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Smith New Court Securities V. Citibank Notes

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SMITH NEW COURT SECURITIES V. CITIBANK FACTS On 21 July 1989 an employee of the second defendant, which was acting as broker for the first defendant, made representations, subsequently discovered to be false, that in buying shares in a public company the plaintiff would be competing with two other bidders, that he would disclose the competing bids after the plaintiff had made its bid and that two other named companies had made bids. The plaintiff bought 28,141,424 shares in the company at 821/4 p each with a view to holding them as a market-making risk and selling them when an appropriate opportunity arose. By September 1989 it became known that a fraud had been perpetrated on the company, which caused a slump in the value of its shares. Between 20 November 1989 and 30 April 1990 the plaintiff sold the shares in small parcels for a total of just over PS11m. It brought an action against both defendants for damages. HOLDING Second, that 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. The old "inflexible rule" is both wrong in principle and capable of producing manifest injustice. The defendant's fraud may have an effect continuing after the transaction is completed, e.g. if a sale of gold shares was induced by a misrepresentation that a new find had been made which was to be announced later it would plainly be wrong to assume that the plaintiff should have sold the shares before the announcement should have been made.... To say that in such a case the plaintiff has obtained the value of the asset as at the transaction date and must therefore bring it into account flies in the face of common sense: how can he be said to have received such a value if, despite his efforts, he has been unable to sell. Turning for a moment away from damages for deceit, the general rule in other areas of the law has been that damages are to be assessed as at the date the wrong was committed. But recent decisions have emphasised that this is only a general rule: where it is necessary in order adequately to compensate the plaintiff for the damage suffered by reason of the defendant's wrong a different date of assessment can be selected. Thus in

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