Dadourian Group International Inc & Ors v Simms & Ors

A claimant in deceit may recover all actual loss directly flowing from the transaction induced by the fraud, subject to causation, remoteness and mitigation. Litigation and arbitration costs can satisfy that test where the deceived party reasonably resisted and counterclaimed against proceedings arising from the induced transaction.

Material non-disclosure on a without-notice freezing order, and failure at trial on the originally pleaded claims, ordinarily favour discharge and enforcement of a cross-undertaking. The court retains an equitable discretion. It may take account of the evidence at the discharge hearing, a closely related successful claim, correction of non-disclosure, the established liability and risk of dissipation.

DGI and its principals sued Mr Simms, Jack Dadourian and Helga Dadourian after an option agreement for hospital-bed tooling led to New York proceedings and London arbitration. DGI alleged several fraudulent representations and related claims. Warren J dismissed all but a deceit claim based on the false implication that Jack was merely an intermediary, awarded damages comprising most New York and arbitration costs, made an indemnity costs order, and refused to discharge freezing orders or enforce the cross-undertakings in damages.

The appellants challenged liability for deceit, inducement, causation, indemnity costs and the freezing-order ruling. DGI also sought to strike out the notices of appeal after obtaining further documents said to expose serious disclosure failures. The central questions were whether the factual findings and consequential-loss findings could stand, and whether the cross-undertakings should be enforced.

1. Appeals dismissed. The trial judge was entitled to find that Jack’s communications falsely implied that he was an impartial intermediary, despite his and Helga’s ownership and control of Charlton. The documentary record and the surrounding course of conduct supported that conclusion.
2. The judge was entitled to hold Mr Simms and Helga jointly liable. Mr Simms participated in the common design and, alternatively, adopted the representation. Helga was liable because the evidence supported the inference that she acted in concert with the others. Joint tortfeasor liability required a common design; it did not rest merely on silence.
3. The fraudulent representation was material and the presumption of inducement was not rebutted. A representor must show that the statement did not play a real and substantial part in the representee’s decision. The judge was entitled to accept that DGI would not have contracted had it known the true position.
4. The judge erred in treating the arbitrator’s findings between DGI and Charlton as binding on these appellants for causation. Nevertheless, DGI reasonably resisted Charlton’s New York claim and arbitration, and reasonably counterclaimed. Those costs directly flowed from the fraudulently induced transaction and were recoverable, save for the separate unsuccessful venue application.
5. The indemnity costs orders stood. The material non-disclosure of significant documents took the case outside the norm. The judge’s exercise of discretion was not wrong in principle or perverse.
6. The freezing-order appeal also failed. The original pleaded claims had failed and there had been material non-disclosure, but the court could take account of the successful closely related deceit claim, the correction of non-disclosure, the substantial judgment debt and the real risk of dissipation. The refusal to enforce the cross-undertakings was within the judge’s discretion.
7. The application under CPR 52.9 to strike out the notices of appeal was dismissed. On the incomplete material the alleged disclosure abuse did not prevent a fair appeal and supplied no compelling reason to deny appellate review.

• Court of Appeal (Civil Division): Appeals from Warren J dismissed; respondents’ notice allowed in part; applications to strike out the notices of appeal and to adduce fresh evidence dismissed ([2009] EWCA Civ 169).
• High Court (Chancery Division): Warren J upheld the deceit claim based on the intermediary representation, awarded damages and indemnity costs, and refused to discharge the freezing orders ([2006] EWHC 2973; [2007] EWHC 454; [2007] EWHC 1673 (Ch)).