Doyle v Olby (Ironmongers) Ltd

Factual and Procedural Background

In 1963, the Plaintiff intended to purchase a business advertised in a weekly publication. The business was represented as belonging to Company A, located at 12 Upper High Street, The City, with a stated turnover of £27,000 and a purchase price of £4,500 for the lease, business, and goodwill, with stock to be taken at valuation. The Plaintiff received accounts for the three years ending 31 December 1962, showing profits, and was given representations regarding staff and the nature of the trade, including that two-thirds of the trade was retail and all trade was conducted over the counter without the need for a travelling salesman.

Relying on these representations, the Plaintiff agreed to buy the business in January 1964, paying £4,500 for goodwill, fixtures, fittings, and the remainder of the lease, plus £5,000 for stock at valuation. The Plaintiff surrendered the existing lease to obtain a longer lease at increased rent, with the freeholder benefiting being an individual associated with the vendor. The Plaintiff funded the purchase partly by cash and partly by a mortgage from Company B.

After taking possession, the Plaintiff discovered that the turnover was significantly less than represented and that half the trade was wholesale, requiring a travelling salesman, which he could not afford. Shortly after possession, a related company canvassed former customers, although the court initially held this did not breach a restrictive covenant. The Plaintiff brought an action for damages for fraud and conspiracy against Company A, two individual directors, and Company B.

The trial before Judge [Last Name] in July 1967 resulted in a finding of fraud and conspiracy by the defendants. The accounts provided were found to contain misleading wage figures and false representations about the nature of the trade. The Plaintiff was awarded £1,500 in damages, which he appealed, claiming the amount was insufficient.

Legal Issues Presented

1. What is the proper measure of damages for fraud and conspiracy as distinct from damages for breach of contract?
2. Whether the trial judge erred in assessing damages on the basis applicable to breach of contract rather than fraud.
3. Whether the appellate court can reassess damages without ordering a new trial, given the absence of a full transcript of evidence.

Arguments of the Parties

Appellant's Arguments

• The damages awarded by the trial judge were too low and based on an incorrect measure appropriate for breach of contract rather than fraud.
• The proper measure of damages for fraud should compensate all losses directly flowing from the fraudulent inducement, including consequential losses.
• The appellate court should correct the error in the damages assessment without ordering a new trial, as the evidence had been heard on the basis that damages were at large.

Respondents' Arguments

• The trial judge's approach to damages should stand, and the appellate court should be cautious in departing from the basis adopted at trial.
• The Plaintiff should not be allowed to recover damages on a different basis than that argued at trial if it prejudices the respondents.

Table of Precedents Cited

Court's Reasoning and Analysis

The court analyzed the distinction between damages for breach of contract and damages for fraud, emphasizing that fraud is a tortious wrong and damages should compensate for all losses directly flowing from the fraudulent inducement, without the contractual limitation of foreseeability. The court rejected the trial judge’s approach of assessing damages as if the misrepresentations were contractual terms, noting that this measure was incorrect for fraud.

The court considered established authorities, including McConnel v. Wright and Clark v. Urquhart, to conclude that damages for fraud encompass all actual losses, including consequential damages, and are not confined to contractual expectations.

The court acknowledged the absence of a full transcript of the trial evidence but determined that the error in damages assessment occurred only in the final submissions and could be corrected without a new trial. The court undertook a broad, jury-like assessment of damages based on available evidence and submissions, arriving at a figure substantially higher than the original award.

The court also addressed the respondents' argument that the Plaintiff should be barred from recovering on a new basis due to the trial submissions, rejecting this unless prejudice to the respondents could be shown. The court found no such prejudice and emphasized the importance of awarding full compensation for the fraud.

Holding and Implications

The court ALLOWED the Plaintiff’s appeal against the damages award and increased the damages from £1,500 to £5,500.

This decision directly affects the parties by providing the Plaintiff with a more adequate compensation reflecting the full extent of losses caused by the fraudulent inducement. The ruling clarifies that damages for fraud are assessed differently and more broadly than damages for breach of contract, reinforcing the principle that fraudulent misrepresentation entitles the victim to recover all actual losses flowing from the fraud. The court did not set new legal precedent but applied and elaborated on existing principles in the context of business purchase fraud.