This is the judgment of the Court giving its reasons for the rulings made on 17 December 2003. The issue as to the cut off date as to contractual interest raises a point of law of general importance.

A key issue in this litigation is the incidence of interest. A very substantial part of Mr Johnson’s claim for damages is for the cost of borrowings entered into in reliance on Gore Wood’s advice. He was liable to pay very high rates of interest on those loans, and they have been outstanding since 1988. The claim for interest has thus understandably been subject to critical scrutiny by Gore Wood.

On 24 August 2001 Gore Wood made a substantial payment into court. If Mr Johnson had accepted the offer, he would have received more than he would have received at trial even if the judge had reached the conclusions which we have held he should have reached. (This ceases to be the case by the date of the appeal because further interest has accrued).

Accordingly, on this application, Miss Elizabeth Ovey, for the respondents, submits, cogently but economically, that, although we have held that the damages to which Mr Johnson is entitled include the cost of his borrowings in respect of his loans and/or commitments incurred prior to 1 December 1989, under CPR 36.19 the court should have regard to the existence of the payment in by Gore Wood on 24 August 2001, and reach the conclusion that in so far as Mr Johnson’s damages exceed the amount that would have been gained by accepting that payment in when made, they are not damage caused by any act of the respondents. Put another way, damages should be assessed not as at the date of trial but as at 24 August 2001. Thus the maximum that Mr Johnson should receive is that amount with statutory interest.

CPR 36.19 provides:-

CPR 36.19(1) and (2) on their face preclude a trial judge from being informed of a payment in at the time when evidence is or should be led as to causation. Miss Ovey seeks to meet this difficulty by invoking the overriding objective and submitting that the exercise to be performed, if her argument is accepted, is purely a mechanistic one so that the terms and spirit of the apparent prohibition in CPR 36.19(2) are not breached.

We do not agree. The court cannot adopt a strained construction of the CPR in reliance on the overriding objective: see per Peter Gibson LJ in Vinos v Marks & Spencer [2001] 3 All ER 784, 791. The terms of CPR 36.19 admit of only one construction, namely the payment in can only be used on arguments as to costs. If Gore Wood had desired to protect themselves by an argument of the present kind, they should have made an open offer which the judge could have taken into account when assessing the damages. They could have done this without making any admission of liability.

In response to the submissions of Mr Ter Haar, we have further ruled that damages by way of interest should run up to a date three months hence, namely 17 March 2004, on the basis that this is likely to be the minimum period necessary for Mr Johnson to receive the judgment monies and satisfy the relevant loans. It will thus compensate him for his actual loss. We consider that the court has jurisdiction to award damages by reference to a date after the court’s order in a case such as the present.

At trial, in consequence of the failure by Mr Johnson to better a payment into court of £120,000 made by Gore Wood on 24 August 1994, Hart J ordered Mr Johnson to pay Gore Wood’s costs from that date. As explained in paragraph 1 of the judgment of Arden LJ given on 3 December 2003, Mr Johnson’s claims at trial exceeded £4.3m. He was held entitled to damages of only £169,973.48.

CPR 36.20 provides:

We have only been shown a part of the transcript of the judge’s judgment on costs. The judge said inter alia:-

The position before us is that, if the judge had reached the conclusions which we have held he ought to have reached, the 1994 payment in (£120,000) would have been bettered by the result at trial. However, on the basis of interest calculated down to the date of trial, a further payment in, made on 24 August 2001, of an amount sufficient to bring the aggregate of both payments in to £750,000 would not have been exceeded. In those circumstances, Mr Johnson has invited us to vary the judge’s order as to costs at trial, to give him his costs down to 24 August 2001 and to order that he should pay none, or some only, of the costs Gore Wood incurred after that date.

We agree that Mr Johnson should have his costs down to the last date for acceptance of the payment in on 24 August 2001. As to the costs since then, we must have regard to the structure of CPR 36.20. This requires us to be satisfied that it is unjust that Mr Johnson should bear all the costs following the payment in: the onus is on Mr Johnson to show this.

Mr Ter Haar submits that the court should adopt an issues-based approach. The governing rule is CPR 44.3 which entitles the court to have regard to Gore Wood’s conduct. Gore Wood lost a large number of the issues which they disputed at trial including the existence of a duty of care, and part of the claims made relating to CPV, AdFocus, the costs of personal borrowings and the NatWest overdraft. The case was also opened on the basis that breach of duty was also in issue. They challenged Mr Johnson’s honesty and his prudence with little success (see the judgment of Hart J, paragraphs 16 to 18). The trial could have been greatly curtailed if these matters had not been disputed: indeed, Mr Ter Haar contends that the trial of fifteen days could have been reduced to three days. In those circumstances, it would be unjust for Mr Johnson to bear all the costs of the trial. The judge was influenced by the degree to which the 1994 payment in exceeded the amount recovered.

Miss Ovey submits that Mr Johnson also ran a number of claims which he lost, such as the claim to the costs of mortgage interest on a flat which he had to buy because he became estranged from his wife. She relies on the fact that the judge considered that Gore Wood had acted properly in contesting all Mr Johnson’s claims, and on the fact generally that the judge did not deprive Gore Wood of any of the costs to which they became entitled under CPR 36.20.

However, we are satisfied that it would be unjust to order Mr Johnson to pay all Gore Wood’s costs after the date of payment in. The ratio of the success at trial to the payment in (a factor which weighed with the judge) has altered markedly since Hart J’s decision on costs. We take account of the way in which Gore Wood conducted the trial. The judge noted that every issue had been contested. For instance, the terms of the loans, which had not been an issue in the Company action, were disputed in these proceedings albeit that the proceedings were effectively between the same parties. Mr Ter Haar also referred to the aggressive cross-examination of, for instance, Mr Johnson’s wife. We note that the trial timetable was considerably extended by the cross-examination of Mr Johnson’s witnesses. The judge’s epithet “properly” which he used to describe the respondents’ actions in making a payment in cannot, we think, in the context of the whole of the passage quoted above have been intended to qualify the second series of actions comprising the challenge of “every element of [Mr Johnson’s claim] which seemed remotely open to challenge”. We also take account of the circumstances of the claim and the litigation history. In all the circumstances, doing the best we can, we consider that the right order would be for Mr Johnson to pay only 50% of Gore Wood’s costs as from the last date on which the payment into Court on 24 August 2001 could have been accepted.

On the hearing of this appeal, no distinction was drawn between investments by way of cash injection and investments by way of the underwriting of the liabilities of AdFocus. We have clarified the judgment to make it clear that the latter form of investment should be treated on the same footing as the former. That means that sums paid by Mr Johnson pursuant to commitments entered into by him in respect of AdFocus prior to 1 December 1989, which are enforceable against him and from which he could not as of 1 December 1989 have been reasonably expected to withdraw, are investments in respect of which he is entitled to damages.

Having so ruled, the court must find a mechanism for giving effective protection to this entitlement. That mechanism, however, must also be proportionate and the court is now very conscious of the length of time it has taken to resolve the present dispute.

In those circumstances, we have made an order that if the amount of damages cannot be agreed, the matter is to be remitted to a Queen’s Bench Master for determination on the basis of the report of a joint expert to be appointed by the parties or in default of agreement by the court. Moreover, we have limited the evidence to be placed before the expert to documentary evidence already disclosed and evidence already given. However, if the expert requests further information the parties are to be at liberty to comply with that request.

The expert will require to be paid or have an assurance as to his fees. This is to be given by the parties equally. However, the costs of this enquiry (including the costs of the expert) are reserved to the Master.

The appellant’s case here is that, on the footing that the sums borrowed from Jellicoe were borrowed by WWH, some of those monies were in effect lent to Mr Johnson to enable him to discharge commitments entered into on behalf of AdFocus. WWH did not claim damages in respect of these monies in the Company action. We have ruled that these sums should be treated as injected by Mr Johnson into AdFocus provided that the commitment was entered into prior to 1 December 1989 and the investment otherwise complies with the ruling on commitments which we have given above.

The same principles apply to the sum of £2,000 borrowed from Mr Maynard and treated as subsumed within the Jellicoe facility.

Put in very simple terms, the position is that Mr Johnson is entitled to recover his investment in CPV and AdFocus, in principle with statutory interest, and the cost of borrowings incurred in reliance on Gore Wood’s “6 month no-lose” advice, as defined in paragraph 3 of the judgment of Arden LJ dated 3 December 2003. However, if those borrowings were used to invest in CPV or AdFocus, he cannot receive statutory interest. Mr Ter Haar accepts that in principle. Otherwise, there would be double-counting. There is no disagreement as to the identification of the borrowings affected, save one: the loan of £10,000 from Mr Bullivant. This is referred to in the judgment of Hart J at paragraphs 124 to 126, 212 and 214 of his judgment.

The £10,000 borrowed from Mr Bullivant was repaid within three months and its use to fund CPV was largely indirect and transitory. In those circumstances, we have ruled that the cost of borrowing £10,000 from Mr Bullivant in 1988 should not be set against the damages in respect of the investment in CPV or AdFocus.