Pistachios in the Park Limited & Anor. v Sharn Panesar Limited & Anor.

In a deceit claim, causation is established where the misrepresentation played a real and substantial part in inducing the transaction. It need not be the sole, principal or decisive cause. The but for test is not invariably applicable; causation may be established by sufficient causal connection in common-sense terms or where the misrepresentation was a substantial factor in producing the result.

A court should not reconstruct what the parties would have agreed had the deceit not occurred. However, cogent evidence that the claimant would have entered the transaction even with knowledge of the truth may undermine inducement. An appellate court should not interfere with a trial judge’s factual conclusion unless it was one which the evidence did not permit.

The appeal concerned an order of HHJ Lethem dated 7 October 2021, awarding the respondents damages of £217,825.94 following a finding of deceit concerning a franchise agreement. The appellants accepted the liability findings and challenged quantum on three grounds.

They argued that the respondents had not proved causation, that the trial judge had relied on an unpleaded allegation concerning the accuracy of revised financial projections, and that termination of the franchise agreement in November 2014 had broken the chain of causation and limited damages. The central issues were the correct approach to causation in deceit, the effect of the trial judge’s findings, and the burden of proving a valid termination and novus actus interveniens.

1. Appeal dismissed. All three grounds of appeal failed. Ground 4, being parasitic on the others, also failed.
2. The trial judge had correctly applied the law of causation. The financial information in the Business Plan need not have been the principal reason for entering the agreement. It was sufficient that it was a significant factor and played a real and substantial part in the decision. The judge was entitled to find that the appellants had not shown, on the balance of probabilities, that the claimant would have proceeded had he known the true position.
3. The but for test is not universally determinative. Causation may be established through a sufficient causal connection in common-sense terms or by showing that the relevant factor was substantial in producing the result. In deceit, the court need not undertake a hypothetical reconstruction of what the parties would have agreed without the fraud. A claimant’s own cogent evidence that he would have acted in the same way may, however, be relevant to inducement.
4. The observations concerning the accuracy of the revised prospectus did not form the basis of the decision. The independent and sufficient basis was the inaccurate Business Plan supplied to the claimant. Ground 2 therefore failed.
5. The appellants bore the burden of proving both that the franchise agreement had been validly terminated in November 2014 and that the termination broke the chain of causation so that damages should end at that date. Their reliance on the absence of a positive case or Reply by the respondents misstated the burden of proof. The evidence did not establish a valid termination, particularly in relation to serious allegations of theft and misappropriation which lacked adequate particularisation or supporting evidence.
6. The judge added that, even if validity of termination had been sufficiently established, serious reservations would remain as to whether it broke the causal chain. The appellants would have had to show that the alleged breaches obliterated the causative potency of the original deceit. Contributory negligence was unavailable in deceit, and proof that the breaches caused damage would not itself establish a break in causation.

• High Court (Queen's Bench Division): HHJ Lethem found the appellants liable in deceit and awarded damages of £217,825.94 by order dated 7 October 2021.
• High Court (Queen's Bench Division) on appeal: The appeal was dismissed. The trial judge’s findings on liability and damages were upheld.