Aitsan Limited & Ors v Stuart Robert Duffy & Anor

Damages for deceit are assessed by identifying the loss directly caused by reliance on the fraudulent representation and comparing the claimant’s actual position with the position if the representation had never been made. Benefits are deductible only where they are tangible, relatively permanent and closely connected with the transaction causing the loss.

Recoveries arising independently from earlier contractual arrangements or separate wrongdoing are collateral and need not be credited. Recoveries obtained only because the claimant relied on the deceit, including proceeds from selling an asset acquired through that reliance, must be brought into account.

The claimants had purchased long leases in a student-accommodation development. The first defendant, an architect, had fraudulently issued certificates of practical completion, causing the claimants to make completion payments despite the development being substantially unfinished.

Liability had been established on summary judgment. On appeal, the quantum issue was remitted for assessment. The principal questions were whether the completion payments constituted recoverable loss and whether credits were required for recoveries from the claimants’ solicitors’ insurers, an administration, or sales of leases.

1. Loss caused by deceit. The claimants suffered loss because the fraudulent certificates caused them to make completion payments and become locked into an unfinished development. Had the representations never been made, the development would not have been completed by the contractual Long Stop Date, and the claimants could have rescinded and reclaimed earlier payments.
2. Applicable measure. The court applied the principles in Smith New Court Ltd v Citibank NA [1997] AC 254. Damages comprise all loss directly flowing from the transaction, subject to credit for benefits closely connected with it and reasonable mitigation. The relevant transaction was the making of the completion payments, not entry into the Sale Agreements.
3. Collateral recoveries. Payments from Blunts’ professional-negligence insurers related to separate alleged breaches by the solicitors and were collateral. They did not reduce the loss caused by the defendant’s deceit. Recoveries in the Sky Apartments administration likewise arose from pre-existing registered agreements for lease and were independent of the deceit.
4. Lease-sale proceeds. Claimants who obtained and later sold leases had to give credit for the sale proceeds. The leases were acquired only because the fraudulent certificates induced payment of the completion sums. It was incorrect to deduct alleged pre-fraud losses first, since that would assess damages as if the representations had been true.
5. The claimants therefore recovered the completion-payment loss, subject to credits for lease-sale proceeds. The 39th claimant accepted that he had suffered no loss and sought permission to discontinue. The Schedule of Loss was to be updated accordingly.

• High Court, Chancery Division: Summary judgment on liability and quantum was granted on 25 March 2021.
• High Court on appeal: By order dated 13 May 2022, HHJ Keyser KC dismissed the liability appeal but allowed the quantum appeal, ordering that damages be assessed.
• High Court (Business and Property Courts): The quantum trial resulted in the present assessment.