Youlton v Charles Russell (a firm)

Damages cannot be increased to reflect a tax liability arising from the claimant’s assignment of a trust claim where the defendant’s liability is no greater than the loss recoverable by the trustees themselves. A loss-of-chance assessment may adopt a broad-brush percentage where separate possible settlement outcomes cannot sensibly be quantified individually. Interest must correspond to the value and timing of the loss actually assessed, avoiding over-compensation. Costs should reflect the litigation as a whole; unsuccessful heads of loss do not automatically justify an issue-based costs order where they added little to the trial.

The judgment determined consequential matters following an earlier judgment in which Professor Youlton had succeeded in claims arising from professional negligence concerning a pension scheme’s interests in property-related agreements. The outstanding issues concerned tax on damages, interest on rent and apportionment claims, costs claimed as damages, and the costs of the two actions.

The court considered whether the assignment of the trustees’ claim justified grossing up damages for tax, how the previously assessed loss-of-chance percentages should be applied, and whether the claimant’s partial success on particular heads or procedural matters required a reduced costs order.

1. Tax. The claimant could not recover an increased sum to meet tax said to arise on damages received following the assignment of the trustees’ claim. Before assignment, the claim was a trust asset. The assignment could not increase the defendant’s liability beyond the amount the trustees could themselves have recovered. The claimant’s personal loss in respect of lost pension rights was subsumed in the diminution of the trust fund. The tax issue was also raised too late and was speculative and uncertain.
2. Rent claim. The appropriate notional settlement date was the December 2006 rent day. The previously assessed 40% loss-of-chance figure was applied to the arrears. Only 10% of the interest which would have been payable under the lease was included, because the 40% assessment also covered settlements involving no such interest or a later commencement date. Interest on damages was awarded at 1% over NatWest base rate, subject to the existing order of Norris J.
3. Apportionment Agreement. No interest was allowed for the period before the notional settlement date. The claim was too speculative, particularly in light of the earlier assessment. Damages were valued at £1.047 million as at that date, subject to credit for the £500,000 recovered under the actual settlement and related interest. Interest ran on the reduced balance, with interest under the settlement ceasing to run against the defendants from the settlement date.
4. Costs. The claimant’s fees were reduced to reflect work on issues which would not have been recoverable, including a 20% reduction in the defendant solicitors’ fees and deductions from counsel’s fees. Expert costs claimed for assistance by the Jekyll Partnership were rejected. The claimant recovered the costs of both actions on the standard basis, subject to disallowance of pleadings and other costs attributable exclusively to the maintenance of two actions. An issue-based or percentage reduction was otherwise inappropriate because the unsuccessful issues added little to the trial.

This was a first-instance consequential judgment following the court’s earlier judgment in the same proceedings. No appeal history is stated.