Smith New Court Ltd v Scrimgeour Vickers (Asset Management) Ltd
Encyclopedia
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.
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 a lot. Smith sold the shares for £11,788,204, a loss of £11,353,220. Smith then brought an action for deceit.
the defendant must make reparation from all damage coming directly from the transaction foreseeability is irrelevant the full price paid can be recovered, minus any benefits he received resulting from the transaction a general rule is that benefits include changes in market price, but this is not to be inflexible to prevent full compensation 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 consequential loss is recoverable... ...subject to mitigation once fraud is discovered.
Lord Steyn asked,
Lord Keith, Slynn and Mustill concurred.
English contract law
English contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
case concerning misrepresentation
Misrepresentation in English law
Misrepresentation in English law is an area of English contract law, which allows a person to escape a contractual obligation or claim compensation for losses. If one person can show that she entered an agreement because of another person's false assurances, then the other person will be unable to...
. It illustrates the damages available for deceit.
Facts
An employee of Scrimgeour, Mr Roberts, fraudulently told Smith New Court that there were close rival bids for buying shares in FerrantiFerranti
Ferranti or Ferranti International plc was a UK electrical engineering and equipment firm that operated for over a century from 1885 until it went bankrupt in 1993. Known primarily for defence electronics, the Company was once a constituent of the FTSE 100 Index but ceased trading in 1993.The...
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 a lot. 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 follow.the defendant must make reparation from all damage coming directly from the transaction foreseeability is irrelevant the full price paid can be recovered, minus any benefits he received resulting from the transaction a general rule is that benefits include changes in market price, but this is not to be inflexible to prevent full compensation 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 consequential loss is recoverable... ...subject to mitigation once fraud is discovered.
Lord Steyn asked,
Lord Keith, Slynn and Mustill concurred.
See also
- English contract lawEnglish contract lawEnglish contract law is a body of law regulating contracts in England and Wales. With its roots in the lex mercatoria and the activism of the judiciary during the industrial revolution, it shares a heritage with countries across the Commonwealth , and the United States...
- Misrepresentation in English lawMisrepresentation in English lawMisrepresentation in English law is an area of English contract law, which allows a person to escape a contractual obligation or claim compensation for losses. If one person can show that she entered an agreement because of another person's false assurances, then the other person will be unable to...
- UK company law
- South Australia Asset Management Corpn v York Montague Ltd [1997] AC 191, a negligence case where the scope of duty was restricted against responsibility for fall in the market price.