Date: Fri, 23 Nov 2007 13:45

From: Charles Mitchell

Subject: Deceit: damages and account

Andrew, David:

Thanks for pointing us to these interesting cases. On the question whether a gain-based remedy should be available for the tort of deceit, I always find myself asking - why not? In Renault the judge did offer a reason, viz. that the claimant had not only suffered no loss but had in fact made a profit itself. I’m not sure whether that’s necessarily a clincher, but it would be interesting to hear what other people think.

The judge’s other reason in Renault was that Arden LJ had previously said in Murad v Al-Saraj [2005] WTLR 1573 that an account of profits isn’t available to victims of deceit, but I doubt whether much weight should be attached to that. At first instance in Murad the claim was allowed both on the basis that the claimants could have a gain-based remedy for the tort of deceit and on the basis that the defendant had to disgorge the profits of his breach of fiduciary duty. The Court of Appeal allowed the claim on the second basis, and it’s not clear to me that any members of the court thought it necessary to decide whether the claim based on deceit was also available.

Halifax Building Society v Thomas [1996] Ch 217 also contains a dictum that an account of profits isn’t available to victims of deceit - but that case was actually decided on the basis that the clamant could not ask for a gain-based remedy founded on the tort of deceit once it had affirmed the contract which had been induced by the defendant’s fraudulent misrepresentation (a similar finding was made in the much earlier case of Selway v Fogg (1839) 5 M & W 83).

So it seems to me that there still isn’t any clear English authority that as a general rule victims of deceit cannot claim a gain-based remedy; in principle it seems to me that this wouldn’t be a good rule for English law to have; and looking back there are many older cases which say exactly the opposite, since they hold that a victim of deceit who is fraudulently induced to part with money can waive the tort and bring an action for money had and received: e.g. Hill v Perrott (1810) 3 Taunt 274; Abbotts v Barry (1820) 2 Brod & B 369; Edmeads v Newman (1823) 1 B & C 418 at 422-3; Holt v Ely (1853) 1 El & Bl 795 at 800.

Best wishes
Charles

Quoting David Cheifetz:

Andrew,

Compare the opposite result - bad guys had to cough up the profit - in 3Com Corporation v. Zorin International Corporation, 2006 CanLII 18351 (ON C.A.).

The defendants obtained a cheaper price for computers from 3Com by telling the distributor that the computers were intended for market X. They were sold in market Y for a higher price. The evidence was also that 3Com couldn't have sold the computers at the higher price. Defendants were held liable for the extra profit.

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