Dadourian Group International Inc & Ors v Simms & Ors

In deceit, a claimant may recover loss directly flowing from a fraudulent misrepresentation, subject to proving causation, remoteness where relevant, and mitigation. Where the claimed loss consists of costs incurred in earlier third-party litigation, the recoverable amount is ordinarily limited to the equivalent of costs assessed on the standard basis, even though the underlying claim is in deceit. The costs should be assessed where agreement is absent. A court may make a percentage reduction to the successful claimant’s costs where issues and evidence are inextricably intertwined. Indemnity costs require conduct or circumstances taking the case out of the norm.

This was a consequential judgment following an earlier trial judgment in claims arising from an option agreement and related arbitration. The first claimant succeeded on a deceit claim based on a representation that the third defendant was only an intermediary, while the other claims failed. The damages claim included costs incurred in litigation and arbitration with a third party, financing costs and storage costs.

The court determined the recoverable measure of those costs, whether assessment was required, the recoverability of storage and financing costs, interest, costs of the action, payments on account and permission to appeal.

1. Damages for deceit. The court maintained its conclusion that the relevant litigation and arbitration costs were directly caused by the misrepresentation. The defendants could not challenge causation by asserting that the claimant’s breach of contract caused the arbitration, because the arbitrator had determined, as between the claimant and the contracting third party, that the claimant’s defence and counterclaim were correct. This did not determine whether the defendants were privies of the arbitration.
2. Measure of recoverable costs. After reviewing Hammond v Bussey, Agius v Great Western Colliery, The Tiburon, Lonrho v Fayed (No 5), British Racing Drivers Club Ltd v Hextall Erskine, Yudt v Leonard Ross & Craig, Pearce v European Reinsurance, Mahme Trust Reg v Lloyds TSB Bank plc and Redbus LMDS Ltd v Jeffrey Green Russell, the court followed the standard-basis approach. DGI was entitled in principle only to its arbitration costs assessed on the standard basis.
3. The claimants had to prove their loss. The costs were therefore to be assessed in default of agreement. Financing costs were recoverable only if allowed on that assessment, and interest on such financing costs would improperly amount to compound interest. Storage costs failed because DGI had not established that they would have been avoided or that the tooling would have been sold or scrapped earlier.
4. Interest on damages was awarded under Supreme Court Act 1981, section 35A, at 1% above base rate. An interim payment of £650,000 was proposed.
5. Costs. An issue-based order was impracticable because the issues and evidence were closely intertwined. A blanket 25% reduction was appropriate to reflect the defendants’ success on substantial issues. Indemnity costs were ordered against Simms, Jack and Helga because their disclosure failures and other conduct took the litigation out of the norm.
6. Permission to appeal was granted on specified aspects of liability, causation and the measure of damages. Permission was refused on reliance and on the findings concerning ownership and control.

This was a first-instance consequential judgment following the court’s earlier liability judgment in the same proceedings. Permission to appeal was granted on specified issues.