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 action. But despite this he had to remain in occupation: ‘he had burned his boats and had to carry on with the business as best he could.’ After three years, he managed to sell the business for 3,700 pounds, but in the meantime he had incurred business debts.
Held: He should recover these losses. The plaintiff in an action for deceit is not entitled to be compensated in accordance with the contractual measure of damage, ie the benefit of the bargain measure. He is not entitled to be protected in respect of his positive interest in the bargain. The plaintiff in an action for deceit is, however, entitled to be compensated in respect of his negative interest. The aim is to put the plaintiff into the position he would have been in if no false representation had been made. The measure of damages where a contract has been induced by fraudulent misrepresentation is reparation for all the actual damage directly flowing from entering into the transaction. In assessing such damages it is not an inflexible rule that the plaintiff must bring into account the value as at the transaction date of the asset acquired: although the point is not adverted to in the judgments, the basis on which the damages were computed shows that there can be circumstances in which it is proper to require a defendant only to bring into account the actual proceeds of the asset provided that he has acted reasonably in retaining it. Damages for deceit are not limited to those which were reasonably foreseeable. The damages recoverable can include consequential loss suffered by reason of having acquired the asset.
Winn LJ said: ‘It appears to me that in a case where there has been a breach of warranty of authority, and still more clearly where there has been a tortious wrong consisting of a fraudulent inducement, the proper starting-point for any court called upon to consider what damages are recoverable by the defrauded person is to compare his position before the representation was made to him with his position after it, brought about by that representation, always bearing in mind that no element in the consequential position can be regarded as attributable loss and damage if it be too remote a consequence . . The damage that he seeks to recover must have flowed directly from the fraud perpetrated upon him.’
Lord Denning MR said: ‘In contract, the defendant has made a promise and broken it. The object of damages is to put the plaintiff in as good a position, as far as money can do it, as if the promise had been performed. In fraud, the defendant has been guilty of deliberate wrong by inducing the plaintiff to act to his detriment. The object of damages is to compensate the plaintiff for all the loss he has suffered, so far, again, as money can do it. In contract, the damages are limited to what may reasonably be supposed to have been in the contemplation of the parties. In fraud, they are not so limited. The defendant is bound to make reparation for all the actual damages directly flowing from the fraudulent inducement. The person who has been defrauded is entitled to say:
‘I would not have entered into this bargain at all but for your representation. Owing to your fraud, I have not only lost all the money I paid you, but, what is more, I have been put to a large amount of extra expense as well and suffered this or that extra damages.’
All such damages can be recovered: and it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen. For instance, in this very case Mr Doyle has not only lost the money which he paid for the business, which he would never have done if there had been no fraud: he put all that money in and lost it; but also he has been put to expense and loss in trying to run a business which has turned out to be a disaster for him. He is entitled to damages for all his loss, subject, of course to giving credit for any benefit that he has received. There is nothing to be taken off in mitigation: for there is nothing more that he could have done to reduce his loss. He did all that he could reasonably be expected to do.’
Lord Denning MR, Winn LJ
[1969] 2 QB 158, [1969] EWCA Civ 2, [1969] 2 All ER 119, [1969] 2 WLR 673
Bailii
Misrepresentation Act 1967 2(1)
England and Wales
Citing:
Cited – Hadley v Baxendale Exc 23-Feb-1854
Contract Damages; What follows the Breach Naturaly
The plaintiffs had sent a part of their milling machinery for repair. The defendants contracted to carry it, but delayed in breach of contract. The plaintiffs claimed damages for the earnings lost through the delay. The defendants appealed, saying . .
Too Rigid – McConnel v Wright CA 24-Jan-1903
In an action by a shareholder in a limited company against a director for damages for misrepresentation in the prospectus, the time at which the damage is ordered to be assessed, is the date of the allotment to the plaintiff; accordingly, where the . .
Cited – Clark v Urquhart HL 1930
The House considered the measurement of damages where property had been purchased as the result of a misrepresentation. Lord Atkin said: ‘I find it difficult to suppose that there is any difference in the measure of damages in an action of deceit . .
Cited by:
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. . .
Approved – 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 . .
Cited – Clef Aquitaine Sarl and Another v Laporte Materials (Barrow) Ltd (Sued As Sovereign Chemical Industries Ltd) CA 18-May-2000
The defendants appealed a finding of fraudulent misrepresentation, saying that no damages had in fact flowed from any misrepresentation. . .
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 . .
Approved – East v Maurer CA 1991
The plaintiffs had bought a hair dressing salon from the defendant, who continued to trade from another he owned, despite telling the plaintiffs that he intended not to. The plaintiffs lost business to the defendant. They invested to try to make a . .
Approved – 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 . .
Applied – South Australia Asset Management Corporation v York Montague Ltd etc HL 24-Jun-1996
Limits of Damages for Negligent Valuations
Damages for negligent valuations are limited to the foreseeable consequences of advice, and do not include losses arising from a general fall in values. Valuation is seldom an exact science, and within a band of figures valuers may differ without . .
Applied – Royscot Trust Ltd v Rogerson 1991
Doyle -v- Olby (Ironmongers) Ltd was an appropriate way of assessing damages for an action under the Act, and damages are calculated on the basis of fraud.
A client misled into an investment is entitled to the measure of damages he would . .
Applied – Archer v Brown 1984
The defendant sold shares in his company to the plaintiff. He had however already sold them elsewhere. The plaintiff sought both rescission and damages. The defendant argued that he could not be entitled to both.
Held: The misrepresentation . .
Cited – London Borough of Haringey v Hines CA 20-Oct-2010
The authority sought rescission of a lease granted to the defendant under the right to buy scheme, saying that she had misrepresented her occupation when applying. The tenant replied that no adequate evidence had been brought that she was not a . .
Cited – Esso Petroleum Company Ltd v Mardon CA 6-Feb-1976
Statements had been made by employees of Esso in the course of pre-contractual negotiations with Mr Mardon, the prospective tenant of a petrol station. The statements related to the potential throughput of the station. Mr Mardon was persuaded by the . .
Cited – Downs and Another v Chappell and Another CA 3-Apr-1996
The plaintiffs had suceeded in variously establishing claims in deceit and negligence, but now appealed against the finding that no damages had flowed from the wrongs. They had been sold a business on the basis of incorrect figures.
Held: . .
Applied – Naughton v O’Callaghan 1990
Damages Award to Restore Plaintiff’s Poistion
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 . .
Cited – Bunge Sa v Nidera Bv SC 1-Jul-2015
The court considered the effect of the default clause in a standard form of contract which is widely used in the grain trade. On 10 June 2010 the respondents, Nidera BV, whom I shall call ‘the buyers’, entered into a contract with the appellants, . .
Lists of cited by and citing cases may be incomplete.
Torts – Other, Damages
Leading Case
Updated: 02 November 2021; Ref: scu.186451