Decided 21 November 1996 Court House of Lords | End date November 21, 1996 | |
Full case name Smith New Court Securities Limited v Scrimgeour Vickers (Asset Management) Limited and others Citation(s) [1996] UKHL 3; [1997] AC 254; [1996] 4 All ER 769; [1996] 3 WLR 1051 Judge sittings Nicolas Browne-Wilkinson, Baron Browne-Wilkinson Similar Doyle v Olby (Ironmon, Royscot Trust Ltd v Rogerson, Derry v Peek, Edgington v Fitzmaurice, Smith v Land and House Pr | ||
Smith New Court Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] UKHL 3 is an English contract law case concerning misrepresentation. It illustrates the damages available for deceit.
Contents
Facts
An employee of Scrimgeour, Mr Roberts, fraudulently told Smith New Court that there were close rival bids for buying shares in Ferranti IS Inc. Smith bought £23.1m worth of shares. Ferranti then revealed it was a victim of a massive fraud (the ‘Guerin’ fraud, an American businessman had sold them a worthless company) and the share price fell considerably. Smith sold the shares for £11,788,204, a loss of £11,353,220. Smith then brought an action for deceit.
Court of Appeal
The Court of Appeal awarded £1,196,010 in damages to reflect the difference between what was paid and the market value at the date of purchase.
House of Lords
Lord Browne-Wilkinson held that Smith New Court was entitled to the full loss of £11.3m. He laid down seven principles as follows:
(1) the defendant must make reparation from all damage coming directly from the transaction(2) foreseeability is irrelevant(3) the full price paid can be recovered, minus any benefits he received resulting from the transaction(4) a general rule is that benefits include changes in market price, but this is not to be inflexible to prevent full compensation(5) that general rule does not apply when misrepresentation continues to operate after acquisition, inducing the claimant to retain the asset, or the claimant is locked into holding the property(6) consequential loss is recoverable...(7) ...subject to mitigation once fraud is discovered.Lord Steyn asked,
Lord Keith, Slynn and Mustill concurred.