage as being consulted by Mr Johnson personally rather than by WWH.
75.	In June 1987 Mr Johnson instructed GW in relation to a joint venture agreement into which he was proposing to enter relating to the promotion of a video juke box business.  The proposed partner in the business was to be a M Reynard or his company Idafic, the joint venture vehicle to be known as Videolencia.
76.	In July 1987 GW were instructed by Mr Johnson personally to prepare a shorthold tenancy agreement for one of the two flats at St Peter’s Court Winchester of which Mr Johnson held long leases.  The flats were part of a development carried out by WWH.  In September 1987 Mr Johnson took the decision to dispense with Mr Skitch’s services on behalf of WWH and to instruct GW in his place.  At that point GW opened a new file (“W98W”), denoting that the client was WWH and the partner responsible Mr Wood.  Up to that time Sunnyfields-related paper had been kept on a file labelled “Johnson, John, Mr, General File”.  From this point onwards there is no doubt that the firm was retained by WWH in connection with the site.  The only question is whether it was also retained by Mr Johnson personally or (absent such a retainer) owed him a duty of care in relation to these matters.  One of the early steps which Mr Wood was asked to take in connection with WWH was to deal with the question of Mr Skitch’s resignation as director of WWH and the transfer of his one share into Mr Johnson’s name a matter in which he was necessarily acting for Mr Johnson personally.  Also during this period GW were instructed to act on Mr Johnson’s behalf in a dispute with a neighbour (Mr Shepherd) at St Peter’s Court, and on WWH’s behalf in relation to a dispute with an architect.  In December 1987 Mr Johnson instructed GW in relation to a new company in which he was interested Collector Piece Video Ltd (CPV).  GW were in due course instructed to draft a supply agreement between Colour Leisure Ltd (CL) under which CL was to supply CPV with control units for video juke boxes for distribution in the UK.
77.	So far as WWH business was concerned there were three occasions on which it is clear that GW acted not only for WWH but also for Mr Johnson in a personal capacity.  There were each in relation to personal guarantees being proffered or given by Mr Johnson in respect of WWH borrowing: on 30 November 1987 in relation to Royal Bank of Scotland, the second, on 8 February 1988, in relation to NatWest Bank, and the third, on 9 February 1988 in relation to a short-term loan by Mr Ridout to WWH of £35,000.  In cross-examination Mr Wood accepted that in relation to such matters he was acting pursuant to what Mr Ter Haar described as “a dual retainer” on behalf of Mr Johnson personally and WWH.
78.	By February 1988 GW had therefore acted, on Mr Johnson’s instructions, in a number of matters.  In some of them they were plainly being instructed by him personally, in others they were plainly being instructed by WWH, and in some again they were clearly acting for both.  Mr Wood acknowledged in his evidence that it was not always easy to say where, or when, the personal retainer transmuted into, or overlapped with, a retainer by one or other of the vehicles through which Mr Johnson traded.  This is not surprising, particularly in relation to cases such as Videolencia and CPV where the initial instructions precede the creation of the relevant vehicle.  However, the fact that the position may in certain situations be difficult to analyse does not mean that it in principle defies analysis.  In principle, the question is whether, in relation to particular acts or omissions by GW, a contract can be inferred between GW and Mr Johnson personally.
79.	The question of principle in this case has already been considered on the trial of the preliminary issue before Pumfrey J, and by the Court of Appeal.  In his judgment Pumfrey J referred to the following passage in the judgment of Scott LJ in Groom v Crocker [1939] 1 KB 194 at 222:
“The relationship is normally started by a retainer, but the retainer will be presumed if the conduct of the two parties shows that the relationship of solicitor and client had in fact been established between them.  The retainer when given puts into operation the normal terms of the contractual relationship, including in particular the duty of the solicitor to protect the client’s interest and carry out his instructions in the matters in which the retainer relates, by all proper means.  It is an incident of that duty that the solicitor should consult with his client in all questions of doubt which do not fall within the express or implied discretion left him and should keep the client informed to such an extent as may be reasonably necessary according to the same criteria.”
80.	After referring to Oliver J’s deprecation of the concept of a general retainer in Midland Bank Trust Co v Hett Stubbs & Kemp [1979] Ch 384 at 396, Pumfrey J continued as follows:
“No doubt a general retainer, in the sense of an obligation to consider all the client’s affairs when asked to advise on any one of them, is not possible.  But it seems to me that any request for particular advice or for provision of any other service is capable of constituting a retainer to advise more than one person.  It all depends upon the circumstances in which the advice is sought.  So, to take an example from this case, it is pleaded that Mr Johnson had, to the knowledge of Gore Wood, charged his home at 86 Chalk Hill in favour of the bank to secure WWH’s debts (Further and Better Particulars answers 7A and 8), had guaranteed  WWH’s liability to a gentleman called Ridout to the extent of £35,000 (Further and Better Particulars answers 7B and 8) and had borrowed £1,000 from Mr Windust for his personal expenditure (Further and Better Particulars answer 8).  In response to a request in March for advice as to how long the Chancery action would take once it became clear that the vendor would challenge the exercise of the option, it is alleged that Mr Wood negligently advised Mr Johnson that the action would be concluded by August 1988.  Given that it is alleged that Mr Wood had acted for Mr Johnson in relation to his other businesses, and that he was familiar with Mr Johnson’s personal financial position, it seems to me quite possible that at trial it will be shown that the relationship of solicitor and client had come into existence between Mr Johnson and Gore Wood and that this request for advice directly relevant not only to WWH’s financial position but also that of Mr Johnson was made not only on behalf of WWH but also on Mr Johnson’s behalf.”
81.	The Court of Appeal agreed with that conclusion (see per Ward LJ at [1999] Lloyd’s Law Reports 91 at 98).  Pumfrey J was there dealing with the specific case of the advice given (as to the timetable for the Chancery proceedings) in response to a particular request.  In approaching the question whether an inference can be drawn from the parties’ conduct that a personal retainer as well as a corporate retainer was intended, the nature of the particular subject matter of the retainer needs to be carefully considered.  In the present case there are three, potentially distinct, subject matters to consider.
82.	The first is the exercise of the option itself.  When Mr Johnson instructed GW to exercise the option it is clear that he did so on behalf of WWH, and it is clear that relevant duties of care and skill were thereupon owed by GW to WWH.  It is also obvious that since Mr Johnson was effectively the sole shareholder in WWH, a breach by GW causing loss to WWH would result in damage to Mr Johnson.  That fact alone would not be enough to give rise to the inference that GW was acting as Mr Johnson’s personal solicitor.  The inference is simply unnecessary.  Mr Johnson’s position qua 100% shareholder is prima facie protected by the duties owed by GW to WWH under its admitted retainer.  If, however, one overlays on that simple model the additional fact that, to the knowledge of GW, Mr Johnson was relying on the effective exercise of the option to put himself in a position where he could be released from his personal guarantees to NatWest and to Mr Ridout, there seems to me less difficulty in drawing the inference that GW owed him a personal duty of care in exercising the option: the instructions to exercise the option can quite readily be seen as having been given both by WWH and by Mr Johnson as guarantor of the bridging finance.  GW had acted for him personally on the giving of the guarantees, and knew that, qua guarantor, he was potentially exposed to loss separate from that to which WWH was exposed on a failure to exercise the option with due care.  In those circumstances I find little difficulty in inferring that when Mr Johnson gave instructions to GW to exercise the option he was doing so not only on behalf of WWH but also on his own behalf, and that GW acted accordingly.
83.	My conclusion is that in relation to the exercise of the option GW did owe duties of care and skill as solicitors to Mr Johnson pursuant to a personal retainer by him which co-existed with those owed by GW to WWH.  In reaching that conclusion I do not rely either on the fact that in their initial instructions GW referred to themselves as acting for WWH “and in particular one of the Directors of the Plaintiff Company, Mr J Johnson”, or on the fact that the bills subsequently addressed to WWH were marked as “payable by J Johnson”.  Both these facts are however quite consistent with the conclusion which I have reached.  I emphasise however that this conclusion that there was a personal retainer does not answer the question what the scope of the retainer was, in the sense of identifying against what kinds of personal loss it was GW’s duty to protect Mr Johnson.  That question I deal with below (see paragraph 198 and following).
84.	In making that inference I should make it clear that I do not accept the wider thesis urged on me by Mr Ter Haar that the personal retainer was one which originated at the original meeting between Mr Johnson and Mr Wood on 7 April 1987.  If (as Mr Wood was disposed to accept) the retainer was a purely personal one at that stage its scope was limited to the advice given on that occasion and the steps then taken by Mr Wood pursuant to the instructions then given.  There was no need for that personal retainer to continue once WWH had decided to dispense with Mr Skitch’s services and to retain GW in September 1987.  Accordingly I am unable to accept that on that occasion, as is pleaded by paragraph 2 of the Statement of Claim, Mr Johnson:
“engaged [GW] to advise him generally and act in its professional capacity as solicitor for him in accordance with his instructions from time to time in connection with a number of business projects in which the Plaintiff was involved.”
85.	The second alleged personal retainer is in relation to advice sought and given as to the duration and outcome of the Chancery proceedings.  If my conclusion on the first retainer is correct, then the inference can readily be drawn, for the same reasons, that a personal retainer existed in relation to the advice.  In fact Mr Wood accepted readily enough in cross-examination that the advice given to Mr Johnson was in his capacity both as director and as shareholder of WWH, and that he was aware that the advice had implications for Mr Johnson’s personal financial arrangements.  The latter is indeed obvious from Mr Johnson’s letter of 9 May 1988.  GW were also to write, on Mr Johnson’s behalf, to Mr Ridout’s solicitors giving them an up-date on the progress of the Chancery proceedings.  When writing letters to the Bank containing information on this issue in April and May 1989 GW were clearly acting both on behalf of WWH and of Mr Johnson personally.  In my judgment the inference of a personal retainer can readily be drawn.  Once again the scope of that retainer, in the sense referred to above, is a matter to which I must return later.
86.	The third alleged retainer is in relation to the conduct of the Chancery proceedings.  Mr Ter Haar submitted that if I were to decide the first two retainers existed it logically followed that this retainer also should be inferred.  I am not sure that it follows as a matter of logic, but in the particular circumstances it would offend common sense to come to any other conclusion.
87.	Mr Ter Haar’s alternative submission was that, absent a retainer, equivalent duties of care and skill were in any case owed at common law.  The submission had already been made in this case on the preliminary issue before Pumfrey J and the Court of Appeal.  In giving the judgment of the Court of Appeal, Ward LJ on this issue said at [1999] Lloyds LR (PN) 91 at 99:
“The need to establish a tortious duty only arises if there was no proper retainer of the solicitors by the client in the circumstances of this case.
The Judge reviewed the authorities carefully.  He considered the respective submissions which seem to be the same as the submissions made to us.  He concluded:
“In my judgment it is not open to me on the present state of the authorities to say that these facts are not capable of giving rise to a duty of care”.”
We agree with his conclusion and with the reasons he gave for arriving at it.  A great deal of argument, written and oral, was addressed to us on this question and we do not intend to over-burden an over-lengthy judgment with another twenty pages that could be devoted to this subject if we were to analyse in detail all the learning on this topic.  If one follows the Caparo Industries Plc v Dickman [1990] 2 AC 605 path and considers the threefold questions of the foreseeability of damage, proximity and fairness, then we would conclude that it is arguable that personal loss was foreseeable, that the relationship, however general, of solicitor and client put the parties in sufficient proximity and that it would not be fair if the negligence caused damage for which there was no remedy.  If, following the second path one enquires whether there has been “an assumption of responsibility”, then we would conclude that it is arguable that the solicitors were tendering skilled advice or services in circumstances where they knew or ought to have known that the plaintiff was relying upon that advice or service and that would appear to fall within the bracket set by Lord Browne-Wilkinson in White v Jones [1995] 2 AC 207.  Mr Steinfeld relies heavily upon the speech of Lord Goff in that case which, he submits, establishes that this duty should only be extended where there is no other available remedy for recovering the loss.  Since the company can recover, the shareholder should not be permitted to do so.  That was, no doubt, an important factor in that case but we would not wish to exclude argument that the line cannot necessarily be drawn as starkly as that.  Certainly, if one allows for the incremental development of the law, this may not be a huge leap forward.  As the judge held:
“But if the facts alleged in the statement of claim are proved, it may well appear at the end of the day that Mr Johnson’s personal affairs and his business dealings were so intimately intertwined that it is quite possible that any professional man advising on all these matters on which the defendants are alleged to have advised, or even in relation to the WWH option alone, would not distinguish between Mr Johnson and his company.  The solicitor would know the advice which he was giving would be relied on for the guidance of the whole since the parts could not sensibly be separated.  The incremental development over White v Jones is not great, provided that the development is limited to special circumstances of this description.  Foreseeability of loss would be clearly present.  I do not see that such imposition of a duty in such circumstances would be otherwise unfair, unjust or unreasonable.”
In our judgment an arguable cause of action is alleged.  We do not think that any modification of this view is required in the light of the decision of this court in Verderame v Commercial Union Assurance Co Plc [1992] BCLC 793, to which counsel drew our attention after the argument had been concluded and judgment reserved.”
88.	Given the conclusions at which I have arrived on the question of a retainer, it is unnecessary for me to burden this judgment with an exposition of the arguments which were addressed to me by counsel on this issue.  Had I come to the conclusion that there was no retainer, I should have had little difficulty in concluding that a tortious duty was owed.  The real question seems to me to be whether the scope of the duty (whether in contract or tort) was such as to encompass the kind of loss for which Mr Johnson now seeks to hold the company liable.  I am not impressed by the argument that it would be unfair to hold GW liable to Mr Johnson in addition to its liability to WWH.  Once the possibility of personal loss distinct from loss to WWH is recognised, and given the rule (now firmly established by the majority decision of the House of Lords on the preliminary issue in this action) which prevents the shareholder from recovering in respect of loss which the company might have recovered, it is not unfair or unreasonable that a shareholder in Mr Johnson’s circumstances (i.e. a 100% shareholder who had guaranteed the company’s liabilities in connection with the proposed transaction) should have a remedy in respect of foreseeable personal loss.
The Losses
89.	I turn to consider the nature of the losses for which Mr Johnson claims compensation.  The claims are:
(1)	Lost investment in CPV:			£ 37,425
(2)	Lost investment in AdFocus:		£ 85,256
(3)	Cost of personal borrowings:		£3.3m (rising)
(4)	Bank interest and charges:		£135,406.24 (rising)
(5)	Mortgage charges and interest:		£ 67,390 (rising)
(6)	Diminution in value of pension fund:	£480,000
(7)	Loss of 12.5% shareholding in WWH:	£ 12,900
(8)	Additional tax liabilities:			£ 80,502
90.	At the outset of his cross-examination Mr Steinfeld secured Mr Johnson’s agreement to the proposition that, except in relation to the pension fund claim, all the above losses stemmed from decisions he made to invest in CPV and AdFocus.  The money invested in CPV and AdFocus was money which, it is claimed, he would not have invested had he had competent advice as to the duration and outcome of the Chancery proceedings.  Moreover the borrowings which he incurred and in respect of which he claims can be analysed as having been made for the purposes of making those investments.  The additional tax liabilities (in the form of penalties and interest) in respect of which he claims would also not have been incurred had those investments not been made.  The proposition which Mr Johnson accepted was that, had those investments not been made then, taking into account the recovery in the Company action, “my corporate and personal losses would have been less or non-existent”.  The central questions are, therefore, (1) whether the duty of care owed by GW to Mr Johnson extended to a duty to protect Mr Johnson in making the borrowing and investment decisions which he did make and (2) if so, whether those decisions were in fact made in reliance on advice given by GW.  Answering those question requires an examination of the history of the investments and borrowings, and for findings to be made as to the extent of GW’s knowledge of them.
Mr Johnson’s interest in video technology
91.	In July 1986 Mr Johnson had been introduced to a Mr Berkeley whose company Berkeley Video Ltd had, in association with Kegmatics Ltd, researched and developed a low cost production video juke box (VJB) which incorporated a visual graphics display facility for point of sale advertising.  Mr Berkeley and Mr Johnson believed there was a market for VJBs in Southern Spain, and Mr Johnson travelled there in March 1987 in order to explore the market.  At about the same time he met a Mr Candy, who had previously been a director of Kegmatics, and who had produced through his company Colour Leisure Ltd (CL) a VJB which he believed to be technically superior to the Berkeley Video/Kegmatics product.  Mr Candy also had what appeared to be a valuable European contact in the form of a M. Reynard who, through his company IDAFIC SA (Idafic), promised to be able to market VJB units throughout Europe.
92.	On his return from Spain in March 1987 Mr Johnson continued to nourish his contacts with Mr Berkeley, and this was one of the matters discussed with Mr Wood at their first meeting on 7 April 1987.  The Berkeley/Johnson project was conceived of as proceeding under the name “Videolencia”.  Quite shortly afterwards Mr Johnson learned that Kegmatics Ltd was in dispute with Berkeley Video Ltd as to the ownership of the technology, and informed both Kegmatics and Mr Berkeley of the fact that he was in discussions with CL.  Mr Johnson was at this stage hoping to find funding for the project through the services of a Mr Cy Gillis, and had located some 32 sites in Spain to which sales might be made.  
93.	Negotiations at this time with Idafic had resulted in a provisional agreement whereby Idafic would supply VJBs to Videolencia and the latter would have the exclusive right to distribute them in Spain and Portugal.  A draft agreement to this effect was forwarded to Mr Wood in May 1987 which he re-drafted in some haste.  It does not appear that he was at this stage given any information by Mr Johnson of the commercial background to the agreement or the manner in which Videolencia’s commitments were to be financed, save that as appeared from the draft agreement the payments were to be made on a deferred basis.  By the middle of July GW had prepared further documentation intended to reflect the on-going negotiations with Mr Reynard and CL.  These envisaged the formation of a joint venture company (Videolencia Ltd) to be equally owned by Mr Johnson and Mr Reynard.  Videolencia was to purchase VJBs from Idafic and operate in Spain through an operating subsidiary.  The documentation contemplated that Mr Reynard would make a immediate cash injection of £20,000 into Videolencia.  CL was to supply the VJBs to Idafic under a separate agreement.  Heads of Agreement were signed to this effect on 31 July 1987. 
94.	The whole edifice, into which Mr Johnson had invested considerable time and effort since the spring, now depended crucially on Mr Reynard coming up with the cash.  He seemed to be dragging his heels.  GW were instructed to write a stiff letter which they did on 25 August 1987.  In his witness statement Mr Johnson said that this letter “reflected [Mr Wood’s] knowledge and commercial grasp of events (not just in relation to Videolencia Ltd but their effects on me personally and my principal activity, WWH Ltd)”.  I comment that one certainly cannot derive that from the letter itself.  By mid September 1987 it became clear that Mr Reynard had cash flow problems of his own, but was still hopeful of resolving them.  Nothing further was heard from him despite at least one chasing letter from GW (written in French and drafted by Mr Johnson).  By the end of October 1987 Mr Johnson had decided to abandon the Videolencia project owing to the lack of funding from Mr Reynard and the fact that the Spanish tourist season that year had by then been missed.
C.P.V.
95.	The abandonment of the Videolencia project left CL with 50 VJB control units on its hands, manufactured in readiness for supply to IDAFIC, and Mr Johnson having invested time effort and money (to the tune of some £20,000).  He conceived the idea of purchasing the units from CL and attempting to market the VJBs in the UK.  Following a successful demonstration at an exhibition in December 1987, he reached an agreement in principle with CL to purchase the units, and it seems likely that draft heads of agreement in this connection were sent by Mr Johnson to Mr Wood at about this time.  The agreement with CL was intended to be firm by 31 January 1988 but CL was  prevailed on to extend this deadline first to 15 and then to 29 February and later to 18 March 1988.  By this time CPV had been acquired as the vehicle through which Mr Johnson intended to purchase the units from CL.  
96.	On Mr Johnson’s evidence these dates were connected with the exercise of the option in relation to Sunnyfields.  The expiry date for the option was then fixed for 20 January 1988.  It was only on 14 January that an extension was agreed to the 19 February 1988.  Mr Johnson was on this basis expecting to finance CPV’s purchase of the units from CL from monies which would become available once the option was exercised and WWH became owner of the valuable development site.  There is no evidence that this was made known to Mr Wood prior to the exercise of the option.
97.	On 22 February 1988 (after the option had been exercised but before he learned that its validity was challenged) Mr Johnson personally made an advance payment of £1,005.00 to CL.  On the same day it was agreed that Mr Johnson would provide consultancy services to CL, in particular in relation to a dispute which CL’s sister company (CVT Ltd) had with a former director.  Mr Johnson was later to be instrumental in causing CVT Ltd to instruct GW to act in proceedings to resolve this dispute.  
98.	It seems clear that Mr Johnson presented himself to CL (Messrs Candy and Carlu) as an astute and careful businessman, with financial resources at his command.  CL had been left financially embarrassed by Idafic’s refusal to honour its commitments and continued to be financially embarrassed by the delay in concluding the contract with CPV.  The £1005.00 paid by Mr Johnson on 22 February was paid directly to one of CL’s suppliers.
99.	By 11 March 1988 Mr Johnson felt in a position to sign the CPV contract with CL.  That involved a commitment by CPV to buy a minimum of 50 control units from CL at a total price of £51,989.50 plus VAT to be paid as to £10,000 in month 1, £12,000 in month 2, £1800 in month 3, £2,400 in month 4 and £3000 in month 5, with 10 units being delivered in each month, and payments thereafter being made at the rate of £3,732.17 per month.  Cabinets at a price of £250,00 each were also to be purchased at the rate of 10 per month.  The initial payment of £10,000 and VAT did not, however, have to be found by Mr Johnson because it had been agreed that payment for his consulting services to CL should be made at a rate which (suitably backdated) enabled the initial units to be delivered without cash actually changing hands as between CL and CPV:  this was the effect of the consultancy agreement, the formal terms of which were drawn up by GW in July 1988, which provided for CL to pay a consultancy fee at the rate of £2,916.66 per month, or units in lieu at a value of £1,039.00 each.  This was in turn potentially offset in part by a provision in the supply agreement that CPV would pay CL £1,000 per month, subject to certain conditions, for its services in assisting in the promotion of CPV’s business.
100.	Mr Johnson has a note in his diary for 11 March 1988 suggesting that he raised with Mr Wood the question of incorporating a break-clause in the supply agreement, and suggests that he did so because of anxiety on his part to be reassured that the six month time estimate for the resolution of the Chancery action could be relied on.  No such break clause was negotiated at the time leading Mr Johnson now to believe that he received the required reassurance from Mr Wood.  I find that he probably did receive that reassurance but whether that is so or not, it appears that Mr Johnson was perfectly confident that such a break clause would be negotiable should the need arise.  It was in fact agreed to on 18 June when CL wrote acknowledging that the first three payments had been received and suspending any liability in respect of the fourth “until such time as WestWay Homes court case is resolved, currently estimated to be September/October this year”.  That Mr Johnson must have been confident that such a break-clause would be obtainable if necessary can be inferred from cash flow projections which he prepared in early April 1988 for the purposes of obtaining bank finance.  These envisage a total of 25 VJB’s being installed over a 12 month period but payments for the control units ceasing after month 7.  The total price payable for units (£29,740) envisages that as at that date he was forecasting only having to pay for and take delivery of 25 units.  
101.	This pitch to the bank (Barclays in the event) was successful and CPV obtained an overdraft facility of £10,000 guaranteed by Mr Johnson.  Obtaining this overdraft did not involve Mr Johnson in making any representations to Barclays about his expected receipt of funds from WWH.  The business case stood on its own two feet.  In paragraph 250 of his witness statement Mr Johnson, after referring to the Barclays facility, comments (not untypically) “I specifically recall orally informing Mr Wood of this development”.  If this is the case, the context seems to have been one in which Mr Johnson was funding what would otherwise have been a salary drawn from WWH (see paragraph 247).  It should in any event be noted that Mr Johnson does not say that he invited Mr Wood to advise him on the wisdom of undertaking the liability.
102.	By June 1988 he had decided that CPV would only seek to establish a 10 site operation.  In the event it only ever achieved 8.  That was an economically unsustainable number of sites to run, and by March 1989 Mr Johnson had concluded that the operations would have to be wound up and the assets sold.  He preferred to devote such resources as were available to him to the other project in which he had by now engaged with Mr Candy, namely the AdFocus project.
103.	By this time Mr Johnson’s net cash investment in the CPV project added up to £23,618.  That figure added to £8,885 consultancy fees (from CL) and a liability to Hunt & Co, accountants, under a personal guarantee of £4,922 is what constitutes the £37,425.00 claimed under this head in the action.  
104.	Does the evidence establish that Mr Johnson would not have made this investment had he been given less optimistic advice by Mr Wood?  Mr Johnson was himself much less clear on this point in his oral evidence than was portended by his witness statement.  He was faced with the difficulty that his cash flow forecasts showed that CPV was being forecast as being able (with the assistance of £10,000 bank borrowing) to stand on its own two feet and able to escape from its liability to buy all 50 of the units.  There was, therefore, on that view no reason why he should not have proceeded with that investment even if Mr Wood’s advice had been that the action might not come on for 18 months.  Faced with that line of questioning Mr Johnson fairly said “I do not know” (Day 5, p35, line 5), “I would have to think about it” (Day 5, p 35, line 55, p39 and p 40 lines 9-10).  I do not think that Mr Johnson ever did give a final considered view on whether he would have made the CPV investment had he been warned (either by Mr Wood or by PS&R) of the possible course which events could theoretically take in relation to the exploitation by WWH of the various causes of action open to it.
105.	The reality of the matter seems to me to be that his decisions in relation to CPV were motivated not so much by the advice which GW gave in March 1988 as by the fact that he had become morally and emotionally committed to the project much earlier in the year, and had done so in the confident expectation that, once the option was exercised, he would be a relatively much wealthier man able to pursue that interest from a position of strength.  Mr Wood’s reassuring advice in March as to the essentially short term nature of the problem with the option gave him no reason to back away from the project.  The project had to be first reduced (from a 25 site to a 10 site plan) and then abandoned altogether (a) because it did not take off as expected and (b) because the AdFocus project appeared to be potentially more exciting, more lucrative, and therefore more deserving of the limited finance which he felt able to commit (see Day 5 p 29, lines 50-55)
AdFocus Ltd
106.	This company was formed by Mr Johnson in May 1988 as part of the project to pursue the development and marketing, in association with CL, of a product known as the Admaster.  This was a solid state video graphics advertising control unit, which had been manufactured by an associated company of CL known as CVT Ltd.  In December 1987 various employees of CVT had left and formed their own company manufacturing and promoting an identical product.  Mr Johnson recommended to Mr Candy that CVT retain GW to bring proceedings.  This was duly done, but an application for interim injunctive relief in the event foundered on 25 May 1988.  CL had in the meantime been improving the specification, with the aim of producing a smaller more compact unit with an internal memory bank, accessible by a remote loading module and capable of displaying 50 pages of high resolution advertising.  On 24 May 1988 Mr Johnson reached an agreement with Mr Candy whereby AdFocus purchased all CL’s intellectual property rights in the technology concerned, agreed to fund all the research and development, and agreed to establish a market for the product.  It also agreed to enter into a manufacturing agreement with CL.  Mr Johnson implies in his witness statement that Mr Wood was aware of his “overall strategy for AdFocus” but, in my judgment, this is a not untypical example of Mr Johnson assuming or asserting that Mr Wood had an almost encyclopaedic knowledge of all Mr Johnson’s projects and plans.  In fact GW were never formally instructed in relation to the AdFocus project, although it is possible that (as Mr Johnson recalls) he asked Mr Rees to “proof-read” the draft heads of agreement which he had himself drawn up.  Mr Johnson in fact chose to instruct PS&R to draw up the detailed contract between AdFocus and CL.  GW’s only involvement was on the periphery of the AdFocus project, namely dealing with the CVT litigation and its aftermath (in relation to which Mr Johnson had entered into financial commitments on Mr Candy’s behalf and GW had drawn some of the supporting security documentation).
107.	By offering financial support to Mr Candy (including lending him some £11,000 interest free) and his assistance with the CVT litigation Mr Johnson had established sufficient goodwill with CL to secure the agreement of Mr Candy and his designer Mr Pritchard to work at half-pay.  GW were involved in July 1988 in drawing up the loan documentation with Mr Candy (see H3/55).  Mr Johnson “drip fed” the monies needed for the R&D from the CPV bank account.  By the end of July Mr Johnson concluded that such expenditure was all that he could at that stage fund “as a comprehensive marketing budget represented a cost in the region of £25,000 (marketing, although essential, was a luxury I couldn’t afford to underwrite at that stage).”
108.	In August 1988 Mr Johnson made contact (through Mr Gillis) with a Spanish company represented by a Mr Gines, and enlisted the latter’s interest in the AdFocus system.  By the end of September 1988 a Mark 1 version of the unit had been ‘productionised’.
109.	In November 1988 Mr Johnson secured an order for 10 units from a company called Video Link Electronics Ltd (VLE) for supply to the Staffordshire Building Society.  CL manufactured the products and AdFocus delivered them, but VLE failed to pay the £14,461 due.  The Staffordshire Building Society could not be tempted into placing an order with AdFocus, the prospects of business with them petering out in April 1989.  An attempt in December 1988 to interest The Fareham Shopping Centre also failed as a result of AdFocus’ inability to provide a termination indemnity bond in a sum of £10,000.  Marketing efforts by consultants retained by AdFocus (DSM) were also hampered by lack of available funding.  Five units were sold to Carlmatt Ltd for installation at the Mander Centre in Wolverhampton.  The latter subsequently became interested from August 1989 onwards in acquiring the Mark 2 version of the product but this in the event led nowhere.
110.	The most encouraging prospect in the spring of 1989 remained Mr Gines.  A Mark 2 version of the unit had been produced, and following a visit to Spain by himself and Mr Candy, Mr Johnson was in a position to write a detailed proposal letter to Mr Gines dated 21 March 1989 answering a detailed questionnaire which had been put.  Mr Gines responded towards the end of April with a 32 page “Strategy Plan” which envisaged starting business in the third quarter of 1989 and expanding it in 1990.  Mr Johnson comments in his witness statement “As usual I orally informed Mr Wood of this progress (if only because we were both always interested in the prospect of any emerging funds which might either assist me personally or the overall situation as it affected WWH Ltd/AdFocus Ltd.”  Once again I think Mr Johnson exaggerates the degree of interest which Mr Wood can be expected to have had in relation to AdFocus, where (to the extent to which lawyers were involved at all) it was PS&R whom Mr Johnson was instructing.  At this stage GW’s instructions from Mr Johnson appear to have been limited to the property side of his affairs, viz the Chancery action and a project Mr Johnson had to develop part of the site of his matrimonial home.
111.	Mr Gines, at very short notice, announced his intention of visiting the UK on 10 July to look at the AdFocus UK operation.  This put Mr Johnson into a spot.  AdFocus had been presented to Mr Gines as an enterprise of some substance.  In reality it consisted of Mr Candy and his design team working in a hired portacabin.  The presentational problem was resolved by Mr Johnson borrowing a friend’s offices in Ringwood for the day.  The visit was a success.  Matters thereafter proceeded towards the signature of Heads of Agreement which PS&R were asked to draft.  Progress towards finalisation of the contract enabled Mr Johnson to write to NatWest on 15 August predicting a receipt of £6,000 from AdFocus into the WWH bank account in October 1989.  He wrote to Barclays Bank on 21 August 1989 claiming that the Spanish contract guaranteed, on a worst case basis, a profit of £100,000 over two years, with the possibility of profits of £1m over the same period.  Barclays had originally provided a £10,000 facility for CPV and this had in practice been used for AdFocus.  To enable AdFocus to enjoy a £20,000 facility with Barclays Mr Johnson had in late June 1989 prevailed on a friend, Mr Windust, to mortgage his home in favour of Barclays.
112.	Problems were, however, encountered in getting Mr Gines to final signature.  He asserted that there were problems with the demonstration unit which had been supplied, and also that there were rival products more easily obtainable in Spain.  The result was that by the middle of October Mr Gines was proposing a much more limited agreement: that his company (Publicien) would purchase 20 MkII products at £1,200 each, payment by irrevocable letter of credit.  In the meantime the non-receipt of the £6,000 promised to NatWest from this source caused Mr Stiling to set his face against any further assistance to WWH.  (WWH’s lack of funding at this critical stage was cured by an injection of £10,000 from Mr Ridout).  It was not, however, until 23 November that the letter of credit (for £24,000, 70% on sight and the balance 90 days after presentation of documents) became available.  Delivery had to be made to Publicien by 1 January 1990.  This had to be re-negotiated to 19 January 1990, and on 14 December 1989 the letter of credit was amended accordingly.  The units were manufactured and delivered, and on 31 January 1990 AdFocus received into its bank account £16,658 the net amount due in respect of the first tranche under the letter of credit.  That still left AdFocus overdrawn by about £17,500 with only a further £7,160 due under the Publicien contract.
113.	AdFocus had an outstanding obligation under that contract to train Publicien personnel.  Its financial circumstances made it difficult to fulfil that.  Success in the Chancery proceedings had not released the funds which Mr Johnson had been promising to the AdFocus team, and the designer Mr Pritchard was disenchanted with the prospect of having to continue to work at half pay.  When funds finally were assembled to enable him to visit Spain in April 1990, he discovered that the electricity supply in Bilbao was causing the units to malfunction.  This caused friction with Publicien.  A further visit to Spain by Mr Pritchard in May was aborted when he was struck down by a gastric disorder.  A Mr Richardson was then fielded as a substitute, an unsatisfactory arrangement as he required to be properly paid and was in any case a software, and not (as was required) a hardware expert.  Solution of the electricity supply problems necessitated the supply of a more sophisticated power unit.
114.	Mr Johnson continued to explore other possible markets for the AdFocus product, and at one point appeared to be close to securing a major contract in the UK with Circle K,  This, however, came to nothing.  By mid June 1990 AdFocus was in serious trouble, with a judgment against it from a supplier and the possibility of more in the pipeline.  It was against that background that, in order to keep the AdFocus business in being, Mr Johnson came to borrow £40,000 from a Messrs Bloom and Stebbings, at 100% interest per annum.  Mr Johnson’s hope was that this would be repaid following a result in the appeal in the Chancery proceedings, scheduled to be heard early in 1991.
115.	The new power units were taken to Spain by Mr Pritchard and Mr Richardson on 10 September 1990.  Publicien, however, continued to report problems, with the result that it was decided to recall the units to the UK for testing and modification.  By the end of the year AdFocus believed that all technical problems had been overcome.  It was still, however, under intense pressure from its creditors, and was unable to pay Mr Pritchard’s and Mr Richardson’s wages.  1991 saw no improvement in the fortunes of AdFocus.  Its attempts to persuade Publicien to pay for the modifications fell on deaf ears.  By 29 April 1991 Publicien had heard nothing further from AdFocus and then wrote asking for 8 modified units.  AdFocus was not in a financial position to fulfil this order.  All Mr Johnson’s fund-raising energies were devoted at that stage to finding money to finance WWH’s costs in relation to GW’s forthcoming appeal against the summary judgment which had been given by Judge Hyam on 19 April.  The appeal was in due course successful.  All contact with Publicien thereafter ceased.
116.	Creditors continued to press in upon AdFocus, but it was clear by the early part of 1992 that it had no future.  In his witness statement Mr Johnson comments:
“By this time [May 1992] AdFocus Ltd had effectively ceased trading as no more funds were available.  The ill feeling which my inability to keep AdFocus Ltd going was palpable.  I made an enemy for life of Mr J Pritchard who felt that I had betrayed him and exploited him.  Mr Gerry Candy was ruined.  AdFocus Ltd’s reputation was in shreds so far as the Publicien SA contract was concerned and from this time forward I had no further contact with them.  As to what has happened to the royalties (if any) which should have been accounted for to AdFocus Ltd I have never had the funds available to find out.  Some four years of effort and research had effectively been thrown away.  All that was left was a clamour of creditors beating a path to my door and making various threats that if they were not repaid AdFocus Ltd would be wound up and I would be called on my guarantees.  This position continued without interruption until after the WWH Ltd-v-Gore Wood & Co Action had been settled and I deal with that below.  I should also mention at this stage that this particular scenario aggravated considerably the position between me and my wife - as most of the creditors found their way to 86 Chalk Hill where my wife was living whilst I was living at 17 Albany Park Court.  As and when I was at 86 Chalk Hill (because my papers were situated at the office annexed to the house) I had to fend off creditors on a regular basis.”
117.	The claim in respect of the loss of the AdFocus investment (as with the CPV investment) is not that the investment would have been successful had finance been available from the Sunnyfield development.  It is that the risk would never have been undertaken but for the advice received as to the duration and outcome of the Chancery action.  It is unnecessary, therefore, for me to consider whether the AdFocus investment made commercial sense.  So far as that question is concerned Mr Johnson’s own evidence was that, in the circumstances in which he found himself, the venture was flawed: to have a real chance of success it needed expenditure on marketing which he knew he could not afford.  What happened was that, despite appreciating that, he was tempted to continue to “drip feed” money into the project so as to keep alive the potentially valuable contact he had made with Mr Candy and, later, with Mr Gines.  In this respect the critical period seems to me to have been from the middle of 1989 onwards when his patient pursuit of the project looked as if it might provide an early commercial return in the form of the first version of the Publicien contract (see paragraph 111).  It is important to note that at that stage he was presenting AdFocus to NatWest as a potential source of funds for WWH.  That was not consistent with his investment in AdFocus itself being premised on the successful outcome of the Chancery action.
118.	The real issues are whether he would have financed the AdFocus investment in the way he did (short term borrowings at high rates of interest) but for the allegedly negligent advice, and whether GW should be seen as responsible for the fact that he did so.  They were certainly never asked for their advice on the prudence of the course he took.  The highest it can be put is that the series of decisions which he took were, in a general sense, foreseeable as the kind of  actions which he might take.
The costs of borrowing
119.	The borrowings in respect of which claims are made in this action date from 18 January 1988 to 12 January 1993.  In general terms Mr Johnson’s thesis in relation to each relevant loan is either (i) that his inability to repay it was due to GW’s negligence or (ii) that he would not have incurred it except in the belief that he would be able to repay it from the proceeds of the Chancery action which he was negligently encouraged by GW to believe would have an early resolution or (iii) that the effect of earlier borrowing (and business decisions) made in reliance on that encouragement was such as to force him into yet further borrowing which he found himself unable to repay.  The only borrowing costs claimed in this action are those attributable to loans in respect of which no claims were made in the Company action.  It is important to bear in mind that substantial claims for borrowing costs (some £400,000 as at December 1992) were made in the Company action, and were the subject of the compromise of that action.  Those claims were confined to the costs of loans which were then identified as having been made either to the company or to Mr Johnson personally for the use of WWH.  Distinguishing those loans from those in respect of which claims are made in this action, and in some cases proving the existence of relevant loans, was an exercise which in the final analysis depended on the oral testimony of Mr Johnson and the respective lenders, with some limited assistance only being derived from source documentation such as bank statements or company accounting records.  In the following paragraphs I describe the various loans in respect of which claims are made and state my findings on the issues which arise as to their terms and enforceability.  The references to the schedule are to the list produced by Mr Tovell (originally as schedule I).  
Mr Windust
Schedule Ref 1, 3 and 8
120.	Mr Johnson claims to have lent to Mr Windust £1,000 on 18 January 1988, a further £792.50 between 5 and 22 April (some of it in small cash sums) and a further £2,000 on 21 June 1989.  A receipt signed by Mr Johnson on 5 April 1988 acknowledged receipt of a total of £1,750 at a rate of 2% per month.  Mr Windust was not told what the first £1,000 was for, simply that Mr Johnson needed it “until the land deal’s settled”.  There had initially been no discussion of a rate of interest, but when seeking the later loans Mr Windust told me that Mr Johnson had suggested the rate and that it should run from 18 January 1988.  Although Mr Windust gave evidence at one point that simple interest was payable, he also told me that he envisaged by this that unpaid interest would be added to capital for the purposes of the interest calculation.  It was not clear whether this had been his understanding at the time or whether it was something which had subsequently been explained to him by Mr Johnson.  What was clear was that each of the loans had been made against Mr Johnson’s assurance that the money to repay them would be available in a matter of months either (in the case of the first loan) when the land deal was settled or (in the case of the others) at the conclusion of the Chancery proceedings.  
121.	It is clear that the sums in question were significant ones for Mr Windust to have lent.  Mr Windust is, and was, a man of very modest means and limited financial sophistication.  I am satisfied that he would not have been asked to lend the first two sums had Mr Johnson not relied (in the first case) on GW to exercise the option efficiently and (in the second case) on their advice that the doubts over its exercise would be quickly and successfully resolved.  The third loan stands on a different footing.  By the time it was made more reliance was being placed by Mr Johnson on the damages claim against GW in relation to which he was being independently advised by PS&R.  I consider this further below.  It is also clear that Mr Windust now expected significant compensation from Mr Johnson for his patience.  Following the conclusion of the Company action Mr Johnson had told him that, as a result of that action having been settled at a discount, repayment in full was not possible but that it might be possible as a result of the present claim.  No claim was made in the Company action by reference to Mr Windust’s loans.  Sums totalling £2,800 appear to have been paid to Mr Windust in 1992 and 1993 in part satisfaction of his claim.
122.	After crediting the repayments, the claim for interest on Mr Windust’s loan has been calculated as totalling £68,966.58 as at 28 February 2002.  This was more than twice the £30,000 which Mr Windust ventured in the witness box as the sum he estimated to be due to him.  I find that the loans were made and that the rate of interest applicable was 24% per annum compounded monthly.
Mrs Johnson Senior
Schedule Ref: 2, 6, 13, 14, 16, 20 and 24
123.	These loans totalling £9,400 were made to Mr Johnson by his mother as follows:
“(a)	28 March 1988 - £700 (repaid on 19 April 1993)
(b)	18 January  1989 - £1,850
(c)	4 April 1990 - £2,000 (repaid on 13 October 1990)
(d)	3 May 1990 - £2,000
(e)	6 June 1990 - £850 (repaid on 2 February 1993)
(f)	13 October 1990 - £1,000
(g)	31 July 1992 - £1,000 (repaid on 5 March 1993)”
She had not sought any interest in respect of the initial lending but Mr Johnson had volunteered a rate of 24% per annum compound which she was content to agree.  The interest cost on the amount outstanding totals, as at 28 February 2002, some £65,878.99.  Mrs Johnson had an approximate idea of how much capital was outstanding but had not made a calculation of the amount now owing to her as interest.  She made clear her indignation at the way she felt her son had suffered injustice.  I find that those loans were made at the agreed interest rate of 24% per annum compounded yearly.
Mr Bullivant
Schedule Ref.4
124.	Mr Bullivant lent Mr Johnson £25,000 at 18% on 3 May 1988 secured on the two St Peters Court flats.  £15,000 of this was used by Mr Johnson, after deduction of arrangement fees, for WWH purposes.  This was claimed in the Company action.  The balance of £10,000 was used by Mr Johnson for other purposes, including the support of CPV.  This element of the loan has been treated for the purposes of the claim as having been repaid in August 1988 when one of the flats was sold.  The claim here is for the modest sum of £532.60.
125.	GW knew about this loan because they were instructed by Mr Johnson to draw the legal mortgage, and the drawdown of the loan passed through their client account.  Mr Johnson relies on this as showing that GW knew that he was borrowing for the purposes of business other than WWH.  He also relies on the terms of the Legal Charge as indicating the essentially short term nature of the loan, directing particular attention to the 6 month redemption date.  That seems to me to exaggerate the significance of this legal redemption date, and ignores the important proviso that the security would not be enforced if the flats were sold within one year.  
126.	It would appear that it was this loan (and the contemporaneous instructions to sell the flats) which lay behind Mr Johnson’s statement in his letter of 9 May 1988 that “as you are aware I have had to completely restructure my financial arrangements as best I could.”
Mr Burden
Schedule Ref: 5 and 26
127.	On 25 November 1988 Mr Burden, Mr Johnson’s co-director of WWH Ltd, lent him £20,000.  Mr Johnson’s evidence is that this was intended to be at the same interest rate (24% compounded quarterly) as had applied to an earlier loan of £15,000 made by Mr Burden in July 1988 (but actually funded by Mr Ridout).  Mr Ridout had lent £35,000 to WWH Ltd in February 1988 at 24% per annum with a provision for monthly compounding.  Of the £20,000 lent by Mr Burden on 25 November 1988, £10,300 was allocated by Mr Johnson to WWH and claimed for accordingly in the Company action.  The balance of £9,699.54 was applied (according to Mr Johnson) towards CPV.  The interest cost in respect of this element as at 28 February 2002 is claimed to be £203,515.50.
128.	Some mystery surrounds what actual interest rate was agreed by the parties at the date the loan was made.  The documentary evidence consists of an acknowledgement by Mr Johnson dated 25 November 1988 but unsigned which makes no reference to an interest rate, a letter from Mr Burden to GW dated 14 March 1989 confirming (presumably for the purposes of the damages calculation in the Chancery action) that the interest rate was 18% and that there was an arrangement fee of £1,389.88, and a letter from Mr Burden to Mr Johnson at WWH dated 5 September 1989 which read:
“With regards to the various loans I have made to the company or to you personally for the avoidance of doubt I confirm that the rate of 24% will be charged as compound interest whilst outstanding.”
The mystery deepens when considering Mr Johnson’s letter to Morris Walder Partnership dated 12 December 1988 (referring to £20,000 at 24%) and the latter’s letter to GW of 9 February 1989 (referring to £25,000 at 18%).
129.	It seems to me probable that the new rate of 24% was agreed with an eye to uniformity of rates used for the purposes of the damages claim in the Chancery action.  I cannot, however, see the basis for claiming quarterly, as opposed to annual, compounding.  The history of this loan also exemplifies the degree of reconstruction which has gone into Mr Johnson’s account of these matters from a very early stage.  His letter to Morris Walder Partnership of 12 December 1988 and witness statement in these proceedings refers to “an arrangement fee of £1,969.25 of which £300.46 was paid in advance” (see para 391).  However, I can find no evidence for there having been an arrangement fee in this sum, and the attribution of £300.46 to this element is demonstrably mistaken.  GW had deducted this sum from the £20,000 received from Mr Burden to satisfy their outstanding professional costs in connection with the consultancy agreement between CL and Mr Johnson (see paragraph 99 above).  Mr Johnson himself notes this at paragraph 392 of his witness statement.  Mr Burden made further loans to WWH Ltd in December 1988 and February 1989 which were claimed for in the Company action.
130.	The second Burden loan in respect of which a claim is made is a sum of £18,074.46 said to have been lent on 12 January 1993 (after settlement of the Company action) at an interest rate of 24% compounded quarterly.  The evidence on this is unclear.  I think that the story is that at the conclusion of the Company action Mr Burden was voted this sum as director’s remuneration and it was applied in making payments on Mr Johnson’s behalf in repayment or partial repayment to Mr J A Maynard of sums which the latter had lent to Mr Johnson at 40% per annum (see below).  There is no documentary evidence of this at all.
131.	On 21 December 1992 WWH paid Mr Burden a sum of £41,238.21 (made up as to £22,300.46 capital and net interest of £18,937.15) in purported repayment of sums he had lent either directly to WWH or to Mr Johnson for WWH’s use.  I find it impossible to reconcile the figure of £22,300.46 with the figures put forward in the Company action, or the interest of £18,937.15 with the claimed interest rate.  On my calculations gross interest at 24% compounded quarterly over 4 years would have amounted to £33,540 (i.e. a net £25,155).  The net interest actually accepted appears, however, to represent a rate in the region of 20% compounded annually.
132.	In his witness statement made in the Company action in May 1992 and re-confirmed for the purposes of those proceedings on 18 December 1996 Mr Burden makes no reference at all to the alleged loan of £18,074.46.  There is a letter from him dated 24 February 1993 thanking Mr Johnson for “the loan and interest repayment” and referring to “the balance of monies .... which you had the use of personally.”  The letter concludes:
“From my point of view, however, it would be helpful if we could agree the figure which is still outstanding plus interest.  As you know I am still paying a high rate of interest against the loans I have made to you and it is for this reason, as you are aware, that I still need to charge you the same interest rate of 24%.”
133.	The letter does not appear consistent with there having been a further recent loan in the sum of £18,074.46.  I can find no reference to the sum in Mr Johnson’s main witness statement: paragraph 1141 simply refers to Mr Johnson having “arranged for Mr Burden’s outstanding salary to be paid off”, and paragraph 1156 to a distribution having been made to clear Mr Burden’s overdrawn director’s loan account.  There is no evidence that Mr Burden’s estate (he died in 1998) has ever made a claim for this, or indeed any other sum, against Mr Johnson.  The only evidence I appear to have in relation to this sum consists of an explanation given by Mr Johnson in cross-examination (Day 8 page 35).  I am not persuaded that there ever was a loan of this sum by Mr Burden to Mr Johnson. 
134.	Mr Steinfeld sought to develop a submission that Mr Burden’s claims against Mr Johnson were statute-barred.  The submission depended (a) on his being able to overcome the objection that this line of defence had never been pleaded and (b) on the proposition that the letter dated 24 February 1993 constituted a demand in writing for repayment of the loan within Section 6(3).  I do not accept that the letter did constitute such a demand and it is therefore unnecessary for me to consider the pleading point.
J A Maynard
Schedule Ref: 9, 15, 19, 21, 22
135.	As claimed, these loans, totalling £11,500, and giving rise to a total interest claim as at 28 February 2002 of £533,902.25 were made as follows:
(a)	06.10.89:		£  2,000
(b)	21.05.90		£  2,500
(c)	25.09.90:		£  3,500
(d)	22.10.90:		£  3,400
(e)	24.10.90:		£     250
				£11,650
136.	The first of these loans was made to AdFocus Ltd (guaranteed by Mr Johnson) to be repaid on 12 November 1989 without interest but for an agreed arrangement fee of £200.  According to Mr Maynard the repayment date was extended to 12 January 1990.
137.	I cannot trace any reference to the second loan either in Mr Johnson’s or in Mr Maynard’s witness statements, save that Mr Johnson’s second witness statement treats it as having been repaid by one of the payments made by him in the period from 1993 onwards.
138.	The last three loans are referred to in a letter dated 18 October 1990 from Mr Johnson to Mr Maynard (the £250 being the balance owing of a loan of £6,500 which is recorded as having been repaid as to £6,250 on 24.10.90, the same day as a further £3,400 was lent).  Nothing is there said about interest.  Mr Maynard asserted in evidence that it was understood between them that the borrowing would be at the same 40% per annum rate as had, by then, been agreed in respect of the Jellicoe lending.
139.	Claims were made in the Company action in respect of loans made by Mr Maynard.  In his witness statement he mentions in this connection £2,000 in October 1989, £6,000 in 1991, £17,222.08 in the lead up to the trial of the Company action and £3,160.00 during the course of the trial.  All of those, he said, were repaid at the conclusion of the Company action.  None of these figures, or this evidence, can readily be related to the receipt given by his company (JA Maynard Ltd) to WWH for £25,603.12 (£8,206.87 capital £6,746.25 net interest and a fee of £10,650).  Mr Rubinstein’s evidence was that at the conclusion of the Company action sums of £25,603.12 and £2,248.75 were paid out of his firm’s client account to “JA Maynard”.  The £2,248.75 presumably represents the tax payment in respect of the net interest payment of £6,746.25.  Mr Maynard’s evidence in this respect does not therefore fit with the receipt which his company gave to WWH.
140.	According to Mr Johnson’s evidence, other repayments presumably in respect of the personal lending were made to Mr Maynard following settlement of the Company action, as to £18,074.46 on 12 January 1993 (see paragraph 122 above) and then by a series of payments totalling £33,005.72 over the next five years the last payment having been made in June 1998.
141.	If that leaves opaque the question of what, if anything, remained due to Mr Maynard personally, either in 1993 or in 1998, the fog only thickens when there is thrown into the equation the loans made by Mr and Mrs Maynard’s offshore company, Jellicoe Holdings Ltd (Jellicoe), to which I now turn.
The Jellicoe Lending
Schedule Ref: 10, 11, and 12
142.	This lending is alleged to consist of the following:
(a)	22.12.89:		£13,500.00
(b)	02.03.90		£  5,000.00
(c)	29.03.90:		£  5,000.00
These give rise to a total interest claim as at 28.02.2002 of £1.948m.
The lending was made pursuant to a facility granted by Jellicoe in December 1989.  A letter from Jellicoe to Mr Johnson dated 15 December 1989 evidences an agreement to lend up to £40,000 to WWH at an interest rate of 66.66% per annum with a minimum interest repayment of £5,000.  The sum of £2,000 “lent to you in October” was said to be included in the facility.  This must have been a reference to one of the two sums of £2,000 lent by Mr Maynard respectively to WWH and AdFocus in October, presumably the former.
The provision for a £5,000 minimum repayment contemplated the possibility of a very early repayment as a result of the then imminent hearing of the Chancery action at first instance.
143.	Mr Johnson confirmed his understanding of what had been agreed in a letter dated 22 December 1989.  This letter, although headed WestWay Homes Ltd, referred to a loan to “me”, emphasised that the 66% was simple interest, and spoke of repayment at any time before 30 June 1990 (with the minimum interest provision).  It made no mention of the earlier £2,000.  A first draw down of £30,000 was contemplated.  As security loan notes in WWH were offered convertible into 26% of the issued share capital.
144.	The initial drawdown was in fact £26,000 suggesting that £4,000 was being retained in respect either of a facility fee, or because both of the October loans were being included notionally in the facility.  This sum was paid direct by Jellicoe into Mr Johnson’s NatWest personal bank account of which £12,500 was transferred into WWH’s bank account on 15 January 1990 in order to enable it keep within its facility.  That £12,500 was claimed for in the Company action.  The balance of £13,500 is the figure in respect of which a claim is made in these proceedings.  Some of it can be traced as having been applied for the benefit of AdFocus (which was under pressure at this time to complete the Publicien order).
145.	A further £5,000 was  drawn down on 3 March 1990, again going to Mr Johnson’s personal bank account.  A further sum of £5,000 was drawn down on 4 May with the same destination.  
146.	The total drawdown was now £36,000 (or £40,000 if there was a £4,000 facility fee).  On 23 July 1990 Mr Maynard on behalf of Jellicoe wrote to Mr Johnson noting that “the Company” would not be able to repay until after the Court of Appeal hearing, extending the repayment date to 3 months after the Court of Appeal hearing, substituting a £4,000 arrangement fee for the £5,000 minimum repayment, and agreeing that interest should be calculated on a compound basis at the rate of 40% (quarterly rests).
147.	In evidence this change in the interest rate was represented to be a reduction to take account of the longer term nature of the loan.  However, the substitution of a 40% per annum rate compounded quarterly could, and in fact did, have the effect of increasing what would have been the liability had the rate remained at 66.66% per annum simple interest.  This seems not to have been understood by the parties.
148.	It was the introduction of this 40% rate at this point which was said to justify the application of a similar rate to the loans made personally by Mr Maynard.  There was no written evidence however of any such agreement.
149.	Loan notes issued under WWH’s seal appear to have been drawn up sometime in 1990 but dated 22 December 1989.  These evidenced a WWH debt to Jellicoe of £40,000 at 66.66% per annum repayable on 31 December 1990, giving Jellicoe a right to convert into 26% of the share capital in the event of non-repayment.
150.	By the end of 1990 the Maynards had decided no longer to operate through Jellicoe.  Mr Maynard accordingly drafted, or amended, an assignment by Jellicoe to Mrs Maynard of WWH’s debt of £40,000 under the Loan Note.  Lloyds Bank International (Guernsey) Ltd (who provided the directors for Jellicoe) quibbled with this: according to their records the lending had been to Mr Johnson personally and had only been for £36,000.  It seems clear that they had not seen the Loan Note, and were never told about it, but had only seen Mr Johnson’s letter of 22 December 1989.  They therefore amended the assignment in these respects and on 25 March 1991 Jellicoe assigned to Mrs Maynard “all entitlement to the sum of £36,000 plus interest [lent] to Mr Johnson under the terms of the Loan Agreement dated 22 December 1989 a copy of which is attached to, and forms part of, this Agreement” and included the statement “The Assignor hereby waives all entitlement to shares in WestWay Homes Limited which formed the security of the loan”.  It is not clear what was the Loan Agreement attached to the assignment but it must, I think, have been Mr Johnson’s letter of 22 December 1989.
151.	Shortly prior to this, on 19 March 1991, Mr Maynard had written on behalf of Jellicoe to Mr Johnson notifying that a further arrangement fee of £4,000 would be charged to “your Company” in the event of non-payment by 19 May 1991.
152.	There is thus considerable confusion as to whether the £36,000 was intended to be lent to WWH or to Mr Johnson.  In evidence Mr Maynard suggested that he probably made no distinction between the two.
153.	On 8 December 1992 Mr Maynard wrote to Mr Johnson in anticipation of the pay-out following the settlement of the Company action, insisting on behalf of himself and Mrs Maynard that all the loans and interest outstanding be repaid.  A sum of £74,850.25 was paid to Mrs Maynard expressed as being as to £40,000 capital and £34,850.25 net interest.  This was expressed to be in satisfaction of all loans etc. “owing to me by WWH” and waiving all claims to be indemnified by Mr Johnson against WWH’s possible default in payment of any principal or interest “advanced by me to WestWay Homes Ltd or to Mr Johnson (in respect of the latter, in relation to monies applied to and for the benefit of WestWay Homes Ltd).” [Italics supplied]
154.	This release must have related to the Jellicoe lending the benefit of which had been assigned to Mrs Maynard.  If that lending was to WWH (as the Loan Notes and Mr Maynard’s letters assume) the letter is plainly a complete discharge of the loan.  If, however, that lending was to Mr Johnson personally the letter only discharges his liability in respect of that lending to the extent that he had applied it for WWH’s benefit (the formula applied was clearly adopted in order to demonstrate compliance with the terms of settlement of the Company action).  The letter is itself inconsistent with the lending having been to Mr Johnson personally (and otherwise than applied for WWH’s benefit) since the only sums so lent were, on Mr Johnson’s evidence, the £23,500 lent between December 1989 and May 1991.  The most obvious solution is that the capital of £40,000 then paid to Mrs Maynard represented the whole £40,000 lent by Jellicoe (£36,000 plus one facility fee of £4,000), on the footing that that sum had indeed been lent to WWH.
155.	That is not, however, the solution urged on me by Mr Ter Haar.  He points to the fact that in the Company action claims had been asserted in respect of a total of £48,206.87 mixed Jellicoe/Maynard lending and that this figure is identical to the total paid out in respect of capital to J A Maynard Ltd and to Mrs Maynard following the conclusion of the Company action.  The division of that sum between J A Maynard Ltd and Mrs Maynard was simply the result of an informal agreement between the Maynards that that is the way in which they would like to receive the money, there being some advantage deriving from Mrs Maynard’s Spanish residence for fiscal purposes in showing this sum as due to her, rather than to Mr Maynard.  Mr Johnson’s evidence supported this to the extent that he supported that there had been a total Jellicoe/Maynard lending to, or for the benefit of, WWH of £48,206 but he could not explain why the Maynards had asked for the sum to be paid in this way.  The Maynards each insisted that the figure of £40,000 was a pure coincidence, but they had no way of knowing how sums which had been lent by Jellicoe had in fact been used by Mr Johnson.
156.	If the Maynards’ account is correct the discharge given by Mrs Maynard for the £40,000 was deceptive, the most likely victim of the deception (should a question ever be raised) being the Inland Revenue.  I prefer not to think that that is the explanation of Mrs Maynard’s letter.  The route by which she was entitled to represent herself as a creditor of WWH and able to give it a discharge for the £40,000 plus interest was as an assignee of Jellicoe in respect of its lending on the footing that that lending had been to WWH rather than as an informal assignee from Mr Maynard or JA Maynard Ltd.
157.	Whether I am right or wrong about that the doubts which the evidence throws up as to her rights mean that any action now brought by her personally against Mr Johnson in respect of the Jellicoe lending would (if he were to resist it) be fraught with difficulty.
Burden (ex G C Ridout)
Schedule Ref: 7
158.	Mr Ridout, who was Mr Burden’s father-in-law, made a number of loans to or for the benefit of WWH.  The only one with which these proceedings is concerned is one claimed to have been made on 16 February 1989.  This was a loan of £20,000 made (according to a letter dated 7.3.1989 written by Mr Ridout) to WWH, and on the same terms “as the original loan made direct to WestWay Homes on 18 February 1988”.  That original loan had been made at a rate of 24% per annum, repayable on demand after 6 months, and had been guaranteed by Mr Johnson personally, and secured by a charge over the ransom strip.
159.	It was Mr Johnson’s case (denied by Mr Wood) that Mr Wood had suggested the rate of interest of 24%.  I am quite satisfied that Mr Johnson is wrong about this, and that his evidence on this point (see Day 6, pp 18-19) is the result of his having re-constructed a version of events from a perusal of the drafts in GW’s files with an eye subconsciously focused on finding fault with GW in almost any possible respect.  It was put to him in cross-examination that it was inherently improbable that GW had suggested the rate of interest, and at that he was inclined to back off from too vehement an assertion of his version.  What he could not dispute was his own evidence about the fixing of the interest rate in the letter dated 12.12.1988 he wrote to Morris Walden Partnership (WWH’s expert witness in the Chancery action).  He there wrote “To attract the loan I offered an interest rate of 24% per annum which was acceptable to me on the basis of six weeks but has obviously become less attractive as it runs on indefinitely.”
160.	He was also insistent that the interest was to be compounded daily, again laying the responsibility for that at GW’s door.  Damages were indeed claimed on that basis in this action.  It is quite clear, however, that no such thing was agreed.  What the document provides for is (by Clause 3) for interest to be paid on the 1st day of each calendar month “(such interest accruing on a daily basis”) and (by Clause 7(9)) for unpaid interest to be added to principal and itself bear interest.  There is then a proviso (on which I heard no argument) that “interest at [24%] only is to be paid on such capitalised arrears .....”
161.	Although the £20,000 had been lent by Mr Ridout ostensibly to WWH, Mr Johnson’s evidence is that some £8,124.44 of this was in fact used by him to reduce CPV’s overdraft at Barclays Bank.  Mr Johnson’s witness statement says that “I orally informed Mr Wood of the division of this loan between myself and WWH Ltd”.  In the sense that at some point in the preparation of the damages claim in the Chancery action the question of how much of this loan could legitimately have been claimed as a “true” borrowing in respect of WWH overheads would have had to be discussed, I can accept this statement.  If the statement is meant to imply that Mr Johnson in some way sought approval by Mr Wood of this borrowing and its application, I do not accept it.
162.	In the Company action a claim was made in respect of the balance of £11,875.56 of this loan (it there being attributed to Mr Burden through whom it had been channelled).  Claims were there made in respect of a total of £141,785 loans made by Mr Ridout.  Following the conclusion of the Company action, Mr Ridout was paid £168,661.56 in respect of capital lent by him to or for the benefit of WWH, and £70,554.75 net interest.  He says that he was also paid a further £23,518.25, which he says was in respect of interest on loans channelled by him to WWH via Mr Burden.  I doubt, however, whether this is in fact the case.  The sum of £23,518.25 was undoubtedly paid out by Rubinsteins on behalf of WWH but it looks to me like the tax deducted in respect of the net interest paid of £70,554.75.  Moreover the receipt of an additional sum in respect of other loans would be inconsistent with the discharge dated 21 December 1992 which he gave in respect of the earlier payments.  His belief that he continues to be owed something by Mr Johnson appears (from his witness statement which was admitted under the provisions of the Civil Evidence Act) to have been as a result of what he was told in 1993 by Mr Johnson: “That part of the loan in the sum of £8,124.44, including interest, I was told by JJ in 1993 would remain an integral part of JJ’s claim in this action.”
163.	Following the conclusion of the Company action, and after he had received the £239,216 which I think he received (or the £262,734.55 which he believes he was paid) he wrote a letter to Mr Johnson dated 16 March 1993 referring to the fact that some monies lent had not been repaid, stating that interest would continue to run at 24% compounded until the balance had been repaid, and inviting Mr Johnson to agree “some sort of timetable by which it will be repaid”.  The letter concluded by saying that “I have asked my son Peter to draw up a schedule of the monies outstanding together with a calculation of interest”.  That appears never to have been done.  Mr Ridout has at all times been content to accept Mr Johnson’s assurance that he was not in a financial position to repay anything in respect of the alleged debt and, it seems, would not be unless and until a sufficient recovery is made by Mr Johnson in this action.  I reject the submission by Mr Steinfeld that the letter dated 16 March 1993 constituted a demand in writing for the purposes of Section 6 of the Limitation Act 1980.
164.	The amount claimed by Mr Johnson in respect of interest on this loan to 28 February 2002 is £177,131.68 but that figure has been arrived at using daily rests for the purposes of compounding.  What the figure would be if calculated on the basis of the provisions contained in the charge has not been agreed between the parties.
Bloom & Stebbings
165.	This was the loan referred to at paragraph 114 above of £40,000 made in July 1990.  It was repaid, with interest and legal fees totalling £31,066.63, in January 1993.
166.	There is no dispute as to the existence of the debt or the rate of interest payable in respect of it.  Unlike the borrowings so far discussed this was an arm’s length transaction with professional money lenders.
167.	Its repayment was achieved by WWH making a loan to AdFocus of a total of £90,000, and then by JJ drawing against his directors’ loan account with AdFocus.  Repayment of the loan to AdFocus (which is now defunct) was guaranteed by Mr Johnson.
WestWay Homes Ltd
Schedule Ref: 25
168.	This claim is directly related to the transfer of funds made by WWH to AdFocus and referred to in the last paragraph.  The claim is for £94,009.00 capital, and interest calculated to 30 June 2001 of £134,528.75, giving a total claim as at that date of £228,537.75.  Since part of the advance was used to pay AdFocus liabilities, it is to some extent a matter of taste as to whether that element is treated as part of the investment in AdFocus or as a free-standing claim: what needs to be avoided (and after a false start has been) is double counting.
169.	This is a sum which only represents a real liability of Mr Johnson to the extent that WWH chooses to enforce it against him.  At the same time it represents an asset of WWH, of which Mr Johnson remains the 87.5% shareholder.  In practice, therefore, Mr Johnson is only at risk in relation to this liability (as he recognises in his witness statement - see paragraph 1136) should WWH go into liquidation.  WWH is, however, now dormant and has been so since 1997  There has been no suggestion of any pressure during that period from the minority shareholder for Mr Johnson’s guarantee to be called, and I find it hard to believe that there ever would be: to the extent that a solvent WWH ever made any recovery, Mr Johnson would prima facie be in a position to extract it by way of salary.
Emsworth-Woodchester Finance
Schedule Ref. 23
170.	The claim here is for £2,039, being the credit cost of finance obtained by Mr Johnson at the end of 1990 on the security of his Honda car, the proceeds of which were used by him to repay a further short term loan which he had obtained in November 1990 from Bloom & Stebbings.  At that point in time he was under severe financial pressure.  He was already in arrears with the mortgage he had taken out to purchase Albany Court and had borrowed up to the permitted hilt from NatWest.  AdFocus was by that time a pool of debt, with no immediate prospects of being able to re-launch itself.  The light at the end of the tunnel was, at that stage, the appeal hearing in the Chancery proceedings, fixed to be heard in February 1991.  It seems clear that at that stage (by now advised by Mr Rubinstein) Mr Johnson hoped and believed that he was still in a “no lose” situation, such that whatever the result in the appeal he could expect a relatively rapid and substantial settlement from GW’s insurers: see his letter to NatWest dated 13 November 1990.  This claim therefore depends on the general proposition that the need to obtain this particular loan was “forced” on Mr Johnson by the earlier alleged negligence of GW.
Bank Interest and Charges
171.	The claim here, calculated to June 2001 is for £135,406.24, and consists of the bank interest and charges paid by Mr Johnson on his personal overdraft at NatWest over the whole period from 25 March 1988 to date.
172.	In his opening Mr Ter Haar suggested that the principle of this head of claim was the same as that in respect of monies borrowed from less conventional sources.  The position is, however, somewhat more complex than that simple statement makes it appear.  The broad picture from the Bank statements is one of relative equilibrium in 1988 (the overdraft in March 1988 being about £700 and at the year end about £500).  The receipts in this period were either transfers from WWH or the fruits of the “personal borrowing”).  Bank interest and charges for the period amounted to £423.05.  The position worsened over the course of 1989.  There was a greater average overdraft (and interest rates had risen).  By the end of December 1989 the interest and charges debited during the year totalled £1,571.70.  The following year (1990) saw debits in respect of these items of £2,407.47, 1991 of £2,509.21, 1992 of £7,622.14, 1993 of £17,467.86 and 1994 of £3,089.46.  The overdraft mounted by degrees over the period to £105,392 at the end of 1992, subsequently peaked at £124,648.06 at the end of 1993 and subsequently reduced by the end of 1994 to about £105,000 at which level it has subsequently remained (with some fluctuations which are immaterial for present purposes).
173.	In his closing submissions Mr Ter Haar analysed part of the reason for the increasing personal overdraft as lying in the relationship between that overdraft and Mr Johnson’s drawings from WWH in respect of salary.  Relying on an analysis done by Mr Tovell (and contained in bundle D2 pp 83-93), he submitted that in the year ended 30 April 1989 Mr Johnson’s drawings from WWH had only been £2,600, £23,670 less than his entitlement to net salary of £26,270.  In the following year (year end 30 April 1990) they were £28,630 against a net salary entitlement of £28,991.  In the next twelve months he overdrew his salary entitlement (£31,586.00) by £11,906, and in the next drew only £4,900 against a salary entitlement of £34,862.
174.	The position is complicated by the fact that NatWest itself insisted on certain transfers as between the personal account and WWH’s account.  Thus in April 1991 NatWest required Mr Johnson to clear both his and his wife’s personal accounts with a transfer from WWH.  This was in the context of NatWest agreeing a temporary increase in WWH’s facility pending completion of the conveyance of the Sunnyfield site (see paragraph 993 of Mr Johnson’s witness statement).  A year later NatWest required him to transfer £63,746 back to WWH’s account.
175.	The claim is made on the basis that the interest charges were and continue to be a natural and foreseeable result of GW’s alleged negligence.
176.	This is disputed by GW.  First it was submitted on their behalf that if the claim is simply put on the basis that, had there been no negligence in the exercise of the option, Mr Johnson would have been a wealthy man with no need of a personal overdraft, the loss must either be reflective loss which he is debarred from recovering or loss resulting from GW’s delay in settling the Company action.  That submission raises a question of general principle which I deal with separately in relation to the pension claim, but which does not need to be answered in this context given GW’s ultimate acceptance in argument that this head of loss was recoverable if at all on the footing that it had been caused by the negligent advice and/or conduct of the litigation.
177.	If, on the other hand, the overdraft was caused by his decisions to invest in CPV and AdFocus, then it was submitted that his ability to recover is limited to a claim for loss of the investment in CPV and AdFocus, that claim being measured by the capital sum invested and statutory interest thereon.  That submission, if it is a good one, appears to me to be good in respect of all the personal borrowings which can be said to have been caused by those decisions.  The answer to this point seems to me to be that, while it is in general true that a claim such as the claim for damages in respect of the “lost” investments in CPV and AdFocus would normally give rise to a claim for the sum invested with interest thereon pursuant to statute, a claimant will not be confined to that measure if he can bring himself within the second limb of the rule in Hadley v Baxendale: see Wadsworth v Lydall [1981] 1 WLR 598, which was approved by the House of Lords in President of India v La Pintada Compania [1985] 1 AC 104 (per Lord Brandon at 129H).  
178.	A third issue of principle arises here, also of general application having regard to a general accounting point made by Mr Ter Haar in his closing submissions, but which was I think implicit in his submissions on this aspect of the claim.  This is that the relevant indebtedness was caused by Mr Johnson’s inability to draw salary from WWH at the relevant time.  This might raise the general question about reflective loss which I deal with in detail in relation to the pension claim, and the potential application of the settlement “cap” to the claim.  Neither question in fact arises once it is accepted (as it was) that this head of loss flowed from the negligent advice and/or conduct of the litigation.
Mortgage Charges and Interest
179.	These claims are made, first, in relation to the mortgage over the matrimonial home at 86 Chalk Hill.  It is alleged that because of the financial circumstances to which he was reduced he fell into arrears and incurred liability for charges and increased interest payments.  The arrears seem first to have started to arise in late 1989, and Mr Johnson fought a rearguard action in respect of these until in June 1991 (when WWH ceased to be able to pay a salary) the DSS took over the interest payments on the borrowing.  By the middle of 1992 the arrears stood at some £17,000.  Given the amounts owing at times in relation to this mortgage, and the fact that at one point (in January 1994) the mortgagee took possession proceedings, one is somewhat surprised to see the claim under this head at the modest figure of £1,276.  I am not sure how it has been calculated.
180.	The second, more substantial claim, is in relation to the flat at Albany Court purchased by Mr Johnson in June 1990.  His case is that this purchase was caused by his wife and he no longer being able to live together, a circumstance caused (he says and she agrees) by the stress occasioned by the train of events set in motion by the negligent exercise of the option.  The claim here is for £67,390, but I am unclear how that has been calculated.  That was not debated before me.
181.	The Albany Court flat was purchased on a shared equity basis from the developers (Barratts) with the assistance of a mortgage from the Leeds Permanent Building Society in a sum of £70,500.  Mr Johnson had to find immediate cash of £8,112.55 which he was able to do as a result of the offer of finance from RJP Properties (see paragraph 184 below).  Mr Johnson rapidly went into arrears with the mortgage payments and by November 1990 the matter was in the hands of Barratts’ solicitors: the arrears constituted a breach of the terms of the shared equity charge entitling Barratts to call in what was otherwise an interest-free for 5 years loan in respect of the purchase of their ‘slice’ of the shared equity.  The position was mitigated by means of the re-financing of the Honda, but by March 1991 arrears had again begun to build up.  The DSS then look over interest payments from June 1991.  Following settlement of the Company action Mr Johnson was able to deal both with the Leeds Permanent and Barratts in such a way as to remove any immediate threat of possession.
182.	As it turns out, the flat is now thought by Mr Johnson to be worth over £225,000 so that (if I understood his evidence) the borrowing incurred to purchase it has proved to be justified in purely commercial terms (see Day 8 p.76).
183.	On that ground alone GW resist this as a recoverable head of loss.  But they also submit (i) that the breakdown of the marriage which is said to have occasioned the purchase cannot possibly be said to have been a reasonably foreseeable consequence of any breach of duty and (ii) in any case the additional charges incurred were the direct result of Mr Johnson having undertaken liabilities to Leeds Permanent at a time when he well knew that he would be unable to service the mortgage (the period concerned is that between the decision at first instance and the Court of Appeal in the Chancery action at a time when he was not being advised by GW).  All these answers to this claim seem to me good ones.  Mr Ter Haar argued that, because Mr Wood had known from inter alia the letter of 9 May 1988 that Mr Johnson’s finances and personal life were under a strain as a result of the debacle it was “within Mr Wood’s contemplation that the claimant’s marriage might be placed under strain and that a separation might ensue.”  There is not, however, a scrap of evidence that Mr Wood was ever told by Mr Johnson of this likelihood, or indeed that it was foreseeable either by Mr or Mrs Johnson at any time during the subsistence of the retainer.  The claim is so far-fetched as a matter of fact and law that it risks casting doubt on the seriousness with which the other claims are capable of being argued for.
Loss of 12.5% shareholding in WWH
184.	Mr Johnson “lost” a 12.5% shareholding as a result of a transaction entered into by him in September 1990 with a company called RJP Properties, designed to keep WWH afloat until the hearing of the appeal in the Chancery proceedings.  RJP bought a 12.5% stake in WWH for £18,750 and agreed to grant it a loan facility of up to £82,500 during a period designed to include the appeal hearing.  Mr Johnson was to have the right to re-purchase the shares for £43,750 (i.e. a premium of £25,000) on or before 28 February 1991.  By March 1991 that had not happened and a total of £75,984.90 had been lent to WWH.  Mr Johnson then agreed that the premium of £25,000 should be added to the loan as a payment due by way of interest, and that the loan while outstanding should be at 40% per annum with monthly rests, with Mr Johnson guaranteeing its repayment.  Claims were in due course made in the Company action in respect of this borrowing and RJP was paid off.  RJP then agreed, in April 1993 that Mr Johnson should have the option of repurchasing the 12.5% at any time up to 30 June 1994 for the greater of £18,750 and the market value as at the date of repurchase.  In the event Mr Johnson felt himself unable to exercise the re-purchase option.  GW’s insurers were invited to advance £40,000 for the purpose but declined.
185.	The claim (of £12,900) is made on the basis that a 12.5% shareholding in WWH would have had a market value of some £40,250 as at the date of the settlement of the Company action (£40,250 - £18,750 less a provision for capital gains tax of £8,600 = £12,900).  That in turn was based on a calculation done by Mr Tovell based on the break-up value of WWH of £322,000.  In cross-examination Mr Tovell accepted the force of Mr Steinfeld’s criticism that this ignored not only the costs of a liquidation but, more significantly, the effect of the block of shares being a minority 12.5%.  He accepted that RJP might well have accepted a 50% discount on the £40,000 break-up value.  On that footing the loss would only amount to some £1,250.
186.	That in my judgment was a sound criticism.  Mr Tovell had also made the assumption that in order to get money out of WWH in order to fund the re-purchase of the shares, or indeed for any other purpose it would be necessary first to declare a dividend in respect of, inter alia, the 12.5% block of shares.  Mr Steinfeld secured Mr Tovell’s agreement that this would not in fact have been necessary:  Mr Johnson could have been voted salary, or WWH could have purchased the shares, or the bank could have lent Mr Johnson the money against documentation which ensured that it was recouped from a dividend declared after the block had been re-purchased.
187.	Apart from these criticisms the claim does not suffer from the objection to the other claims so far discussed that it was quite outside the kind of damage which was foreseeable as arising from the negligent exercise of the option.  It was foreseeable that in order to finance WWH pending resolution of the Chancery proceedings Mr Johnson, as the 100% shareholder, might have to dilute his equity stake.
Additional Tax Liabilities
188.	The additional tax liabilities are set out in Appendix P to Mr Tovell’s report as updated by Appendix C to the Amended Schedule of Loss.  They there appear to be of two kinds, although Mr Tovell’s reports do not explain them beyond what appears in those schedules.
189.	Appendix P contains three separate calculations.  The first, (a), compares the actual position in relation to the impact of higher rate tax on the gross remuneration (£155,276) voted in tax year 1992/3 with what it might have been had that remuneration been voted, and tax accounted for over the previous four tax years.  Allowing for a saving in respect of employees NIC, the calculation shows that £15,341 more higher rate tax was paid as a result of the one-off payment in 1992/1993 than would have been paid on the alternative hypothesis.  (The calculation is somewhat crude as no allowance is made for the timing difference in the payments; but Mr Steinfeld did not challenge the figures).  If all that was being said was simply that the Company’s impecuniosity as a result of the defective exercise of the option led it to defer paying remuneration until 1992/3, I can understand how the additional higher rate tax is a legitimate head of claim.  However, Mr Tovell actually describes it as due to a “tax led decision to defer payment of PAYE”.  As I understand it he so describes it because remuneration was not being voted to Mr Johnson during the relevant period, but Mr Johnson was simply drawing monies from WWH regardless of his obligations under the Companies Act and the Taxes Act.  If the monies had been properly paid to him by way of remuneration, WWH would have had to account for PAYE at the time and would not have been able to afford to do so.
190.	The result of this mode of operation was to throw up the additional liabilities which are the subject of Mr Tovell’s next calculations namely at (b) tax under s.160 on benefits resulting from the overdrawn current account, and (c) interest and penalties in respect of the same.
191.	It is not suggested that Mr Wood was ever asked to advise on this mode of operation.  What was said was that it “must have been foreseen that there would come a time when WWH would be unable to continue to pay salaries albeit that the claimant was still working for WWH and entitled to be voted a salary.  The defendant must therefore have foreseen that if salaries were paid at a later date, there might be tax disadvantages by comparison with the position had salaries been regularly paid in the ordinary way”.  That proposition I can understand in relation to a claim that the later payment of salary, in a large one off payment at the later date, attracted more higher rate tax than a series of payments spread over a number of years would have done, but that appears not to be the main basis of the claim.  The latter is based (as I think Mr Tovell accepted in cross-examination at Day 11 pp 18-24) on the consequences of the “tax-led” decision not to account to the Inland Revenue for the tax due on the drawings.
192.	Mr Ter Haar in his closing speech sought to counter this objection by advancing a new thesis.  This was that Mr Johnson could be shown in each of the years ended 30 April 1988, 1989, and 1990 not in fact to have drawn significantly more than what would have been his net salary entitlement (and in 1989 significantly less).  It could therefore be shown that Mr Johnson had not in fact spent the unpaid PAYE.  This may be so, but it does not alter the fact that the mode of operation depended on WWH not accounting to the Revenue in respect of it.  Insofar as the claim is based on WWH’s own failure properly to account to the Revenue, it cannot in my judgment be laid at GW’s door.  On the other hand the claim in respect of additional higher rate tax payable as a result of WWH’s inability to spread the remuneration over earlier years is a claim which is the direct result of WWH’s non-receipt of the development profit at the time when it should have been received, and is in my judgment entitled to succeed.
193.	Mr Ter Haar’s alternative analysis incidentally drew attention to the fact (implicit in Mr Tovell’s figures) that the mode of operation (of not accounting to the Revenue) was not something which began with the defective exercise of the option.  It pre-dated it.
The Pension Claim
194.	This claim is based on the premise that had the option been unequivocally exercised WWH would have made a profit of £623,010, out of which a substantial sum would have been paid into WWH’s pension scheme.  It is accepted on behalf of Mr Johnson that the amount would not have exceeded the maximum on which WWH would have been entitled to tax relief but there is an issue as to how much that would have been.  The parties were agreed that I should leave that matter over for further evidence and argument.  Mr Johnson’s contention is that a sum of £325,000 could and would have been paid in, as to £275,000 in the year ended 30 April 1989 and £25,000 in each of the two subsequent years.  The timing of those payments depended on my preferring his expert evidence as to when the development would have been completed as against GW’s.  Each side was content to leave the other’s expert un-cross-examined on the point, a decision which was economical but which leaves me with no rational basis for preferring the evidence of one over the other.  I proceed on the assumption that by tendering evidence on the point which GW has not sought to cross-examine, Mr Johnson has satisfied the burden of proof on this point.
195.	The remaining factual issue is whether Mr Johnson would in fact have caused WWH to make the payments.  Mr Tovell’s evidence is that as Mr Johnson’s accountant he would have advised that this be done (see paragraph 20 of his second report).  This was not challenged.  Mr Johnson’s evidence is surprisingly silent on the question.  In paragraphs 284, 489, 861 and 1036 of his witness statement he had lamented the fact that as a result of WWH’s financial difficulties payments had not been made into the scheme.  This implied that some payment would have been made but for the impecuniosity, but not what the size of the payment would have been.  In paragraph 1160 he refers to the fact that in April 1993, following discussions with Mr Tovell, WWH had paid £50,000 into the scheme.  There is a faint suggestion in that paragraph that more would have been paid in then had it been possible for the scheme to use the money to purchase one of the development plots at 86 Chalk Hill.  In paragraph 1210 he explains that one of the reasons why he had put a substantial sum of money into the scheme was the facility it potentially allowed to WWH to borrow back from the tax-efficient pool thus created for its own development purposes.  Nowhere does he actually say that, had the Sunnyfield development made a sufficient profit in 1989 he would have applied it in the manner pre-supposed by his claim.
196.	Had Mr Steinfeld chosen to explore the matter in cross-examination, I have little doubt that Mr Johnson would have confirmed that this is what he would have done.  That proposition would no doubt then have been tested by examining, for example, whether it was not far more likely that Mr Johnson would have foregone the immediate tax advantage of such a large payment into the pension fund in order to preserve his freedom to deploy the funds elsewhere.  In that context the looming of the property recession, and the need for finance of Mr Johnson’s other business might have been significant factors in the decision.  But none of these issues was explored.  Mr Steinfeld instead took the forensic risk that he would be able to persuade me that the whole question of whether the payments would have been made had been left so vague that I could not, and in the absence of the direct statement from Mr Johnson should not, draw any positive inference.  So far as that is concerned he has, it must be said narrowly, failed to persuade me: there was no challenge to the advice which Mr Tovell would have given, and there is sufficient in Mr Johnson’s evidence to persuade me that he would have followed it.
197.	Mr Johnson is debarred by the decision in the House of Lords from claiming to be compensated for the fact that the payments were not made, but is left free by that decision to claim for what was there described as the “enhancement of the value of [his] pension if the payments had been duly made”.  What that means is a matter to which I return (see paragraph 233 et seq).
Scope of Duty and Remoteness
198.	I return to the question posed at paragraph 83 above as to whether any or all of these heads of loss are the kinds of loss for which GW can be held liable assuming all relevant causation issues are decided in Mr Johnson’s favour.  There are two ways in which this problem can be analysed, namely as a problem concerning scope of the duty or as a problem concerning remoteness of damage.
199.	I take as my starting point for approaching the question of the scope of duty (whether it is seen as arising out of a contractual retainer or in tort) the passage in the speech of Lord Hoffmann in South Australian Asset Management Corp v York Montague [1997] AC 191 (“SAAMCO”) where he says at p. 211:
“A plaintiff who sues for breach of a duty imposed by the law (whether in contract or tort or under statute) must do more than prove that the defendant has failed to comply.  He must show that the duty was owed to him and that it was a duty in respect of the kind of loss which he has suffered.  Both of these requirements are illustrated by Caparo Industries Plc  v Dickman [1990] 2 A.C. 605.  The auditors' failure to use reasonable care in auditing the company's statutory accounts was a breach of their duty of care.  But they were not liable to an outside take-over bidder because the duty was not owed to him.  Nor were they liable to shareholders who had bought more shares in reliance on the accounts because, although they were owed a duty of care, it was in their capacity as members of the company and not in the capacity (which they shared with everyone else) of potential buyers of its shares.  Accordingly, the duty which they were owed was not in respect of loss which they might suffer by buying its shares.  As Lord Bridge of Harwich said, at p. 627: 
“It is never sufficient to ask simply whether A owes B a duty of care. It is always necessary to determine the scope of the duty by reference to the kind of damage from which A must take care to save B harmless”.”
200.	So far as a contractual duty is concerned the scope of the duty must depend on a “process ... of construction of the agreement as a whole in its commercial setting”.  In the present case the analysis by which I have arrived at the conclusion that the existence of a contract of retainer is to be inferred does not entail, thus far, a duty owed to Mr Johnson personally other than a duty to protect the interest of WWH.  On that analysis the duty owed to him personally was a duty owed to him in his capacity as a shareholder in WWH and as the actual or potential guarantor of its liabilities.  To extend the duty so as to expose the defendant to liability for losses suffered by the claimant in other capacities requires additional circumstances from which either it can be inferred that the duty was owed in respect of those capacities or it can be said, under conventional rules of remoteness, that those losses were in the contemplation of the parties as likely to result from the breach (i.e. the second limb of the rule in Hadley v Baxendale).
201.	In relation to the duty to advise, the position in relation to the scope of the duty is the same whether one views it as arising out of the contract or as a matter of tort law.  Statements made in the speeches in the House of Lords in Caparo Industries v Dickman [1990] 2 AC 605 were relied on by Mr Steinfeld in support of this proposition, viz.:
“The salient feature of all these cases is that the defendant giving advice or information was fully aware of the nature of the transaction which the plaintiff had in contemplation, knew that the advice or information would be communicated to him directly or indirectly and knew that it was very likely that the plaintiff would rely on that advice or information in deciding whether or not to engage in the transaction in contemplation.  In these circumstances the defendant could clearly be expected, subject always to the effect of any disclaimer of responsibility, specifically to anticipate that the plaintiff would rely on the advice or information given by the defendant for the very purpose for which he did in the event rely on it.  So also the plaintiff, subject again to the effect of any disclaimer, would in that situation reasonably suppose that he was entitled to rely on the advice or information communicated to him for the very purpose for which he required it.” (per Ld Bridge at pp 620-1)

“.....the necessary relationship between the maker of a statement or giver of advice ("the adviser") and the recipient who acts in reliance upon it ("the advisee") may typically be held to exist where (1) the advice is required for a purpose, whether particularly specified or generally described, which is made known, either actually or inferentially, to the adviser at the time when the advice is given; (2) the adviser knows, either actually or inferentially, that his advice will be communicated to the advisee, either specifically or as a member of an ascertainable class, in order that it should be used by the advisee for that purpose; (3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry, and (4) it is so acted upon by the advisee to his detriment.”  (per Ld. Oliver at p.638)

“I do not think that such a relationship should be found to exist unless, at least, the maker of the statement was, or ought to have been, aware that his advice or information would in fact be made available to and be relied on by a particular person or class of persons for the purposes of a particular transaction or type of transaction.  I would especially emphasise that to my mind it does not seem reasonable to attribute an assumption of responsibility unless the maker of the statement ought in all the circumstances, both in preparing himself for what he said and in saying it, to have directed his mind, and to have been able to direct his mind, to some particular and specific purpose for which he was aware that his advice or information would be relied on.” (per the dissenting judgment of Richmond P in Scott Group v McFarlane cited in Ld Oliver’s speech at p.644 and approved at p. 650)

“My Lords, in each of these cases where a duty of care has been held to exist, the statement in question has, to the knowledge of its maker, been made available to the plaintiff for a particular purpose upon which he has relied.” (per Ld. Jauncey at p. 658) 

“...reliance, even if probable, thereby establishing proximity, does not establish a duty of care of unlimited scope. Regard must be had to the transaction or transactions for the purpose of which the statement was made.  It is loss arising from such transaction or transactions rather than "any loss" to which the duty of care extends.”  (ibid. p.661)

That mere foreseeability of reliance on advice is not the touchstone of the existence of a duty of care was also emphasised by the following passages from the judgments in the Court of Appeal in Galoo v. Bright Graheme Murray [1994] 1 WLR 1360:
“....an accountant and auditor of a company may owe a duty of care to a take-over bidder if he approves a statement which confirms the accuracy of accounts which he has previously audited or which contains a forecast of future profits, when he has expressly been informed that the bidder will rely on the accounts and forecast for the purpose of deciding whether to make an increased bid, and intends that the bidder should so rely.” (per Glidewell LJ at p.1381).    
 
“Mere foreseeability that a potential bidder may rely on the audited accounts does not impose on the auditor a duty of care to the bidder, but if the auditor is expressly made aware that a particular identified bidder will rely on the audited accounts or other statements approved by the auditor, and intends that the bidder should so rely, the auditor will be under a duty of care to the bidder for the breach of which he may be liable.” (ibid p.1382)
“It is tempting to distinguish between the Caparo case [1990] 2 A.C. 605 and the Morgan Crucible case [1991] Ch.  295 on the basis that in the latter, though not the former case, the identity of a particular purchaser of shares in the company was known to the defendants when they represented that the company's accounts which they had prepared were fair and true. This excludes individual members of the body of existing shareholders to whom the statutory accounts are published (the Caparo case), whilst including an identified take-over bidder, as in the Morgan Crucible case. But there could be intervening situations, for example, where an existing shareholder is known to be a potential purchaser of more shares, with a view to acquiring the whole or a majority of the shares.  The identification test would not provide the answer in such a case.  No duty of care would be owed to such a person, in my judgment, on those facts alone, because the third of the four propositions listed by Lord Oliver in the Caparo case [1990] 2 A.C. 605, 638D, already quoted by Glidewell L.J., as it was by Slade L.J. in the Morgan Crucible case [1991] Ch.  295, 318, would not be satisfied: "(3) it is known either actually or inferentially, that the advice so communicated is likely to be acted upon by the advisee for that purpose without independent inquiry," and, vitally, it could not be said that the auditors in such a case "intended that they should act" upon it, for that purpose": per Slade L.J. in the Morgan Crucible case [1991] Ch. 295, 320A (per Evans LJ at 1388).”
202.	It is necessary therefore to consider with some care what exactly was known to (and expected of) Mr Wood (or other relevant personnel within GW) at each stage when negligent advice is alleged to have been given.  I start with the position in the spring and summer of 1988.  At this time Mr Wood knew a good deal about how WWH had financed the purchase of the site and how it had been proposing to finance the development.  From this he knew that Mr Johnson was very short of cash resources.  He knew, for example, about Mr Ridout’s loan of £35,000 in February 1988.  There is no evidence, however, that he knew anything about the small loans made by Mr Windust (in January and April 1988) or the loan by Mr Johnson’s mother in March 1988.  The loan from Mr Ridout was intelligible as a short-term bridging loan, and Mr Wood must have appreciated that his advice on the timing and success of the Chancery action was relevant to that.  As to the way in which CPV was to be financed, there is no evidence that he knew anything very specific about that save that (as I have found) he was told by Mr Johnson that he needed his projected salary from WWH in connection with that business, that he encouraged Mr Johnson to believe that there were reasonable prospects of making an early recovery in respect of this from Mr Moores or McCarrahers, and that he knew that Mr Johnson was relying on his forecast as to the timing of the Chancery action in not negotiating a break clause in the CPV/CL supply agreement (see paragraph 94 above).
203.	Against that background of knowledge on Mr Wood’s part, I do not think that it can be said that his advice was given in a context where he knew it was going to be relied on by Mr Johnson in relation to the latter’s subsequent decisions to borrow money in order to invest in CPV or AdFocus.  So far as CPV was concerned, Mr Wood did know that some reliance (in relation to the break clause) was being placed on his advice, but no loss flowed from the fact that in March 1988 Mr Johnson did not stipulate for such a break clause.  It was subsequently agreed.  So far as AdFocus was concerned, there is no evidence that GW had any special knowledge of Mr Johnson’s hopes and plans.  Indeed the “investment” in AdFocus in the early period was of a very modest nature (as the figures set out in the Table at paragraph 212 below demonstrate).  It seems to me that the highest it can be put is that Mr Wood knew that his advice was likely to be relied on by Mr Johnson in organising the finances of WWH in the interim so as to procure the payment by WWH to Mr Johnson of the salary which he had been expecting to receive.  That would necessarily, to Mr Wood’s knowledge, involve WWH in borrowing to achieve that end.  However, it might also mean that, to the extent that WWH did not, or could not, borrow for that purpose Mr Johnson might himself personally borrow monies to replace the missing salary.
204.	This expectation would have been confirmed by what GW learned of Mr Johnson’s financial situation during the remainder of 1988.  The picture presented to them would have been of WWH and/or Mr Johnson entering into a number of short term borrowing arrangements:  Bullivant (£25,000) in May 1988 repayable on sale of the St Peter’s Court flats; Burden (£15,000) in July 1988; Burden (£20,000) in November 1988.  None of these loans can have caused GW any surprise in the light of the discussion which had taken place on 10 March 1988.
205.	So far as concerns GW’s potential liability in respect of this borrowing, it does not seem to me to matter whether or not GW knew how the money was being spent, or whether it was being spent in a sensible manner.  What they would have known was that the loans were being taken out in the expectation that they could be repaid within a relatively short period out of the proceeds either of the development finance which would become available if specific performance was ordered or out of a damages claim which was certain to succeed if specific performance was not available.
206.	Accordingly to the extent to which Mr Johnson can prove that he would not have borrowed the relevant money but for the incorrect advice, and subject to questions of mitigation, it seems to me that he is in principle entitled to recover in respect of the borrowing costs incurred in relation to the loans made while those expectations held good.  These comprise Mrs Johnson’s £700 in March 1988, Mr Windust’s £792.50 in April 1988, Mr Bullivant’s £10,000 in May 1988, Mr Burden’s £9,699.54 in November 1988 and Mrs Johnson’s £1,185.00 in January 1989.  The £1,000 lent by Mr Windust in January 1988 stands on a different footing.  That is a loan which would have been repaid in February or March 1988 had the option been effectively exercised.
207.	The picture, however, changes in 1989 for a number of reasons.  First, it was by then clear that the earlier advice as to the timing of the Chancery action had been incorrect.  Mr Johnson would therefore have appreciated the essential fragility of such forecasts.  In the light of the slippage in the timetable a decision was taken to split the issues of liability and damage.  This necessarily postponed to an uncertain date the receipt of damages in the event (always possible) that the specific performance action failed.  Even the specific performance action was not being realistically forecast to take place before the autumn of 1989 (see Mr Wood’s letter to NatWest of 4 April 1989).  Secondly, from an early stage in 1989 it was brought home to Mr Johnson that, while WWH’s damages claim could incorporate a claim in respect of his salary, it could not include the borrowing costs of loans (whether made to WWH or to Mr Johnson) the proceeds of which were applied to purposes other than WWH: see Mr Johnson’s evidence at Day 7 p. 51 (“..... I had naively assumed during the course of 1988 that any loans I had obtained, the full value could be incorporated in WWH’s claim.  Mr Wood soon put me right .....”).  Given that it was an implicit assumption that the damages claim, if unsuccessful against Moores, would succeed against either McCarrahers or GW this was tantamount to being advised that the borrowing costs in relation to these personal loans would not be recoverable against GW.
208.	The date of this advice is not clear, but it appears to have been given some time after 16 February 1989 when the Burden (ex Ridout) loan was made.  Schedules of Mr Tovell and of Mr Johnson from around this date (see D/1202 and 1228) seem to have been prepared on the basis that all loans made to WWH would be recoverable, however the proceeds had in fact been used.  Moreover as at that date there had as yet been no decision to have a split trial and Mr Johnson had no reason not to assume that a trial (and a conclusion) was realistically possible within a six month timescale.  I therefore conclude that this loan falls in principle to be treated in the same way as those made in 1988.
209.	It is not possible to take quite the same view of the loan made in June 1989 (Mr Windust’s £2,000).  Mr Johnson knew that that was going to be irrecoverable against any of the litigation defendants, actual or potential, and must have been calculating that if the specific performance action was successful it would easily be repaid out of available development finance (in that respect taking a risk on the then faltering property market) or out of the alternative damages claim in respect of that profit against either McCarrahers or GW.  By this stage the GW advice as to the trial timetable had begun at last to be accurate, but it was also only to be a trial in relation to liability.  No advice had been given by GW which assured him that the alternative claim against McCarrahers (either for breach of warranty or indirectly for Moore’s inability to pay damages) was necessarily going to be speedily resolved following conclusion of the Chancery action.  So far as he was relying on the fact that GW’s insurers would speedily settle his potential claim against GW, he was relying on PS&R’s advice and not GW’s.  On the other hand nothing had yet been said by Mr Wood to still the expectation which Mr Johnson reasonably had, as the result of the earlier advice, that the conclusion of the liability trial would in practice produce a relatively early financial result.
210.	The last loan made to Mr Johnson while GW was still retained by him, was the loan of £2,000 made by Mr Maynard on 6 October 1989.  By this time further factors had crept into the equation.  First, it was by that time ominously apparent that the decline in the property market meant that the possibility of achieving a profit from the development if specific performance were ordered had disappeared.  To the extent that he was relying on litigation to produce the fruits out of which this could be repaid, Mr Johnson must have been relying on the loss of profit element in a damages claim against either McCarrahers or GW.  Secondly, by that time he certainly knew from advice he had from an obviously worried Mr Wood that the latter took the view that there was a sufficient risk of the Chancery action leaving him no better off that GW should themselves be joined as defendants, a point which was to be reinforced at the conference with counsel on 12 October 1989.  In fact there is good reason to think that the justification for this loan was not the expectation of early receipt of damages in the “no-lose” Chancery litigation (although that is undoubtedly the pitch which was made to Mr Maynard) but the expectation of bringing off the lucrative contract which he thought that AdFocus had secured with Publicien.  It was the temptation of concluding that contract which caused him to persuade Mr Windust to mortgage his home to support an AdFocus bank facility in June 1989.  It appears to have been after this loan to Mr Maynard was made that Mr Gines backed away from concluding this contract, and negotiated the very much more modest agreement which was substituted for it.
211.	For these reasons I have concluded that liability for the borrowing costs in connection with loans made after July 1989 onwards cannot be laid at GW’s door simply on the basis of the “6 months’ no lose advice” given at the outset.  If liability for the subsequent loans is to be laid at GW’s door, it can only be on the basis that the subsequent loans were loans “forced on” Mr Johnson by the pressure of earlier events, themselves caused by GW’s negligence.
212.	In his closing submissions, Mr Ter Haar identified the point at which Mr Johnson was inevitably “sucked in” to a spiral of further borrowing as the point in November 1989 when AdFocus decided to implement the (by now reduced) Publicien contract.  He illustrated the developing entanglement of Mr Johnson by an appendix to his written closing submissions which analysed investments made by Mr Johnson and his borrowing costs (both personal and in respect of CPV and AdFocus) on a quarter by quarter basis.  The following table (constructed by me from that appendix) shows the following basic picture:
Quarter	CPV
Capital Invested	AdFocus
Capital Invested	Borrowing Costs	Cumulative Total of Borrowing Costs	
1988/1	£  8,983.12		£       82.53		
1988/2	£18,607.04	£  1,026.30	£     589.51		
1988/3	£  9,430.13	£  3,045.34	£  1,029.07		
1988/4	£16,435.95	£     789.57	£  1,179.98		
1989/1	£  9,948.42	£     490.80	£  2,023.81	£    4,861.21	
1989/2	£  6,050.00	£     314.25	£  2,695.55		
1989/3		£  1,035.90	£  3,108.57		
1989/4		£12,317.69	£  3,700.25	£  14,365.58	
1990/1		£  4,482.70	£  5,320.46		
1990/2		£  5,670.64	£  5,787.77		
1990/3		£23,387.55	£  8,052.81		
1990/4		£18,044.26	£  8,485.66	£  42,012.28	
1991/1		£  3,870.10	£10,089.71		
1991/2	              25	£  2,627.51	£  9,950.02		
1991/3		£     585.50	£10,468.66		
1991/4		£  1,957.00	£11,370.41	£  83,891.08	
1992/1		Nil	£12,657.69		
1992/2		£     800.00	£17,291.25		
1992/3		£  1,000.00	£17,010.38		
1992/4		Nil	£17,707.60	£148,558.00	
1993/1			£17,822.74		
1993/2		£     220.57	£16,979.58		
TOTALS	£69,454.66	£81,664.98		£183,360.32	
213.	Mr Ter Haar relied on some manuscript calculations done by Mr Johnson on 18 November 1989, and a short term cash flow for AdFocus of the same date, as showing that, in deciding to undertake the Publicien contract, Mr Johnson was relying on the early and successful conclusion of the WWH damages claim.  By that stage, however, there was no advice from Mr Wood as to when the damages claim would be finally resolved, nor did Mr Johnson think to raise that question with him at that stage.  Instead, on his account, he consulted Mr Tovell “To double check his understanding of the advice given him by Mr Wood in April 1989 concerning recoverability of WWH Ltd’s Claim for Damages” (see paragraph 650 of Mr Johnson’s witness statement, my emphasis).  That advice had related to the quantum of WWH’s claim, rather than to the timing of any receipt (see Mr Tovell’s witness statement in the Company action, paragraph 19).
214.	The only rational basis by this stage for believing that WWH would make an early recovery of damages lay in the supposition that it would be settled by the insurers of either McCarrahers or GW.  In relation to both possibilities Mr Johnson was relying on PS&R.  In relation to the first he had also had the benefit of Mr Wood’s advice in March 1989 that Moores would (if he lost) have a cause of action against McCarrahers which would be exploitable by WWH, although he also knew that that view was not shared by counsel.  If one asks the question whether it was or should have been foreseeable to Mr Wood in March 1989 that his confirmation that he shared Mr Le Bas’ view about the indirect recoverability of damages from McCarrahers would be relied on by Mr Johnson in December 1989 to incur the risks of the Jellicoe loan to enable AdFocus to enter into the Publicien contract, the answer in my judgment has to be no for a number of reasons.  First, for it to be reasonable so to have relied on it requires that this unrecorded oral advice be interpreted as advice that the putative recovery from McCarrahers could in effect be treated as money in the bank which would be released at the conclusion of the Chancery action.  It plainly could not be: first, the advice itself was known to be controversial - his counsel had expressed a contrary view; and secondly, in so far as those damages consisted of costs of delay they would, ex hypothesi, not be available to meet this lending, and it must by the late autumn of 1989 have been obvious with the depression in the property market that the assertion of a loss of profit claim would itself be controversial.  Secondly, Mr Johnson had by then had it emphasised to him on more than one occasion that there was a danger that, unless GW were joined to the proceedings, WWH might be exposed (by GW’s insurers) to an unacceptable and potentially terminal cash flow problem.  He knew that Mr Wood thought that there was a sufficiently significant risk that he might lose against both McCarrahers and Moores that GW should cease to act for him.  Thirdly, the Publicien contract which was finally on offer was not, as I read Mr Johnson’s cash flows, itself expected to be profitable: the commercial justification for it was that it kept the door open to the possibility of greater things in the future on the lines of the original projections underlying the earlier, and aborted, proposals.  The idea that the loss potentially resulting from entering into the Publicien contract (with the concomitant need for the Jellicoe facility) was the kind of loss which was within the scope of Mr Wood’s duty to consider in March 1989 seems to me quite simply untenable.
215.	The matter can be tested by the alternative approach of asking, in relation to the loans in 1988 and 1989, whether they were of the order which was foreseeable in order to make up for loss of expected salary from WWH.  In the year to 30 April 1989 Mr Johnson’s net drawings from WWH were in fact only some £13,644.03 as against a net salary projection of £26,270.  It can therefore be argued that Mr Johnson might foreseeably in that period have wished to borrow the difference (£12,625.97).  The borrowings made during this period and outstanding at the end of it (Windust, Burden, Mrs Johnson and Burden (ex Ridout)) are indeed of that order.  In the year to 30 April 1990 his drawings from WWH (£28,630) roughly equalled his projected net salary.  Additional borrowing in that period covered expenditure beyond that which his salary would have permitted.
216.	My conclusion is that, so far as the personal loans are concerned, there is a cut-off point in the middle of 1989 beyond which the borrowing costs cannot fairly be said to be GW’s liability.  These costs were incurred for a purpose (investment in AdFocus) which was outside the scope of GW’s retainer and in circumstances in which Mr Johnson could not reasonably have supposed relying solely on GW’s advice that conclusion of the Chancery proceedings would lead to a speedy payment of damages from which the loans could be repaid.  It cannot be said that the loans were in any sense “forced on” Mr Johnson as a result of earlier decisions or commitments made by him as a result of GW’s negligence.
217.	I do not, however, think that the same cut-off point applies to the borrowing costs in respect of the NatWest overdraft.  GW had themselves, in May 1989, lent their assistance in presenting a case to NatWest for increased overdraft facilities pending trial both for WWH and for Mr and Mrs Johnson personally.  There was no suggestion that in doing so they told the bank that the need for the personal facility was caused by Mr Johnson’s desire to finance the AdFocus enterprise.  What was sought was simply support for his (and Mrs Johnson’s “personal expenditure”).  In response NatWest in due course agreed to increased facilities of £10,000 each for Mr and Mrs Johnson: see the bank’s letter dated 24 August 1989.
218.	It seems to me that GW’s involvement on behalf of Mr Johnson with these negotiations with NatWest is entirely consistent with a recognition by them that Mr Johnson’s need to borrow from the Bank was a foreseeable consequence of their own shortcomings both in the exercise of the option itself and in bringing the proceedings to an earlier conclusion.  Having supported the application to the bank it does not lie in their mouth now to say that the consequent use by Mr Johnson of the facility should really be seen as having relied simply on the basis of PS&R’s advice as to the prospects of ultimate success of a damages claim against GW themselves.
219.	By the time of termination of GW’s retainer the personal NatWest overdraft had risen to some £18,217.81.  Recognising that an element of broad brush is here being applied, it seems to me fair to charge GW with the bank charges and interest actually suffered by Mr Johnson attributable to the period after 18 February 1988 and prior to 1 December 1989, and with the bank charges and interest thereafter incurred in relation to his overdraft with NatWest (but not in relation to any amount in excess of £18,217.87 for the time being outstanding).
Causation
220.	Having identified the borrowing costs in respect of which GW might be liable in principle, it remains to consider whether it has been proved that Mr Johnson would not have incurred them but for the relevant negligence on the part of GW.  As to this, I am satisfied that Mr Johnson would not have incurred the costs of these borrowings but for the advice he had received to the effect that his problems could be regarded as a short term cash flow problem.  So far as the personal borrowings were concerned I do not think that he would indeed have been in a position to have borrowed the relevant sums from either Mr Windust, Mrs Johnson, Mr Burden or Mr Ridout had he not felt able to assure them of what he perceived as being the very temporary nature of his needs.
221.	That conclusion also leads me to think that he would not in fact have embarked on the CPV venture had careful advice been given.  I have already noted that Mr Johnson’s evidence was equivocal as to whether or not he would have caused CPV to enter into the CL contract had proper advice been given.  What I think can be said, however, is that to the extent that his investment in CPV depended on his borrowing the money to do so at high rates of interest it would not have been made.  
222.	The personal borrowings which he incurred in the relevant period in fact total some £24,166.48, roughly equivalent to the net £23,618 cash investment made by him in CPV.  I hold that Mr Johnson is entitled to recover his investment in CPV, which I calculate as the £23,618 claimed together with the amount (£4,922) for which he is liable to Hunt & Co in respect of his guarantee.  I exclude from the amount of the CPV investment the £8,885 contributed by way of consultancy fees.  I am not satisfied that these fees would have been earned by Mr Johnson independently of CPV having entered into the CL contract.
223.	I am not able on the evidence to conclude that mortgage interest and charges to which Mr Johnson found himself exposed in the latter part of 1989 were caused by any negligence on GW’s part.  They seem to me to have been caused rather by his desire to deploy his strained resources in pursuit of the AdFocus project.
Mitigation
224.	On the basis of my findings thus far, GW are in principle liable for the borrowing costs in respect of the personal loans set out in the table below.  That table sets out the amount of that cost as at 31 December 1992 and the amount claimed as at 28 February 2002.
Lender	Date	Amount of Loan	Borrowing Costs 31.12.1992	Borrowing Costs 28.02.2002	
Windust	18.01.1988	   1,000.00	    2,280.00	    9,462.47	
      “	22.04.1988	      792.50	    1,658.00	  20,742.58	
      “	21.06.1989	   2,000.00	    2,594.00	  38,761.53	
Mrs Johnson	28.03.1988	      700.00	    1,381.82	    1,381.82	
      “	18.01.1989	   1,850.00	    2,523.04	  29,281.98	
Bullivant	03.05.1988	 10,000.00	       532.60	       532.60 	
Burden	25.11.1988	   9,699.54	  15,537.00	 203,515.50	
Ridout	16.02.1989	   8,124.44	  12,076.00	 177,131.68	
Total 
Outstanding		
  14,166.48	
  38,582.46	
 480,810	
225.	It should be noted that the borrowing costs in that Table as at 31 December 1992  are my own calculations, using the interest rates claimed except in the case of the Ridout loan (where I have used a rate of 24% per annum compounded monthly).  As a result of my finding in relation to the Burden loan, the figures shown for that loan require to be recalculated using yearly as opposed to quarterly compounding.
226.	The purpose of setting out these calculations is to test the principal mitigation argument deployed (and the only one expressly pleaded) on behalf of GW.  This was that Mr Johnson should, following the settlement of the Company action, have mitigated his loss either by paying off his personal lending or coming to some arrangement with his creditors so as to reduce or cap his liabilities at that point.
227.	It should be said at the outset that the context in which this debate took place was that of Mr Johnson being liable (to his creditors) in respect of the totality of his personal indebtedness (calculated at that point as amounting to some £1/4 m. capital and interest).
228.	In addition Mr Johnson had liabilities to NatWest of over £100,000.  After paying off all its immediate creditors (and making a payment of £50,000 into the pension scheme) WWH was left with realisable assets of some £45,000 in cash and the site (worth about £200,000).  It was accepted by Mr Steinfeld that, had these assets been realised and distributed to Mr Johnson, he would have been left with only some £165,000 with which to pay off his creditors.  In those circumstances the suggestion was that Mr Johnson ought at some point to have entered into an arrangement with his creditors, so as to reduce or extinguish his liabilities.
229.	One of the principal difficulties faced by that proposition lay in the sheer scale of the liabilities apparently faced by Mr Johnson.  Another lay in the nature of the arrangement into which the creditors might have  been prepared to enter.  The reality was that the relevant creditors were prepared to forego their immediate claims on the faith of Mr Johnson’s assurance that he would be pursuing these proceedings and that he expected to be able to repay these creditors at the conclusion of these proceedings.  Some of the evidence suggested indeed that in securing that forbearance Mr Johnson had indicated (somewhat echoing earlier times) that he expected GW’s insurers to enter into a fairly rapid compromise of these proceedings.  The fact that the creditors were prepared to forebear may, however, give a clue as to the form any IVA might have taken: it could, for example, have included a provision protecting the creditors’ rights in the event of this action being successful and an obligation on Mr Johnson to pursue it.  That would in turn have begged the very same question of mitigation as is now raised.
230.	There is a further puzzle involved.  Although Mr Johnson may well have obtained his creditors’ forbearance on the back of an assurance that their claims would be met from the successful conclusion of this action, no claim in respect of the personal indebtedness was in fact formally advanced in this action until after the service of a draft report by Mr Tovell in 1996.  Moreover, a decision had apparently been made deliberately in September 1994 not to plead this head of damage when (belatedly) answering a request for further and better particulars served in December 1993, nor even to raise it in informal without prejudice discussions until some time after the service of the further and better particulars.  This tardy raising of the whole question with GW’s insurers gave some support to Mr Steinfeld’s thesis that the very existence of the outstanding indebtedness should be looked on with scepticism.
231.	Some of the difficulties with the argument as a whole are reduced once one knows that the duty to mitigate only arises in relation to the £53,000 or so of personal indebtedness (i.e. capital of £14,166 and interest of £38,582) and some £18,000 of indebtedness to the bank.  So far as both are concerned. there were assets available to Mr Johnson which he could have used in order to staunch the otherwise ever increasing debt, the burden of which he was hoping to throw on to GW.  Moreover, there is reason to suppose that each of the relevant personal creditors would have been prepared to moderate his or her claims in respect of interest in return for repayment either immediately or pursuant to some agreed schedule: Mr Burden and Mr Ridout appear to have been prepared to take that line in relation to sums paid to them as a result of the compromise of the Company proceedings; Mrs Johnson would not, I find, have been insistent on recovering her full pound of flesh had it put her son in serious difficulties; and I have equally no doubt that Mr Windust would have been prepared to temper his claim had Mr Johnson thought it necessary to ask him to do so.
232.	In my judgment Mr Johnson ought to have used the assets available to him to discharge that outstanding indebtedness.  The element of it constituted by the personal borrowings (on my calculations £52,748 as at 31 December 1992) was carrying interest at 24% per annum (with varying rests) at a time when bank base rates were around 6% per annum.  The justifications advanced for failing to discharge them was that it was reasonable for Mr Johnson to steer a course which did not involve him selling the land while there remained a reasonable prospect of his being able to obtain a fresh planning permission for it.  That was certainly an understandable course for him to have taken given the whole history of the matter, given the forbearance of his creditors, and given the fact that he hoped to make an early and substantial recovery in this action.  What seems, however, to have been absent from his thinking was an appreciation that in making this decision he was under a duty to consider the interests of GW.  From that point of view it was unreasonable for him to pursue a course of action which inevitably led to GW being exposed (assuming them to be liable at all) to ever increasing levels of liability; and, moreover, to do so without alerting them to the fact.  In retaining the land in the hope of developing it he was taking the risk that his hopes for it might not be realised in such a way as to enable the increasing indebtedness to be discharged, and to the extent to which he was relying on a recovery from GW to cover it he was seeking to take that risk at GW’s expense.  Given that the relevant liabilities could have been discharged, I do not think that that conduct was consistent with the duty to mitigate.
The Pension Claim
233.	Two questions of principle have to be decided in relation to this claim.  The first is whether the claim under this head is too remote, either (so far as the claim is put in contract) under the rule in Hadley v Baxendale as explained in Victoria Laundry v Newman [1949] 2KB 528 or (so far as it is put in tort) on the test of reasonable foreseeability.  The second relates to the way in which the rule against double recovery applies so as to define the nature of Mr Johnson’s personal claim and to delimit it from WWH’s claim in respect of lost profits.
234.	On the first of these questions Mr Steinfeld argued that the loss claimed was not loss which arose naturally from the breach such that it was obviously likely to result from the breach, so that it was irrecoverable under the first limb of the rule in Hadley v Baxendale.  He submitted that the only damage which truly fell within that category was loss of profit to WWH.  Accordingly, he submitted, the loss was only recoverable if it was within the second limb, i.e. damage which was actually, by reason of special circumstances communicated at the time, in the contemplation of the parties as likely to result from the breach.  Since there was no evidence that Mr Johnson had communicated any intention to GW that he intended to use part of WWH’s profits to contribute to the pension scheme, the claim did not satisfy the requirements of the second limb.  So ran the argument.
235.	In my judgment that argument is flawed.  I have already decided that the scope of GW’s personal retainer by Mr Johnson entailed a duty of care to Mr Johnson in his capacity as the effective owner of WWH.  I agree that loss of profit to WWH was damage within the first limb of the rule in Hadley v Baxendale likely to flow naturally from the breach of duty.  However given WWH’s role as effectively Mr Johnson’s alter ego, any foreseeable damage suffered by him personally as a result of WWH’s loss of that profit (e.g. loss of dividends, diminution in the value of his shares, loss of salary or inability to pay into the pension scheme) seems to me to flow just as naturally and obviously from the breach.  The fact that he may not be able to claim damages in respect of that personal loss is not the result of the damage being unnatural and outside the first limb of the rule, but the consequence of the different rule (now illuminated by the decision of the House of Lords) which prevents recovery by him of so-called “reflective” loss.  I should add that, if I am wrong about that, then, for the purposes of the second limb of the rule in Hadley v Baxendale, I find as a fact that there was no communication to GW of any intention to apply the profits from the development into the pension scheme.
236.	The real issue therefore seems to me to lie in the resolution of the second issue, namely how the rule against double recovery applies in the present case.  The following passages in the speeches in Johnson v Gore Wood & Co [2001] 2 WLR 72 are here relevant:  At pages 94 E-B and 95 D-E Lord Bingham of Cornhill stated the general principles in the following terms:-
“(1)  Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss.  No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder’s shareholding where that merely reflects the loss suffered by the company.  A claim will not lie by a shareholder to make good a loss which would be made good if the company’s assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss.  So much is clear from Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, particularly at pp 222-223, Heron International, particularly at pp 261-262,  George Fischer, particularly at pp 266 and 270-271, Gerber and Stein v Blake, particularly at pp 726-729.  (2)  Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding.  This is supported by Lee v Sheard [1956] I QB 192, 195-196, George Fischer and Gerber.  (3) Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of duty owed to that other.  I take this to be the effect of Lee v Sheard, at pp 195-196, Heron International, particularly at p 262, R P Howard, particularly at p 123, Gerber and Stein v Blake, particularly at p 726.  I do not think the observations of Leggatt LJ in Barings at p 435B and of the Court of Appeal of New Zealand in Christensen v Scott at p 280, lines 25-35, can be reconciled with this statement of principle ”
As he then went on to point out, however, these principles do not by themselves solve the problem of whether:
“....the loss claimed appears to be or is one which would be made good if the company had enforced its full rights against the party responsible, and whether (to use the language of Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) [1982] Ch 204, 223) the loss claimed is “merely a reflection of the loss suffered by the company”.  In some cases the answer will be clear, as where the shareholder claims the loss of dividend or a diminution in the value of a shareholding attributable solely to depletion of the company’s assets, or a loss unrelated to the business of the company.  In other cases, inevitably, a finer judgment will be called for.”
237.	It is clear from that passage that loss of a dividend, or diminution in the value of a shareholding, are irrecoverable by the shareholder where such losses are the result of the loss by the company of a profit in respect of which the company itself has a right of recovery against the defendant.
238.	Turning to the particular claim in respect of the pension Lord Bingham concluded (at 95G-96A):
“(3)  Diminution in value of Mr Johnson’s pension and majority shareholding in WWH.  In part this claim relates to payments which the company would have made into a pension fund for Mr Johnson: I think it plain that this claim is merely a reflection of the company’s loss and I would strike it out.  In part the claim relates to enhancement of the value of Mr Johnson’s pension if the payments had been duly made.  I do not regard this part of the claim as objectionable in principle.  An alternative claim, based on the supposition that the company would not have made the pension payments, that its assets would thereby have been increased and that the value of Mr Johnson’s shareholding would thereby have been enhanced, is also a reflection of the company’s loss and I would strike it out.”
239.	Since he was concerned only to establish how the general principle applied in relation to the pleaded claim for the purposes of a striking out application, it was unnecessary for him to expand upon what he had in mind by his reference to the “enhancement of the value of Mr Johnson’s pension if the payments had been duly made”.  The principle is that Mr Johnson cannot claim the contribution but is not precluded from claiming damages referable to the benefit he has lost by reason of the contribution not having been paid.  Given that the benefit derived from any pension policy is the product of the contributions paid, it is not obvious what Lord Bingham had in mind (nor can any clarification be obtained from considering the terms of the pleading which did not include the phrase “enhancement of the value etc.”).  Given, however, that no claim can be made for the payment itself, one interpretation of the passage is that the relevant distinction is one between the contribution never having been made (irrecoverable) and the contribution not having been duly made (recoverable).  In other words recovery is in principle permissible in respect of loss resulting from the fact that (as a result of GW’s negligence) a particular payment was not made at the time when otherwise it would have been.  Another possible interpretation is that the distinction being made is between Mr Johnson’s ability to claim that WWH ought to have had, say, £300,000 profit in its hands (not recoverable by him in his personal claim) and his ability to claim that he would have been personally better off if the assumed £300,000 worth of profit had been applied towards his pension.  That distinction would call for a comparison between (a) the value to him as a 100% shareholder of the notional recovery by the company of the sum of £300,000 and (b) the value to him of that sum being applied towards his pension.
240.	Lord Goff agreed with Lord Bingham on this point at p 100G-101A in the following terms:
“On that basis I, like Lord Millett, agree with my noble and learned friend, Lord Bingham of Cornhill, that the heads of damage specified by him as items 1, 2, 4 and 5 are unobjectionable and should not be struck out.  Item 3 relates to the diminution in value of the plaintiff’s pension policy set up by the company and accruing to the benefit of the plaintiff as part of his remuneration in his capacity as director of the company.  In so far as the claim relates to payments which the company would have made into a pension fund for the plaintiff, I agree that the claim is merely a reflection of the company’s loss and should therefore be struck out.  But in so far as it relates to enhancement of the value of his pension if the payments had been made, it is unobjectionable and should be allowed to stand.”
241.	Although the formulation is not identical to Lord Bingham’s it is difficult to suppose that he meant anything different.  Moreover Lord Goff had read Lord Millett’s speech in draft, and it can be inferred that he did not disagree with Lord Millett’s analysis which I set out below.
242.	Lord Cooke’s speech casts no further light on this particular question.  On his analysis of the law, the solicitor’s duty to the client personally might extend to protecting him “against the operation of rules of law that might foreseeably restrict the individual’s right to recover damages if no duty were owed to him personally”  (see p 105H-106A), citing as examples of such rules the rule that a shareholder has not right as such to recover from a defendant damages for breech of the latter’s duty to the company, and the rule that there is no cause of action in damages for the late payment of damages.  He therefore considered that:
“While double recovery has to be avoided, at this pre-trial stage I would not rule out the possibility that, on the close scrutiny at trial spoken of by Lord Bingham, it will be found that the ultimate agreed payment to the company was not intended to and did not in fact adequately compensate Mr Johnson for the company’s want of title to the land in early 1988.  It may be chiefly a matter of the timing.  The rule in The Lips would not exclude the plaintiff’s personal claim; he is not claiming damages for delay in paying damages to him.  Rather he is claiming damages for the fact that his company did not have the land in 1988 - a claim outside the provenance and the purview of the rule in The Lips.
Thus the true scope of the settlement in 1992 is one of the matters requiring examination.  In the instant case the settlement covered a very large part of the company’s claim.  It may well have been a reasonable settlement, reached after having due regard to the interests of the company’s creditors, who could not successfully claim that more should have been recovered.  There may nevertheless be some possibility that, in addition to any other right to personal damages that he may have against the solicitors, Mr Johnson could be heard to say against them that in any event he should be compensated for his company not having recovered fully.”
Failing that approach (which was not shared by the other members of the committee) he concluded:
“Apart from the question of any shortfall in the company’s recovery, I think that Mr Johnson could have a good personal claim against the solicitors for compensation on the basis already stated, that is to say on the basis that the damages claimed by him were not suffered by the company.  Accordingly I agree with Lord Bingham that the claimed heads of damages numbered in his speech 1, 2, 4 and 5 should not be struck out before trial, and that the same applies to the part of head 3 relating to the enhancement of the value of Mr Johnson’s pension if the payments had been duly made.  I am rather less clear that the remaining parts of head 3 should be struck out.  Certainly, however, these claims relating to lost payments into a pension fund or retention of corresponding amounts in the company’s assets look very much like claims for double recovery.  As the other members of your Lordships’ Appellate Committee are in no doubt that they should be struck out, I am content to concur in that conclusion.”
243.	Lord Hutton’s conclusions on the application to the pension claims of the principle adopted by the majority were expressed (in very similar to those terms used by Lord Goff) at pp 114H-115A in the following terms:
“In respect of head 3 I am also in agreement with the opinion of Lord Bingham that because it is not a separate and distinct loss, Mr Johnson cannot claim in respect of the moneys which WWH would have paid into a pension fund for him if those moneys had been available to it, and that that part of the claim should be struck out, but that Mr Johnson can claim in respect of enhancement of the value of the pension if the payments had been made.”
244.	Lord Millett gave a fuller explanation both of the principle being applied and of the manner of its application to this particular head of claim.  At p 121 E-G after discussing the cases where the company has a cause of action and the shareholder none and vice versa, he said:
“The position is, however, different where the company suffers loss caused by the breach of a duty owed both to the company and to the shareholder.  In such a case the shareholder’s loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own cause of action.  If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders.  Neither course can be permitted.  This is a matter of principle; there is no discretion involved.  Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the company’s creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.”
245.	In rejecting the approach of the Court of Appeal in New Zealand in Christensen v Scott [1996] 1 NZLR 273 (which had allowed a claim by shareholders for diminution in the value of their shareholdings resulting from loss to the company caused by actionable negligence by its advisers) he said at p 125C-D-126E:
“I cannot accept this reasoning as representing the position in English law.  It is of course correct that the diminution in the value of the plaintiff’s shares was by definition a personal loss and not the company’s loss, but that is not the point.  The point is that it merely reflected the diminution of the company’s assets.  The test is not whether the company could have made a claim in respect of the loss in question; the question is whether, treating the company and the shareholder as one for this purpose, the shareholder’s loss is franked by that of the company.  If so, such reflected loss is recoverable by the company and not by the shareholders.
Thomas J acknowledged that double recovery could not be permitted, but thought that the problem did not arise where the company had settled its claim.  He considered that it would be sufficient to make an allowance for the amount paid to the liquidator.  With respect, I cannot accept this either.  As Hobhouse LJ observed in Gerber Garment Technology Inc v Lectra Systems Ltd [1997] RPC 443, 471, if the company chooses not to exercise its remedy, the loss to the shareholder is caused by the company’s decision not to pursue its remedy and not by the defendant’s wrongdoing.  By a parity of reasoning, the same applies if the company settles for less than it might have done.  Shareholders (and creditors) who are aggrieved by the liquidator’s proposals are not without a remedy; they can have recourse to the Companies Court, or sue the liquidator for negligence.
But there is more to it than causation.  The disallowance of the shareholder’s claim in respect of reflective loss is driven by policy considerations.  In my opinion, these preclude the shareholder from going behind the settlement of the company’s claim.  If he were allowed to do so then, if the company’s action were brought by its directors, they would be placed in a position where their interest conflicted with their duty; while if it were brought by the liquidator, it would make it difficult for him to settle the action and would effectively take the conduct of the litigation out of his hands.  The present case is a fortiori; Mr Johnson cannot be permitted to challenge in one capacity the adequacy of the terms he agreed in another.
Reflective loss extends beyond the diminution of the value of the shares; it extends to the loss of dividends (specifically mentioned in Prudential Assurance Co Ltd v Newman Industries Ltd (No2) [1982] Ch 204) and all other payments which the shareholder might have obtained from the company if it had not been deprived of its funds.  All transactions or putative transactions between the company and its shareholders must be disregarded.  Payment to the one diminishes the assets of the other.  In economic terms, the shareholder has two pockets, and cannot hold the defendant liable for his inability to transfer money from one pocket to the other.  In principle, the company and the shareholder cannot together recover more than the shareholder would have recovered if he had carried on business in his own name instead of through the medium of a company.  On the other hand, he is entitled (subject to the rules on remoteness of damage) to recover in respect of a loss which he has sustained by reason of his inability to have recourse to the company’s funds and which the company would not have sustained itself.
The same applies to other payments which the company would have made if it had had the necessary funds even if the plaintiff would have received them qua employee and not qua shareholder and even if he would have had a legal claim to be paid.  His loss is still an indirect and reflective loss which is included in the company’s claim.  The plaintiff’s primary claim lies against the company, and the existence of the liability does not increase the total recoverable by the company, for this already includes the amount necessary to enable the company to meet it.
On the assumption which we are bound to make for the purpose of this appeal, which is that the firm was in breach of a duty of care owed to Mr Johnson personally, he is in principle entitled to recover damages in respect of all heads of non-reflective consequential loss which are not too remote.  Mr Johnson’s principal complaint is that the firm negligently failed to exercise the company’s option in a manner which would be incontestable.  Even if this constituted the breach of a duty owed to Mr Johnson personally as well as to the company, there was a single breach which made it impossible for the company to establish that it had exercised the option without litigation.  In the event this delayed by four years the commencement of the development by the company and the time when the company could raise money at normal commercial rates of interest on the security of the land and commence the proposed development.  Damages in respect of these heads of damage are recoverable by the company, and in so far as they are reflected in the diminution in the value of Mr Johnson’s shares in the company are not recoverable by him.”
Then at p 126G Lord Millett turned to the pension claim and dealt with it in the following terms:
“Mr Johnson claims that, but for its lack of funds resulting from the firm’s failure to exercise the option properly, the company would have continued to make contributions to Mr Johnson’s pension scheme.  For the reasons I have endeavoured to state, Mr Johnson cannot recover the amount of the contributions which the company would have made if it had had the necessary funds; this merely reflects the company’s loss and is included in its own claim.  Nor can Mr Johnson claim interest in respect of the lost contributions for the same reason.  But Mr Johnson’s claim in respect of the enhancement of his pension is a different matter.  The problem here is one of remoteness of damage, not reflective loss, for the loss (or strictly the net loss) is one which the company could not have sustained itself.  Had Mr Johnson carried on business in his own name instead of through the medium of the company, then (subject only to the question of remoteness) he would have been entitled to recover a sum representing the lost increase in the value of his pension after giving credit for the amount saved in respect of the contributions and interest.  Such loss is separate and distinct from the loss suffered by the company, and while Mr Johnson’s claim to recover it faces obvious difficulties it should not be struck out at this stage.  But if he does establish his claim, he will have to give credit for the contributions which would have been required, whether by the company (reflective loss) or by himself (which he has saved), together with interest thereon.”
246.	That passage is consistent with the second interpretation which I have placed on Lord Bingham’s speech.  In order to identify that part of the loss which is both personal to Mr Johnson and non-reflective of WWH’s loss, the assumption has to be made that WWH has made the relevant recovery (i.e. the premium).  The personal non-reflective loss then lies in the additional benefit which results from that notional recovery not having in fact been applied as a contribution to the pension scheme.  To calculate that, credit has to be given for the amount of the contribution and (if the calculation is done at any date later than the date when the company’s notional recovery occurs) with interest thereafter.  I return below to the relevance of the reason why in fact the contribution was not made from the actual or assumed recovery.
247.	The rival submissions of the parties on the question of principle as to the manner in which the pension claim should be calculated were as follows.  Mr Ter Haar submitted that Lord Millett’s views on the giving of credit for interest on the contributions which would have been required were contrary to the view of the majority and were wrong.  Since, as I have shown, Lord Millett alone gave any explanation of the proper approach to the question of calculation, it cannot be said that his views were contrary to the views of the majority unless it can be shown that his analysis contradicted some general principle laid down in the other speeches.  As I have sought to explain it did not.  The reasons why Mr Ter Haar says that the analysis is wrong were expressed by him as follows in his written closing submissions:
“In any event the credit will only have to be given in respect of any interest saved.  However no interest was saved.  In the case of Mr Johnson, he would never have had the use of the money other than through the distribution to the pension fund.
In the case of the Company, the point is also false.  Ex hypothesi the Company would never have had the use of the money after it had been paid to the pension fund.  Accordingly the interest which falls to be credited must be the interest notionally received by the Company by reason of not paying the premiums earlier.  However the Company never received that interest in fact.  It may be said that notionally it received interest on the development profit in the settlement monies.  If so, the point is also false: if the available profit had been calculated by including profit by way of interest upon the earlier receipt of the development profits there might be a point, but this has not happened.  Accordingly notionally the interest upon that development profit (if in so far as any is deemed to have been received) remains within WestWay Homes.  Accordingly no credit falls to be given.
The essence of the point is simple: the Defendants cannot have their cake and eat it.  They have persuaded the House of Lords that any shortfall in profits received by the Company is not a loss which Mr Johnson can recover.  It follows equally that they cannot claim credit for income which the Company is deemed to have received whether it did or did not receive that income.”
248.	The expert evidence which he wishes to adduce accordingly proceeds on the assumption that the calculation which has to be done is the following:
(a)  a calculation of the projected value of the fund at Mr Johnson’s normal retirement date (NRD) based on the contributions which it is claimed would have been made;
(b)  a calculation of the benefits which (a) would provide;
(c)  a calculation of the sum which Mr Johnson would need personally at NRD to produce (b);
(d)  a calculation as in (a) but based on the contributions which have in fact been made;
(e)  add to (d) the contribution which it is claimed would have been made;
(f)  calculate the benefits which (e) would have provided;
(g)  calculate the amount that Mr Johnson would need personally at NRD to provide the same benefits as in (f);
(h)  deduct (g) from (c)
(i)  calculate the present capital value of (h).
249.	I am unable to accept Mr Ter Haar’s submissions.  In order to avoid double recovery the assumption has to be made that the company made full recovery and therefore has enjoyed the use of what it has notionally received.  The calculation set out above appears to assume that the recovery by the company will not occur until normal retirement date, and that when it occurs it will not be with interest to that date.  I am quite unable to see the rationale for this approach.
250.	Mr Steinfeld’s submission was as follows:
“...   What is that loss in relation to the pension claim?  It cannot be the whole loss of a return on the premium itself because that is a loss which WWH would itself have sustained from being deprived of the use of the money.  What it is is the difference between the rate of return or interest which WWH would have earned on the money and the additional return on the same money which the Claimant would have earned had he not been deprived of recourse to it.  It cannot, however, be assumed that the money had it been there would have been invested by WWH so as to earn any less a return than as invested in the pension policy.  WWH may have earned more or it may have earned less - and the only safe assumption to make is that it would have earned the same.  But the difference is that by reason of the special tax treatment of pension schemes, in the pension scheme the interest would roll up tax free whereas in the hands of WWH it would be subject to corporation tax.  The Claimant’s expert calculates what applying the actual return on the policy to date and the anticipated return up to the Claimant’s assumed retirement date would have been the size of the fund on that date referable to the premiums.  He then simply deducts from that sum the amount of the premiums (but without interest) and discounts back to the present time.  What should be done is to add as a deduction interest rolled up on the premiums using the same assumed rate of return as for the pension policy itself but subject to deduction of tax.  In other words the loss, if capable of being claimed by the Claimant at all, is the loss of the tax benefit from investing in a pension policy.”
251.	If correct that implies an amendment of line (e) in the calculation set out in paragraph 248 above.  In my judgment the submission is correct.  It is consistent with Lord Millett’s analysis and provides an explanation (the only one available so far as I can see) of how Mr Johnson might have suffered non-reflective loss as a result of the non payment of the putative pension contribution.
252.	An important point here is that the critical factor giving rise to this element of loss is the fact that the company has not in fact applied the recovery (actual or assumed) in payment of the contribution, when had it instead received actual profits from the development it would have done so.  There might in theory be all sorts of reasons why that happened.  There might have been changes in the tax law or changes in the pattern of remuneration which precluded the payment.  Changes in the economic circumstances of the company might in the meantime have been such as to preclude the application, and so forth.  This, as it seems to me, is why Lord Millett said that “the problem here is one of remoteness of damage”.  As it seems to me, in order to surmount this problem of remoteness, it must be shown that the reason for the non-payment of the contribution by the company is (a) sufficiently connected with the negligence for it not to be too remote and (b) not attributable to any failure by the company to make full recovery.  In the present case the reason was the impecuniosity of the company, and that impecuniosity flowed from GW’s negligence.  The first condition is therefore in my judgment satisfied.  The second, however, seems to me to pose a considerable difficulty.  Certain elements at least of WWH’s impecuniosity were or may have been the result of the application of rules of law which prevented it from recovering fully for all the losses which in fact flowed from the negligence.  Its loss as a result of the late payment of damages could only be recovered in form of an award of interest under statute; and its financing charges in defraying the costs of its action against GW would not have been recoverable as costs.  As I read the speeches in the House of Lords, Lord Cooke alone would not deny Mr Johnson’s personal claim so far as the shortfall in WWH’s recovery was so attributable because GW’s duty under the personal retainer might extend to protecting him against the operation of such rules of law.  While I can see that, in the right circumstances, a retainer could have this scope, I am unable to see why the inference should be drawn on the facts of this case that it did.  
253.	Against the background of these considerations, I turn to a further submission of Mr Steinfeld.  This was that, in measuring the loss of enhancement to the pension, the date of settlement of the Company action should be taken as a cut-off point.  The argument was that the whole basis of the claim was that, but for the negligence, there would have been a successful development which would in 1989/1990 have yielded a substantial profit, a large part of which would have been available to contribute to the pension scheme.  The only foreseeable effect of the negligence was to substitute for it a damages claim by WWH against GW which would put it into the position it would have been in but for the negligence.  Accordingly the only foreseeable consequence of the breach was a delay in WWH coming into the receipt by way of damages of the profit it would otherwise have earned from the development, WWH being compensated for that delay by an award of interest.  Accordingly, he submitted, the only recoverable loss is the loss of pension benefit caused by the delay between the time when WWH would have received the profits and the time when the Company action was settled: at the latter date the Company was or should have been in a position to make the contribution.
254.	The submission seems to me to be correct.  No reason is advanced as to why WWH did not make the contribution belatedly other than the fact that its recovery was insufficient for the purpose.  Accordingly any claim for loss after that date is on the face of it a claim based not on GW’s negligence but on the insufficiency of WWH’s recovery in respect of that negligence.
Application of the settlement “cap”
255.	It was accepted by GW that, insofar as clause 3 of the settlement agreement bit at all on the claims made in this action it only did so in relation to the pension claim: that, on GW’s analysis, was the only head of loss which flowed directly from the negligent exercise of the option itself, as opposed to the negligent advice as to duration and outcome or the negligent conduct of the proceedings.  I am not sure that that position is necessarily correct since the costs of the first Windust loan and some part of the additional tax liabilities claim could be seen as resulting, like the pension claim, from the fact that the development profit was not received when it should have been but in the form of a later receipt of damages.  That, however, is academic for present purposes.
256.	The short question, also probably academic in view of my findings as to how the pension claim should be calculated but which would be a live one if I am wrong in my approach, is whether the loss of pension enhancement falls within the words “losses suffered by [Mr Johnson] by reason of loss of income, dividends or capital distribution in respect of his position as a shareholder of [WWH]”.  It was submitted on behalf of GW that these words must have been intended, and should be construed, as apposite only to such claims as Mr Johnson could make notwithstanding the rule in Prudential v Newman.  I cannot accept that submission.  The precise ambit of that rule (and of the way in which Mr Johnson proposed to make his claims) was not clear at the relevant date.  The wording of the clause is naturally to be read as applying to losses of the kind described, whether or not such claims might be barred by operation of the rule.  The question is therefore simply one of whether the cap, as formulated, fits the particular head of the pension claim.  The loss is clearly not the loss of a dividend.  Nor is it the loss of a “capital distribution in respect of his position as a shareholder”.  The only question is whether it can be said to be a claim for loss of “income”.  As to that, the further question arises as to whether the words “in respect of his position as a shareholder” qualify income as well as “capital distribution”.  As a matter of grammar they do.  But the phrase as a whole then produces the puzzle as to how Mr Johnson, qua shareholder, could lose income otherwise than as a result of the non-payment of dividends.  The draftsman was either being pleonastic, or had in mind income paid otherwise than by way of dividend.  If the latter, the reference must have been intended to be either to director’s fees or to remuneration for services neither of which would have been payable “in respect of his position as a shareholder”.
257.	In my judgment the reference to “income” was intended to add something to the word “dividends” and included remuneration which, as the controlling shareholder, Mr Johnson would have been able to procure that WWH paid to him.  If that is right, the word seems to me to be wide enough to catch pension benefits, such benefits being in substance a form of deferred remuneration.  Accordingly, should the point be relevant, I would hold that the £250,000 cap does apply to the pension claim.
Summary of conclusions
258.	For the reasons I have given Mr Johnson is in my judgment entitled to damages under the following heads as follows (I use the numbering in paragraph 89 above):
(1)	In respect of the lost investment in CPV £28,540 (see paragraph 232) with interest pursuant to statute.
(3)	In respect of the cost of personal borrowings, an amount in respect of the eight loans which I have calculated (see paragraph 224) as at 31 December 1992 as £38,582.46 (but in respect of which the calculations need to be checked and in the case of the Burden loan recalculated). Mr Johnson is also entitled to interest pursuant to statute on this sum as from 31 December 1992.
(4)	Bank interest and charges.  Mr Johnson is entitled to these (capped as indicated in paragraph 219) up to 31 December 1992, with interest pursuant to statute thereafter.
(6)	Diminution in value of the pension scheme.  I will direct an inquiry as to damages, the precise terms of which will need to be the subject of further argument.
(7)	Loss of 12.5 per cent shareholding in WWH.  Mr Johnson is entitled to £1,250.00 (see paragraph 185).  I will hear submissions as to his entitlement to interest pursuant to statute on this sum.
(8)	Additional tax liabilities.  The sum of £15,341.00 referred to in paragraph 189 above with interest pursuant to statute.
The order for payment will need to make provision for application of the cap in the event of the damages referable to the first Windust loan, the additional tax liabilities and the pension claim together exceeding the cap.