Johnson v Gore Wood & Co

A Part 36 payment cannot be used to determine causation or impose a substantive cut-off date for damages where CPR 36.19 restricts disclosure of the payment until liability and quantum are decided. The overriding objective cannot justify a strained construction of that rule; an open offer is required if the defendant seeks that protection.

Damages may be assessed by reference to a date after the order where necessary to compensate actual loss. The costs discretion under CPR 36.20 requires attention to all the circumstances, including the relationship between the payment and result, the parties’ conduct, and the litigation history. Where it would be unjust to apply the usual consequence, a reduced costs order may be made.

The claimant sued his former solicitors for losses arising from advice concerning transactions involving CPV and AdFocus. His claim included investment losses, borrowing costs and interest. The High Court, after awarding damages of £169,973.48, ordered him to pay the respondents’ costs from 24 August 1994 because he had failed to better a payment into court.

On appeal, the court considered the effect of a further payment into court made on 24 August 2001, the proper end date for interest, the costs consequences of the payment, and whether certain AdFocus commitments and borrowings qualified as recoverable investments or borrowing costs. It also considered the appropriate mechanism for determining any disputed amount.

1. Contractual interest and payment in. The court rejected the respondents’ argument that the payment into court on 24 August 2001 fixed the date at which damages ceased to be recoverable. CPR 36.19(1) and (2) permitted the payment in to be used only in arguments as to costs. The court could not adopt a strained construction of the rules by relying on the overriding objective. An open offer, without admission of liability, could have been made if the respondents wished to protect themselves on the substantive damages issue. The court applied the approach in Vinos v Marks & Spencer [2001] 3 All ER 784.
2. Date of loss. Damages by way of interest were to run to 17 March 2004, three months after judgment. The court had jurisdiction to assess damages by reference to a date after the order where that was necessary to compensate the claimant for the actual period required to receive the judgment monies and satisfy the relevant loans.
3. Costs. The claimant was entitled to his costs until 24 August 2001. Under CPR 36.20, the onus was on him to show that it would be unjust to make him bear all costs after the payment in. The court considered the changed relationship between the payment and the result, the respondents’ conduct in contesting every issue, the extension of the trial through cross-examination, and the circumstances and litigation history. It concluded that the claimant should pay only 50% of the respondents’ costs from that date.
4. Investments and borrowing costs. Enforceable AdFocus commitments entered into before 1 December 1989, from which the claimant could not reasonably have been expected to withdraw by that date, were investments equivalent to cash injections and qualified for damages. The same principles applied to sums borrowed through Jellicoe and the £2,000 subsumed within that facility. Borrowing costs were recoverable in principle, but statutory interest was unavailable where the borrowings had funded CPV or AdFocus investments, to prevent double counting. The £10,000 Bullivant borrowing was not set against the investment damages because it was repaid within three months and its use was indirect and transitory.
5. Further determination. If the AdFocus damages could not be agreed, the issue was remitted to a Queen’s Bench Master. The determination was to proceed on a joint expert’s report, using documentary evidence already disclosed and evidence already given, with further information permitted if requested by the expert. The parties were to provide equal security for the expert’s fees, with costs reserved to the Master.

1. High Court of Justice, Queen’s Bench Division: Hart J awarded damages of £169,973.48 and ordered the claimant to pay the respondents’ costs from 24 August 1994 under CPR 36.20.
2. Court of Appeal (Civil Division): The court varied the costs order, rejected a substantive damages cut-off based on the payment in, extended interest to 17 March 2004, clarified the treatment of AdFocus commitments and related borrowings, and remitted any disputed damages assessment.