Johnson v Gore Wood [2001] 1 All ER 481; [2001] 2 WLR 72 (HL)

• X, a company in which Plaintiff was majority shareholder, sued Defendant (solicitors) who gave them bad advice about the length of litigation, so that by the time the litigation was finished, the purpose of the litigation (to buy property) was made useless due to the fall in value.

• Plaintiff, as a result, claimed separately from X for the diminution of the value of his pension and shares, which HL rejected since it was merely a reflection of X’s loss, for which Defendant had already had to pay damages.

• Plaintiff also claimed for mental distress and anxiety which the majority of lords rejected, saying it was not usually possible to claim for these. 

Lord Bingham

• Addis sets out the general rule that anxiety and distress are generally not compensable (rejecting Lord Steyn’s assertion in Malik), subject to the Watts qualification and therefore the claim must be struck out. 

Lord Cooke (dissenting)

• As a general rule he accepts that “Contract-breaking is treated as an incident of commercial life which players in the game are expected to meet with mental fortitude.” 

• However in this case Plaintiff suffered extreme financial embarrassment and, from initially being wealthy, ended up on benefits which caused a breakdown in his family relationships. 

• Although these are described as “anxiety”, they really come under the classification of “inconvenience and discomfort” under Watts and should therefore attract damages. 

Lord Millett

• Shareholders cannot recover for loss in value of shares which is reflective loss

• This rule exists for policy reasons

  • Is principally for benefit of company’s creditors

  • i.e. Ensures loss is recovered by company and not shareholders

RELATED CASES

• Addis v Gramophone Co

• Malik v BCCI

• Johnson v Unisys

• Watts v Morrow