Tuke v Hood & Anor

An agency relationship does not automatically impose identical fiduciary duties in every context. The scope of any fiduciary obligation depends on the parties’ agreement and the circumstances, including the principal’s knowledge that the agent is remunerated by the counterparty. A fraudulent misrepresentation claim requires proof of falsity, dishonest knowledge or recklessness, intention, inducement and loss. Damages are compensatory and may include consequential loss. Where loss depends on a counterfactual investment opportunity, the court estimates the loss by evaluating the chances rather than applying the balance of probabilities to the precise amount. A dishonest assister is not liable to disgorge profits made by the defaulting fiduciary, unless those profits are in reality the assister’s own. A knowing-receipt claim cannot arise where the claimant transferred property under a valid, unrescinded contract. Exemplary damages remain exceptional.

The claimant purchased and later sold or exchanged a collection of classic cars through JD Classics Ltd, controlled by the first defendant. He alleged that the defendant dishonestly misrepresented ownership, value, provenance and third-party involvement in eleven transactions, and dishonestly assisted breaches of fiduciary duty by the company.

The claimant also sought damages for loss of investment opportunity, equitable compensation, an account of profits, knowing receipt, conversion and exemplary damages. The court considered the effect of an earlier agency judgment concerning JD Classics Ltd, while recognising that the first defendant had not been a party to those proceedings. The central issues were liability, causation, the proper measure of damages and the availability of equitable remedies.

1. Agency and fiduciary duties. Agency is created by express or implied authority and is assessed objectively. However, describing a relationship as agency or fiduciary does not determine the scope of the duties owed. In the early purchase transactions, the claimant knew that JD Classics would make money as a dealer and did not seek disclosure of its margin. Any fiduciary duties were therefore materially attenuated, and no liability for secret profits or equitable compensation arose in respect of the XKSS purchase. The same conclusion applied to the secret-profit aspects of the Aceca and Gullwing purchases.
2. Deceit. The defendant made dishonest representations about third-party ownership, value, provenance and the involvement of independent purchasers in the relevant purchase and part-exchange transactions. The representations were intended to induce the claimant and did induce him. The evidential presumption of inducement was not rebutted. Damages were assessed by reference to the loss actually caused, including consequential financing costs where causation was established.
3. Group C transaction. The claimant would not have entered the transaction had the ownership and value of the cars been truthfully presented. The court assessed the loss by reference to the realistic net value of the cars, financing charges and the overvaluation of cars supplied in part exchange.
4. Loss of investment opportunity. The claim was legally available. The court evaluated the counterfactual possibilities and awarded 75 per cent of the calculated loss, reflecting the strong probability that the claimant would have retained most of his favourite cars but also uncertainty about funding requirements, maintenance and future sales.
5. Dishonest assistance and account of profits. The ingredients were fiduciary duty, breach, assistance and dishonesty judged objectively under the Ivey standard. A dishonest assister is not liable to disgorge profits made by the defaulting fiduciary, JD Classics, where the profits were booked by that separate company and were not the defendant’s own profits. There was no basis to pierce the corporate veil.
6. Knowing receipt and conversion. Knowing receipt failed because the claimant’s cars had been transferred under contracts of sale that had not been rescinded or set aside. The conversion claim concerning the GT40 road car also failed because the transaction was intended to transfer both GT40 cars.
7. Exemplary damages. The frauds, although serious, did not justify this exceptional remedy. Substantial compensatory damages were adequate.
8. Outcome. Damages of £4,247,061.01 were awarded for the individual transactions and £8,900,730 for loss of investment opportunity, subject to possible adjustment concerning the time value of benefits received. Compound interest was reserved for a consequential hearing. The claims for an account of profits, knowing receipt, conversion and exemplary damages were dismissed.

Not an appeal. The judgment referred to an earlier agency decision concerning the claimant and JD Classics Ltd, from which permission to appeal had been refused, but that decision was not formally binding on the first defendant.