Glossop Cartons And Print Ltd & Ors v Contact (Print & Packaging) Ltd & Ors

In a claim for fraudulent misrepresentation, damages comprise loss directly flowing from entering the transaction, assessed subject to causation, remoteness and mitigation. The measure does not insure the claimant against its own commercial misjudgements or over-optimism. A claimant cannot recover losses which would have been incurred even if the representations had been true, or which reflect risks appreciated and factored into the price. Mitigation affects the calculation of recoverable loss and does not create a separate head of damage. The price-paid-less-true-value method remains a method of measuring the single legal loss, rather than an independent entitlement to recover every difference between price and value. Consequential expenditure is recoverable where it directly results from the fraud and is not excluded by the proper application of these principles.

This was the resumed hearing of a Part 7 claim concerning the quantification of damages following the court’s earlier findings that certain representations concerning electricity supply and flooding had been fraudulently made. The claimants also pursued contractual claims arising from warranties and an indemnity.

The court had previously determined liability and gave guidance on damages. The resumed hearing addressed expert evidence and eleven alleged heads of loss, including electricity and building works, transport and storage costs, lost turnover, trading losses, professional costs and contractual claims. The central issue was whether losses arising from commercial assumptions or decisions unrelated to the fraud were nevertheless recoverable because they followed entry into the transaction.

1. Applicable measure. The court adhered to the principle identified in [1996] UKHL 3 that a defendant inducing a transaction by fraudulent misrepresentation must make full reparation for damage directly flowing from that transaction. The price-paid-less-true-value approach is a method of measuring the single legal loss, not a separate measure of recovery.
2. Commercial misjudgement. A claimant cannot recover losses which are the product of its own commercial misjudgement or over-optimism. This applied to anticipated storage savings, continued use of the Old Mill, speculative growth in digital printing and contemplated conversion works. Losses which would have been incurred even if the representations had been true lacked the necessary causal connection.
3. Mitigation. Failure to mitigate affects the calculation of diminution in value and consequential loss. It does not create an additional head of damage. The claimants should reasonably have addressed the problems affecting Unit 3 rather than treating conversion of Unit 4 as mitigation.
4. Limits on deceit damages. The court distinguished the absence of contributory negligence as a defence to liability, discussed in [2002] UKHL 43, from the separate question whether the claimed loss flowed directly from the transaction. Causation, remoteness and mitigation remained practical limits, consistent with the reasoning quoted from [1997] AC 254.
5. Application and orders. Recoverable items included the temporary electricity supply to Unit 3, the temporary generator, and independent barrister’s costs, together with sums due under the contractual claims. Other heads failed for lack of causation, speculation, inadequate evidence, unreasonable mitigation or because the partnership had suffered no loss. Judgment was entered for £21,277 on the Bramhall warranty claim and £32,700 under the Unit 3 sale agreement, with the remaining calculation to take account of the admitted £112,500 counterclaim.