The case is very interesting and in my opinion very well reasoned. To the extent that the plaintiffs are able to recover the difference between what they made and what they would have made between the date when the fraud started and the date of the trial, the measure of recovery is the same as that in a case like Wroth v. Tyler where the plaintiff captures the difference between the contract price and the value of the land at the date of trial. In other words, Parabola Investments can be regarded as one where the date of calculation of damages is shifted from breach-date to judgment-date, breach occurring at the start of the fraud The only difference between the cases is that the judgment-date value in Wroth v. Tyler was set by the market, while in Parabola Investments it is set by the rate of return the plaintiff proved it could have earned.

 

An alternative way to look at the issue—and to arrive at the same amount as the trial judge and Court of Appeal—is to award compound interest at the actual rate that the plaintiff showed it could have earned on the capital invested at the start of the plaintiff’s relation with the defendant, i.e., before it lost its capital. At court may be unwilling to award interest, eo nomine, at a rate of 50% but the actual amount awarded as compensation would be equivalent to such an award. If the award in Wroth v. Tyler is turned into an award of interest, it’s an annual rate of about 40%.

 

These calculations show that it matters not whether the claim is for breach of contract or in tort.

 

Angela Swan

 

 

-----Original Message-----
From: James Lee [mailto:j.s.f.lee@bham.ac.uk]
Sent: May 5, 2010 1:20 PM
To: obligations@uwo.ca
Subject: Recovering for the Loss of the Availability of Funds for Investment

 

Dear Colleagues,

 

Members may be interested in today's Court of Appeal decision in Parabola Investments Ltd & Ors v Browallia Cal Ltd & Ors [2010] EWCA Civ 486 http://www.bailii.org/ew/cases/EWCA/Civ/2010/486.html. The case involves a claim in deceit by one of the world's most successful traders against a broker who was fraudulent and described by the judge as having been "exposed not just as a fraudster throughout the relationship between Tangent and Man but also as a persistent and inveterate liar in almost everything he said".

 

It was not disputed that the claimant was able to recover the difference in the size of their fund available for investment (over £3 million), plus interest. However, the claimant argued that their loss was greater still: "first, from its lost opportunity to have traded with the fund as it would otherwise have done during the Man period (referred to during the appeal as stage 1), and secondly, from its lost opportunities for trading during the period from the termination of its relationship with Man until the trial (stage 2) resulting from the depletion of its trading fund."

 

It is therefore a claim for the loss of availability of the fund for investment, and loss of a chance. The claim succeeded (the appeal was dismissed) and the Court of Appeal draw on Sempra Metals v IRC (familiar to restitution lawyers in their analysis. It seems to me to be an important case.

 

Best wishes,

 

James

 

--

James Lee

Lecturer

Director of the LLB Programme

Birmingham Law School

University of Birmingham

Edgbaston

Birmingham

B15 2TT, United Kingdom

 

Tel: +44 (0)121 414 3629

E-mail: j.s.f.lee@bham.ac.uk