Doyle v Olby (Ironmongers) Ltd
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WINN,LORD JUSTICE SACHS |
| Judgment Date | 31 January 1969 |
| Judgment citation (vLex) | [1969] EWCA Civ J0131-1 |
| Date | 31 January 1969 |
| Court | Court of Appeal (Civil Division) |
[1969] EWCA Civ J0131-1
The Master of The Rolls (Lord Denning)
Lord Justice Winn and
Lord Justice Sachs
In The Supreme Court of Judicature
Court of Appeal
Appeal of plaintiff from judgement of Mr. Justice Swanwick without a jury, date July 24th, 1967.
The Plaintiff Appellant, Mr. Doyle, appeared in person.
Mr. DAVID A. L. SMOUT (instructed by Messrs. George and George appeared on behalf of the Respondent Defendants.)
Mr Doyle in 1963 was minded to buy a business. He saw an advertisement in Daltone Weekly. He got particulars. The business was said to belong to A. Olby & Son Ltd., 12 Upper High Street, Epsom, Surrey, and the turnover £27,000. The price asked for the lease, the business and goodwill was £4,500. The stock was to be taken at valuation. Mr. Doyle made further enquires about it. On 6th November, 1963, Mr. Leslie Olby, a director of the company, produced accounts to him. They were for the three years ending 31st December, 1962. In a covering letter Mr. Olby said: "Dear Mr. Doyle. As requested we are enclosing accountant's figures covering Olby (Ironmongers) Ltd., 12 Upper High Street, Epsom, Surrey." Those figures showed that for those three years there had been considerate profits: £1,921 net profits in 1960: £1,749 in 1961: and £1,361 in 1962. Mr. Doyle also saw Mr. Cecil Olby who worked on the premises. Mr. Doyle asked Mr. Cecil what staff were employed. Mr. Cecil Olby said: "One Manager, two assistants, on van-driver, and a part-time clerical assistant; with a wage bill of £42 a week." He added that one of the staff was a very old man. Mr. Doyle also asked Mr. Cecil Olby how the trade was geared as between the retail trade and the wholesale trade. Mr. Cecil said: "Two-thirds retail: one-third wholesale - all over the counter". In other words, it was trade which was done from the shop itself and would not need a traveler to go round and canvas for orders. On those representations, Mr. Doyle agreed to buy this business. The agreement was entered into in January 1964. Mr. Doyle agreed to pay £4,500 down in cash, which covered the goodwill, fixtures and fittings, and the remainder of the lease (which had about four years to run). The stook was to be bought on valuation. In addition, there was a restrictive covenant on the sellers, Olby (Ironmongers) Ltd., in which they covenanted that they would not for five years engage in anyironmongers' business within a radius of ten miles from 12 Upper High Street, Epsom.
Mr. Doyle paid the £4,500. He took stock at a valuation of £5,000 which he paid. He needed a longer lease, so he surrendered the existing lease and took a longer lease at a greatly increased rent. The freeholder who benefited was Mr. Cecil Olby himself.
In order to pay all the money, Mr. Doyle put up all the cash he had - £7,000: and he raised £3,000 on Mortgage from Askinex Ltd.
So he went into occupation. But I am afraid that things were very different from what he was led to believe. The turnover was far less than he had been told. The trade was not all over-the-counter. Half of the trade was wholesale business which could only be obtained by employing a traveller to go round to the customers. Mr. Doyle could not afford to employ a traveler. So all that trade was lost. The whole transaction was a disaster for Mr. Doyle. To add to his troubles, in February 1964, soon after Mr. Doyle went into occupation, a company called A. Olby Ltd. Of Penge (which was closely associated with the vendor company, A. Olby (Ironmongers) Ltd.) canvassed and sent travelers round to customers who had been previously customers of the Epsom business. The judge held that this was not a breach of the restrictive covenant, though I am not so sure about it.
Mr. Doyle was most dissatisfied, and in May 1964 he brought this action for damages for fraud and conspiracy against the company which sold him the Epsom business, that is, Olby (Ironmongers) Ltd.: against Mr. Cecil Olby, who was the man who worked in that business: Mr Leslie Olby, his brother, who was a director; and against & Son Ltd., which was the company at Penge, of which Mr. Leslie Olby was managing director.
Although Mr. Doyle had started the action, he had to remainin occupation. He had burnt his boasts and had to carry on with the business as best he could. He tired to sell it, but there were difficulties. One was that the landlord, Mr. Cecil Olby, would not give him a licence to assign, and so forth. After three years he did manage to sell it for a sum of some £3,700. This cleared off the Mortgage to Askinex Ltd., but he was left with many outstanding debts to the bank, to suppliers, and the like. His debts came to £4,000 and he has been sued in the County Court by many of his creditors.
The case came for trial before Mr. Justice Swanwick in July 1967. It took many days, but in the end Mr. Justice Swanwick found that the defendants had been guilty of fraud and conspiracy. The accounts which were produced in November 1963 to Mr. Doyle contained "a blatantly wrong figure" for wage and management remuneration. The representation by Mr. Cecil Olby that the sales were "all over the counter" was completely untrue, and must have been known to Mr. Cecil Olby to be untrue. He was a have been himself and went round to customers on two days a week at least. His wages amounted in the year 1962 to £555. That figure was not brought into the accounts which were produced to Mr. Doyle, and made them completely false. It turned out that Mr. Cecil Olby had had a breakdown and was not really capable of doing much business. But Mr. Doyle was not to know that. The Judge found that the representations were false to the knowledge of Mr. Cecil Olby, and that this knowledge must be imputed to the other defendants because he was acting on their behalf. Furthermore, there was a conspiracy between them to defraud Mr. Doyle.
The defendants put in a notice of appeal against the finding of fraud and conspiracy. It was on the list in this Court when the case was called on for hearing yesterday, but it was not persisted in. Mr. Smout abandoned it. So we approach the case on the accepted footing that Mr. Doyle was induced by the fraudand conspiracy of the defendants to buy this business.
The Judge awarded Mr. Doyle £1,500 damages. Mr. Doyle appeals against that award. He says it is far too small. The Judge arrived at the figure of £1,500 by accepting the submissions of Counsel then appearing for Mr. Doyle. The Judge said as to damages: "My task is simplified by the submissions of the plaintiff's Counsel, which I accept, that there are two alternative bases for damages, each of which arrives at virtually the same round figure. The first is that, to preserve the trade custom, it would have been necessary to employ a part-time traveler at about £600 a year, and I think there is a reasonable prospect that such a person could have been obtained. If 2½ times that figure is taken, that being the normal basis for valuing goodwill, it actually represents, as I have said, a reduction in the value of the goodwill equivalent to the cost of making good the representation, that is, about £1,500. Second, and alternatively, if the trade custom was 50% of the turnover, its loss would result in a reduction in the value of the goodwill of 35% to 40%, which, applied to the accountant's figures of £4,000, again would approximate to a round figure of £1,500. Therefore, I think it is at this figure that I can best quantify the loss."
It appears, therefore, that the plaintiff's Counsel submitted, and the Judge accepted, that the proper measure of damages was the "cost of making good the representation", or what came to the same thing, "the reduction in value of the goodwill" due to the misrepresentation. In so doing, he treated the representation as if it were a contractual promise, that is, as if there were a contractual term to the effort "The trade is all over the counter. There is no need to employ a traveler." I think it was the wrong measure. Damages for fraud and conspiracy are assessed differently from damages for breach of contract.
It was submitted by Mr, Smout that we could not, or, at any rate, ought not, to correct this error. I do not agree. We never allow a client to suffer for the mistake of his Counsel if we can possibly help it. We will always seek to rectify it as far as we can. We will correct it whenever we are able to do so without injustice to the other side. Sometimes the error has seriously affected the course of the evidence, in which case we can at least order a new trial. But there is nothing of that kind here. The error was made at the end of the case. All the evidence had been taken on the footing that the damages were at large. It was only in the final submission that the error was made. Such an error we can, and will, correct.
The second question is what is the proper measure of damages for fraud, as distinct from damages for breach of contract. It was discussed during the argument in ( Hadley v. Baxendale & Co. (1854) 9 Ex. 341), and finds a place in the notes to Smith's Leading Cases (13th edition) page 563, where it is suggested there is no difference. But in MoConnel v. Wright (1903 1 Ch. 546) at page 554, Lord Collins pointed out the difference. It was an action for fraudulent statements in a prospectus whereby a man was induced to take up shares. Lord Collins said of the action for fraud: "It is not an action for breach of contract, and, therefore, no damages in respect of prespective gains which the person contracting was entitled by his contract to expect come in, but it is an action of tort - it is an action for a wrong done whereby the plaintiff was tricked out of certain...
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