Doyle v Olby (Ironmongers) Ltd

Court of Appeal

Citations: [1969] 2 QB 158; [1969] 2 WLR 673; [1969] 2 All ER 119.

Facts

The claimant saw the defendant’s advert for the sale of an ironmongers’ business. When the claimant made further inquiries, the defendant provided the last three years’ accounts. These showed considerable profit. The brother of the defendant’s director also told the claimant that all trade was over the counter. The claimant agreed to buy on the condition that the defendant covenanted not to compete with the business within a ten-mile radius for five years.

After the sale, the claimant discovered that the company’s profits were exaggerated. They also discovered that half the trade had been earned by a director’s brother as a travelling salesman. Meanwhile, a company associated with the defendant began poaching the claimant’s potential customers in the area. The claimant suffered substantial loss and eventually had to sell the business.

Issue(s)

The claimant sued the defendant, its director, the directors’ brother and the associated company for fraud/deceit and conspiracy. The fraud/deceit and conspiracy allegations were substantiated at trial. However, the trial judge calculated the damages as including only including the cost of making good the defendant’s false representations or rectifying the loss of goodwill. He did not award the substantial loss of profits which the claimant had suffered. The claimant appealed the judge’s ruling on the measure of damages available.

Decision

The Court of Appeal allowed the appeal. The judge should have awarded all of the losses which the claimant suffered as a direct result of the deception. Here, the claimant was tricked into buying a business he otherwise would not have bought. As such, he was entitled to his overall loss up until he sold the business, minus any benefits he received.

This Case is Authority For…

The proper measure of damages for the tort of deceit is all damage and loss flowing directly from the tortious act. The claimant’s position before the fraudulent statement should be compared with his position at the end of the transaction.

There is no need for the loss to be foreseeable. However, a loss may be irrecoverable if it is rendered too remote by the claimant’s own actions. Examples include failure to mitigate or an action which breaks causation.

Other

The measure of damages for deceit is superior to damage awards for breach of contract in some respects – particularly because contract damages are not normally recoverable unless they are foreseeable.