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 flowing from his wrong. The calculation of damages was to be made without reference to any date or forseeability. Where a causal link could be shown, the defendant was liable.
Lord Browne-Wilkinson said: ‘The following principles apply in assessing damages payable where the plaintiff has been induced by fraud or misrepresentation
(1) The Defendant was bound to make reparation for all the damage directly flowing from the transaction.
(2) Although such damage may not have been foreseeable, it must have been directly caused by the transaction.
(3) In assessing such damage the Plaintiff is entitled to recover by way of damages the full price paid by him but he must give credit for any benefit which he has received as a result of the transaction.
(4) The general rule of benefits received by him include the market value of the property . .
(5) While the circumstances in which the general rule should not apply cannot be comprehensibly stated, it will only not apply when either (a) the misrepresentation has continued to operate after the date of the acquisition of the asset or (b) the circumstances of the case are such the Plaintiff is by reason of the fraud locked into the property.
(6) In addition the Plaintiff is also entitled to recover consequential losses caused by the transaction.
(7) The Plaintiff must take all reasonable steps to mitigate.’
Lord Steyn said ‘the principle is well settled that where there has been no misdirection from the issue of fact by the trial Judge the presumption is that his conclusion on the issue of fact is correct. The Court of Appeal will only reverse the trial Judge on an issue of fact when it is convinced that his view is wrong. In such a case if the Court of Appeal is left in doubt as to the correctness of the conclusion it will not disturb it.’
Lord Browne-Wilkinson, Lord Keith of Kinkel, Lord Mustill, Lord Slynn of Hadley, Lord Steyn
Gazette 13-Dec-1996, Times 22-Nov-1996, [1996] UKHL 3, [1997] AC 254, [1996] 4 All ER 769, [1996] 3 WLR 1051
House of Lords, Bailii
Misrepresentation Act 1967 2(1)
England and Wales
ApprovedDoyle 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 . .
CitedTwycross v Grant CA 2-Jun-1877
The plaintiff had bought shares in a company promoted by the defendant. The prospectus was fraudulent having failed to mention certain contracts which made the shares valueless.
Held: The shares being worthless, the plaintiff was entitled to . .
CitedWaddell v Blockey 1879
The damages for an item bought as a consequence of a misrepresentation or other tort are to be calculated as at the date of sale. . .
CitedPeek v Derry CA 1887
The court considered an action for damages for deceit: ‘As I understand the law, it is not necessary that the mis-statement should be the motive, in the sense of the only motive, the only inducement of a party who has acted to his prejudice so to . .
CitedMcConnel 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 . .
CitedLivingstone v Rawyards Coal Co HL 13-Feb-1880
Damages or removal of coal under land
User damages were awarded for the unauthorised removal of coal from beneath the appellant’s land, even though the site was too small for the appellant to have mined the coal himself. The appellant was also awarded damages for the damage done to the . .
CitedClark 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 . .
CitedDoyle 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 . .
CitedSouth 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 . .
CitedDowns 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 . .
CitedJohnson v Agnew HL 1979
The seller had obtained a summary order for specific performance of a contract for the sale of land against the buyer.
Held: The breach was continuing and was still capable of being remedied by compliance with the order for specific . .
CitedDodd Properties (Kent) Ltd v Canterbury City Council CA 21-Dec-1979
The defendants had, in the course of building operations, caused nuisance and damage to the plaintiff’s building. The dispute was very lengthy, the costs of repair increased accordingly, and the parties now disputed the date at which damages fell to . .
CitedIBL Ltd v Coussens 1991
Flexibility in the date of breach rule applies in assessing damages for conversion. . .
CitedEast 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 . .
CitedIn re H and R (Minors) (Child Sexual Abuse: Standard of Proof) HL 14-Dec-1995
Evidence allowed – Care Application after Abuse
Children had made allegations of serious sexual abuse against their step-father. He was acquitted at trial, but the local authority went ahead with care proceedings. The parents appealed against a finding that a likely risk to the children had still . .
CitedRoyscot 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 . .
CitedCounty Personnel (Employment Agency) Ltd v Alan R Pulver and Co (a Firm) CA 1987
The claimant sought damages after his negligent solicitors had saddled him with a ruinous underlease. They had had to buy themselves out of the lease. The court considered the date at which damages were to be calculated.
Held: The starting . .
CitedAttorney-General of Hong Kong v Wong Muk Ping PC 1987
When making findings of credibility and reliability it is unsafe for a trial judge to compartmentalise the case: ‘It is commonplace of judicial experience that a witness who makes a poor impression in the witness box may be found at the end of the . .
CitedPasley v Freeman 1789
Tort of Deceit Set Out
The court considered the tort of deceit. A representation by one person that another person was creditworthy was actionable if made fraudulently. A false affirmation made by the defendant with intent to defraud the plaintiff, whereby the plaintiff . .
CitedDavidson v Tullock 1860
In a case framed in deceit the measure of damages involved ascertainment of the ‘real’ or ‘face’ value of the shares at the time of allotment or purchase. . .
CitedDerry v Peek HL 1-Jul-1889
The House heard an action for damages for deceit or fraudulent misrepresentation.
Held: The court set out the requirements for fraud, saying that fraud is proved when it is shown that a false representation has been made knowingly or without . .
CitedArkwright v Newbold CA 1881
Cotton LJ discussed the tort of deceit and said: ‘In my opinion, it would not be right in an action of deceit to give a plaintiff relief on the ground that a particular statement, according to the construction put on it by the court, is false, when . .
CitedShepheard v Broome 1904
. .
CitedBroome v Speak 1903
. .
CitedPotts v Miller 1940
High Court of Australia . .
CitedToteff v Antonas 1952
(High Court of Australia) Dixon J said: ‘In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the . .
CitedOverseas Tankship (UK) Ltd v Morts Dock and Engineering Co Ltd (The Wagon Mound No 1) PC 18-Jan-1961
Complaint was made that oil had been discharged into Sydney Harbour causing damage. The court differentiated damage by fire from other types of physical damage to property for the purposes of liability in tort, saying ‘We have come back to the plain . .
CitedIn Re Smith Kline and French Laboratories Ltd HL 9-Feb-1989
The plaintiffs had applied for a product licence for a patented drug. To support its application, it supplied the authority with confidential information which the authority now sought to make use of the confidential information when considering . .
CitedKemp Properties (UK) Ltd v Dentsply Research and Development Corporation 1991
The measure of damages is the same as for fraudulent misrepresentation i.e. all loss caused by the plaintiff having been induced to enter into the contract. . .
CitedRuxley Electronics and Construction Ltd v Forsyth HL 29-Jun-1995
Damages on Construction not as Agreed
The appellant had contracted to build a swimming pool for the respondent, but, after agreeing to alter the specification to construct it to a certain depth, in fact built it to the original lesser depth, Damages had been awarded to the house owner . .
CitedYorkshire Dale Steamship Co Ltd v Minister of War Transport HL 1942
Treatment of Merchant as War Vessel
The House considered when a merchant vessel may be treated on the same footing as a war vessel and be deemed to be engaged on a warlike operation.
Held: This depended on the nature of the cargo and the voyage: ‘She was then in the act of . .
Not relied uponRoyscot 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 . .
Appeal fromSmith New Court Securities Ltd v Scrimgeour Vickers (Asset Man) Ltd CA 8-Mar-1994
Where shares had been purchased at an artificially inflated price, after a fraudulent misrepresentation, the loss was calculated on the value they would have had on the market with full knowledge of the company’s affairs, absent that . .

Cited by:
CitedGreat Future International Limited and Others v Sealand Housing Corporation (in Liquidation) and Others ChD 3-Dec-2002
The claimants were to be awarded damages, having been fraudulently induced to purchase shares. The defendant claimed that the increase in the value of the shares which had subsequently occurred should be taken to reduce the damages awarded because . .
CitedAMEC 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. . .
CitedMCI Worldcom International Inc v Primus Telecommunications Inc ComC 25-Sep-2003
The claimant sought judgment, and the defendant leave to amend its defence. The question was whether the proposed defence had any reasonable prospect of success.
Held: The misrepresentation alleged was made by the claimant’s in-house . .
CitedDingley v Chief Constable of Strathclyde Police HL 11-May-2000
The officer had been injured in an accident in a police van. He developed multiple sclerosis only a short time afterwards. The respondent denied that the accident caused the MS.
Held: There is no proof of what causes MS, but it was common . .
CitedWatkins v Home Office and others HL 29-Mar-2006
The claimant complained of misfeasance in public office by the prisons for having opened and read protected correspondence whilst he was in prison. The respondent argued that he had suffered no loss. The judge had found that bad faith was . .
CitedVeitch and Another v Avery CA 12-Jul-2007
The claimants appealed the award of only nominal damages after they succeeded in their claim against their solicitors for negligence in their conduct of the defence of a mortgage possession action.
Held: The appeal failed. The judge was . .
CitedGrosvenor Casinos Ltd v National Bank of Abu Dhabi ComC 17-Mar-2008
Banker’s reference no guarantee
An Arab businessman lost pounds 18m at the claimant casino, and wrote scrip cheques against his account with the defendant. The claimant obtained judgment, but being unable to enforce that judgment pursued his bank. The club had used a system where . .
CitedSibley and Co v Reachbyte Ltd and Another ChD 4-Nov-2008
Solicitors appealed against a costs order made refusing them payment of all of Leading and Junior counsel’s fees.
Held: The leading counsel involved had not provided anything like a detailed account of the time he had spent on what was a . .
CitedCheltenham Borough Council v Laird QBD 15-Jun-2009
The council sought damages saying that their former chief executive had not disclosed her history of depressive illness when applying for her job.
Held: The replies were not dishonest as the form could have been misconstrued. The claim failed. . .
CitedJoyce v Bowman Law Ltd ChD 18-Feb-2010
The claimant asserted negligence by the defendant licensed conveyancers in not warning him of the effect of an option in the contract. He had been advised that it would allow him to choose to buy additional land, but it was in fact a put option. The . .

Lists of cited by and citing cases may be incomplete.
Updated: 29 August 2021; Ref: scu.158871