East v Maurer
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MUSTILL,LORD JUSTICE BELDAM,LORD JUSTICE BUTLER-SLOSS |
| Judgment Date | 28 September 1990 |
| Judgment citation (vLex) | [1990] EWCA Civ J0928-6 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 90/0811 |
| Date | 28 September 1990 |
and
[1990] EWCA Civ J0928-6
Lord Justice Mustill
Lord Justice Butler-Sloss
and
Lord Justice Beldam
90/0811
1981 E No.263
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(HIS HONOUR JUDGE TUCKER Q.C., Sitting as a Deputy High Court Judge)
Royal Courts of Justice
MR. ROBIN SHAWCROSS (instructed by Messrs. Johnsons, Solicitors, Lymington, Hampshire, S041 9AL) appeared on behalf of the Defendants (Appellants).
MR. JEREMY NICHOLSON (instructed by Messrs. Edwards & Bodley, Solicitors, Christchurch, Dorset, BH23 1QD) appeared on behalf of the Plaintiffs (Respondents).
I have asked Lord Justice Beldam to deliver the first judgment on this appeal.
Ever changing style and fashion makes the ability to attract and satisfy intending customers a particularly valuable asset in the proprietor of a ladies' hair styling salon. According to the evidence, it was an attribute possessed by the first defendant who, in 1979, owned two salons in Bournmouth which he carried on under the name of Roger de Paris. One of the salons was at 44 Haven Road, Canford Cliffs. It had only recently been opened under the managership of a Mr. Mole. The other salon, at 37 Exeter Road, was closer to the centre of the town. Canford Cliffs, as those who are familiar with the area will know, is an expensive and fashionable area in which to live and the need to keep up with fashion may be more pronounced there. But the salon at 37 Exeter Road was conveniently placed for hotel guests and was close to the central shopping area. It was also much longer established. The first defendant had, by 1979, been there, first as an employee and then as its proprietor since 1958.
The first defendant's experience in styling ladies' hair was cosmopolitan. From time to time he had worked in salons in Hamburg, in Stockholm, in Paris, in Lausanne and in Mayfair. He had also taken part in competitions at international level. According to witnesses he had a personality which reflected his experience and, as the judge found, he had built up at Exeter Road a very good business.
By 1979, he had decided to concentrate his efforts at a smaller and more exclusive salon, he had decided to sell his Exeter Road business and to devote all his energies to Canford Cliffs. The plaintiffs bought the business at Exeter Road from him in September 1979. The second plaintiff, Mrs. East, intended to continue the business, but under the style and name of "Xellance". The second plaintiff herself had had considerable experience as a ladies' hairdresser and stylist, but it was of a more restricted character. She had run, successfully, several businesses in outlying districts of Oxford, Iffley and Kennington, but she and her husband wanted to have a business in the Bournemout area and so, for £20,000, they bought the salon at Exeter Road from the first defendant and his company, the second defendant.
In the course of the negotiations for the sale they learned that the first defendant had another salon at Canford Cliffs, but he deliberately and completely misled the plaintiffs about his intentions. He told them falsely that he had no intention of working at the Canford Cliffs salon unless, for example a staff emergency arose due to illness or for some other reason. He told them that he intended to open a salon abroad, probably in Switzerland. Such an intention obviously meant that his valuable personal contact with the clientele at Exeter Road could not follow him to the Continent and would probably not follow him to the Canford Cliffs salon because he would not be working there. His representations would obviously play a most significant part in inducing the plaintiffs to buy the salon, and so the learned judge held. He found that the representations were false to the first defendant's knowledge, and held that the plaintiffs were entitled to damages. On this aspect of the case there is no appeal against his finding.
Mrs. East started to run the salon on 1st September 1979. It was not long before it was apparent to her, and to others who were working in the salon, that the level of business was falling away at an alarming rate. In due course she learned that the first defendant was working full time at his Canford Cliffs salon.
For just over three years Mrs. East tried to make the salon profitable. In her attempts she spent considerable sums on advertising; she installed a solarium bed and eventually began to combine the hairdressing business with a boutique.
During this period she made several attempts to sell the business and eventually, on 6th February 1989 she succeeded in selling the lease of the premises for £7,500. The learned judge found that the plaintiffs had behaved reasonably throughout; that they could not have sold the business before they actually did. He awarded them damages totalling £33,328; interest on the sums awarded brought the total award to £55,205.
His award was made up in this way. Firstly, he took the capital expenditure by taking the cost price of the business, £20,000, and deducting from it the amount realised on the sale, thus arriving at the figure of £12,500. Secondly, he awarded the plaintiffs the fees and expenses incurred by them in buying and selling the business, and in carrying out improvements in an attempt to make it profitable. The figures awarded there amounted in total to £2,390. Next, he awarded trading losses incurred during the 3 1/4 years during which the plaintiffs attempted to run the business. Those amounted to £2,43 8.
The next head of damages he awarded has led the defendants to appeal to this court against the amount of the damages. In addition to the sums already mentioned, he awarded the plaintiffs loss of profits during the 3 1/4 year period arriving at a figure of £15,000. Finally he awarded the figure of £1,000 as general damages for disappointment and inconvenience of the plaintiffs in their attempt to establish this business. It is against the award of £15,000 for loss of profit that the defendants now appeal.
Mr. Shawcross, for the appellants, submits that there is a difference in the manner in which damages are assessed for breach of contract and for the tort of deceit He says that the authorities show that no damages at all are recoverable for loss of profits in an action of deceit. Although there is no express decision which states that to be the case, in no case which has dealt with the proper measure of damage in an action of deceit, has there been an award for loss of profits, although one would have expected to see one. He concedes that if his submission in this regard is correct there would have to be a compensatory factor, for the learned judge only awarded interest on the capital expended from 2nd February 1983, when the plaintiffs ceased to carry on the business and sold it. So Mr. Shawcross concedes that if his submission is right, the plaintiff would be entitled to interest on the award for that 3 1/4 year period. Finally, he submits that even if damages for loss of profit are recoverable, the learned judge assessed the figure at too high a level, and on an incorrect basis. That the measure of damages for the tort of deceit and for breach of contract are different, no longer needs support from authority Damages for deceit are not awarded on the basis that the plaintiff is to be put in as good a position as if the statement had been true; they are to be assessed on a basis which would compensate the plaintiff for all the loss he has suffered, so far as money can do it.
This was confirmed in the case of Doyle v. Olby (Ironmongers) Limited, to which both the learned judge and this court were referred; it is reported in [1969] Q.B. Reports at page 158 and was a case in which the facts were similar to those of the present case.
In the course of his judgment Lord Denning M.R. said at page 166:
"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 (1854) 9 Ex. 341), and finds a place in the notes to Smith's Leading Cases, 13th ed. (1929) at p. 563 where it is suggested there is no difference. But in McConnel v. Wright [1903] 1 Ch. 546, 554, Lord Collins M.R. 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 prospective gains which the person contracting was entitled by his contract to expect to 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 money in his pocket, and, therefore, prima facie, the highest limit of his...
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