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Smith New Court Securities V. Vickers Notes

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SMITH NEW COURT SECURITIES V. VICKERS 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 LORD BROWNE WILKINSON In sum, in my judgment the following principles apply in assessing the damages payable where the plaintiff has been induced by a fraudulent misrepresentation to buy property: (1) the defendant is bound to make reparation for all the damage directly flowing from the transaction; (2) although such damage need 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 benefits which he has received as a result of the transaction; (4) as a general rule, the benefits received by him include the market value of the property acquired as at the date of acquisition; but such general rule is not to be inflexibly applied where to do so would prevent him obtaining full compensation for the wrong suffered; (5) although the circumstances in which the general rule should not apply cannot be comprehensively stated, it will normally not apply where either (a) the misrepresentation has continued to operate after the date of the acquisition of the asset so as to induce the plaintiff to retain the asset or (b) the circumstances of the case are such that the plaintiff is, by reason of the fraud, locked into the property. (6) In addition, the plaintiff is entitled to recover consequential losses caused by the transaction; (7) the plaintiff must take all reasonable steps to mitigate his loss once he has discovered the fraud. Difference between contractual damages and damages for misrepresentation

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