Michael Anthony Tuke v Derek Hood
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lady Justice Andrews,Lord Justice Baker |
| Judgment Date | 14 January 2022 |
| Neutral Citation | [2022] EWCA Civ 23 |
| Docket Number | Case No: A4/2021/0422 |
| Year | 2022 |
| Court | Court of Appeal (Civil Division) |
[2022] EWCA Civ 23
Lord Justice Coulson
Lord Justice Baker
and
Lady Justice Andrews
Case No: A4/2021/0422
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT
MR JUSTICE JACOBS
Royal Courts of Justice
Strand, London, WC2A 2LL
The Appellant appeared in person
Alexander Wright and Edward Jones (instructed by Wilmot & Co Solicitors LLP) for the Respondent
Hearing date: 15 December 2021
Approved Judgment
This judgment was handed down remotely at 10.00am on 14 th January 2022 by circulation to the parties or their representatives by email and by release to BAILII and the National Archives
INTRODUCTION
A person is deceived by a fraudster into selling to him, at an under-value, a valuable and appreciating chattel which he bought as an investment and which, but for the deceit, he would otherwise have retained for himself (and thus benefited from any appreciation in its value). The issue raised in this appeal is whether, in the computation of damages for deceit, and specifically, the head of damages compensating the victim for the loss of that investment opportunity, the victim is obliged to give credit to the fraudster not only for the cash he received as part of the fraudulently induced sale transaction, but also for the “time value” of that money in the period between that transaction and the trial.
Irrespective of whether any benefit was actually obtained by the victim, Mr Tuke, from the use of the money, it is contended by the wrongdoer, Mr Hood, that such a credit should be given. Mr Hood submits that the “time value” should be calculated either in the same way as Mr Tuke was awarded compound interest on the equitable compensation for Mr Hood's dishonest assistance in breaches of fiduciary duty by Mr Hood's company, or in the same manner as discretionary interest under statute.
The suggestion that, unless the victim gives credit to the fraudster for the time value of the money, he will be overcompensated, is a novel one. It was not pleaded in the defence, which was settled by experienced counsel. Nor was it raised in argument at trial by Mr Hood, then acting in person, nor by counsel acting for his then trustees in bankruptcy, who were joined as interested parties. Rather, it appears to have had its genesis in a concern expressed by the trial judge, Mr Justice Jacobs, (“the Judge”) which only arose if he adopted an approach to calculation of the damages for the lost investment opportunity which he had indicated in the judgment he was minded to follow, but which, following submissions at a further hearing to deal with consequential matters (“the post-judgment hearing”) he decided was wrong in principle.
By the time of that hearing, Mr Hood had successfully appealed against the bankruptcy order which was operative at the time of trial, and therefore instructed counsel to represent him. It is not suggested by Mr Hood that the approach to quantification which the Judge eventually adopted was incorrect. This is unsurprising, since it was the approach that his own counsel advocated at the post-judgment hearing.
As is recorded in the further reserved judgment delivered by the Judge on 18 January 2021 following that hearing, Mr Hood's then counsel successfully argued that the approach originally taken by the Judge to quantification of the loss of investment opportunity claim involved an element of double-counting. Mr Wright, who appeared on this appeal on behalf of Mr Tuke, as he did at all the hearings below, confirmed to us that it was not submitted to the Judge that credit should be given for the “time value” of the money even if he adopted the different approach to quantification that was then being advanced on behalf of Mr Hood.
The argument that, even on the Judge's revised approach, credit should have been given for the time value of the money received from the fraudulently induced sale transactions, was raised for the first time in the appellant's notice and accompanying skeleton argument settled by fresh counsel (leading and junior) from leading Chancery chambers, who had appeared neither at trial nor at the post-judgment hearing. They ceased to act when Mr Hood was once again made bankrupt. The fact that the argument was neither pleaded nor raised in the court below is not immediately apparent from those documents. Whilst those factors in and of themselves might have justified the dismissal of the appeal, I am mindful that permission to appeal was granted. Moreover, the point is one of potentially wider significance. In those circumstances, it seems to me that the better course is to address the argument on its merits, such as they are.
Mr Hood appeared in person at the remote hearing of his appeal. Quite understandably, he was unable to add anything of substance to the written submissions of his former counsel. I have considered those submissions with care, but on closer examination their veneer of plausibility proved to be illusory.
For the reasons which will appear, I consider the suggestion that credit should be given for the time value of the money, measured as notional interest, to be fundamentally misconceived and contrary to principle. Moreover, there are very strong public policy reasons why it should be rejected. The upshot of requiring such credit to be given would be to reduce the recoverable damages the longer the fraud went undetected, and thus to allow a dishonest defendant to benefit from the concealment of his fraud or dishonest assistance in a breach of fiduciary duty. It would also be contrary to the fundamental aim of fully compensating a victim of fraud for all the loss directly flowing from the fraudulent transaction, including consequential loss. Far from being overcompensated, Mr Tuke would not be fully compensated if he were to be required to give any credit for the time value of the money he received.
FACTUAL BACKGROUND
In December 2009, having recently sold his business for around £60 million, Mr Tuke identified classic cars as a potential investment which would achieve returns greater than other types of investment which were then available in the aftermath of the global financial crisis. The market in classic cars did indeed prove to have strong growth potential, and Mr Tuke had an eye for a bargain. Between December 2009 and September 2010 he invested around £20 million in classic cars, 7 of which (“the Investment Cars”) each cost in excess of £1 million, some of them in excess of £3 million. He bought the first 4 vehicles from an apparently reputable specialist classic car dealership named JD Classics Ltd (“JDC”), which was founded and run by Mr Hood. Mr Hood was also the sole or majority owner of JDC at all material times. Thereafter, Mr Tuke purchased another 17 cars through JDC acting as his agent.
There are no doubt many honest and reputable second-hand car dealers plying their trade in this country. Unfortunately for Mr Tuke, Mr Hood was not among their number. Following a 3-week trial in the Commercial Court, in a comprehensive judgment running to some 156 pages, the Judge found that Mr Hood had deceived Mr Tuke on a very large number of occasions over many years, in flagrant breach of the trust that had been placed in him. He also found that Mr Hood was a mendacious witness who had attempted to mislead the court in earlier proceedings (tried by Mr Justice Lavender) to prevent disclosure of damaging internal records which were subsequently used to prove the frauds on Mr Tuke (judgment [26]–[32]). He had even fabricated and backdated a letter in an attempt to deceive the court in these proceedings as to the nature of the agency relationship between Mr Tuke and JDC (judgment [66]–[89]). He held Mr Hood liable in both deceit and dishonest assistance in JDC's breaches of trust in respect of 8 transactions, and deceit alone in respect of a further 2 transactions. A claim in respect of a further transaction (which did not involve allegations of fraud) was dismissed.
It is unnecessary to rehearse the full detail of Mr Hood's dishonesty, because only one of the fraudulently induced transactions is of significance for the purposes of this appeal, namely, the transaction which caused the loss of business opportunity. That was known as the “Group C transaction”.
There came a time when Mr Tuke was seeking to sell some of the classic cars in order to raise money to pay a substantial tax bill, and to reacquire an interest in the business which he had sold. In September 2010 he appointed JDC as his agent to negotiate and conclude the sale of cars and receive payments on his behalf, in return for a 10% commission. He told Mr Hood which of the cars he particularly wished to keep.
In January 2011, Mr Hood presented Mr Tuke with the Group C transaction. This involved Mr Tuke selling 4 of his existing cars for £4 million, and at the same time, agreeing to purchase 5 Jaguar “Group C” racing cars for £10 million. Mr Hood told Mr Tuke that he had persuaded 4 individual owners to part with their vehicles so that Mr Tuke would be able to acquire a valuable collection of his own, which would appreciate in value, and that the 4 cars sold by Mr Tuke were going to the owners of the 5 Group C cars in part-exchange. He also told Mr Tuke that the racing cars had been valued at £10 million.
The deposit of £2 million for the purchase of the Group C cars was financed from the sale price of £4 million ascribed to the 4 cars, and Mr Tuke borrowed the balance of £8 million from a finance company (“Close”). This left Mr Tuke with £2 million in cash (less certain commissions and charges). However, he was also left with a liability to repay the loan...
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...for anything more than the market value of the shares they sold. That is especially so since, as Andrews LJ noted in Tuke v Hood [2022] EWCA Civ 23, [2022] 2 WLR 983, at paragraph 58, the authorities demonstrate that “a deliberate wrongdoer is not to be rewarded for the fruits of his own ......
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Court Of Appeal Rejects Novel Argument That Fraud Victims Should Give Credit For The "Time Value" Of Cash Received As Part Of A Fraudulent Transaction
...fraudulent transactions, but also for the "time value" of that money in the period between the transaction and the trial: Tuke v Hood [2022] EWCA Civ 23. This decision will be noteworthy for financial institutions for the Court of Appeal's analysis as to the correct calculation of damages i......
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Court Of Appeal Rejects Novel Argument That Fraud Victims Should Give Credit For The "Time Value" Of Cash Received As Part Of A Fraudulent Transaction
...fraudulent transactions, but also for the "time value" of that money in the period between the transaction and the trial: Tuke v Hood [2022] EWCA Civ 23. This decision will be noteworthy for financial institutions for the Court of Appeal's analysis as to the correct calculation of damages i......