Downs v Chappell; Downs v Stephenson Smart (a Firm): CA 1996

The plaintiff purchased a book shop. He claimed that in doing so he had relied upon the accounts prepared and signed off by the respective defendants.
Held: The judge had been wrong by testing what would have been the true figures as against those prepared when deciding what the plaintiff would have done. In deceit the plaintiff need only first to establish that there had been a material fraudulent misrepresentation. Had the plaintiff known of the deceit he would not have purchased the business, and therefore damages were to be calculated on that basis. Once he became aware of the misrepresentation, they failed to act upon an offer of purchase, and that was their own act, and damages were adjusted accordingly. Changes in the market were too remote and were not to be awarded. It then fell to decide whether the the torts themselves caused the loss. Since here if the figures had been true, the plaintiffs could have financed the purchase, no windfall was created by the award.
Hobhouse LJ said: ‘The judge was wrong to ask how they [the representees] would have acted if they had been told the truth. They were never told the truth. They were told lies in order to induce them to enter into the contract. The lies were material and successful . . The judge should have concluded that the plaintiffs had proved their case on causation . .’
References: [1997] 1 WLR 426, [1996] 3 All ER 344, [1996] CLY 5689
Judges: Hobhouse LJ
Jurisdiction: England and Wales
This case cites:

  • Considered – Naughton v O’Callaghan 1990
    In 1981 the plaintiffs had bought a thoroughbred yearling colt called ‘Fondu’ for 26,000 guineas. In fact a mistake had been made and its pedigree was not as represented. Its true pedigree made it suitable only for dirt track racing in the United . .
    ([1990] 3 All ER 191, [1991] CLY 1319)
  • Approved – Doyle v Olby (Ironmongers) Ltd CA 31-Jan-1969
    The plaintiff had been induced by the fraudulent misrepresentation of the defendant to buy an ironmonger’s business for 4,500 pounds plus stock at a valuation of 5,000 pounds. Shortly after the purchase, he discovered the fraud and started the . .
    ([1969] 2 QB 158, , [1969] EWCA Civ 2, [1969] 2 All ER 119, [1969] 2 WLR 673)

This case is cited by:

  • Cited – UCB Corporate Services Limited v Williams CA 2-May-2002
    The wife of a borrower sought to defend a claim for possession of the property by the chargor. She claimed that he signature had been obtained by an equitable fraud.
    Held: Undue influence occurred when improper means of persuasion were used to . .
    (, Times 27-May-02, Gazette 13-Jun-02, [2002] EWCA Civ 555)
  • Cited – AMEC Mining v Scottish Coal Company SCS 6-Aug-2003
    The pursuers contracted to remove coal by opencast mining from the defender’s land. They said the contract assumed the removal first of substantial peat depositys from the surface by a third party. They had to do that themselves at substantial cost. . .
    (, [2003] ScotCS 223)
  • Cited – Smith New Court Securities Ltd v Scrimgeour Vickers HL 21-Nov-1996
    The defendant had made misrepresentations, inducing the claimant to enter into share transactions which he would not otherwise have entered into, and which lost money.
    Held: A deceitful wrongdoer is properly liable for all actual damage . .
    (Gazette 13-Dec-96, Times 22-Nov-96, , , [1996] UKHL 3, [1997] AC 254, [1996] 4 All ER 769, [1996] 3 WLR 1051)
  • Cited – Charter Plc and Another v City Index Ltd and others ChD 12-Oct-2006
    An employee of the claimant had fraudulently spent several million pounds of the claimant’s money on personal bets through the defendant company. The claimant said that the defendants knew the origin of the funds and were liable to repay them. . .
    (, [2006] EWHC 2508 (Ch), Times 27-Oct-06, [2007] 1 All ER 1049, [2007] 1 WLR 26)
  • Cited – Hayward v Zurich Insurance Company Plc SC 27-Jul-2016
    The claimant had won a personal injury case and the matter had been settled with a substantial payout by the appellant insurance company. The company now said that the claimant had grossly exaggerated his injury, and indeed wasfiully recovered at . .
    ([2016] 3 WLR 637, , [2016] UKSC 48, , [2016] 4 All ER 628, [2016] 2 All ER (Comm) 755, [2016] WLR(D) 423, [2017] AC 142, , UKSC 2015/0099, , , , , )

These lists may be incomplete.
Last Update: 27 November 2020; Ref: scu.181210