Case No: A3/2000/0630 & 1A3/999/1106
Neutral Citation Number: [2001] EWCA Civ 592
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEENS BENCH DIVISION
BRISTOL MERCANTILE COURT
(His Hon. Judge Raymond Jack Q.C.)

Royal Courts of Justice
Strand, London, WC2A 2LL

Thursday 26th April 2001

B e f o r e :

LORD JUSTICE WARD
LORD JUSTICE TUCKEY
and
LADY JUSTICE ARDEN

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	ERIC TERENCE DAY	Appellant	
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	JAMES THOMAS GREGORY COOK	Respondent	

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(Transcript of the Handed Down Judgment of
Smith Bernal Reporting Limited, 190 Fleet Street
London EC4A 2AG
Tel No: 020 7421 4040,  Fax No:  020 7831 8838
Official Shorthand Writers to the Court)
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Mr Michael de Navarro Q.C. and Mr John McDonald (instructed by Gaynor Smith Owen for the Appellant)
Mr Iain Hughes Q.C. and Mr Ben Elkington (instructed by Beachcroft Wansbroughs for the Respondent)

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Judgment
Lady Justice Arden: 
	Introduction
1.	This case is an example of the impact of company law on professional liability.  The principal issue is whether the appellant, Eric Terence Day (Mr Day), can recover damages against his solicitor, James Thomas Gregory Cook (Mr Cook) for the loss in value of his shareholding in his principal trading vehicle caused by his solicitor’s breach of duty.  The main issue of law has been settled by the House of Lords in the recent case in Johnson v Gore Wood & Co [2001] 2 WLR 72, which was decided after the judgment now under appeal was given. In essence the House of Lords held in that case that, where a wrong is suffered by a company and one of its shareholders, the shareholder cannot recover for loss which merely reflects loss which the company has suffered.  I will call that the “no reflective loss principle”.  I refer to that decision in more detail below. As the House of Lords recognised, there are limits to the no reflective loss, principle.  This Court must consider whether this case falls beyond those limits.
2.	The trial of these proceedings took place before His Honour Judge Raymond Jack QC and lasted some sixteen days.  The Judge gave a long judgment setting out his findings on the facts. I need not set out all the background.  I will start with an overview.  
3.	In  1987 Mr Day was a self-made business man in Tewkesbury who, through his company, subsequently called Theocsbury Ltd (“TL”), had recently sold a nursing home business for £1.8m.  He was planning to open a second nursing home with his daughter and her fiancé at Oxhey House, Bushley, near Tewkesbury, and to make other investments in the Tewkesbury area.  He had a solicitor who had acted for him since about 1979.  That was Mr Cook and Mr Day trusted him implicitly.  Mr Cook had business ambitions of his own.  He became aware that Mr Day had funds available for investment.  Mr Cook persuaded Mr Day to finance a number of disastrous business ventures in which Mr Cook participated.  Mr Day lost his money.  The Judge held that Mr Cook had acted in breach of duty to Mr Day, and TL and other companies in the TL group.  The Judge held that the transactions were unfair.  In particular, under the arrangements which were set up, Mr Day took the risk of the business ventures while Mr Cook took a share of the anticipated gain but none of the risk. The Judge found against Mr Cook on Mr Day’s case as to breach of duty, and there is no appeal from that part of the Judge’s judgment.
4.	The investments which Mr Day was persuaded to make were made through companies which he owned or set up for the purpose.  His principal company was called Theocsbury Ltd (“TL”), in which at the material time he held over 82% of the shares.  He and his accountant were the directors of TL.  He later set up or joined in setting up four more companies Theocsbury Properties Limited (“TPL”), Theocsbury Computers Limited (“TCL”), Theocsbury Computer Maintenance Limited (“TCML”) and Day Estate Agents Limited (“DEAL”).  TL made investments in these companies.  The loss which Mr Day claimed in his statement of case is the diminution in value of his shares in TL.  The Judge held that Mr Cook owed duties to both Mr Day and the companies in question. (core bundle page 75).  Mr Cook’s original defence was that he was Mr Day’s solicitor but that he had not given advice with respect to the commercial merits of the transactions, and that the transactions were merely business dealings. That concession was withdrawn by an amendment to the pleadings. In his closing speech counsel for Mr Cook conceded that Mr Cook owed only a duty of care to Mr Day.  It was also pleaded on Mr Cook’s behalf as follows:
	"(1) 	(a)	the Defendant was retained from time to time by 		the Plaintiff to act in relation to particular 			transactions on behalf of companies in which the 		Plaintiff was interested;
	(b)	the Defendant was so retained in relation to 			each of the transactions particularised in the 			Statement of Claim;
	(c) 	in relation to each of the said transactions the 		Defendant owed to the said companies a duty 		of care in contract and tort to act with the skill 		and care to be expected of a reasonably 			competent solicitor;
(2)	. . .
(3)	If, which is not admitted, the said companies suffered 	any loss or damage as a result of the transactions 	particularised in the Statement of Claim, any such loss 	or damage was suffered by the companies only.  The 	plaintiff is not entitled to claim any such loss."
5.	We are told that at trial Mr Day’s claim was hotly contested.  In the end the Judge in large measure accepted Mr Day’s case.  He held that Mr Cook was in breach of his duty of care in failing to advise Mr Day to take independent advice and to give advice in the best interests of the client.  The Judge also found that Mr Cook was in breach of fiduciary duty because the transactions viewed objectively were unfair to Mr Day.  The Judge held that Mr Cook had misused his position as a solicitor to draw Mr Day into transactions which were beneficial to Mr Cook and unfair to Mr Day.
6.	As to damages, Mr Day alleged that as a result of the defendant’s breach of duty, he had suffered loss in the value of his shareholding in TL in consequence of the various investments made on Mr Cook’s advice.  In addition he claimed that if TL’s business had been confined to the development and management of Oxhey Nursing Home, the acquisition and development of Theocsbury House and other investments as they would have been but for Mr Cook’s advice, the value of his shareholding in TL as at 23 June 1999 would have been £2.3m or thereabouts.  Mr Day accordingly claimed the loss in value of his shareholding in TL in this amount.
7.	On the question whether Mr Day could recover damages for the loss in value of his shareholding in TL (“the company point”) the Judge considered a number of authorities, including the decision of the Court of Appeal in Johnson v Gore Wood & Co [1999] Lloyd’s Rep PN 91, which (in this respect) the House of Lords has now affirmed.  The Judge found that because (1) the advice had been given to the companies as well as Mr Day and  (2)most of the investments were made by the companies, Mr Day personally could not recover any damages from Mr Cook for the diminution in value of his shares in TL.  However, he held that Mr Day succeeded on his claim by assignment to recover a sum of £100,000 lent by TL to Mr Cook, and additionally that Mr Day entitled to recover the sum of £13,581.43 which he had personally lent to DEAL and a further sum of £36,000 which he had had to pay under a guarantee which he had given to Hill Samuel & Co (“Hill Samuel”) in respect of DEAL’s borrowings.
8.	The Judge made findings of fact in case he was wrong on the first point.  The Judge found that on this basis Mr Day’s loss would be some £1.8m although that figure was subject to further work and calculations.  The Judge found that Mr Day was forced by Lloyds Bank, bankers to the TL group, to sell Oxhey, the second property that he had bought for development as a nursing home, and in addition that the sale of Oxhey was caused by the failure of Mr Day’s ventures with Mr Cook.
9.	The Judge held that the date of breach for the purpose of assessing damages should be taken to be December 1991 when Lloyds Bank appointed receivers to TL.  He further held that it was not appropriate to calculate losses on the basis of hypothetical businesses running to the date of trial.  In addition, in the case of DEAL, the Judge held that Mr Cook was not liable for losses after 31 October 1990, when Mr Day should have closed down the business.  This meant that Mr Day recovered only £13,587.43 out of sums totalling £36,000 advanced by him to DEAL.
10.	It is apparent that Mr Day has lost a very considerable part of his wealth due to breach of duty by his solicitor, and on the basis of the Judge’s judgment he is unable to recover it.  Mr Day is the only claimant.  None of the companies which I have mentioned (together “the TL group”) are parties to these proceedings.  We are told that at the relevant time it was considered possible that any assignment by the companies to Mr Day of these claims would be champertous and that any such assignment might in practical terms be useless (or detrimental) because Mr Day required legal aid.  (Those explanations cannot affect the legal consequences of the fact that the companies are not parties).  The TL group became insolvent.  Two companies went into administrative receivership and all were dissolved at various dates between 1992 and 1996.  Any claim by them against Mr Cook would now be statute-barred.  
11.	Mr Day was at all material times a director of each of the companies in the TL group.  He owned not less than 82% of TL at all material times.  TL owned initially 76% and later 99% of TPL.  Mr Day held 26% of TCL though this was subsequently transferred to TL.  He owned 26% of TCML but thereafter  shares in TMCL were allotted to TL who subsequently owned 79% of that company.  Mr Day initially owned 50% of DEAL (with the other 50% being owned by Mr Cook) but in July 1990 his shareholding rose to 99% and was transferred to TL.  Mr Cook did not own any shares in TL, but he acquired 24% of the issued share capital of TPL in January 1988, 35% of the issued share capital of TCL in December 1987 and 12% of the issued share capital of TCML in June 1988.
12.	There are three groups of investments which Mr Day made on the strength of Mr Cook’s advice.  They are investments in a solicitor and estate agency business, investments in computing, and investments in property.  I will take each of these three groups in turn.  Before doing so I would record that the Judge paid tribute to Mr Day’s courage in giving evidence since, in addition to his financial misfortune, he is now seriously ill.  The Judge found that Mr Day’s recollection on some matters was acute, but that his serious illness must have had an effect, which he could not evaluate, upon his evidence.  
13.	With that introduction, I turn to examine in more detail the three groups of investments which were made on Mr Cook’s advice.
	1. Investments in James Cook Solicitor and Estate Agency
14.	Mr Cook was anxious to set up a combined estate agency and solicitor practice.  However he was prevented by the rules of the Law Society from entering into a partnership with Mr Day who was not a solicitor.  Notwithstanding this, on the Judge’s findings, there was a joint venture between Mr Day and Mr Cook from the summer of 1988.  The idea was that Mr Cook would set up a chain of offices providing the services of a solicitor and estate agency.  Shortly after 5 August 1988 Mr Cook and Mr Day signed two agreements, a financing agreement and a consulting agreement, but these documents were backdated to 1 March 1988, the date when Mr Cook commenced his new business.  The new business was called James Cook Solicitor and Estate Agency.
15.	The Judge summarised the provisions of the consultancy agreement and the financing agreement as follows.  The consultancy agreement provided for Mr Day to give such advice to the practice of solicitor and estate agency being carried on by Mr Cook as Mr Cook might reasonably request.  In return Mr Cook was to receive one half of the profits of the practice after deduction of £40,000 save insofar as Mr Cook received salary from another company in the TL group.  The agreement could be terminated by twelve weeks’ notice given by Mr Cook or by twelve months’ notice given by Mr Day.
16.	The Judge summarised the financing agreement as follows:
	" It recorded that Mr Cook was currently trading on his own account as solicitor and estate agent at Theocsbury House in Tewkesbury.  It recorded that Mr Cook had put £40,000 into the business it also acknowledged that Mr Day had paid £40,000 to Mr Cook . . . It provided by clause 1 that Mr Day should cause to be made available such bank loans and overdraft facilities as Mr Cook, Mr Day and Mr Cook’s bankers should agree for the funding of premises for Mr Cook other than Tewkesbury.  It provided by clause 2 that Mr Day should guarantee those monies and any rents (if a landlord required), and that the bank should look to that guarantee before claiming against Mr Cook.  So the intention was that Mr Day should underwrite the funding of the expansion of the business.
	The combined effect of clauses 1 and 2 was for Mr Day to guarantee to lenders such sums as he agreed to.  The intention and proper construction was in my view that Mr Day would provide a guarantee to a lender on which he would be liable.  But the clauses can also be read as providing that, as between Mr Day and Mr Cook, Mr Day would be primarily liable to a lender if he agreed to the loan regardless of whether he had given a guarantee to the lender.  Mr Cook was later to take advantage of this ambiguity. 
	The financing agreement provided that in return for the consultancy services Mr Day should be entitled to invoice Mr Cook for half the profit of the business less the difference between £40,000 and any salary received by Mr Cook from the TL group, salary paid to Mrs Cook and the costs of insurances for the Cook family.  The agreement was terminable on twelve weeks’ notice by Mr Cook and by twelve months’ notice by Mr Day.  There were buy out provisions.  It was provided that all assets and liabilities of the business should be in the sole name of Mr Cook subject to the guarantee provision”.  (Core Bundle, pages 34-5).
17.	The agreement records that Mr Day had paid £40,000 to Mr Cook. In fact this sum was paid by TL as to £10,000 on 28 July 1988 and as to £30,000 in early August 1988. Both sums were paid by cheque drawn on TL’s bank account.  The parties have treated TL as the creditor.   In his statement of case, Mr Day claims that the loan was made by TL, and not by him as recorded in the financing agreement, and Mr Day has not made any claim to recover the £40,000 as monies lent by him.  Mr Cook has not contended that the £40,000 was lent by Mr Day (see Mr Hughes’ closing submissions which state that the £40,000 was provided by TL and not Mr Day).  Indeed it would have been unlawful for TL to pay the £40,000on Mr Day’s behalf since that would involve a loan to him in breach of the Companies Act 1985.  Mr Cook claimed that the £40,000 was not lent but paid under the terms of the financing agreement.  The Judge held that the loan of £40,000 was not repayable so long as the arrangements set out in the financing agreement continued (Core Bundle, page 38).
18.	Thereafter Mr Cook obtained a loan from Hill Samuel in the sum of £200,000.  When he approached Hill Samuel for this loan on 8 August 1988, he offered a guarantee from TL (Judgment, Core Bundle, page 39).  Subsequently, as the Judge indicates, Mr Cook claimed that Mr Day was bound to guarantee this sum.  At that point Mr Day broke off his relationship with Mr Cook.
19.	Mr Cook’s solicitor and estate agency business did not prosper.  The market had boomed in 1988 but after that property prices fell.
20.	In March 1989 Mr Cook persuaded Mr Day to arrange for TL to lend him the sum of £100,000 to keep the business afloat until it could be sold.  The business was not sold and eventually in July 1989 Mr Day procured DEAL to take over the estate agency side of Mr Cook’s solicitor and estate agency, including all its debts.  The Judge was highly critical of this transaction.  He said:
	" I do not think it is putting it in too dramatic terms to say that Mr Cook caused Mr Day to step into the fire so that he (Mr Cook) might step out of it".
21.	TL acting by its receivers subsequently assigned the right to recover £100,000 from Mr Cook to Mr Day personally and Mr Day brought a second action (tried simultaneously with the professional liability action) in which he alleged that he, alternatively TL, was entitled to repayment of the £100,000.  (It was not explained to us why no other claim of the companies, such as the claim for the £40,000, had been assigned to Mr Day).  Mr Cook alleged that this debt was written off in the course of the take over by DEAL.  However the Judge rejected that defence because Mr Cook referred to the £100,000 as outstanding in correspondence and in addition showed the amount as a loan in his own professional accounts.
22.	DEAL made substantial losses as follows:
16 months to 31 October 1990 - £304,701
Year ended 31 October 1991 - £115,845
Year ended 31 October 1992 - £110,712
	As at 31 October 1992 DEAL owed £554,907 to Hill Samuel, £76,875 to TL and £65,807 to Mr Day.  Mr Day had given a personal guarantee to Hill Samuel.  Hill Samuel brought proceedings against Mr Day on this guarantee but the proceedings were compromised on terms that Mr Day paid £36,000 to Hill Samuel.
	2. Investments in computer businesses
23.	There were two businesses concerned with computing.  The first was that of TCL which was set up to develop a programme to be used in a solicitor’s conveyancing practice.  Mr Day took a 26% shareholding which was later transferred to TL.  The other two shareholders were Mr Cook and Mr Greaves.  The three shareholders entered into an agreement dated 3 March 1988 to cover matters relating to the company.
24.	The agreement  imposed a number of obligations on Mr Day in connection with the financing of TCL’s business.  It required him to arrange for the company to have the top floor of Theocsbury House at market rent but not being payable until profits were made.  In addition, Mr Day was committed to funding TCL’s business for a minimum period of two years.  Clause 24 provides that Mr Day’s obligations would be deemed fulfilled if fulfilled by any company in which he had a controlling interest.
25.	TCL’s business was initially profitable, making a profit of £61,735 in the year ended 31 January 1990.  But this was largely due to a sale of know-how to TCML.  Thereafter it made losses and its business was transferred to TCML.
26.	 TCML was the second computer business in which Mr Day or his companies invested on Mr Cook’s advice.  TCML had been acquired “off-the-shelf” in July 1988 to carry on a computer hardware business. TL took a 26% shareholding.  TCML went on to make a loss of £152,513 largely on account of the acquisition of the know-how of TCL.  It then made a further loss and its business was sold.
27.	In June 1988, TPL gave a cross-guarantee of the liabilities of TCL and TCML to Lloyds Bank.  At the end of 1988, Lloyds Bank required TL and TCL and also TL and TCML to give cross-guarantees.  In December 1988, Mr Cook was instrumental in relaying to Mr Greaves a request from Lloyds Bank for cross-guarantees from the TL group (except TPL, which had already given such a guarantee) to secure group borrowings.  In his memorandum dated 19 December 1988 Mr Cook said this:
	“There is nothing unusual about [the cross-guarantees executed or to be executed by the TL group in favour of Lloyds Bank] but they are the type of guarantees that all banks require when there is a facility given to a subsidiary of a parent company.  The parent company always guarantees the liabilities of a subsidiary and vice-versa.”
	Mr Cook then gave Mr Greaves advice about the procedure for obtaining the approval of TCL.  Mr Cook then added:
	“I am arranging for [TL] to seal an identical guarantee and also identical forms for [TCML] . . .. I am afraid that I will have to tender my apologies to that meeting . . ..
28.	On  2 August 1988 TL paid £25,000 into TCL’s current account with Lloyds Bank and this sum was shown in TCL’s accounts as a debt owed to TL.  That was repaid in 1990, no doubt following the execution of the cross-guarantee required by Lloyds Bank.  The accounts of TCL as at 20 March 1991 show that TCL was then in debted to TL in the sum of £76,225.  However, it seems that this debt must have been repaid since Mr Day’s case is that the losses made as result of the investments in computer businesses were as a result of the enforcement of TL’s cross-guarantees of the liabilities of TCL and TCML (Mr Day’s expert report, paragraph 4.5.6). There are no findings of fact concerning the execution of these cross-guarantees, and accordingly no findings as to why the directors approved them for execution.
	3. Investments in property
29.	In the summer of 1987 Mr Day decided to buy a property in Tewkesbury subsequently called Theocsbury House.  The property was subsequently bought by TPL.  Completion took place on 7 January 1988.  The purchase price was provided as to £100,000 by TL and as to £140,000 by a loan from Lloyds Bank.  There is no complaint about the acquisition of Theocsbury House.  Thereafter it was let to Mr Cook and TCL. Mr Cook persuaded Mr Day to arrange for one floor of this property to be let to TCL and the ground floor to be let to his new solicitor and estate agency business.  Neither tenant was able to pay the rent.  Mr Cook was given a rent holiday and in addition the rent was allocated between the various parts of Theocsbury House in a way that favoured Mr Cook.  TPL made losses on the lettings to these two tenants.
30.	In May 1988, TPL formed an association with Granyte Ltd.  In pursuance of this partnership and with advice from Mr Cook it acquired properties known as Hill Farm and Battledown, neither of which proved to be good investments.
31.	Mr Cook also persuaded Mr Day to invest in “chain breaking”.  This meant that Mr Cook’s estate agency would buy properties at the end of “chains” where the owner was unable to sell the property but had contracted to buy a property from another party conditionally on doing so.  This was obviously a high risk venture and it resulted in losses to Mr Day.  Again, it was carried out not by Mr Day personally but through TPL. 
	The decision of the House of Lords in Johnson v Gore Wood
32.	I now turn to the relevant law.  In Johnson v Gore Wood, above, the House of Lords so far as material affirmed the decision of the Court of Appeal.  In that case the claimant alleged that he, as well as his company, had been given negligent advice by the defendant solicitors arising out of the same matters.
33.	Lord Bingham held that the authorities supported the following propositions:
	"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, particularly at pages 222-3, Heron International, particularly at pages 261-2, George Fischer, particularly at pages 266 and 270-271, Gerber and Stein v. Blake, particularly at pages 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, at pages 195-6, 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 the duty owed to that other.  I take this to be the effect of Lee v. Sheard, at pages 195-6, Heron International, particularly at page 262, R.P. Howard, particularly at page 123, Gerber and Stein v. Blake, particularly at page 726. I do not think the observations of Leggatt L.J. in Barings at p. 435B and of the Court of Appeal of New Zealand in Christensen v. Scott at page 280, lines 25-35, can be reconciled with this statement of principle." (page 94E-95A).
34.	Lord Bingham gave the following guidance for the application of the principles contained in these propositions:
	"These principles do not resolve the crucial decision which a court must make on a strike-out application, whether on the facts pleaded a shareholder’s claim is sustainable in principle, nor the decision which the trial court must make, whether on the facts proved the shareholder’s claim should be upheld.  On the one hand the court must respect the principle of company autonomy, ensure that the company’s creditors are not prejudiced by the action of individual shareholders and ensure that a party does not recover compensation for a loss which another party has suffered.  On the other, the court must be astute to ensure that the party who has in fact suffered loss is not arbitrarily denied fair compensation.  The problem can be resolved only by close scrutiny of the pleadings at the strike-out stage and all the proven facts at the trial stage: the object is to ascertain 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. At the strike-out any reasonable doubt must be resolved in favour of the claimant."
35.	Lord Bingham then considered the various heads of claim pleaded by the claimant.  He held that, for example, claims in respect of investments and loans which the claimant had made personally, and additional tax liability which the claimant suffered, were not objectionable in principle.
36.	Lord Goff gave a concurring speech, and agreed with Lord Millett’s analysis (below) of the earlier case law.  Lord Cooke of Thornden concurred in the result, but considered in some cases it was possible that the shareholder would suffer additional loss.  He cited the case of Christensen v Scott [1996] I NZLR 273, where a shareholder was permitted to pursue a claim for reflective loss after the company’s claim had been settled.  Lord Hutton agreed with the result, holding that the approach in Prudential Assurance v Newman should be preferred to that in Christensen v Scott as it had stood for almost 20 years.
37.	Lord Millett’s speech contains a lengthy analysis of the case law relevant to the no reflective loss principle:
	"The firm’s cross-appeal: recoverable heads of damage.
	A company is a legal entity separate and distinct from its shareholders.  It has its own assets and liabilities and its own creditors.  The company’s property belongs to the company and not to the shareholders.  If the company has a cause of action, this represents a legal chose in action which represents part of its assets.  Accordingly, where a company suffers loss as a result of an actionable wrong done to it, the cause of action is vested in the company and the company alone can sue.  No action lies at the suit of a shareholder suing as such, though exceptionally he may be permitted to bring a derivative action in right of the company and recover damages on its behalf: see Prudential Assurance Co. Ltd v. Newman Industries Ltd (No.2) [1982] Ch. 204 at p.210.  Correspondingly, of course, a company’s shares are the property of the shareholder and not of the company, and if he suffers loss as a result of an actionable wrong done to him, then prima facie he alone can sue and the company cannot.  On the other hand, although a share is an identifiable piece of property which belongs to the shareholder and has an ascertainable value, it also represents a proportionate part of the Company’s net assets, and if these are depleted the diminution in its assets will be reflected in the diminution in the value of the shares.  The correspondence may not be exact, especially in the case of a company whose shares are publicly traded, since their value depends on market sentiment.  But in the case of a small private company like this company, the correspondence is exact.
	This causes no difficulty where the company has a cause of action and the shareholder has none; or where the shareholder has a cause of action and the company has none, as in Lee v. Sheard [1956] 1Q.B. 192, George Fischer (Great Britain) Ltd v. Multi Construction Ltd. [1995] 1 B.C.L.C. 260, and Gerber Garment Technology Inc. v. Lectra Systems Ltd. [1997] R.P.C. 443.  Where the company suffers loss as a result of a wrong to the shareholder but has no cause of action in respect of its loss, the shareholder can sue and recover damages for his own loss, whether of a capital or income nature, measured by the diminution in the value of his shareholding.  He must, of course, show that he has an independent cause of action of his own and that he has suffered personal loss caused by the defendant’s actionable wrong.  Since the company itself has no cause of action in respect of its loss, its assets are not depleted by the recovery of damages by the shareholder. 
	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, insofar 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.  These principles have been established in a number of cases, though they have not always been faithfully observed.  The position was explained in a well-known passage in Prudential v Newman at p.222:                                                                                                                   "But what [the shareholder] cannot do is to recover damages merely because the company in which he is interested has suffered damage.  He cannot recover a sum equal to the diminution in the market value of his shares, or equal to the likely diminution in dividend, because such a loss is merely a reflection of the loss suffered by the company.  The shareholder does not suffer any personal loss.  His only loss is through the company, in the diminution of the value of the net assets of the company, in which he has (say) a 3 per cent. shareholding.  The plaintiff’s shares are merely a right of participation in the company on the terms of the articles of association. The shares themselves, his right of participation, are not directly affected by the wrongdoing.  The plaintiff still holds all the shares as his own absolutely unencumbered property.  The deceit practised upon the plaintiff does not affect the shares; it merely enables the defendant to rob the company.  A simple illustration will prove the logic of this approach.  Suppose that the sole asset of a company is a cash box containing £100,000.  The company has an issued share capital of 100 shares, of which 99 are held by the plaintiff.  The plaintiff holds the key of the cash box.  The defendant by a fraudulent misrepresentation persuades the plaintiff to part with the key.  The defendant then robs the company of all its money.  The effect of the fraud and the subsequent robbery, assuming that the defendant successfully flees with his plunder, is (i) to denude the company of all its assets; and (ii) to reduce the sale value of the plaintiff’s shares from a figure approaching £100,000 to nil.  There are two wrongs, the deceit practised on the plaintiff and the robbery of the company.  But the deceit on the plaintiff causes the plaintiff no loss which is separate and distinct from the loss to the company.  The deceit was merely a step in the robbery.  The plaintiff obviously cannot recover personally some £100,000 damages in addition to the £100,000 damages recoverable by the company."
	It is indeed obvious that (on the given facts, where no consequential losses are stated to have arisen) the defendant cannot be made liable for more than £100,000 in total.  It is equally obvious, however, that if the damages were recoverable by the shareholder instead of by the company, this would achieve the same extraction of the company’s capital to the prejudice of the creditors of the company as the defendant’s misappropriation had done.
	It has sometimes been suggested (see, for example, George Fischer v. Multi Construction at p.266 g-i) that Prudential v. Newman is authority only for the proposition that a shareholder cannot recover for the company’s loss, and is confined to the case where the defendant is not in breach of any duty owed to the shareholder personally. That is not correct.  The example of the safe-deposit box makes this clear.  It is the whole point of the somewhat strained business of the key.  The only reason for this is to demonstrate that the principle apples even where the loss is caused by a wrong actionable at the suit of the shareholder personally.....
	The plaintiff sought to distinguish Prudential v Newman by arguing that the defendant was in breach of a duty owed to him personally.  But, as I pointed out, that was not the problem.  The problem was that the only conduct relied upon as constituting a breach of that duty was the misappropriation of assets belonging to the old companies, so that the only loss suffered by the plaintiff consisted of the diminution in the value of his shareholding which reflected the depletion of the assets of the old companies.  The old companies had their own cause of action to recover their loss, and the plaintiff’s own loss would be fully remedied by the restitution to the companies of the value of the misappropriated assets.  It was not alleged that the plaintiff had been induced or compelled to dispose of his shares in the companies; he still had them.  If he were allowed to recover for the diminution in their value, and the companies for the depletion of their assets, there would be double recovery.  Moreover, if the action were allowed to proceed and the plaintiff were to recover for the lost value of his shares, the defendant’s ability to meet any judgment which the old companies or their liquidators might obtain against him would be impaired to the prejudice of their creditors.  The plaintiff would have obtained by the judgment of the court the very same extraction of value from the old companies at the expense of their creditors as the defendant was alleged to have obtained by fraud. ...As Hobhouse L.J. observed in Gerber (at p. 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) 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. . . ."
38.	It will thus be seen from the speeches in Johnson v Gore Wood that where there is a breach of duty to both the shareholder and the company and the loss which the shareholder suffers is merely a reflection of the company’s loss there is now a clear rule that the shareholder cannot recover.  That follows from the graphic example of the shareholder who is led to part with the key to the company’s money box and the theft of the company’s money from that box.  It is not simply the case that double recovery will not be allowed, so that, for instance if the company’s claim is not pursued or there is some defence to the company’s claim, the shareholder can pursue his claim.  The company’s claim, if it exists, will always trump that of the shareholder.
39.	Accordingly the court has no discretion.  The claim cannot be entertained.  The English rule is therefore different from the position in New Zealand: see Christiansen v. Scott, above.
40.	Even in the case of owner-managed companies, there is no discretion.  Thus the position in English law differs from the position (as I understand it to be) in the majority of States in the USA, where the courts exercise limited discretion to allow direct recovery by shareholders of closely-held corporations where the court is satisfied that:     
	"to do so will not (i) unfairly expose the corporation or the defendants to a multiplicity of actions, (ii) materially prejudice the interests of creditors of the corporation, or (iii) interfere with a fair distribution of the recovery among all interested persons." (Principles of Corporate Governance, American Law Institute (1994) para 7.01).
41.	However, it is apparent that there are limits to the application of the no reflective loss principle. The principal limit is that the no reflective loss principle does not apply where the company has no claim and hence the only duty is the duty owed to the shareholder (Lord Bingham’s proposition (2)).  Likewise it does not apply where the loss which the shareholder suffers is additional to and different from that which the company suffers and a duty is also owed to the shareholder: see Lord Bingham’s proposition (3) and see Heron International v Grade [1983] BCLC 244, as explained by Lord Millett in Johnson v Gore Wood.  There may well be other limits.
42.	Accordingly the Court must consider carefully such issues as whether the defendant owed a duty to the company as well as the shareholder, and whether, if both the company and the shareholder have a cause of action, the loss which they can claim is the same.  In some cases these issues may not be difficult to determine, but it is difficult here because the companies are not parties to these proceedings and because Mr Day was closely identified with the companies.  Mr Hughes accepted that the onus of proof was on the defendant in this respect.  In these circumstances the Court must, as Lord Bingham indicated, scrutinise the facts with care and consider whether the loss would have been made good if TL (or any other company in the TL group) had enforced any action which it may have had against Mr Cook.
	Submissions on this appeal
43.	Mr Day appeals against the Judge’s ruling that he could not recover the diminution in value of his shareholding in TL, and on other points referred to below.  Mr Cook cross-appeals against the Judge’s conclusion that he was liable to pay Mr Day the sum of £100,000.  There is no appeal against the judgment against Mr Cook for £36,000 and £13,851.43 plus interest.
	(1) Appellant’s submissions
44.	Mr De Navarro Q.C. for the Appellant makes the following submissions.  As his first main submission he submits that the only duty of care which Mr Cook owed was to Mr Day and that on this basis the case fell within Lord Bingham’s proposition (2).  He submits that the Judge was wrong to conclude that a similar duty was owed to the companies.  He particularly relies on the agreement dated 3 March 1988 in relation to TCL, which was an agreement with Mr Day personally.  The shares in TCL were originally held by Mr Day and it was only later that they were transferred to TL.  In addition Mr De Navarro submits that the facts that Mr Day chose to use TL as a source of finance for TCL and that Mr Cook knew TL had funds to invest are insufficient to found any duty to advise TL.  Furthermore, Mr Cook regarded himself as Mr Day’s solicitor.  Mr De Navarro makes similar submissions in respect of DEAL. 
45.	Mr De Navarro drew attention the following paragraph in the judgment:
	"In August 1988 TL paid £40,000 to Mr Cook, and in March 1989 £100,000.  Initially TL had a straightforward claim in debt to recover the £100,000.  Mr Cook was also in breach of duty to TL in requesting it.”  (Core Bundle page 75).  
	Mr De Navarro submits that it is significant that the Judge did not say that Mr Cook was in breach of duty to TL in requesting the £40,000.  (One possibility is that the second “£100,000” should read “£140,000” and that the Judge failed to spot that error when correcting the transcript.  However argument has proceeded on the basis that the Judge failed to deal expressly with the question whether Mr Cook was in breach of duty to TL with respect to the £40,000, and accordingly I proceed on that basis too).
46.	Mr De Navarro further submits Mr Cook was not consulted by the companies either with respect to the consultancy and financing agreements or with respect to the payment of the £40,000.  The Court should not attach significance to the fact that Mr Cook suggested that TL group should change its bankers to Hill Samuel since that change did not happen and (on Mr Day’s case) Mr Cook had an ulterior purpose for this.  As respects the cross-guarantees, Mr Day was already committed to fund TCL.  In any event, if Mr Cook was instructed, it was simply to draw up the guarantees.  The crucial point was that at this stage Mr Day was already committed and accordingly any breach of duty thereafter by Mr Cook to the companies was not causative of Mr Day’s loss.
47.	As his second submission Mr De Navarro also submits that in the present case Mr Cook owed Mr Day a fiduciary duty as well as a duty of care in tort whereas the only duty owed to the companies was a duty of care.  He submits that it is difficult to see how the principles in Johnson v Gore Wood apply to a breach of fiduciary duty.  On his submission, the remedies for such a breach are in the discretion of the court and are not necessarily limited to compensation.  Moreover contributory negligence is no defence to a claim for a breach of fiduciary duty (Nationwide Building Society v. Various Solicitors [1999] Lloyds Reports PN 241).  If the principle in Johnson v Gore Wood were to apply in this situation a shareholder could be deprived of his right to recover part of his loss by the contributory negligence of another. In addition different rules of causation may apply to actions in tort.  
48.	As his third main submission, Mr De Navarro submits that the duty of care owed by Mr Cook to Mr Day was different from the duty of care owed by Mr Cook to the companies.  He does not amplify this submission in detail but clearly the duty owed to a company when executing a bank guarantee may be different from that owed to an individual entering into an agreement on some different occasion in his private capacity.  He submits that where there is a duty to an individual who suffers a separate and distinct loss he may sue provided that he can show a duty of a different nature.  In this connection he relies on Walker v Stones [2000] 4AER 412 where the loss suffered by the claimants (who were indirectly interested in shares) was additional to that suffered by the company itself.
49.	As his fourth main submission, Mr De Navarro submits that, when Mr Cook persuaded Mr Day to invest in property transactions, he was persuading Mr Day to act through TPL and that therefore the duty was primarily owed to Mr Day and not to his company.  He submits that the duty to the company is in effect parasitic upon the duty to Mr Day personally.  On his submission, it should not make a difference that Mr Day wrote out the cheques on TL rather than procured TL to pay money to him (for example, I assume, by way of dividend) and that he then wrote out personal cheques.  In any event, Mr De Navarro submits, there was no assumption of responsibility to the companies. The judgment does not state how the Judge reached his conclusion that there was an assumption of responsibility to the companies.
50.	As his fifth main submission, Mr De Navarro submits that Mr Day’s loss was a personal loss and not a reflective loss.  His shares in TL were less easily saleable and lost all their value because of the defendant’s breach of duty.  The present case is on all fours with R.P. Howard v Woodman Matthews [1983] BCLC 117, which was approved in Johnson v Gore Wood.  Accordingly the loss was a personal one.
(2) Respondent’s submissions
51.	Mr Iain Hughes Q.C., for the respondent, makes the following preliminary submissions directed to the merits.  First he submits that a shareholder could not go behind the settlement by the company of its own claim.  In those circumstances he was left with his remedy against the company and its directors or liquidators.  Second he submits (for reasons I need not enlarge) that, if there was a “black hole” or irrecoverable loss in this case, it was entirely the responsibility of Mr Day and his legal advisers.  I need not say more because in my judgment the question whether or this appeal succeeds is a question of law and it is not influenced by the circumstances in which the present problem arose.
52.	As regards the question whether a duty was owed to the companies, Mr Hughes submits that Mr Cook was appointed the companies solicitor and therefore plainly owed a fiduciary duty to the companies. Accordingly it follows that there would be a cause of action in them as well.  He refers to the accounts of TL for periods ended 31 October 1987 and 31 October 1988 and to the accounts of TCL for the period ended 31 January 1989 (which were of course signed by the directors after the periods to which they relate). They state that Mr Cook is the issuing company’s solicitor. Mr Hughes referred to Mr Day’s witness statement in which he had referred to Mr Cook as the companies’ solicitor and stated that Mr Cook had been consulted on legal matters relating to the companies.  Mr Hughes submits that as the companies’ solicitor, Mr Cook had a duty to advise the companies on any matter necessitating advice.  He further submits that there would be a conflict of interest between the companies and Mr Day and that accordingly his primary duty was to the companies.  In addition he should have seen that they had independent advice.  However Mr Hughes did not produce the terms of any retainer.
53.	Mr Hughes submits that the companies would have the same cause of action as Mr Day. Mr Day’s own witness statement referred to discussions on legal matters that he had had with Mr Cook relating to the companies.  Moreover Mr Cook had acted for TL on the disposal of Sarn Hill, its original nursing home.  In addition Mr Cook acted for the company in ascertaining whether more favourable facilities could be obtained from Hill Samuel.  Mr Day admitted that he had provided information to Mr Cook for this purpose.
54.	Taking the various claims in turn, Mr Hughes submits that the representations which were made to Mr Day to induce him to lend £40,000 to James Cook Solicitor and Estate Agency were made to him in his capacity as a director of TL.  He contends that the loan was not a personal loan by Mr Day.  If it had been a personal loan it would not affect the value of shares in TL.  Mr Day himself claimed that he had authorised TL to make a loan of £40,000.  The Court should ignore the provisions of the financing agreement and hold that the claim to the £40,000 belongs to the company.  There was a long relationship between Mr Cook and the companies.  Mr Cook acted for the companies in regard to all the relevant transactions.  He accepted appointment as the company’s solicitor and Mr Day trusted him as solicitor to the company as well as solicitor to himself.  If representations were not made to the company, then the companies’ claim was for an omission to give advice.  If the representations were made to Mr Day personally he suffered no loss.
55.	Mr Hughes relies on the fact that Mr Day contends that he should have been advised with respect to the cross-guarantees and debentures that were required of the companies.  He referred to the memorandum dated 19 December 1988 set out above..  This, he submits, shows that Mr Cook was acting for the companies and was intimately concerned in the giving of the guarantees.  The loans were all shown in the books as being from TL.  Mr Cook knew that the loans came from TL.  TL would have had a claim for breach of fiduciary duty.  Mr Cook failed to advise TL as to the advantages and disadvantages of investment.  In addition he ought to have advised TL to obtain independent advice with regard to guarantees and the debentures.  The loss which Mr Day suffered was the same loss as the companies’.  Given Mr Cook’s interest in TCL, he plainly had a conflict of interest and duty as between Mr Cook and TCL.  Mr Day was TL and Mr Cook owed duties to TL.  If the liquidators of TCL had sued Mr Cook, and Mr Day was held to have a claim here, there would have been a race to judgment.  Mr Hughes relies on breach of fiduciary duty by Mr Cook to the companies.  The only relevant loss in respect of the computing business is TCL’s loss.  If the figure cannot be agreed, it would have to be remitted by the Judge.
56.	The proper claimant in respect of the property transactions was clearly TPL.
57.	Mr Hughes accepts that if Mr Day were sued by the companies for breach of duty, he could claim an indemnity from Mr Cook.  However he submits that the companies would also have a direct claim against Mr Cook.
Conclusions
58.	It will be recalled that the claim for damages with which the Court is concerned is a claim for damages with respect to the diminution in value in Mr Day’s shareholding in TL.  Necessarily, therefore, it is conceded that the actual expenditure of money and incurring of liability was directly or indirectly through TL.  Accordingly, as I see it, Mr Day’s best chance of success on this appeal, and indeed his only chance of success on this appeal, is in showing that Mr Cook’s only duty was to himself.  As Mr De Navarro rightly recognises, that argument is most difficult in relation to the property dealings.  All the property investments mentioned above were made through the companies.  There is no evidence suggesting any personal commitment by Mr Day.  Accordingly any duty in relation to those investments was owed to TPL  or TL and not to Mr Day.
59.	I now turn to the investments in James Cook Solicitor and Estate Agency.  The losses that were incurred here were incurred through the two payments of £40,000 and £100,000 respectively.  The obligation to fund the business originated in the agreement of 1 March 1988 to which TL was not a party.  Moreover the obligations to provide finance were imposed on Mr Day personally.  Mr De Navarro concedes that he cannot pursue an argument that there was no duty to TL with respect to the payment of £100,000.  There is however, an issue as to whether Mr Cook owed a duty to TL at the  time of the payment of £40,000.  This was paid (at least as to £10,000) prior to signature of the agreement (which was backdated 1 March 1988).  
60.	The Judge did not make any findings as to whether, with respect to any transaction said to give rise to loss, the client was Mr Day or TL or other companies in the group or any combination of these persons. Accordingly in my judgment the Judge must have been proceeding on the basis of a tortious duty of care (if any) so far as the companies were concerned.  In this connection, in my judgment, it is not enough for Mr De Navarro to point to evidence (given by Mr Cook at trial) that Mr Cook regarded himself as Mr Day’s solicitor.  Nor on the other hand is it sufficient of itself for Mr Hughes to point to the companies’ accounts as showing that Mr Cook was the  solicitor of the company issuing the accounts. It has to be the proper inference from the totality of the evidence that Mr Cook assumed the responsibility to advise the companies with respect to the transaction in question.  
61.	As Mr De Navarro points out, the Judge appears to have made no express finding as to whether Mr Cook owed TL a duty of care when it paid the two sums totalling £40,000 in July and August 1988.  On the other hand the Judge did not exclude the £40,000 from his decision on the company point, and accordingly it seems to me that by implication he found that Mr Cook owed a duty of care to TL with respect to that sum of £40,000.
62.	I note in passing that in his final written submissions before the Judge Mr Hughes submitted that the £40,000 was a debt due to TL and therefore Mr Day could not advance any claim in respect of the diminution in value of his shares in TL as a result of this loan.  Before us Mr Hughes has relied on breach of the duty of care, in my judgment rightly so because the fact that TL made a loan to Mr Cook (giving rise to a debt in TL’s favour) would not exclude the possibility of a claim by Mr Day for the diminution in value of his shares in TL as a result of Mr Cook’s negligent advice to him (Mr Day) if that debt proved to be irrecoverable or was lent on terms which were disadvantageous to TL.
63.	It is now well established that where a party voluntarily assumes responsibility to another with respect to a statement which he makes, he owes a duty of care (see Hedley Byrne v Heller & Partners [1964] AC 465).  In the absence of any express assumption of responsibility, it is a question of fact whether responsibility has been assumed.  The term “assumption of responsibility” has not been exhaustively defined by the courts, but guidance can be found in the authorities as to what is required.  The Court must be satisfied that there was an assumption of responsibility derived from “a relationship between the parties, which may be general or specific to the particular transaction, and which may or may not be contractual in nature” (per Lord Goff in Henderson v Merrett Syndicate Ltd [1995] 2 AC 145 at 180).  The nature of a voluntary assumption of responsibility was further explained by Lord Browne-Wilkinson in White v Jones [1995] 2 AC 207 at 273), in these terms:
	"Let me now seek to bring together these various strands so far as is necessary for the purposes of this case: I am not purporting to give any comprehensive statement of this aspect of the law.  The law of England does not impose any general duty of care to avoid negligent misstatements or to avoid causing pure economic loss even if economic damage to the plaintiff was foreseeable.  However, such a duty of care will arise if there is a special relationship between the parties.  Although the categories of cases in which such special relationships can be held to exist are not closed, as yet only two categories have been identified, viz.(1) where there is a fiduciary relationship and (2) where the defendant has voluntarily answered a question or tenders skilled advice or services in circumstances where he knows or ought to know that an identified plaintiff will rely on his answers or advice.  In both these categories the special relationship is created by the defendant voluntarily assuming to act in the matter by involving himself in the plaintiff’s affairs or by choosing to speak.  If he does so assume to act or speak he is said to have assumed responsibility for carrying through the matter he has entered upon.  In the words of Lord Reid in Hedley Byrne ... he has ‘accepted a relationship ... which requires him to exercise such care as the circumstances require, ‘i.e. although the extent of the duty will vary from category to category, some duty of care arises from the special relationship.  Such relationship can arise even though the defendant has acted in the plaintiff’s affairs pursuant to a contract with a third party."
64.	On this basis it will be relevant to consider:
	(a) the relationship between Mr Day and Mr Cook;
	(b) the relationship between Mr Cook and TL and between Mr Day and TL;
	(c) whether Mr Cook knew or ought to have known that TL (rather than Mr Day) would advance the sum of £40,000 to him;
	(d) whether he knew or ought to have known that TL would rely on his advice;
	(e) the nature of the advice; and
	(f) whether TL had its own legal adviser.
65.	In this connection Mr Cook was clearly advising Mr Day on the terms of the proposed arrangements between Mr Day and Mr Cook with regard to James Cook Solicitor and Estate Agency.  The Judge held that that advice was given negligently and in breach of fiduciary duty because of the failure to advise Mr Day that he should take separate legal advice.  The question is whether that duty of care extended to TL as prospective financier of the business.
66.	I return to the facts.  The evidence showed that at the time the £40,000 was paid Mr Cook and Mr Day had a long-standing professional relationship.  The shareholders’ agreement relating to TCL had already been signed.  Mr Cook knew that Mr Day’s business vehicle was TL and that TL has  substantial funds to invest.  In practice, Mr Day’s affairs and TL’s affairs were interwoven and interdependent.  Mr Day held over 82% of TL’s issued share capital.  Mr Cook had also acted for TL for several years, and was intimately acquainted with its affairs.  He knew it had no other legal adviser.  If he had not wished TL to rely on his advice, he could have made that clear.  Mr Cook knew that the funding for James Cook Solicitor and Estate Agency would be provided by TL.  By the time the agreement was signed he knew that the £40,000 (or part of it) had already been paid by TL, and, contrary to the statement in the agreement that Mr Day had paid £40,000 to Mr Cook,the parties have treated TL as the creditor of Mr Cook for this sum.  Indeed the Judge found that it was inevitable that the monies for the business would come from TL. Mr Cook must also have known that TL would have to become a party to the terms of the loan which the Judge held he had agreed between himself and Mr Day.  He was therefore dealing with Mr Day not simply in his private capacity but also in his capacity as a director of TL.  Mr Day was the only active director of TL so far as the events relevant to these proceedings are concerned.
67.	The subject matter of the advice was the financing and consultancy agreements and the legal aspects of making an investment in James Cook Solicitor and Estate Agency.  The financing agreement contains indications that the funding obligations could be discharged by Mr Day’s companies, for example it provided that Mr Day should “guarantee or cause to be guaranteed” bank loans for the business (clause 2).  As I see it, there is no evidence that Mr Cook had any basis for thinking that Mr Day would provide finance otherwise than by using funds provided by TL directly or indirectly.  Moreover, within a few days of the financing agreement being signed, Mr Cook was negotiating with Hill Samuel for a loan to himself for the purposes of the new business to be guaranteed by TL.  In the circumstances that Mr Cook clearly knew that it was TL which would provide the finance under the financing agreement.  TL was fully “identified” for the purpose of Lord Browne-Wilkinson’s test in White v Jones, and, given that TL was controlled by Mr Day, the probability was that TL would rely on Mr Cook’s advice.  Mr Cook has never suggested that TL had some other legal adviser.  Moreover, vis a vis Mr Cook, TL and Mr Day were both on the same side of the transaction.
68.	It has not been suggested by Mr De Navarro that TL would not have relied on any advice given by Mr Cook or that it would not have taken separate advice if at any relevant stage it had been advised to do so.  In the circumstances of this case, it is in my judgment properly to be inferred that TL relied on Mr Cook’s expertise and would have taken separate advice if advised to do so and acted upon it.  It is to be noted that the Judge found that Mr Day would have taken separate advice if advised to do, that with respect to James Cook Solicitor and Estate Agency and TCL, that had he taken separate advice he would have been advised not to enter into the agreements with Mr Cook and that he would have accepted that advice (Judgment, Core bundle pages 50 and 55).  If such advice would have been unfavourable as regards Mr Day entering these agreements, it would similarly have been unfavourable as regards TL providing funding.
69.	In the circumstances, the Judge should in my judgment have found (if he did not by implication do so) that Mr Cook owed a duty of care to TL as well as Mr Day with respect to the sums totalling £40,000  Accordingly, in my judgment, Mr Day is precluded from recovering damages in respect of that sum by the no reflective loss principle: see Lord Bingham’s proposition (1).
70.	I have taken into account that there are references in letters written by Mr Cook and in the witness statements and indeed in the financing agreement itself to Mr Day having been requested to pay or having paid the £40,000.  These references do not affect my conclusion.  Rather the confusion illustrates what I see as the reality of the situation, namely the close identification of Mr Day with his various companies.
71.	I would add that no argument has been addressed to the question whether, if Mr Day had any claim for the diminution in value of his shareholding in TL by the payment of £40,000, he would have suffered any loss since TL subsequently became insolvent.
72.	That leaves the investments in the computing businesses.  The loss incurred by Mr Day is the loss in value of his shares in TL due to the execution by it of a cross-guarantee for the liabilities of TCL to Lloyds Bank.. As regards TCL , there was a shareholders’ agreement with Mr Day personally.  So a duty of care was owed to Mr Day, and the question is whether a duty was owed to him alone.  
73.	The Judge came to the following conclusion:
	"If TL and TPL had sued Mr Cook in respect of the rental arrangements for Theocsbury House for breach of his duty as solicitor to the companies making the same allegations as I have considered in relation to Mr Day, they would between them have succeeded.  Likewise in respect of chain breaking, 7 Vine Street, Hill Farm and Battledown House.  I can see no reason for holding that there was a duty on Mr Cook to advise Mr Day as an individual to take independent advice and not holding that he had a duty likewise to advise TL and, after it was formed, TPL.
	The position as to TCL is more difficult because TL was not initially to be a shareholder in TCL.  Although TCL’s accounts show that by 31 January 1989 TL held 26 shares, the agreement of 3 March 1988 provided for the shares to be taken by Mr Day.  Nonetheless TL was inevitably involved as the sole source of finance for TCL.  Just as there was a duty to advise Mr Day individually as the controlling shareholder, there was a duty to advise the company.  If TL had sued Mr Cook in respect of the arrangements regarding TCL, it would have succeeded.
	I can omit TCML. . . ."
74.	The involvement of TL in the financing of TCL and TCML may be summarised as follows.  TL was not a party to the shareholders’ agreement relating to TCL.  Mr Day was a party and the agreement committed Mr Day to funding the business for two years.  It also provided however, that Mr Day’s obligations could be performed by any of his companies.  In August 1988, TL lent TCL £25,000.  In December 1988, TL executed cross-guarantees of TCL’s and TCML’s liabilities to Lloyds Bank.  TL lent a further £76,225 to TCL in the period ended 20 March 1991.
75.	However, the evidence of loss to Mr Day in relation to the computing companies is through enforcement of the cross-guarantees given by TL of TCL’s and TCML’s liabilities (see Mr Day’s expert’s report, paragraph 4.5.6)..
76.	Mr Cook clearly owed a duty of care to Mr Day with respect to the shareholders’ agreement relating to TCL.  The question whether Mr Cook similarly then owed a duty of care to TL as prospective financier would depend on whether Mr Cook voluntarily assumed responsibility to TL.  As I see it, similar considerations would apply here as apply in relation to the question whether Mr Cook owed a duty of care to TL with respect to the £40,000.  In particular, Mr Day was closely identified with TL and on the Judge’s findings it was inevitable that TL would have to provide the finance.  Then matters were known to Mr Cook.  In the circumstances I consider that the correct conclusion is again that Mr Cook assumed a duty of care to TL.  He should have advised TL before the shareholders’ agreement was signed to take separate advice because of Mr Cook’s interest in TCL, just as he owed Mr Day a duty to give this advice.  It might be too late to give the advice after the agreement was signed.  Again, therefore, Mr Day’s claim against Mr Cook to recover the loss in value of his shareholding in TL due to TL’s advances to TCL (if not repaid) and TL’s execution of the cross-guarantees constitutes a claim for reflective loss and is trumped by TL’s own potential claim against Mr Cook.
77.	With respect to the cross-guarantees given by TL of TCL’s and TCML’s liabilities, although the point does not now arise, Mr Cook in my judgment also came under a duty of care to TL at the time of their execution.  The memorandum dated 19 December 1988 referred to above shows that he was instrumental in arranging for TL to execute these guarantees.  The Judge does not refer to this memorandum in his judgment, but it was in the trial bundles and it was referred to in the chronology placed before the Judge on behalf of Mr Day.  It has been referred to in submissions on this appeal without objection.  It is clear from the terms of that memorandum that as regards TCML Mr Cook was acting in his professional capacity, giving advice as to whether such guarantees were normally required and how they should be approved and executed.  There is nothing in the memorandum to suggest that he was acting in some other capacity in relation to TL.  The cross-guarantees were legal documents which he, TL’s solicitor on many matters in the past, was asking it to sign.  TL had no other legal adviser.  In the circumstances, in my judgment, Mr Cook  assumed responsibility to give appropriate advice.  That advice should have been that TL should take independent advice, given his (Mr Cook’s) interest in TCL. I do not consider it likely that Mr Cook’s duty was (as suggested) limited to drafting the guarantees.  Those documents were apparently in the bank’s standard form.  There is no evidence which would justify limiting Mr Cook’s duty in this way. 
78.	The cross-guarantees were executed in about January 1989..  For the reasons explained above, I consider that it is properly to be inferred that if the correct advice had been given in March 1988 no guarantees would have been executed. The fact that Mr Day was under a commitment to provide funding for TCL does not make TL’s loss by reason of executing the guarantees his loss.  Accordingly in my judgment, Mr Day’s loss in the value of his shareholding in TL due to the execution of the cross-guarantees is clearly reflective loss for which Mr Day cannot now claim because of the no reflective loss principle: see again Lord Bingham’s proposition (1).  
79.	In my judgment that is sufficient to dispose of the appeal.  Mr De Navarro has sought to argue that the duties owed to Mr Day were different in content or that they were of a different nature because they were fiduciary duties.  This is a difficult area because the duties to the company were never pleaded as such.  However, as I see it, it is not sufficient as a matter of law to say that the duty of care was a different one or that the duty was not a fiduciary one (if indeed that was the case).  It follows from Lord Bingham’s proposition (3) above and from the decision of the House of Lords in Johnson v Gore Wood that even if Mr Day and TL have different causes of action, still TL’s claim would trump Mr Day’s unless he incurred some additional loss.  For the same reason it does not assist to say that the duty owed to Mr Day was the primary duty owed by Mr Cook or that additional duties were owed to Mr Day which were not also owed to the companies.
80.	That leaves Mr De Navarro’s argument that the diminution in value of Mr Day’s shareholding was a personal loss, not a reflective loss.  There is no basis on which the Court can reach that conclusion.  This is not a case such as R.P. Howard v Woodman Matthews (above), where the defendant’s breach of duty resulted in some additional loss to the shareholder over and above the loss in value of his shareholding.  The only exceptions to the non-reflective loss principle in this case are the sums of £36,000 and £13,851.43, against which there is no cross-appeal.
81.	Mr Day’s appeal against the Judge’s findings with respect to Oxhey and with respect to the date of breach for the purposes of assessing loss was not in the event pursued and does not arise.
82.	In the circumstances I would dismiss this appeal.  The loss which Mr Day suffered would have been made good if TL had enforced the causes of action available to it against Mr Cook.  The situation in the present case is comparable to the deceit practised on a shareholder to part with the key to the company’s money box in the example given in Prudential Assurance v Newman, as explained by Lord Millett in Johnson v Gore Wood.  The shareholder has no cause of action in respect of that deceit if the company’s money box is robbed with the stolen key because the company itself has a cause of action in respect of that event. 
83.	Since writing the first draft of this judgment, I have had the advantage of reading in draft the judgments of Ward and Tuckey LJJ.  They consider that there are issues which need to be remitted back to the Bristol Mercantile Court. As will be apparent I have come to a different conclusion from them on this aspect of the case. So far as concerns the question whether Mr Cook owed a duty to TL as well as to Mr Day with respect to the transactions of which Mr Day complains in these proceedings, the question is whether the Judge drew the right inferences from the primary facts which he found.  It is not said that his findings of primary fact were against the weight of the evidence or that there were primary facts which he should have found but did not do so:  neither party in fact asked this Court to order a retrial.  This Court has full power to draw inferences  and make findings of fact (CPR 52.10), and is in as good a position as the Judge to decide what inferences should be drawn from the evidence accepted by the Judge or incontrovertible evidence.  Accordingly it seems to me that this Court can determine whether or not the Judge's conclusion that there was a duty of care to TL was correct.  I do not consider that the unfortunate fact that his reasoning on the point was brief, or (with respect to the £40,000) non-existent, prevents this Court from considering what inferences should properly be drawn since as I see it  the Court can in this case ascertain for itself what inferences should be drawn from the facts as found by the Judge or the documents accepted by both parties.  I am not convinced that a retrial is necessary. I am concerned about further legal costs and delay.  Some twelve years have now elapsed since the events in question took place.  In the course of his lengthy judgment the Judge observed that on many aspects of the case there was no documentary evidence at all because the parties kept no records.  These factors will doubtless increase the difficulties of a retrial in this case.
Mr Cook’s Cross-Appeal with respect to the judgment for £100,000
84.	Mr Cook has a cross-appeal against the Judge’s decision that he was indebted to TL in the sum of £100,000.  Mr Cook relied on Mr Day’s evidence that there was an understanding that this loan would be assumed by Mr Day as part of the take-over by DEAL of Mr Cook’s estate agency business.  
85.	The Judge rejected this defence on the basis that it was inconsistent with contemporary correspondence and with accounts which Mr Cook drew up of his own practice.  The Judge rejected the defendant’s explanation that he had been advised by his own accountants to draw his accounts showing the loan.  The Judge concluded that the matter had become over-simplified in Mr Day’s mind by the passage of time.  (Core Bundle, page 42-3).
86.	Mr Hughes submits that the Judge’s conclusion was inconsistent with his finding that Mr Day’s memory was acute on some matters and that the Judge’s conclusion was against the weight of the evidence.  
87.	Mr De Navarro submits that Mr Day’s evidence was that nothing had actually been agreed about the take-over of this loan.  In addition there had been no agreement for the loan to be set-off against any other money that Mr Day owed Mr Cook.  He also relies on the correspondence referred to by the Judge and in conclusion submits that it was open to the Judge to come to the conclusion that he should reject Mr Cook’s defence.
88.	The question whether the indebtedness on £100,000 was still in existence at the date of the judgment was a question of fact.  The Judge heard the evidence given by Mr Day and Mr Cook.  In my judgment he was entitled to come to the conclusion that he did.  It was consistent with such contemporaneous documents as existed.  In the circumstances, it is not open to this court to review the Judge’s finding of fact on this point and accordingly I would dismiss the cross-appeal. 
The position of Mr Cook
89.	We are informed that in 1991 Mr Day made a formal complaint the Law Society about the conduct of Mr Cook, and that his complaint was not proceeded with because of these proceedings.  We understand that it would be open to Mr Day to pursue his complaint once these proceedings are concluded, possibly following the order of this Court.  We are told that meanwhile Mr Cook continues in practice as a solicitor (on his own), though on a lesser scale than before.  We do not know whether Mr Day wishes to pursue his complaint. For my part, I do not consider that the responsibility for ensuring that the attention of the appropriate professional body is brought to the findings of the Judge should rest solely with Mr Day.  Accordingly I would direct that the judgments of the Judge and of this Court should be sent forthwith to the Office for the Supervision of Solicitors in order that consideration may be given by it to Mr Cook’s conduct as a solicitor and any appropriate action taken, and with a request that a report of the action taken (if any) be sent to Mr Day and this Court within six months of the date of this order
Lord Justice Tuckey:
90.	Like Lord Justice Ward I have found this a most difficult case.  I was reluctant to accept that the decision in Johnson -v- Gore Wood & Co. compelled the conclusion that Mr. Day could only recover the modest amount awarded by the Judge although by his negligence and breach of fiduciary duty his trusted solicitor, Mr. Cook, had caused the loss of most of his fortune.
91.	Like the Judge, Arden LJ has decided that Johnson does compel this conclusion because in respect of all three groups of investments made by Mr. Day Mr. Cook also owed duties to his companies so Mr. Day’s loss is only reflective of the companies’ loss and therefore falls foul of Lord Bingham’s proposition one.  I agree with Ward and Arden LJs for the reasons they give that Mr. Day’s claims arising from the investments he made in property, TCML and the acquisition of the estate agency business in July 1989 do fall foul of this rule.  I also agree with them that the appeal and cross-appeal in relation to the loan of £100,000 should be dismissed and that Mr Cook should be reported to the Office for the Supervision of Solicitors.
92.	This leaves the claims in relation to the £40,000 and  TCL about which Ward LJ and Arden LJ disagree.  I propose to state my conclusions on these two matters shortly in the hope that this will simplify the task of ascertaining the majority view.  
93.	At the end of the argument before us I provisionally thought that the £40,000 fell to be dealt with in the same way as the £100,000.  In other words it was simply a loan by TL to Mr. Cook; that appeared to be how the case was pleaded and what Mr. Day was saying,.  However, I am persuaded by Ward LJ’s comprehensive analysis of the pleadings, the evidence and the judgment that I was wrong about this.  The agreement to lend or invest £40,000 stems from the financing agreement which was made between Mr. Cook and Mr. Day personally and was part of the personal obligation assumed by Mr. Day in clause 1 of that agreement.  These reasons, further elaborated by Ward LJ in paragraph 147 of his Judgment, point strongly, I think, to this being a personal loan and not a loan by TL.  Nevertheless the £40,000 was paid by TL and Mr Day’s loss was expressed to be the loss in value of his shares in TL resulting from such payment.  So the next question is whether Mr Cook came under any duty to advise TL about this transaction.  The Judge made no express finding about this or whether the loan was by Mr Day or TL.  What should we do?  Like Ward LJ, at one stage I thought we could answer both questions in favour of Mr Day, but I now agree that there are too many areas of fact and law left undecided in the Judges’s judgment to enable us to do so.  What I am clear about however, is that it is not open to us to spell out the duty to advise as Arden LJ does in paragraph 63 to 67 of her judgment.  The onus was on Mr Cook to show what, if any, duty he owed to TL, as Mr Hughes conceded, and I have no doubt that he failed to do this at trial.  In these circumstances it would be quite wrong for us to decide the matter in his favour on appeal.
94.	Mr. Day’s claim in relation to TCL was expressed to be for loss in the value of his shares in TL due to its underwriting of the business of TCL and its guarantee of TCL’s indebtedness to the bank.  I think it is necessary to consider these two causes of the loss separately.
95.	Firstly, TCL’s business was underwritten pursuant to the shareholders’ agreement of 3 March 1998 under which Mr. Day personally took 26% of the shares in TCL and agreed to make unlimited funds available to meet the outgoings and other expenses of the company for at least two years.  This was different from the other investments in which TL was either directly or immediately involved.  Mr. Cook should obviously have advised Mr. Day to take independent advice about the wisdom of entering into this agreement.  For these reasons, further elaborated by Ward LJ in paragraphs 165 - 166 of his judgment, I think Mr Day had a very respectable personal claim for any loss flowing from the investments made in TCL pursuant to the shareholders agreement.  But these investments were made through TL and Mr Day’s loss was expressed to be the loss in value of his shares in TL so again the question is whether Mr Cook came under a duty to advise TL about this transaction. The Judge dealt with the point shortly on the basis that TL was “inevitably involved as the sole source of finance for TCL”, so Mr. Cook owed the company the same duty as he owed Mr. Day.  I do not agree.  It was not inevitable that the money would come from TL.  The agreement allowed Mr. Day to provide the finance “by any company in which he had a controlling interest” but did not require him to do so.  He could for example have provided it from dividends received from TL or from personal borrowing, in which case Mr. Cook could not possibly have been under any duty to advise TL.  The problem again is that Mr Day’s claim was not clearly advanced on the above basis.  So what should we do?  Again I do not think that we can decide the matter.  Certainly we cannot decide the matter in favour of Mr Cook by spelling out a duty to advise as Arden LJ does in paragraph 76 of her judgment.   
96.	The other cause of the loss was the unlimited guarantee of TCL’s indebtedness which TL gave to Lloyds Bank in about December 1988.  This was part of a restructuring in which Mr. Day transferred his 26% share holding in TCL to TL.  If Mr. Cook came under a duty at this time to advise TL about the wisdom of entering into such a guarantee, then Mr. Day’s loss attributable to the guarantee is merely reflective of TL’s loss and so is irrecoverable.  But, as I understand, it this point was not investigated at all at trial. Certainly the judge made no finding about it.  Like Ward LJ I do not think we can decide it.  It may be for the reasons given by Arden LJ in paragraph 77 of her judgement that Mr Cook will succeed on this issue but that will be for the judge to decide after hearing evidence and argument. If Mr Cook succeeds on this issue but fails on the issue arising out of the shareholders agreement he will on the face of it be entitled to the amounts invested through TL under the agreement at least until December 1988, even if those amounts were subsequently subsumed into borrowings the subject of TL’s guarantee.
97.	For these reasons I agree with Ward LJ that the appeal should be allowed in relation to the £40,000 and TCL and, however unfortunate this may be,  the matter should be sent back to the Bristol Mercantile Court to decide the questions set out in paragraph 185 of his judgment.
Lord Justice Ward:
98.	I have found this to be a troublesome case.  The judge deduced from the successes enjoyed by Mr Day until 1987 that:-
	“he was shrewd in the management of a business which he understood.  He was naive outside his field.  I deduce from what I have read and heard that he was completely trusting of those he thought he should trust.  He thought he should trust professional men and perhaps also those with a better education than himself."
	He put his trust in his solicitor, Mr Cook.  Sad to say his trust was misplaced.  Mr Cook behaved not only negligently but also in breach of his fiduciary duty to Mr Day.  In a word, he behaved dishonourably.  I agree he should be reported to the Office for the Supervision of Solicitors as Arden L.J. has directed.  The result for Mr Day of this breach of trust was calamitous.  Whereas he could at the end of 1987 have regarded himself to all intents and purposes to be a millionaire, he had lost nearly all his wealth by the time the receivers moved in four years later.  It is altogether understandable that he should blame Mr Cook and seek to recover from him the whole of the lost fortune he believes he might have been able to enjoy with better advice and in better times.
99.	Thus this complicated litigation followed.  It has been difficult to see the wood from the trees.  Johnson v Gore Wood & Co. is itself a thorny thicket in the midst of this jungle of ill-defined facts.  Much of the difficulty has understandably arisen because Mr Day - and his advisers - have too readily fallen into the trap of thinking that, because Theocsbury Ltd. (TL), through which Mr Day conducted his businesses, was his alter ego, accordingly what was the company’s was also his to deal with as he wished.  Confusion and uncertainty have arisen through the failure to distinguish what he did and what was done for him personally and what he did and what was done for him when wearing his hat as the controlling mind and controlling shareholder in the company whose legal interests were in fact being affected by his actions. 
100.	In my judgment justice can only be done in this case firstly by separating company business from personal business and by then applying the principles of Johnson v Gore Wood & Co. [2001] 2 W.L.R. 72.
101.	There is really very little dispute about a number of key matters in this case.  Mr Day started out his life running a small garage business.  On the advice of his accountant, he began to operate the business through a limited company which he controlled.  In 1971 he branched out and through his company Avonside Holidays Ltd. took the lease of a caravan site.  When that business ceased, the company became Sarn Hill Rest Homes Ltd., later to become TL, which acquired the ownership of the property known as Sarn Hill from which the nursing home business was conducted.  Those were the days of the intoxicating property boom.  That produced huge profit from the sale of the land and the business.  The happy position was that there was £900,000 odd in the company’s account with Lloyds Bank and Mr Day would not have been the only one to have believed that another fortune was there for the asking.  The nursing home at the Oxhey was hoped to be the next successful venture.  That business was owned by Tewkesbury Nursing Homes Ltd. (THNL) in which TL held 76% of the shares.  Although that £900,000 was “his” to dispose of, all concerned were well enough aware that it was the company’s money and all were well aware of the need to reduce the company’s liability to capital gains tax by obtaining the maximum rollover relief through appropriate acquisitions by the company which would qualify for that relief.  The acquisition of Theocsbury House was an obvious example.  That was and was always intended to be a company acquisition, the company concerned being Theocsbury Property Ltd. (TPL) in which TL again held 76% of the shares.  Mr Day had no personal interest in that company.  It was the company which let the various parts of the building and if the terms of the lettings were, as the judge rightly held them to be, improperly advantageous to Mr Cook, the resulting losses were the company’s as the business of letting was for the company as landlord to transact.  It was also the company which became involved in the chain-breaking property purchases and again the losses were the company’s.  The company, TPL entered into other speculative property transactions and lost money through its association with Granyte Ltd. in Hill Farm and Battledown.  Since any loss suffered by the company reduced the value of the company, the loss in that sense was also being suffered by the majority shareholder, Mr Day.  Assuming that Mr Cook owed some duty to the companies in any or all of these matters (and I am far from certain that he always did) and that he also owed duties to Mr Day personally because he knew Mr Day’s wealth was ultimately to be affected by these transactions, Mr Day has no claim because his loss is reflective of the company’s loss.  These losses fall squarely and unarguably within the first rule established by Lord Bingham of Cornhill in Johnson v Gore Wood & Co [2001] 2 W.L.R. 72.
102.	I leave aside for a moment the arrangements made to enable Mr Cook to set up his new practice as a solicitor, to enter the estate agency business and to set up Theocsbury Computers Ltd. (TCL) with Mr Greaves.
103.	The next venture was Theocsbury Computer Maintenance Ltd. (TCML) which was to carry on a computer hardware maintenance business under the management of Mr Amies who, with Mr Greaves, was experienced in this field.  Together they held the majority of the shares in the company.  TL had 26% and Mr Cook 12%.  If Mr Day personally had any shareholding in the company it was a minor one.  Eventually TL became the major shareholder.  What is, however, important, in my judgment, is to note the judge’s finding as to the way that this company had been set up.  He held:-
	"Mr Cook prepared heads of agreement between the four main shareholders which were signed and are dated 20th June 1988.  They provided for the signatories to be directors and for Mr Moss to be auditor.  There was no provision related to funding."
104.	It is that last sentence which has significance for me.  On those findings, Mr Day had little personal interest in this company and importantly was not making himself responsible for financing it.  If it was an ill-advised adventure, the losses were company losses and assuming again the separate duties owed to Mr Day and to TCML and TL, the losses would have been suffered ultimately by the holding company and any personal loss would again have been reflective of the company’s.  Again Lord Bingham’s first principle rules.
105.	I turn to the estate agency business.  This was Mr Cook’s brainchild.  As I shall indicate, he involved Mr Day in what was, initially at least, some kind of joint venture between the two individuals.  It was an utterly disastrous venture.  On the judge’s findings (p. 41) Mr Cook was telling Mr Day that the business was worth £700,000 when in fact that sum was what was required to clear the whole of Mr Cook’s borrowing.  Mr Day did agree to take it over from 17th July 1989.  The judge found that the vehicle by which Mr Day acquired the business was the resuscitated company, Day Estate Agents Ltd. (DEAL).  The judge made the damning finding that:-
	"I do not think that it is putting it in too dramatic terms to say that Mr Cook caused Mr Day to step into the fire so that he might step out of it."
106.	Nonetheless when Mr Day stepped into the fire, he was for the first time wearing his company hat.  DEAL’s subsequent losses may ultimately have redounded to Mr Day’s personal disadvantage, but they were primarily company losses and the controlling shareholder’s personal loss was reflective of the company’s loss.  Proposition 1 applies again.
107.	So far I am in agreement with Arden L.J. and Tuckey L.J. that Mr Day’s claims for the damages suffered from the TPL, TCML and DEAL business ventures are irrecoverable.  Where I differ from Arden L.J. is in the analysis of the dealings between Mr Day and Mr Cook which led to the setting up of the solicitor/estate agency business and of Theocsbury Computers Ltd. (TCL)
108.	Many of the central facts do not appear to me to be in any or at least any serious dispute.  At the risk of repeating matters already set out by Arden L.J. and by quoting quite extensively from the judgment, I highlight the following salient facts and features which appear to me to be most relevant.  Where passages are italicised, I have added the emphasis.
109.	The judge found:-
	(p.20) "It is further clear that in the autumn of 1987 he (Mr Cook) was taken with the idea of setting up a combined solicitor and estate agency business. ... He hoped ultimately to have a number of branches.  Mr Cook was also interested in developing computer software for use by estate agents and solicitors in property transactions.”
	(p.21) “Thus I find that in the latter part of 1987 Mr Cook was looking to make a substantial change in his professional life.  In short he had quite grandiose ideas for escaping from the rut of a small conveyancing practice.  He wanted to terminate his partnership and set up a new business which would combine estate agency with legal practice. ... His ability to organise and run such an operation was untested.  He had no direct experience of estate agency or of software companies.  But most important, he had only £40,000 by way of capital for any new business.  He needed money."
	(p.22) “I find that when Mr Cook became aware of Mr Day’s intention to purchase Theocsbury House, he discussed with Mr Day his plans which I have already outlined.  He suggested he should occupy part of Theocsbury House for the purpose of the estate agency business and solicitors practice.  I am satisfied that he included in his plans the software aspect of them:  he suggested to Mr Day that Mr Day should support a company to be set up for that purpose which would be run by Mr Greaves.  I am satisfied that no joint venture as to the solicitor and estate agency business was agreed between Mr Cook and Mr Day at this stage.  Nor had Mr Day ever himself considered using Theocsbury House for an estate agency.  There is some documentation as to what occurred in 1987 on the software side. The first documentation is two undated pages of notes made by Mr Cook in two pens.  They purport to set out the main points of agreement between Mr Day, Mr Cook and Mr Greaves. ... The main features are:
	(a)	Shareholdings - Mr Greaves 39%.  Mr Cook 35%.  Mr Day 26%.
	(b)	Salaries - Mr Greaves £25,000 (his salary at General Automation), Mr Cook £25,000, Mr Day Nil.  
	(d)	Funding - Mr Day to fund salaries of staff including those of Mr Greaves and Mr Cook and to fund equipment rentals etc.  …
	(e)	Mr Day’s commitment should be for a minimum of 2 years.”
	(p.25) “An agreement was entered into between Mr Greaves, Mr Cook and Mr Day relating to TCL which is dated 3 March 1988.  The interval is unexplained.  Its main features were:
		(a)	Shareholdings:  (as above).
		(b)	Salaries:  (as above).  …
		(h)	Mr Day should provide funding for the 		outgoings of the company ...
		(m)	Mr Cook was to devote a major part of 		his time to TCL it being acknowledged that 			some time would be required for him to 			administer the solicitors practice and estate 			agency, which was to be kept to a minimum.” 
110.	It is important, in my judgment, to look more closely at that agreement.  Mr Cook was relying upon it as evidence of his case that this was a joint venture.  Mr Day did not deny that he had entered into the agreement:  his case was that he did so because he trusted Mr Cook and Mr Cook was in breach of his various duties to Mr Day and, had he been properly advised, he would never have entered into the deal at all.  There is no suggestion that I have seen that the agreement was not implemented or that it did not accurately record the basis upon which this business was set up and conducted.  It imposed onerous obligations on Mr Day, in particular:-
	"(11)	Mr Day shall make funds available for payments of the outgoings of the company including in particular but without prejudice to the generality of the foregoing salaries of Mr Greaves, Mr Cook and such other staff as Mr Greaves, Mr Cook and Mr Day may from time to time agree.
	(12)	Mr Day shall make sufficient funds available to purchase, hire or rent or alternatively shall provide such computer equipment and development software as Mr Greaves may reasonably request and motor vehicles up to the value of ten thousand pounds (£10,000) and such other salaries and vehicles to such other staff as they may from time to time agree  ...
	(15)	Mr Day undertakes to make funds available for the purposes mentioned in this agreement including the payments of the outgoings mentioned herein for a period of not less than two years from the first day of February 1988  ...
	(20)	Upon the company making commercially viable profits there shall be paid out of those profits as a first charge on those company profits and the company bank account all sums expended by or on behalf of Mr Day in financing the company ...”
	(22)	Mr Cook hereby undertakes:-
	(i)	that he will devote the major part of his time to the business of the company it being acknowledged ... that a certain amount of his time will be involved in administering the solicitors practice and estate agency ... it also being acknowledged by Mr Cook that he shall spend the minimum possible amount of time in that business. ...
	(24)	In this agreement any obligation on the part of Mr Day shall be deemed to have been fulfilled if actually fulfilled by any company in which he has a controlling interest."
111.		When the judge summarised the agreement it is noticeable that he did not make any reference at all to paragraph (24).  It seemed to play no significant part in the case being presented to him.  
112.	The judge went on to observe that Mr Day’s shares in TLC were initially held by him directly but that they were transferred in 1988 to TL.  From the company records placed before us the date of that transfer appears to have been 19th December 1988.  That marks the moment when TL acquired a direct interest in TLC.  It may be an important turning point identifying when the investment, if any, in TCL changed from personal to corporate.
113.	He then dealt with the acquisition of Theocsbury House by TPL.  He dealt with the “rent holiday” that TPL granted Mr Cook and he then returned to “the question of the salary of £25,000 p.a. to be paid to Mr Cook by TCL”.  He said:-
	(p.27)	"The starting point for this was not in dispute:  it was that Mr Cook had earned £40,000 from Cook and Hickman and he did not want to receive less when he moved to Tewkesbury.  Until his new practice as a solicitor/estate agent in Tewkesbury was established, he was going to need money.  This had to come, directly or indirectly, from Mr Day. Contrary to what was stated in the agreement relating to TCL, I do not think that Mr Cook intended to spend most of his time working for TCL and only the minimum time for his practice and estate agency.  His primary business was the latter combination:  TCL was ancillary, and there was little he could contribute on an every-day basis.  I reject his evidence that it was not a sham.  I find that it was simply a means of getting him the money he needed from Mr Day.  I am satisfied that the probability is that the initiative must have come from Mr Cook both as to the suggestion that he should have a salary of £25,000 and that it should be put through TCL.  I think Mr Day agreed to it in a mixture of generosity and naiveté.  He did so because he wanted to help Mr Cook succeed in his new solicitor/estate agent venture ...  On 1st March Mr Cook began business at Theocsbury House as a solicitor and estate agent."
114.	The judge then dealt with the operation of the estate agency business and the chain-breaking scheme that was to be done through TPL and financed by Lloyds.  He dealt with TPL’s introduction to Granyte Ltd. and the company’s property speculating ventures at Hill Farm and Battledown.  As I have remarked, that was all company business.
115.	Then the judge dealt with the events which led to an agreement between Mr Cook and Mr Day covering the solicitor/estate agency business.  He referred to Mr Cook’s notes and pointed out that they were inconsistent with a 50/50 joint venture having been decided in 1987.  He related the history of the setting up of DEAL with 50% of the shares being held by Mr Cook’s father as his nominee.  This was to protect Mr Cook from any possible complaint by the Law Society.  The judge found:-
	(p.33)	"I find that the probability is that in May 1988 Mr Cook was putting his mind to how he was to expand from Tewkesbury to a spread of agencies in surrounding towns.  He would need finance for this and the only source was Mr Day.  So he had conceived the idea of bringing Mr Day in on a share of the profits. ... The likelihood is that the proposal was discussed in principle with Mr Day about that time and before he agreed to the Stroud proposal.  But the form of the venture was not yet determined."
	(p.34)	“In July and early August 1988 Mr Cook was engaged in drafting two agreements to be entered into between him and Mr Day.  The shorter of the two I can call “the consultancy agreement”:  I will call the other “the financing agreement” ... The final versions were entered into shortly after 5th August 1988.  They were backdated, however to 1 March 1988, the date when Mr Cook commenced his new business.
	The consultancy agreement provided for Mr Day to give such advice to the practice of solicitor and estate agency being carried on by Mr Cook as Mr Cook might reasonably request.  In return Mr Cook was to receive one half of the profits of the practice after deduction of £40,000 save insofar as Mr Cook received salary from another company in the TL group ...
	It (the financing agreement) recorded that Mr Cook was currently trading on his own account as solicitor and estate agent at Theocsbury House in Tewkesbury.  It recorded that Mr Cook had put £40,000 into the business.  It also acknowledged that Mr Day had paid £40,000 to Mr Cook - to which I will return.  It provided by clause 1 that Mr Day should cause to be made available such bank loans and overdraft facilities as Mr Cook, Mr Day and Mr Cook’s bankers should agree for the funding of premises for Mr Cook other than Tewkesbury.  It provided by clause 2 that Mr Day should guarantee those moneys and any rents (if a landlord required) and that the bank should look to that guarantee before claiming against Mr Cook.  So the intention was that Mr Day should underwrite the funding of the expansion of the business.”
	(p.35)	“The combined effect of clauses 1 and 2 was for Mr Day to guarantee to lenders such sums as he agreed to.  The intention and proper construction was in my view that Mr Day would provide a guarantee to a lender on which he would be liable.  But the clauses can also be read as providing that, as between Mr Day and Mr Cook, Mr Day would be primarily liable to a lender if he had agreed to the loan regardless whether he had given a guarantee to the lender.  Mr Cook was later to take advantage of this ambiguity.”
	(p.36)	“On 28th July Mr Cook had written two letters to Griffiths Marshall (his accountants) each enclosing a copy of the then draft of one agreement asking for their advice. ...
	The second letter relates to the financing agreement.  It refers first to the two sums of £40,000.  Mr Day had at this date paid £10,000.  Mr Cook wrote: “If the matter is ever queried it will be considered to be an interest free loan”.  I am satisfied that Mr Cook was concerned here as to the view that the Law Society may take of the association of Mr Day with his business as a solicitor.  That was one of the problems listed on the note.”
116.	In order to be able to distinguish between company business and personal business it is necessary to pay close regard to these agreements.  The Financing Agreement provided:-
	"WHEREAS:
	(2)	Mr Cook and Mr Day have agreed that Mr Day will make funds available to Mr Cook and will guarantee or cause to be guaranteed suitable banking arrangements for Mr Cook to carry on in business at Theocsbury House aforesaid and such other places as Mr Cook and Mr Day shall from time to time agree.
	NOW THIS AGREEMENT WITNESSETH as follows:-
	1.	Mr Day has paid Mr Cook the sum of forty thousand pounds (£40,000.00) which Mr Cook hereby acknowledges.  Mr Day shall cause to be made available such bank loans and overdraft facilities as Mr Cook, Mr Day and Mr Cook’s bankers shall agree ...
	2.	Mr Day shall guarantee or cause to be guaranteed the moneys referred to in clause 1 hereof ... to the intent that in the event of the said loans and overdrafts being called in by the said bank the said bank shall rely upon the said guarantees and any security provided to the said bank in support of such guarantees before making any claim against Mr Cook in respect of the said loans and overdrafts.
	3.	The sums of £40,000 each paid by Mr Day and Mr Cook shall not bear interest.”
117.	Clause 4 provided that in return for the consultancy services provided by Mr Day, he should receive up to one half of the profits calculated, of course, after Mr Cook had taken his £40,000 first. Clause 6(iii), to which the judge later referred, provided in summary that in the event of the business being put on the market for sale, the proceeds of sale should be deployed in “repaying to Mr Cook and Mr Day any sums introduced but which had not been repaid.”
118.	Despite the terms of the agreement that Mr Day was to be responsible for financing the enterprise, Mr Cook in fact arranged funding from Hill Samuel who advanced the money without requiring any guarantee to be given by Mr Day or by TL or by anyone.  On what basis and in what circumstances Mr Cook came to offer Hill Samuels a guarantee is not made clear in the judgment.  The judge felt that was simply bad decision making by Hill Samuel.  
119.	Then the judge returned to the payment of £40,000.  He said:-
	(p.38)	"I must return briefly to the £40,000 paid by Mr Day through TL to Mr Cook in tranches of £10,000 on 28th July 1988 and £30,000 in early August 1988.  I am satisfied that this was paid as part of the arrangements contained in the two agreements backdated to March 1988.  I think that it was probably dealt with on the basis of “I have put in £40,000:  you should too."  I think it unlikely that it was discussed whether or not it was of the nature of a loan.  Mr Cook’s own letter to Griffiths Marshall shows that he saw a difficulty in treating it as capital advanced to the partnership, and preferred to treat it as a loan.  I consider that it should be treated as a loan, but a loan that was not repayable so long as the arrangement set out in the agreements continued:  I refer to clause 3 and 6(iii) of the financing agreement.
	I have traced through in some detail what occurred in relation to the two agreements backdated to 1 March 1988 because of the light it throws on relations between Mr Cook and Mr Day.  As I have said, the agreements did not cause Mr Day any actual loss apart from the £40,000.  The agreements show how Mr Cook pursued his own interests in disregard of his duties to his client.  This is relevant when one has to consider the other transaction.”
120.	The judge then recorded how Mr Cook opened four further estate agent offices with funds obtained from Hill Samuels at a time which could not have been worse as the market was already slowing prior to a long period of low prices and inactivity.  The judge noted that in its first year to 31 January 1988 (which surely had to be 1989) TCL made a loss of £65,043.  It was not paying rent.  That there were financial difficulties was obvious.
121.	The judge then continued:-
	(p.39)	"In March 1989 £100,000 was paid as a loan by TL to Mr Cook.  Mr Cook stated that this was paid to keep the business going pending its sale, as they both realised that the property bubble had burst. ... Mr Day stated that Mr Cook approached him for the loan on the basis that the business had not done as well as expected and that it would come round.  He said he was shown projections for the future which showed profits.  These are available among the trial papers.  I accept Mr Day’s evidence."
122.	This was undoubtedly a loan by TL to Mr Cook.  It was the chose in action which was assigned by the receivers to Mr Day and it forms the subject of the second action.  Mr Cook was to allege that when eventually DEAL took over the estate agency business, this loan was somehow swept up or swept away.  The judge rejected that contention.  By his cross-appeal Mr Cook submits he was wrong to do so.  For the reasons given by Arden L.J. with which I agree, there is no merit in that cross-appeal and it should be dismissed.  
123.	I return to the operation of TCL.  The judge found:-
	(p.44) "By reason of the collapse of the residential property market the market for TCL’s estate agency software was most unpromising.  To provide it with work an agreement was entered into with General Automation dated 8th August 1989 whereby TCL was to develop specified legal programs for General Automation for a monthly fee.  In the autumn of 1989 its business was at least largely transferred to TCML.  In its second year, that is to 31st January 1990, it made a profit of £61,735 leaving only a small loss to be carried forward.  This however included a credit of £205,000 for know-how sold to TCML.  £190,217 was owed on bank overdraft.  Mr Greaves was transferred to TCML and left in May 1990.  TCL appears to have continued to trade in some minor way.  There was a loss in the period to 20th March 1991 of £46,454.  It was struck off the Register of Companies on 24 November 1992."
124.	The judge then dealt with the disintegration of TCML.  I need not go into the details.  It seems to have made some spectacular losses;  not as spectacular, however, as DEAL.  It seems that by 31 October 1992 DEAL owed £554,907 to Hill Samuel, £76,875 to TL and £65,807 to Mr Day.  In December 1991 Lloyds Bank appointed receivers of TL and TPL.
125.	The judge’s conclusions of the fact finding chapter of his judgment were:-
	(p.47)	"I do not think that at the start Mr Cook set out to take deliberate advantage of Mr Day.  But he found that he was, as it were, pushing at an open door.  For Mr Day liked to be generous, and he wholly trusted Mr Cook.  I think that at the very start when Mr Cook first told Mr Day of his plan and suggested he might be his tenant Mr Cook allowed himself to be blind to the position of conflict of interest in which he was placing himself.  But from an early stage the position of conflict in which he was placing himself must have been obvious.  His desire to put his plan into action and his need for a backer were the cause of his blindness.  ... I find that as 1988 progressed his self-interest became the more dominant.  In 1989 he was saving himself at the expense of Mr Day."
126.	The judge concluded:-
	(p.48)	"I have intended to mention all matters of real importance.  I should record that there were other matters investigated in the evidence which I have omitted."
127.	The next chapter of the judgment dealt with duty, breach and causation.  In summary he found that Mr Cook was under a duty to advise Mr Day “in strong terms” to take independent advice “with a sufficient explanation of why he should do so”.  He was in little doubt that Mr Day would have done as Mr Cook suggested because he trusted him.  Had independent advice been given:-
	(p.50)  "It must have been that there were surely investment opportunities around Tewkesbury which offered Mr Day a surer and fairer return on his capital than the scheme for TCL.  It must have been that the scheme was unfairly balanced in favour of Mr Cook at Mr Day’s expense.  I am satisfied that the probability is that Mr Day would have followed such advice."
128.	The judge then dealt with the August 1988 agreements.  He said:-
	(p.54)	"This brings me to the agreements made in August 1988 but back-dated to 1st March 1988, the payment of £40,000 to Mr Cook at about the time of their making, the payment to Mr Cook of £100,000 in March 1989, the take-over by DEAL of the agencies together with half of Mr Cook’s Hill Samuel debt.  I have no doubt that any responsible adviser who was shown the two agreements would have advised Mr Day not to sign them and not to invest £40,000 or any other sums in Mr Cook’s estate agency business.  The two agreements, one to be kept secret, were a warning in themselves against becoming involved with Mr Cook in this venture.  Mr Day would have been advised that he was being used by Mr Cook to provide funding potentially without limit for an uncertain return.  …I am also satisfied that on receiving such clear advice Mr Day would have followed it.”
	(p.55)	I therefore find that by reason of Mr Cook’s admitted (or very largely admitted) breaches of duty Mr Day was caused to make the investments which he did."
129.	The judge then dealt with “fiduciary duty - conflict of interest”.   He concluded:-
	(p.63)	"In my view these cases establish that a client may be entitled to equitable compensation for loss incurred by reason of the solicitor acting in conflict of interest and so breach of fiduciary duty.  Thus compensation is the converse of the right to an account of profits where the transaction is profitable.  It is a defence to such claim both that the client was fully informed as to the transaction and that the transaction was fair.”
	(p.64)	"I think that they (the transactions) were unfair:
	(b)	The arrangements for TCL, in particular Mr Day’s low shareholding combined with his obligation to finance the company over an uncertain period with the provision of Mr Cook’s salary, were unfair.  
	(h)	The advances of £40,000 and £100,000 to Mr Cook were unfair.”
	(p.65) “It seems to me, however, that the compensation to be provided particularly in an equitable jurisdiction must be fitted to the facts of the case.  The situation here is that Mr Cook misused his position as a solicitor to draw his client into a series of transactions which were of potential benefit to himself and unfair to his client, and which have resulted in loss to his client.  In these circumstances it does not provide adequate compensation simply to redress the unfairness, leaving the client with losses from a transaction which he would not otherwise have entered into.  Fairness requires that in these circumstances the client should recover the whole of his loss.  I conclude that this way of putting his case is available to Mr Day and would enable him to recover the measure of compensation which he seeks.”
130.	Then the judge dealt with the company point.  He said:-
	(p.65)	"Mr Day’s claim aims to restore the financial position which he would have had through his shareholding in TL if he had not entered the transactions of which he complains.  In the amended statement of claim, with respect to each transaction which is complained of reference is made to “the plaintiff’s loss of value in Theocsbury Ltd."...”
131.	The judge referred to the total volte-face of the defendant who withdrew an admission in his original defence that he had acted with Mr Day’s solicitor and owed him a duty in respect of the various transactions.  The amended pleading suggested that Mr Cook had acted for Mr Day’s companies and owed a duty to them and that the loss was suffered by the companies only.  The judge recorded Mr Cook’s case as follows:-
	(p.66)	"(a)	Mr Cook owed a parallel and indistinguishable duty to TL in respect of the transactions complained of as he did to Mr Day.  Prior to TL’s dissolution or the barring of the claims by limitation, TL had a claim against Mr Cook for such damage as TL suffered.  That damage included the loss of its assets, namely the damage now claimed by Mr Day.
	(b)	In accordance with decisions of the Court of Appeal ... a shareholder cannot claim for a diminution in the value of his shareholding in such circumstances:  the claim must be brought, if at all by the company."
132.	The judge’s conclusions were:-
	(p.74)	"In the present case there is no doubt as to the duty owed by Mr Cook as a solicitor to Mr Day in connection with the transactions with which I am concerned.  It was well established by the evidence and eventually accepted on Mr Cook’s behalf. ... This is in contrast with at least some of the cases in the Court of Appeal considered in Johnson and perhaps with Johnson itself.  It is here the duty to the companies which may require scrutiny.”
	(p.75)	"The position as to TCL is more difficult because TL was not initially to be a shareholder in TCL.  Although TCL’s account show that by 31st January 1989 TL held 26 shares, the agreement of 3 March 1988 provided for the shares to be taken by Mr Day.  Nonetheless TL was inevitably involved as the sole source of finance for TCL.  Just as there was a duty to advise Mr Day individually as the controlling shareholder, there was a duty to advise the company.  If TL had sued Mr Cook in respect of the arrangements regarding TCL, it would have succeeded.
	In August 1988 TL paid £40,000 to Mr Cook, and in March 1989 £100,000.  Initially TL had a straightforward claim in debt to recover the £100,000.  Mr Cook was also in breach of duty to TL in requesting it.”
	Finally the judge held:-
	(p.81)	"The outcome is that Mr Day is successful against Mr Cook in respect of £36,000 which he had to pay to Hill Samuel under his guarantee of the indebtedness of DEAL and in respect of £13,851.43 advanced by him to DEAL before 31 October 1990.  He is also successful in respect of the £100,000 loan assigned to him by TL’s receivers.  His major claim to recover the overall reduction in his wealth caused by Mr Cook fails."
	As to Mr Day’s claim in respect of the £40,000 advanced to Mr Cook’s 	solicitor and estate agency practice.
133.	As the arguments became refined in the course of the hearing before us, the issues boiled down to (i) whether the sum of £40,000 was an advance (whether by way of loan or investment does not much matter for present purposes) made by Mr Day personally or made by TL;  and (ii) if Mr Day has a claim to it, whether he is barred from recovery by operation of Johnson v Gore Wood.  I very much doubt whether the judge had the benefit of the issues being as sharply defined as that (and even as thus defined the Gore Wood question is pretty fuzzy around the edges).
	£40,000 – a personal or a company advance?
134.	The ambiguous way in which the case was pleaded and presented hardly helps to clarify this issue.  In his claim at paragraph 90, Mr Day alleged that “in or about July/August 1988 the defendant asked the plaintiff for a loan of £40,000”.  He went on to allege that he was induced to make that loan by certain misrepresentations.  Then he pleaded in paragraph 91 that:-
	"In reliance upon these representations and induced thereby the plaintiff caused Theocsbury Ltd. to make a loan of £40,000 to the defendant."
135.	In both cases I have added the emphasis to show that the seeds of confusion were there being sown as to who the lender was, Mr Day personally or his company.
136.	Paragraph 93 of the statement of claim made but a passing reference to the “service”, or as we have referred to it, the financing agreement and the plaintiff complained of misrepresentations and the lack of explanation as to the effect of the agreement.  Paragraph 97 alleged that in or about February/March 1989 the defendant requested from the plaintiff a loan of £100,000 yet paragraph 98 again pleaded that the plaintiff caused Theocsbury Ltd. to make the loan.
137.	These allegations were but a tiny part of the larger claim relating to “taking over Day Estate Agents Ltd.”  When the damage for this part of the claim came to be particularised, it followed the form of the claim for all the heads for the plaintiff’s loss in claiming “the loss of value in TL in consequence of” the particular venture with which that chapter of the claim was concerned.  Particulars were, however, given of “loans to the defendant £140,000” as being part of the total loss of over £1m flowing from this disastrous little foray into the estate agency business.
138.	In his defence Mr Cook helpfully set out in paragraph 9A his “principal contentions”.  They were in summary that the defendant was retained on behalf of the companies in which the plaintiff was interested in relation to each of the transactions particularised in the statement of claim and in respect of each of those the defendant owed the company a duty of care.  In relation to each of the transactions the plaintiff did not enter into the transactions personally but rather caused a particular company to do so.  Any loss or damage was suffered by the companies only and the plaintiff was not entitled to claim such loss.  He sought to rely on the fact that he and the plaintiff had entered into four joint venture agreements to rebut the allegation that the transactions were of doubtful if any benefit to the plaintiff.  It is, however, interesting to observe that when he gave particulars of those allegations he pleaded that:-
	"(iv)	The defendant was not retained to advise the plaintiff in his personal capacity or to advise any company as to the commercial wisdom of entering into a particular transaction.
	(vii)	Further alternatively, if and insofar as any advice was given by the defendant to the plaintiff as to the merits of entering into a transaction (the same being denied) such advice was given to the plaintiff in the context of the joint venture agreements between the plaintiff and defendant dated 1st March 1988 (2), 3rd March 1988 and 20th June 1988."
139.	With regard to the £40,000, he denied paragraphs 91 and 92 but pleaded:-
	"It was agreed between the plaintiff and the defendant prior to the setting up of the solicitor/estate agency business that both of them would invest the sum of £40,000 in the said business.  The interests of the plaintiff and the defendant in the said business were governed by the two agreements dated 1st March 1998 …"
140.	With regard to the £100,000, he admitted as alleged in paragraph 93 that the defendant requested from the plaintiff a loan of £100,000 but he denied any misrepresentations and so denied that the plaintiff was induced to cause TL to make the loan of £100,000.  He denied that the plaintiff suffered the alleged loss and damage but averred in the alternative that the damaged was suffered by TL and not by the plaintiff.
141.	In his witness statement Mr Day said in paragraph 44 that “the defendant wished to borrow £40,000 from me”.  He complained that the detail of the two agreements of 1st March were never explained to him by Mr Cook and he said there was no joint venture between them.  Dealing with the service/financing agreement he said in paragraph 175 that “in or about June or July 1988 the defendant asked me for a loan of £40,000”.  Once again I add the emphasis.  He complained again that he was never given advice about the consequences of the agreement for him and his family if he signed it.  Then he said in paragraph 177:-
	"Under the terms of the agreement, TL would lend the defendant the sum of £40,000."  My emphasis again.
142.	In paragraph 179 he said:-
	"Pursuant to the signing of the service agreement, I authorised TL to pay over a cheque of £40,000 in favour of the defendant by instalments of £10,000 immediately and a further £30,000 within 14 days after that.  The loan was in the total sum of £40,000 because this was the figure that the defendant indicated that he was short.  The defendant also indicated that if anything happened to him, his wife would be aware from the documentation that there was a loan outstanding of £40,000 to TL.  This sum was shown as a loan in the balance sheet of his practice prepared by his accountant."
143.	Mr Cook in his witness statement described the formation of the solicitor/estate agency business saying in paragraph 50:-
	"We both agreed to invest £40,000 in the business and to share the profits on a 50/50 basis."
144.	In paragraph 95 he said:-.
	"Mr Day paid his investment of £40,000 in two tranches.  £10,000 was paid by TL on 28th July as per document 4863 in the defendant’s discovery.  The balance of £30,000 was paid by TL on 4th August 1988.  This represented his initial investment of £40,000 as had been agreed between us.
	96.	It has been suggested that the £40,000 invested by each of us amounted to a loan.  This is incorrect - there was no agreement regarding the repayment of the money by the business.  The money was an investment in the business.  If the business had prospered as anticipated then I am sure that both Mr Day and I would have expected to get our investment back."  (In case it is not by now obvious, I have added the emphasis).
145.	It is a remarkable feature of this case how frequently both parties now seem to be contending for the very opposite of what they proposed to the judge.  Mr Day was seeming to suggest that the loan was made by the company; yet Mr Cook was asserting strongly that the loan was made by Mr Day personally though he would now prefer it to be treated as the company loan.  They are advancing forensic schizophrenia to dizzy heights.  What, however, did the judge make of the case before him?
146.	In my judgment the vital findings he made included these:- 
	 (1)	Mr Cook had discussed the agreements at least in broad terms with Mr Day who knew that he was to assist with the financing of the business in return for half the profits after Mr Cook’s £40,000.
	 (2)	The judge was “satisfied” that the £40,000 was paid “as part of the arrangements contained in the two agreements backdated to 1st March 1988.”
	 (3)	The financing agreement acknowledged that Mr Day had paid £40,000 to Mr Cook.
	 (4)	The judge considered that the payment should be treated as a loan.
	 (5)	The agreements did not cause Mr Day any actual loss apart from the £40,000.
	 (6)	In March 1989 £100,000 was paid as a loan by TL to Mr Cook.
	(7)	 The judge was satisfied that when Mr Cook wrote to his accountants on 28th July saying that if the matter was ever queried the money should be considered as an interest free loan, Mr Cook was there concerned as to the view the Law Society might take of the association of Mr Day with his business as a solicitor.
	 (8)	The judge was also in no doubt that any responsible adviser who was shown the two agreements would have advised Mr Day not to sign them and not to invest £40,000 or any other sum in Mr Cook’s estate agency business.
	 (9)	The advance of £40,000 was unfair. 
	 (10)	The judge found - at p.75 - that in August 1988 TL paid £40,000 to Mr Cook and in March 1989 £100,000.  He then, however, went on to draw a distinction between the two amounts and held that TL had a straightforward claim in debt to recover the £100,000, not, it is to be noted, £140,000.  He also observed that Mr Cook was in breach of duty to TL in requesting “it” when “it” must refer to the £100,000 and not the £40,000. On that reading of the judgment, the judge was not treating the advance of £40,0000 as a company loan, nor was he finding a breach of duty to the company in respect of that transaction.
147.	In fact, as I read the judgment, the judge did not clearly and unequivocally make any finding as to whether the £40,000 was advanced on behalf of Mr Day personally or whether it was a company loan.  That may be, and I suspect that it was, because the point was never as crisply identified as that.  If it had been, the main factors tending to show it was a personal advance (whatever the source of the moneys) are these.  Having been satisfied that the £40,000 was paid as part of the arrangements contained in the agreements the terms of the agreement are likely to be conclusive of the argument.  The financing agreement was an agreement between the two individuals.  The company was not concerned with it or in it.  The fact that the £40,000 was shown in the company’s books as a company loan to Mr Cook was an internal bookkeeping matter which could not alter the legal obligations of the individuals.  The whole masquerade being played by Mr Cook depended upon his having an individual “partner”, although the agreements made it plain that no partnership was in fact intended.  Whether or not the Law Society would have been fooled by the scheme is neither here nor there, but what is abundantly plain is that the Law Society would never have tolerated a sharing of profits in the business if profits were to be shared with a company.  The whole scheme was sold to Mr Day upon the basis that if he put in his £40,000 to match the £40,000 paid by Mr Cook, then once Mr Cook had taken his threshold income of £40,000 either from the practice and from TCL, then any further profit would be shared equally.
148.	The arguments to support a finding that the £40,000 was from first to last a loan by TL and not a personal loan from Mr Day using TL funds (whether rightly or wrongly lawfully or unlawfully) are set out in the judgment of Arden L.J.
149.	I defer, for the moment, deciding whether or not this court is in a position to make that crucial finding of fact which the judge did not make and I go on to consider the next point.
	The claim for £40,000 and Johnson v Gore Wood
150.	The second issue for me is whether or not that claim is defeated by Johnson v Gore Wood.  Mr Cook has to show, and the burden of proof is conceded to be on him, that he was in breach of a duty to the company causing it the loss of £40,000 of which any personal loss is reflective.
151.	Once again it is necessary to see what findings the judge made.  He set out the submission made on behalf of Mr Cook at p.66 in these terms:-
	"Mr Cook owed a parallel and indistinguishable duty to TL in respect of the transactions complained of as he did to Mr Day."
152.	He then dealt with the various transactions in turn.  The only reference to the advance of £40,000 is at page 75 in the passage where he seems to treat the advances of £40,000 and £100,000 differently.  He found Mr Cook to be in breach of duty in requesting the loan of £100,000; but he did not make any express finding as to whether or not Mr Cook owed TL a common law contractual or tortious duty to advise it either not to permit its director and major shareholder drawing upon company funds to make a personal advance of £40,000 in a wholly improper transaction or at least to seek separate advice.  Nor did he make any finding of breach of a fiduciary duty owed to the company to permit company funds to be applied to this business.
153.	There is no evidence to which I can recall being directed which identified Mr Cook’s retainer in respect of this particular matter.  It is suggested merely that as the company’s solicitor he was under some duty to the company.  If this was a personal venture of Mr Day’s but Mr Cook knew (or ought to have known) he would draw on company funds to meet personal obligations, is there a duty to be a busybody and give gratuitous advice which has not been asked for?  What interest had the company in its controlling shareholder becoming personally involved in this solicitor/estate agency business?  Is it possible to reconcile Mr Cook’s present case as advanced to us with his pleaded case denying that he was ever retained to “advise any company as to the commercial wisdom of entering into a particular transaction”?  Is it succumbing to undue cynicism to speculate of the outraged indignation of the professional negligence indemnity insurers were they to have been confronted with a claim by the company for damages in respect of this £40,000, assuming that Mr Day’s personal claim had become statute barred?  Can anyone really imagine Mr Cook in those circumstances acknowledging his duty to the company and his breach of it?
154.	To be fair to Mr Cook he recognised the impossibility of his position.  On the fourth day of his cross-examination on 8th July 1999 Mr De Navarro Q.C. referred Mr Cook to two letters he had written to his accountants on 28th July 1988 about the consultancy and the financing agreements backdated to 1st March 1988.  The second letter dealt with the financing agreement and in the transcript at page 26/27 this exchange takes place:-
	"Mr De Navarro:	Then we go on to record certain facts, “I have introduced £40,000;  Terry proposes to introduce £40,000."  Note Terry, not Theocsbury Ltd.
	A.	Yes.
	Q.	That was how you saw it?
	A.	Yes.
	Q.	You saw Theocsbury Ltd. as simply being the vehicle, 	did you not, for the introduction of this money?
	A.	Yes
	Q.	It was in truth Mr Day?
	A.	Mr Day owned 999% almost of Theocsbury Ltd.
	Q.	When you were giving advice to Mr Day at this time, making suggestions to Mr Day at this time, did you not say to yourself, “I am giving advice to the managing director of Theocsbury Ltd.?”
	A.	I was dealing with Mr Day.
	Q.	You said to yourself, “I am giving advice to Mr Day”?
	A.	Dealing with Mr Day.
	Q.	Lawyers may subsequently seek to draw these distinctions, but they were not distinctions you were drawing at the time, were they?
	A.	Not necessarily, no.
	Q.	… then you say Mr Day has in fact paid you £10,000.  So, again, it is Terry, not Theocsbury Ltd., although the cheque was in fact drawn on Theocsbury Ltd.
	A.	I think that is probably right, yes.
	Q.	“This has been dealt with by paying it into my personal account and by me giving my own cheque and paying it into the office account here;  if the matter is ever queried it can be considered to be an interest free loan.”
	A.	Yes
	…
	Q.	The agreement was only to be signed when the other £30,000 was paid to be dealt with in the same manner.  Then I need not trouble you about the next.  There is quite a long bit about what happens if either of you died.
	A.	Yes.”
155.	In the face of that evidence the judge would have had some difficulty in finding that Mr Cook was giving any advice to the company or considering himself to be under any duty to the company in respect of that transaction.  Mr Cook seemed to have been accepting that the fact that the £40,000 was drawn on the company’s bank account was as immaterial as if Mr Day paid the money by way of a cheque drawn on his building society.  On that view of the transactions it may be difficult to spell out a duty to advise the company to be on guard against its controlling shareholder raiding its funds.
156.	If the judge were to find that Mr Cook has a valid claim to this amount and that TL has no claim to it, Mr Day would be entitled to his judgment for this sum.  As the judge has found that the advance of £40,000 was unfair and that “fairness requires that in these circumstances the client should recover the whole of his loss”, the judge could well find that Mr Day should in equity recover what he would have had had he invested the money wisely and not in Mr Cook’s selfish enterprise.  That could entitle him to compound interest on the sum of £40,000 from the dates of payment of the £10,000 and £30,000 until the date of his judgment, the interest to be compounded quarterly perhaps at 2% above bank rate.
157.	In my view a judgment of that kind was one which it may have been permissible for the judge to reach had he been directed to the proper issues in respect of that £40,000 but Arden L.J. does not see it that way.  As I read her judgment in draft she concludes that the judge should have found that Mr Cook owed a duty of care to TL as well as Mr Day with respect to the sums totalling £40,000.  She appears to find it clear that Mr Cook voluntarily assumed responsibility to TL.  She appears to be ready to find that there is a special relationship between the parties along the lines suggested by Lord Browne-Wilkinson in White v Jones [1995] 2 A.C. 207, 273.  That could arise because of a fiduciary relationship between the parties.  That may arise by virtue of the solicitor and client relationship but there is scant evidence of the exact nature and extent of that relationship.  Mr Cook appears in the company accounts as the company solicitor.  Mr Day in his witness statement spoke of seeking his guidance “in regard to legal matters affecting the company”.  In my judgment much may turn on whether this is a company loan or a personal loan.  The second category of special relationship arises where the defendant has voluntarily answered a question or tendered skilled advice and services in circumstances where he knew or ought to have known that an identified plaintiff would rely on his answers or advice.  As I understand the case before us, Mr Cook was emphatic about at least one thing, namely that he did not give any advice at all, not to Mr Day nor to TL.  Nothing in the judgment suggests the judge approached the case along these lines and the question is whether we are entitled to do so in the absence of the necessary findings of fact to support the conclusion.
	My conclusions on the claim to £40,000.
158.	Although I had been inclined to think that the evidence on the question whether this was a personal advance or a company advance of £40,000 pointed sufficiently in one direction to enable this court to make the findings the judge did not, and although I confess it had not occurred to me that this was a voluntary assumption of responsibility case until I read Arden L.J.’s judgment, I now conclude, having given the matter the most anxious thought, that there are too many areas of fact and law left undecided in the judgment and about which different views can be taken that this court cannot safely substitute its own judgment.  I shall, however, turn to the next unfortunate aspect of this case before setting out how, in my judgment, this appeal has to be decided.
	As to Mr Day’s claim for damages arising out of the TCL venture.
159.	Once again it is necessary to see how this claim was being advanced.  Dealing with TCL, Mr Day pleaded in paragraph 68 that the defendant suggested that “the plaintiff should invest £30,000 in this project as start-up capital”.  The italics are mine and will be mine wherever they appear.  He then pleaded that he, the plaintiff, initially provided banking facilities for the project and arranged for the sum of £25,000 to be invested by TL.  He did not expressly refer to the 3rd March 1988 agreement and his particulars of damage were related, as always, to his loss of value in TL in consequence of the venture.
160.	In his witness statement he made reference to what he called the shareholders agreement signed by Mr Greaves, Mr Cook and himself but did not elaborate upon it.  He explained in paragraph 145 that:-
	"At the beginning of August 1988 I arranged for TL to transfer £25,000 to the credit of the bank account of TCL.  The sums which TL had already paid on behalf of this company up to that date (which was in effect all the bills of that company) were appropriated to the accounts of the company as a debt.  The company was granted an overdraft facility by Lloyds Bank with whom the account had been set up.  I wished this money to be paid into a new account for the company so as to set it up on a proper financial footing.  I did it to avoid having to debit TL for debts which were not its responsibility.  However it was necessary for TL to borrow money at high rates of interest prevailing at that time."
161.	In his witness statement Mr Cook described in paragraph 9 mentioning his acquaintance with Mr Greaves to Mr Day “to see if that was the sort of business proposition that he was interested in”.  In paragraph 73 he says that he told Mr Day he had to satisfy himself about the nature of the investment.  He dealt with the agreement in paragraph 87 and said in paragraph 91:-
	"As far as I am aware TCL was funded with money from TL and/or Mr Day.  I was not specifically aware of the details of the financing of the company nor of any loans from TL to TCL."
162.	He dealt with the operation of TCL in paragraph 124 saying, “I believe that TL invested the sum of £25,000 in TCL in or about August 1988”.  In paragraph 125 he said, “TCL absorbed enormous costs but did not generate any income”.  In paragraph 129 he said, “TCL ate money.  It ran up huge debts and I believe it ceased trading in May 1990”.
163.	The salient features of the way the judge dealt with TCL are as follows:
	(1)  He took account of the notes made by Mr Cook on the agreement which recorded that Mr Day was to fund salaries of staff including those of Mr Greaves and Mr Cook and to fund equipment rentals etc.  Mr Day’s commitment should be for a minimum of two years.
	(2)  He then referred to the agreement itself.  He found at p.27 that the agreement was “simply a means of getting him (Mr Cook) the money he needed from Mr Day.”
	(3)  He held that there were investment opportunities which offered Mr Day a surer and fairer return on his capital than the scheme for TCL.
	(4)  He also found that the arrangements for TCL, in particular Mr Day’s low shareholding combined with his obligation to finance the company over an uncertain period and to provide Mr Cook’s salary were unfair.
	(5)  He held there was a duty to advise the company as well as Mr Day  and so Mr Day could not recover his personal losses.
164.	In the light of those findings based on the way the case was pleaded and presented, how is Mr Day’s claim truly and fairly to be seen and how is justice to be done to the parties on this appeal?  I regard it as most unfortunate, though understandable, that Mr Day chose, if I may be permitted the colloquialism, “to go for broke” by seeking to recover, as flowing from the collapse of his financial empire, the whole of the profits he hoped to gain, the not insignificant sum of £2.3m.  For the reasons given by my Lady, the vast bulk of that claim could never be supported because the losses were company losses and Mr Day’s claims reflective only of those losses, assuming the duties owed to him and to the company were breached.  The particularised loss flowing from the TCL venture included the inter-company balance written off by TL relating to TCL of £76,225 and the amount under the cross guarantees to which I will refer in the sum of £291,735.  There was again no attempt to separate personal losses from company losses.  On the facts before the judge there was, however, a plain and obvious personal claim which could properly be advanced.  That was a claim for his personal losses arising out his personal involvement in TCL as regulated by the financing agreement to which he personally was a party and under which he personally assumed disastrously disadvantageous responsibilities. The pity of that case is that it was not clearly advanced, even before us, but since it was common ground that the agreement had been entered into, I can see no injustice to Mr Cook if this court considers the extent to which a personal claim can be maintained.
165.	The first point to note about the agreement is that TL was not directly involved in it.  Mr Day himself was to be the shareholder in the new company.  It was not to be part of the TL group.  Profits were to be paid to Mr Day personally, though one notes without surprise that profits were not to be calculated before the salaries of Mr Greaves and Mr Cook had been paid.  The crucial clauses are clauses 11 and 12 which required Mr Day personally to make funds available for the payment of the outgoings and other expenses of the company.  That bound him to be responsible for the whole financing of the business and he undertook in clause 15 to make those funds available for two years from 1st February 1988.  It was a matter of supreme indifference to Mr Cook how Mr Day was to meet his obligations and clause 24 expressly provided that any obligation on the part of Mr Day was to be deemed to have been fulfilled if actually fulfilled by any company in which he had a controlling interest.
166.	I can see how Mr Day could establish all the ingredients of a good cause of action.   He accepted personal responsibility.  He agreed in effect to be TCL’s banker for two years.  He should never have done so.  He did so because of Mr Cook’s selfish indifference.  The breaches of duties are beyond challenge.  TCL was operated in such a way that, as Mr Cook put it, it “ate money.”  In the light of the deeming provisions of clause 24, drafted by Mr Cook, Mr Cook would not be entitled to argue that Mr Day did not suffer personal loss when he procured his companies to meet his personal obligations to fund TCL for two years.  Subject to the Johnson v Gore Wood point, Mr Day could assert a claim for damages for the amount of money TCL did eat and the amount of borrowing and debt it did incur over that two year period for which Mr Day had made himself personally responsible.
	As to the impact of Johnson v Gore Wood.
167.	Once again the point only arises if Mr Cook owed TL a duty causing the company a loss of which Mr Day’s personal claim is reflective.  I have the greatest sympathy for the judge who had to find his way through the jungle I mentioned at the beginning of this judgment.  When he came to deal with the question of a duty being owed to the company in respect of the TCL losses, his finding at p.75 was:-
	"Nonetheless TL was inevitably involved as a sole source of finance for TCL.  Just as there was a duty to advise Mr Day individually as the controlling shareholder, there was a duty to advise the company."
168.	That is practically all in a long judgment that the judge says on this vital question of the duty owed to the company.  I regret that I do not understand why it follows that because there was a duty to advise Mr Day there was at the same time a duty to advise the company even if it was inevitable that that company would be the ultimate source of finance.  The agreement contemplated a personal investment for a supposedly personal benefit, illusory as that was.  Mr Day was not obliged by the agreement to draw on TL’s funds to meet his personal obligations.  Indeed to “borrow” from the company for personal purposes would have been in breach of the Companies Act.  Although it may have been fiscally imprudent, he could have declared big dividends payable to himself or drawn a huge bonus and so lawfully have acquired the funds necessary for his private investment.  I regret that I find no sufficient explanation in the judgment as to why the duty to the company arises out of a transaction in which the company is not involved.  I repeat I do not blame the judge given the difficulties with which he had to cope but unfortunately that does not exonerate him from giving a judgment in which reasons are given to explain why he decided what he decided with enough particularity for this court to be able to test his conclusions.  That transparency requires that he should have identified at least when the retainer to the company arose, how it arose and what its content was.  This is all the more essential given the pleaded denial of a duty to give commercial advice to the company and indeed of any breach of duty to the company at all.  The failure to give adequate reasons for the judgment is by itself adequate ground for allowing the appeal; see Flannery v Halifax Estate Agencies Ltd [2000] 1 W.L.R. 377. 
169.	If the appeal were to be allowed on that basis, then the question would arise whether any injustice would be done if we were to decide from the facts found by the judge, the proper inferences to be drawn from them and the other incontrovertible material before us whether or not Mr Cook owed duties to the company in connection with the setting up of TCL.  Relevant matters would include the following.  Mr Day personally, not the company, was involved.  TCL was unconnected to TL.  Mr Cook was acting, on the judge’s findings, as Mr Day’s solicitor. The knowledge of the financing arrangements was acquired in that capacity, not in his capacity as TL’s solicitor, whatever that might involve.  I bear in mind the classic observations of Oliver J., as he then was, in Midland Bank v. Hett, Stubbs & Kemp  [1979] 1 Ch.384, 402:-
	"Mr Harman sought to rely upon the fact that Mr Stubbs was Geoffrey’s solicitor under some sort of general retainer imposing a duty to consider all aspects of his interest whenever he was consulted, but that cannot be.  There is no such thing as a general retainer in that sense.  The expression “my solicitor” is as meaningless as the expression “my tailor” or “my bookmaker” in establishing any general duty apart from that arising out of a particular matter in which his services are retained.  The extent of his duties depends upon the terms and limits of that retainer and any duty of care to be implied must be related to what he is instructed to do."
170.	There was no evidence to which we were referred of any specific instructions given by the company.  The most Mr Hughes could point to was Mr Cook’s appearing on the company accounts as the company solicitor.  There was no evidence that Mr Day saw this transaction as a “legal matter” for TL in respect of which he should seek guidance.  The question may be whether it was any business of TL, and therefore of its solicitor, that its major shareholder was setting up another company, not being part of the TL group, so as to impose upon him the duty to advise the company that on no account was it to permit its director to be involved.  Mr Cook has to establish that he was under any duty to TL to give it advice about Mr Day’s entering into the arrangements he did and implementing them as he did.  If there was no such duty, Mr Day may to be entitled to recover the amount of the financing he underwrote for that two-year period.  
171.	That, however, was not the only basis upon which Mr Cook put his case to us.  I have adverted to the invidious position in which Mr Cook finds himself in this appeal in having to rely on the opposite of what he was asserting before the judge when his pleaded case was that although he owed a duty to the companies, but not to Mr Day personally, he was not in breach of any duty and he was certainly not under any duty to give advice about the commercial wisdom of any of the transactions. If justice requires that we be indulgent to Mr Day whose pleadings obfuscate rather than illuminate his best case, we should be equally indulgent to Mr Cook and allow him to assert the defence he could have made but, as it seems to me, did not make to the judge.  As this case appears to me to have so suffered from a lack of focus by both sides, we should endeavour to do justice as best we can in the circumstances and we should not shut out any case which in fairness to the parties can be entertained.
172.	The case which Mr Cook now presents to us is that when in about December 1988, Lloyds Bank, who had granted TCL its overdraft, insisted on the overdraft being guaranteed by TL, Mr Cook was involved in the discussions with the bank, had occasion to consider the guarantees that were required, approved them and according to his memorandum to Mr Greaves (not Mr Day) dated 19th December 1988 arranged for TL to seal its guarantee.  Mr Cook seeks to argue that at that time he was under a duty as company solicitor to advise the company against assuming unlimited liability for the profligate borrowings of TCL or at least to advise to company to seek independent advice.  
173.	Arden L.J. considers that Mr Cook clearly came under a duty of care to TL.  I regret that I am not at all sure it is as clear as that but it may be that a duty of care did arise then. There is simply nothing before us about the crucial happenings in December.  We do not even have sight of the guarantees.  We do not know what he did or did not do for the company, still less what instructions, if any, he had or who on the company’s behalf gave them. We know nothing precise about the retainer which defined the scope of his duty.  His pleaded case, contrary to the submissions to us, was that he was not retained to advise any company as to the commercial wisdom of entering into a particular transaction.  With no judgment from the judge on the point, nothing to suggest that it was even an issue addressed by the parties in the court below, no evidence on the transcripts dealing with the specific events and a black cloud of obscurity hanging over the whole question, I conclude that it would be utterly wrong to make any judgment at all about this new case.  What then is to happen?
	Final Conclusions
174.	Let me try to summarise the position.  Save and except in relation to the £40,000 and the underwriting of TCL for its first two years, Mr Day’s appeals in respect of all other matters must be dismissed because the losses are primarily company losses not personal losses and any loss through the diminution in the value of the shareholding is merely reflective of the primary loss suffered by the company.
175.	Mr Cook’s cross appeal in respect of the £100,000 loan assigned to Mr Day should also be dismissed.
176.	As to the £40,000, the judge made no clear findings:-
	(1)	As to whether or not that was a personal advance or a company advance.
	(2)	Whether or not Mr Cook owed TL any duty in respect of that advance.
Mr Day should succeed in his appeal because there are no clear findings.
177.	Mr Day’s appeal should be allowed in respect of his underwriting TCL because:-
	(1)	The judge made no findings as to whether or not he suffered any personal damage through the operation of the funding provisions in the March 3rd Agreement;
	(2)	The judge’s findings of a duty owed by Mr Cook to TL was erroneous in that:-
	(i)	It did not follow that simply because there was a duty to advise Mr Day individually as the controlling shareholder, there must be a similar duty to advise the company.
	(ii)	No sufficient reasons were given for that conclusion and the judge’s failure to identify why he found as he did is a reason in itself for allowing the appeal.
178.	The powers of the court of appeal as set out in CPR 52.10(2) enable the court to:-
	"(a)	Affirm, set aside or vary any order or judgment made or given by the lower courts;
	(b)	Refer any claim or issue for determination by the lower court;
	(c)	Order a new trial or hearing; ..."
179.	In deciding how to exercise those powers this court will, of course, have regard to the overriding objective of the Rules, foremost of which is to deal with the case justly.
180.	I have very great sympathy for the judge whose judgment is to be set aside because the parties failed to address to him the arguments which they ought to have done.  The arguments have not even been fully and properly addressed to us.  So the first critical question is whether it is just to allow those arguments to be addressed at this stage.  In my view it is.  Mr Hughes did not object to the points being taken in this court.  There was sufficient clear and undisputed evidence to allow the points to be raised, even if it may not be enough for us to decide them.  The conduct of the defendant was utterly deplorable and the defendant cannot complain if this court allows an injustice to be corrected if it can fairly be corrected.
181.	In weighing the options open to us I am acutely conscious that the events took place many many years ago.  The hearing lasted seventeen days.  Mr Day gave his evidence from a wheelchair for he has had to undergo treatment for cancer of the spine.  He was in pain when he gave that evidence, as the judge found.  He said:-
	"His serious illness must have had its affect on his evidence, though I cannot assess how it may have done so."
182.	To send the matter back for rehearing must be a considerable strain but not to allow him to recoup some of his losses, if he is entitled to that recoupment, must add insult to that injury.  I should not forget that Mr Cook is a professional man over whose head these allegations have been hanging for a long time.  The cost must be horrendous.  We have to deal with the case in ways which are proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of each of the parties.
183.	It was a consideration of those factors which led me to the preliminary view, when first I set out to write this judgment, to see whether there was any fair way in which we could resolve matters here rather than send the case back to the Mercantile Court in Bristol.  I might have been prepared to grasp the nettle in respect of some, though not all of the unresolved aspects of the case.  I take account of the fact that Arden L.J. does have a sufficiently clear view of the case but I cannot accept that her views are necessarily correct.  It will be obvious where I differ from them.
184.	I conclude, therefore, that I cannot in fairness and justice to the parties make my own findings even in respect of the claim to £40,000 and the underwriting of TCL calculated perhaps for the two years or, if a separate duty arose out of the giving of the cross guarantees in December then up to that date.  I am therefore driven to allow the appeal but to remit these two aspects of the claimant’s claim to the Mercantile Court.
185.	In summary the judge will have to deal at least with these questions:-
	(1)	Was the £40,000 a personal advance or a company advance?
	(2)	Was a duty owed to TL in respect of that advance?
	(3)	Did Johnson v Gore Wood apply?
	(4)	Was Mr Day under a personal obligation to underwrite TCL, and if so to what extent and for what period did he do so, proper regard being had to the agreement of 3rd March 1988, including Clause 24.
	(5)	Was a duty owed to TL from the inception of this arrangement and if so how did it arise?
	(6)	If no duty was originally owed, did a separate duty arise from the giving of the cross guarantee in December?  How did that duty arise?
	(7)	How does Johnson v Gore Wood apply in those circumstances and can Mr Day assert pursuant to Lord Bingham’s third proposition that he has suffered a loss “separate and distinct from that suffered by the company”.  
	(8)	What is the amount of his loss, if any, measured perhaps by reference to the extent to which Mr Day introduced or caused capital to be introduced, the amount of the overdraft at the time up to which the loss has to be calculated and the amounts of any debts incurred by TCL but underwritten by Mr Day, having due regard to its assets at the time any notional balance sheet is to be drawn.
	(9)	If Mr Day is entitled to any judgment, is he in addition entitled to compound interest and if so at what rate and over what period?
186.	It is very important to emphasise to the judge rehearing these matters that he or she is free, indeed duty bound, to decide these questions afresh untrammelled by our view.  The judge will know Arden L.J.’s opinion, because she makes it plain, and the judge may guess what I may have found.  But I repeat, it is now for the judge to decide as the case and the evidence is presented to the court below on the rehearing.
187.	I end as I began, this has been a very troublesome case indeed and it is profoundly unsatisfactory that no clear conclusion can be reached after all these years of litigation.  The result is not disproportionate and in my clear view justice would not be done without the case receiving this further consideration.  To that extent I would allow Mr Day’s appeal in part but dismiss Mr Cook’s cross appeal.
188.	Finally, I ask in utter despair, and probably in vain, is it too much to expect of these parties that they seek to avail of this court’s free A.D.R. service so that a legally qualified mediator can guide them to a long overdue resolution of this dispute which reflects little credit to the legal profession?

ORDER: The appeal is allowed in part; case remitted to the Mercantile Court in Bristol on the questions of whether the claimant is entitled to his £40,000 and to whether he is entitled to further damages in respect of an investment (if any) in the TCL business; the appellant to have 100 per cent of the costs of the cross-appeal, but only 75 per cent of the costs of the appeal; no change to the order for costs below; the costs of the matters remitted will be costs in the cause in that retrial.
(Order does not form part of approved Judgment)