Neutral Citation Number: [2005] EWHC 1493 (Ch)

Case No: HC04C04048
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 12 July 2005

Before:

THE HONOURABLE MR. JUSTICE HART
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Between:

	RONALD JOHN PEARCE	Claimant	
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	(1) EUROPEAN REINSURANCE CONSULTANTS AND RUN-OFF LIMITED
(2) CHRISTOPHER NORMAN PALMER
(3) BDO STOY HAYWARD (A PARTNERSHIP) 	

Defendants	

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Mr John McDonnell QC and Mr Grant Armstrong (instructed by Beaumont and Son) for the Claimant.
Mr Mark Simpson (instructed by Simmons & Simmons) for the Third Defendant. 

Hearing dates: 29, 30th June 2005
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Judgment

Mr. Justice Hart: 

1.	This is an application by the third defendant (“BDO”) pursuant to CPR Part 3.4(2)(a) and Part 24.2 to strike out the claim against them on the basis that it is bound to fail, alternatively for summary judgment on the basis that it has no real prospect of success.  
2.	The claim is brought against three defendants, namely European Reinsurance Consultants and Run-Off Limited (“ERCRO”), Christopher Norman Palmer (“Mr Palmer”) and BDO.   
3.	To explain the background to, and nature of, the claim it is necessary to proceed on the basis that the allegations contained in the Particulars of Claim are true.  This application has proceeded on that basis.  It should be made absolutely clear at the outset that this is purely an assumption made for the purposes of the application.  If the action proceeds to trial (and it is the object of this application to prevent it doing so against BDO), it is likely that some of the background and many of the allegations will be disputed.  The precise areas likely to be in dispute are not clear because BDO has not yet pleaded to the claim.  All that follows by way of apparent narrative is therefore no more than a summary of allegations which are made in the first 208 paragraphs of the Particulars of Claim.  
4.	The background to the claim is that ERCRO was effectively a two-man quasi-partnership company engaged in providing a specialised service to reinsurers. The quasi partners were the claimant and Mr Palmer.  Their shares were held 50:50 by them and their wives.  As chairman Mr Palmer had a casting vote.   In early 2001 Mr Palmer and the claimant fell out, and the claimant presented a petition for winding up of ERCRO on the just and equitable ground.  The claimant informed ERCRO’s principal client of his intention to present that petition before presenting it.  That provoked a claim by ERCRO against the claimant for an injunction restraining him from communicating confidential information to third parties.  In April 2001 the claimant was removed as a director of ERCRO.  Some negotiations took place in the summer of 2001 for a purchase by Mr Palmer of the shares held by the claimant and his wife but these did not result in any agreement.   In July 2001 the claimant gave notice of discontinuance of his winding up petition.   
5.	On 5th September 2001 there commenced the train of events which have led to the present claim.  Under Article 14(h) of ERCRO’s Articles of Association it was open to Mr Palmer as sole director to enforce the retirement of the claimant as a shareholder by resolution, with a consequent triggering of the procedure for transfer of shares contained in Article 14(a)-(c) of those articles.  The effect was that the claimant was deemed to have served a notice of his desire to transfer the same at a price certified by the auditor pursuant to the provisions in Article 14(c) as “the sum which in his opinion represents the fair value of the shares comprised in the transfer notice as at the date of the transfer notice”.  For these purposes the auditor was to act as an expert and the fair value of each share comprised in the deemed transfer notice was defined as “its value as a rateable proportion of the total value of all the issued shares of the company and shall not be discounted or enhanced by the reference to the number of shares referred to in the transfer notice”.  On 5th September 2001 Mr Palmer as sole director of ERCRO resolved accordingly and at the same time resolved under Article 14(c) to instruct BDO, who were the auditors of ERCRO, to certify the fair value of the claimant’s shares.  The claimant was notified of this resolution on the day on which it was made, and, on a date which is at present unclear but which the claimant appears to allege to have been shortly after the resolution, BDO were instructed to undertake the valuation of the claimant’s shares (and those of his wife which had been similarly dealt with by resolution) pursuant to Article 14(c) of the Articles of Association.
6.	On 15th October 2001 ERCRO obtained an order against the claimant in respect, inter alia, of the costs of the discontinued winding up petition and in respect of its own proceedings.   As a result orders were made in sums of £11,000 (assessed costs of the hearing) and £25,000 (a payment on account of the costs of the petition).   Subsequently statutory demands were served by ERCRO in respect of those sums which the claimant unsuccessfully sought to set aside.   A bankruptcy petition was then, on 19th December 2001, presented in the Brighton County Court, and on that petition a bankruptcy order was made, in the claimant’s absence, on 26th February 2002.  
7.	The claimant had been hoping to resist the bankruptcy petition on the ground that the value of his shares exceeded the petition debt and that ERCRO therefore had security for that debt.  Mr Palmer, however, prevailed on BDO to send a letter to Brighton County Court dated 22nd February 2002 which was designed to convey the impression that, apart from the sums in respect of costs owed by the claimant to ERCRO, its liabilities exceeded its assets and that the claimant’s shares thus had no value.  The letter was drafted by Mr Palmer.  The bankruptcy order was, in the event, made in the absence of the claimant and despite his application for an adjournment.  BDO knew, or ought to have known, that the statements in its letter were untrue and/or misleading as to ERCRO’s financial position.  The claimant appealed the bankruptcy order, but pending the hearing of that appeal (which was not heard until 27th June 2002) his assets vested in the Official Receiver.
8.	On 8th April 2002, ERCRO and/or Mr Palmer wrote to BDO requiring them to proceed with a valuation under the Articles immediately and insisting that it was unnecessary for BDO to seek representations “from all purported interested parties” before completing the valuation process.   BDO then formed the intention of preparing a letter which purported to give the appearance of a certificate of fair value under the Articles but which was not in fact such a certificate, concealed from the claimant the instructions which it had received from Mr Palmer and then prepared and sent a letter dated 12th April 2002 which gave the appearance of a certificate of fair value under the Articles.   The letter valued the claimant’s shares at £10,400 (£400 per share).  BDO was aware that its letter was intended or likely to be used by ERCRO in the appeal against the bankruptcy order.  The claimant contends that the shares should have been valued as worth in excess of £350,000.   
9.	ERCRO thereupon acted on the letter dated 12th April 2002 by transferring the claimant’s shares to Mr  Palmer for £10,400.   ERCRO informed the claimant of the fact of the sale by a letter dated 16th April 2002.   The claimant disputed that BDO had taken his views into account in arriving at their valuation and Mr Palmer therefore drafted a letter for BDO to send to ERCRO who forwarded it to the claimant asserting inter alia that BDO had considered items 20 to 23 of a written statement made by the claimant dated 23rd March 2002, and a paper prepared by the company in support of its opinion that the shares should be valued at par or alternatively at an extremely low value “as part of the overall process in arriving at our opinion of value”.  That was misleading since BDO had had neither of those two documents until supplied with them under cover of a letter dated 20th May 2002.  Further correspondence between Mr Pearce’s solicitors and ERCRO on the one hand and between them and BDO on the other hand, resulted in continued representations by ERCRO that the letter dated 12th April 2002 was a certificate of fair value by BDO in accordance with Article 14(c) and no denial by BDO that that was the case.  On 24th June 2002 BDO confirmed that “we will stand by our valuation of 12th April 2002 in full”.  
10.	The appeal against the bankruptcy order came before Lloyd J. on 27th June 2002, when counsel on behalf of ERCRO relied on the valuation as a conclusive certificate of value under Article 14(c) of the Articles of Association.   For reasons which appear from his judgment given on that day Lloyd J. allowed the appeal, discharged the bankruptcy order and remitted the petition be re-heard, at the same time transferring the proceedings to the High Court.  In short, those were reasons (1) that the petition, which was in terms based only on the statutory demand for £11,000, was inaccurate in stating that there was no security for the debt; (2) that an issue had existed with regard to the value of the shares which the District Judge had probably not fully appreciated, and that he ought not to have taken into account the BDO letter of 22nd February without an adjournment; (3) that there had been material before the District Judge in the debtor’s grounds of opposition filed in accordance with Rule 6.21 which called for determination; and (4) that he was wrong to have drawn adverse inferences from the debtor’s absence in the circumstances and from his not having put in sworn evidence.  The bankruptcy proceedings were transferred to the High Court and on 7th January 2003 the petition was dismissed with costs.   
11.	The claimant pleads against BDO that it owed him a number of duties.   They are spelled out in paragraphs 34 and 35 of the particulars of claim.  They include a duty to exercise reasonable care and skill in the valuation of the shares under Article 14(c) of the Articles of Association, a duty to commence and to carry out the valuation process diligently with reasonable expedition and without unnecessary delay, a duty to investigate various matters in connection with the current financial position of ERCRO including a duty to investigate the possible diversion of income due to ERCRO to any other business owned or controlled by Mr Palmer, a duty to consider the claimant’s representations, a duty to provide information to the claimant and to respond to his reasonable enquiries for the purpose of enabling him to make informed representations to BDO in connection with the valuation process, a duty to act honestly fairly and impartially holding the balance between the claimant and Mr Palmer in the course of the valuation process, to ensure “equality of arms between the parties”, and so forth.  Some debate took place before me as to the correct legal analysis of these duties, but that is not a matter which it is necessary to resolve on this application:  BDO accepts for the purposes of this application that the extensive duties pleaded against it are all sustainable as a matter of law.  
12.	The breaches by BDO of the duties which are pleaded are also accepted, for the purposes of this application, to have occurred.   They include a failure to proceed diligently with the valuation of the shares, a failure to make the necessary enquiries and verification, a failure to respond to correspondence from the claimant, a failure to notify the claimant of the receipt of correspondence from Mr Palmer, acting unfairly and partially for Mr Palmer’s case and/or interests, a failure to act fairly as between Mr Palmer and Mr Pearce, and, as a result of all these breaches, coming up with a valuation which was wrong.  Of particular relevance for the purposes of the present application is the allegation that BDO’s failure to value the shares in the period between September and December 2001 was the result of instruction given by ERCRO and/or Mr Palmer not to proceed with the valuation of the shares pending the outcome of the bankruptcy proceedings (see paragraph 74 and 76(e) of the particulars of claim).  The writing of the letter dated 22nd February 2002 to the Brighton County Court is alleged to have been a breach of BDO’s duty of fairness and impartiality as well as being alleged to have been negligent.  The preparation of the letter dated 12th April 2002 and that of 21st May 2002 are also alleged to be breaches of those duties.
13.	The application is based on the proposition that even if all the duties alleged against BDO are made out as a matter of law, and even if every single one of the breaches alleged against BDO is made out as a matter of fact, none of the damages alleged by the particulars of claim to have been sustained as a result of those breaches are recoverable by the claimant.   To examine that proposition it is necessary to set out in full paragraph 210 of the particulars of claim which contain the relevant allegations of damage in the following terms:
“Mr Pearce is entitled by way of damages and/or equitable compensation to be restored to the position if the valuation had been carried out properly and impartially and in accordance with Article 14 of the Articles of Association.  ERCRO and/or Mr Palmer and/or BDO are liable to Mr Pearce for all losses sustained by Mr Pearce which were caused by their respective breaches of duties, on the basis that the shares had been properly valued and the sum properly due to him had been paid by Mr Palmer.  Any order of restitution to Mr Pearce to the position where the shares were transferred to him and a further valuation carried out would be of no benefit to Mr Pearce having regard to the fact that Mr Palmer has conducted the business of ERCRO since 5 September 2001 in his own interest and without any regard to the interests of Mr Pearce and ERCRO has now ceased to trade and has no assets.  Accordingly, Mr Pearce seeks the sums set out below.
PARTICULARS OF LOSS
(a)	Mr Pearce has sustained substantial prejudice in the valuation process by reason of the partial acts and/or acts in breach of BDO’s duties and has been put to expense in discovering the true position of the steps taken by BDO to value the shares;
(b)	Mr Pearce’s shares in ERCRO have been purportedly valued at £400 per share and £10,400 in total.  The valuation placed upon the shares by BDO ignores, amongst other things, the past income position of ERCRO and excludes any future business likely to be carried out by ERCRO. Mr Pearce contends his shareholding in ERCRO should have been valued in excess of £350,000;
(c)	Mr Pearce will contend that had the valuation of the shares been conducted diligently and promptly and in accordance with the obligations set out above the bankruptcy proceedings would not have taken place and Mr Pearce would not have been put to expense in defending the said proceedings.  Accordingly, Mr Pearce is entitled to recover his costs incurred as from 5 September 2001 and subsequently in defending the bankruptcy proceedings insofar as those costs have not been recovered from any other party;
(d)	ERCRO issued statutory demands against Mr Pearce on 2 November 2001 for £11,009.64 and 12 November 2001 for £25,000 and presented a bankruptcy petition on 19 December 2001 against Mr Pearce based on the first statutory demand notwithstanding:
(i)	ERCRO held security for the sums alleged then to be due; and
(ii)	the valuation of the shares had not taken place;
(e)	Mr Pearce was made bankrupt on 26 February 2002;
(f)		the bankruptcy order was set aside on appeal by order of the Honourable Mr Justice Lloyd on 27 June 2002;
(g)	the petition was ultimately dismissed by the court on 7 January 2003 with costs to be paid by ERCRO;
(h)	Mr Pearce was put to expense in funding the costs of the bankruptcy proceedings and numerous appeals.  The unrecovered costs incurred by Mr Pearce and which would have been avoided if ERCRO and/or Mr Palmer and/or BDO had complied with their respective duties as set out above are estimated at approximately £100,000;
(i)	Mr Pearce has been put to expense by reason of finance charges and higher interest rates arising from having to re-mortgage his property and borrowing monies to pay for some of the bankruptcy costs;
(j)	Mr Pearce has been put to expense by reason of the loss arising from the sale of one of the family cars at a reduced price to pay for urgent expenses, including urgent costs in respect of the bankruptcy proceedings;
(k)	Mr Pearce has been put to expense by reason of the loss arising from the cancellation of a holiday;
(l)	Mr Pearce has suffered loss arising from the loss of opportunity to invest money from the sale of his shares;
(m)	Further, Mr Pearce has been put to substantial inconvenience and distress by the delay in valuation and/or institution and/or continuation of the bankruptcy proceedings which would have been avoided had ERCRO and/or Mr Palmer and/or BDO complied with their respective duties above;
(n)	Mr Pearce has been put to further expense in investigating the valuation of the shares and the actions of ERCRO and Mr Palmer and BDO and in establishing the true position of the valuation.”
14.	These heads of damage have been grouped for the purposes of argument before me into three groups (1) Loss of Value, i.e. the first two lines of sub paragraph (a) and sub paragraph (b); (2) Bankruptcy Costs, namely sub paragraphs (c) to (h) and (3) Other Claims, namely sub paragraphs (i) to (o).   I will take them in turn.
Loss of Value
15.	If I correctly understood Mr Simpson’s submissions on behalf of BDO under this head, they were in summary as follows.  Taken together, the claims against ERCRO, Mr Palmer and BDO had the result (if they were proved) that there was no valid certificate of value under Article 14(c) of the Articles of Association, that the transfer of the shares which had taken place should be reversed, and that for the purposes of the claim against BDO the claimant should be treated as either having retained the shares throughout, or as being entitled at his option to have them revested in him.   That being the case, any loss he has suffered is properly to be viewed, not as a loss resulting from any breach of duty by BDO, but as a result of the shares having become diminished in value as a result of subsequent events.  Since the scope of BDO’s duty in valuing the shares did not extend to a duty to protect the claimant from subsequent diminution in the value of the shares, BDO cannot be held liable in respect of such loss.  Moreover, to the extent that such diminution in value was the result of breaches of duty owed to ERCRO by Mr Palmer, an attempt by the claimant to recover such diminution by way of damages against BDO was an attempt to recover “reflective loss” which was not open to him as a result of the judgment in the House of Lords in Johnson v. Gore Wood [2002] 2 AC 1.
16.	It seems to me that this argument is misconceived.   It mistakes the nature of the claimant’s case.  The claimant’s case is that his shares were transferred, purportedly under the Article 14 machinery, at a price which did not reflect their fair value properly ascertained under that procedure.   If BDO had performed their duties correctly, the allegation is that his shares would have been transferred under the Article 14 machinery at the proper (higher) value.   Therein lies his loss.   The fact that the shares subsequently diminished in value is a reason why he does not wish (at least as his primary remedy) to avail himself of the right which he may have, as a result of the facts which he has subsequently discovered and now alleges against all three defendants, to set aside the transfer to Mr Palmer.
17.	The fact that he may have such a right (arising, inter alia, from BDO’s collusion with Mr Palmer) does not deprive the claimant of his right to claim damages from BDO based on the position in which he claims he would have been had it performed its duties properly.  The claimant does not assert that the resolutions dated 5th September 2001 were in any way flawed.  What he does assert is that, had BDO performed its duties satisfactorily, the machinery of Article 14 would have yielded him a purchase price of in excess of £350,000.  To succeed in that claim he will no doubt have to prove that Mr Palmer would have chosen to purchase at that figure (or, possibly, simply establish the existence of a genuine chance that he would have done — I do not decide this point).  It cannot begin to be said on the material before me that he has no real prospect of succeeding in such a claim.  Even if he failed to prove that the purchase would have taken place it would be open to him to plead an alternative case based on the position he would have been in on that hypothesis.  Either way of putting the damages claim results in a claim for precisely the kind of damage in respect of which BDO owed the claimant the duties which are pleaded (and which I assume for the purposes of this application).
18.	I would add that I am quite unable to see that the claim, as so put, has anything at all to do with the rule against recovery of reflective loss.  A claim against BDO for failure to take into account in its valuation claims of ERCRO against Mr Palmer does not constitute an attempt by the claimant to enforce a claim which properly belonged to ERCRO.  A claim by the claimant against Mr Palmer for damages based on the diminution in the value of his shares as a result of breaches of duty owed by Mr Palmer to ERCRO probably would.
The Bankruptcy Costs
19.	The claimant obtained various costs orders in its favour against ERCRO in the course of the bankruptcy proceedings and on their dismissal.  Those costs were ordered to be assessed on the standard basis.  For present purposes it can be assumed that the claimant has succeeded in recovering those assessed costs from ERCRO.  The claim under this head is therefore for costs incurred by the claimant in connection with the bankruptcy proceedings over and above those which he has been held entitled to recover from ERCRO under an assessment carried out by the Costs Judge in those proceedings on the standard basis.  
20.	Two potential issues of principle arise.  First, are costs incurred in connection with the bankruptcy proceedings in principle the kind of loss in respect of which BDO owed the claimant a duty?  The effect of a stream of authority on this subject (principally Caparo Industries v. Dickman [1990] 2 AC 605, Galoo v. Bright Grahame Murray [1994] 1 WLR 1360, and South Australian Asset Management Corporation v. York Montague [1997] AC 191 (“SAAMCO”)) were usefully, pithily, and for present purposes sufficiently summarised by Arden LJ. in Johnson v. Gore Wood [2003] EWCA Civ. 1728  at § 91 in the following way:
“Starting with Caparo v Dickman, the courts have moved away from characterising questions as to the measure of damages for the tort of negligence as questions of causation and remoteness. The path that once led in that direction now leads in a new direction. The courts now analyse such questions by enquiring whether the duty which the tortfeasor owed was a duty in respect of the kind of loss of which the victim complains. Duty is no longer determined in abstraction from the consequences or vice-versa. The same test applies whether the duty of care is contractual or tortious. To determine the scope of the duty the court must examine carefully the purpose for which advice was being given and generally the surrounding circumstances. The determination of the scope of the duty thus involves an intensely fact-sensitive exercise. The final result turns on the facts, and it is likely to be only the general principles rather than the solution in any individual case that are of assistance in later cases.”
21.	Although at first sight the bankruptcy costs might appear not to be the kind of loss for which an expert valuer performing the role required by Article 14(c) of ERCRO’s articles would normally be responsible the pleaded allegations amount to a case that BDO in fact allowed its duties as valuers to become perverted by a desire to assist Mr Palmer and ERCRO in their (successful) attempt to bankrupt the claimant, that in itself being a breach of the alleged duty of impartiality.   It cannot, in my judgment, be said at this stage of the action, when the fact-sensitive inquiry to which Arden LJ referred has not been conducted, that the claimant has no real prospect of establishing an entitlement to damages under this head.
22.	The second question is whether the fact that, as against ERCRO, the costs which are now claimed against ERCRO were not recovered under the assessment is now a bar to their recovery as damages against BDO.  This raises a question of some difficulty on which the authorities do not speak with one voice.  
23.	At one time the rule clearly was that where costs incurred by a claimant incurred in other proceedings are recoverable in damages the amount recoverable would be his costs taxed as between solicitor and client less his costs taxed as between party and party recovered by him in the earlier proceedings.  A line of cases commencing with The Tiburon [1992] 2 Lloyds Rep. 26 now stand as authority for the proposition that where costs are claimed as damages the appropriate machinery for their quantification is an assessment on the standard basis.
24.	That proposition is supported by dicta of the Court of Appeal in The Tiburon and in Lonhro v. Fayed (No.5) [1993] 1 WLR 1489.  The only decisions to that effect are those of Carnwath J. in British Racing Drivers’ Club v. Hextall Erskine & Co. [1996] PNLR 523, and of Ferris J. in Yudt v. Leonard Ross & Craig, 24th July 1998.  In Yudt, Ferris J. noted that the decision in British Racing Drivers’ Club v. Hextall Erskine & Co. and the dicta in The Tiburon and Lonhro v. Fayed (No.5) were the subject of vigorous criticism in the 16th edition of McGregor on Damages, and confessed himself impressed by that criticism.  However he held that in the circumstances, while not strictly bound by Carnwath J’s decision, the correct course was for him to follow it. 
25.	The question has also been touched on in a third relevant decision in the Court of Appeal, Penn v. Bristol & West Building Society [1997] 1 WLR 1336, where it was held (without any explicit reference to the authorities) that, in a case where the court was obliged to deal with the claim through the mechanism of an order for costs, the mere fact that the claim could have been advanced as a claim for damages had a separate action been brought did not, by itself, justify the award being made on the indemnity basis.
26.	On behalf of the claimant Mr McDonnell QC advanced the following arguments as to why this line of authority did not justify me in striking out his claim at this stage.
27.	First, he pointed out that in The Tiburon both Parker LJ. (ibid. at p. 34) and Scott LJ. (ibid. at p. 35) appear to have contemplated the possibility of the court departing from the standard basis in an appropriate case (whether the claim was being advanced as a claim for costs or as a claim for damages).  Such a view would also be consistent with the way in which Waller LJ. expressed himself in Penn at p. 1366B-C.  It would therefore be open to the trial judge in the present case to order that the costs claimed as damages should be assessed on the indemnity as opposed to the standard basis.
28.	Secondly, he submitted that, whether or not Carnwath J’s decision was correct, the position had changed with the introduction of the CPR.  The alternatives which the authorities had been considering were the standard and indemnity bases as defined by the changes to the Rules of the Supreme Court introduced in 1986.  The standard basis as defined by CPR Part 44.4(1) and (2) differs from the previous definition in containing a criterion of proportionality in addition to the criterion of reasonableness.  Mr McDonnell also drew my attention to the provisions of CPR 48.8 which apply the indemnity basis, with some important modifications, to the assessment of a bill as between solicitor and client. 
29.	Thirdly, he submitted that even were I satisfied that Carnwath J’s decision was applicable under the CPR regime, there was a point here which merited consideration by the Court of Appeal and which, if it was to be determined at that level, should only be so dealt with after the relevant facts had been found.
30.	I was persuaded by those arguments that it was not appropriate for me to seek to decide the question summarily.  There are plainly strong arguments of legal policy in favour of the view adopted by Carnwath J, and those arguments may survive the change in the nature of the standard basis introduced by CPR 44.4(2) notwithstanding the new notion of proportionality.  On the other hand the “two stage” approach to the question of proportionality laid down by the Court of Appeal in Lownds v. Home Office [2002] 1 WLR 2450 is not obviously apt as a method of approach to the assessment of damages.  Moreover, the basic rule applied by Carnwath J. is capable of giving rise to anomalies (to some of which Ferris J. alluded in Yudt).  I do  not think that the court can properly address the issues raised by those decisions without exploring in more detail than is possible at this stage in the action why particular items of costs claimed by the claimant in the bankruptcy proceedings were disallowed and/or reduced in the course of the assessment which took place on the standard basis.  If, for example, the disallowance or reduction occurred as a result of ERCRO being given the benefit of the doubt on the item’s reasonableness or proportionality, and the claimant is able to show that, but for BDO’s breach of duty, it would have been able to surmount that doubt, it would seem to me unjust for the claimant to be debarred from claiming that as damages.  A similar injustice would occur if the claimant were able to show that its inability to have sought or obtained an order on the indemnity basis against ERCRO was caused or contributed to by BDO’s fault.  It would in my judgment be wrong to shut the claimant out from putting his case in these possible ways at this stage.  Furthermore, if it is correct that the judge trying this action would have jurisdiction to order an assessment on the indemnity basis, it cannot in my judgment be said that this is a case where the jurisdiction would stand no real chance of being exercised.  While no dishonesty as such is pleaded against BDO, if the pleaded allegations against BDO were proved in every particular, the court would be entitled to take an extremely dim view of BDO’s approach to its professional duties, and one which might justify it in ordering a method of assessment which gave the benefit of any doubt as to reasonableness of the costs incurred to the claimant.
Other claims
31.	With the exception of the claim for damages for “distress” in sub paragraph (m), I did not understand Mr Simpson to argue that any of the other claims were unsustainable in principle.  The complaint was that the claimant had not adduced any evidence to support them.  This complaint was based on the submission that where a defendant has applied for summary judgment against a claimant, the onus lies on the claimant to satisfy the court by evidence that he has a real prospect of being able to prove his case at trial.  No authority was cited for that proposition and I do not think that it represents the law.  The defendant is entitled to seek further information from the claimant in relation to those claims but, to date, has chosen not to do so.  In my judgment an application of the present kind made without any relevant request for information is not the appropriate mechanism under the rules for obtaining that information.
32.	So far as the claim for damages attributable to “distress” is concerned, this word should in my judgment be struck out:  see Johnson v. Gore-Wood [2002] 2 AC 1.  I was not persuaded by Mr McDonnell that the observations made in Johnson v. Unysis Ltd [2003] 1 AC 518 should encourage me to allow this question to go to trial.  Striking out this head of damage does not, however, mean that the claimant is not entitled, on the facts pleaded, to re-cast it as a claim for general damages for loss of his reputation or credit arising out of the making of the bankruptcy order:  see Quartz Hill Gold Mining Co. v. Eyre  (1883) 11 QBD 674.