03 October 2018 - Post by:Taly Dvorkis
In Inter Export v Lasytsya, the Court of Appeal held that the correct measure of damages for fraudulently misrepresenting the ability to pay the contract price is to put the aggrieved party in the position it would have been in had the deceit not occurred.
Lasytsya was the company director of Nerida which had entered into a contract with Inter Export for shipment of USD 1.2m worth of sunflower oil. At the time, Inter Export requested, and Lasytsya provided, multiple assurances that payment would be made. Inter Export therefore bought the sunflower seeds and pressed the oil. Before the oil was shipped, Lasytsya sent forged bank documents showing that payment had been made in full. Inter Export therefore provided the oil for shipment by a third party which had purchased the oil from Nerida, and so Inter Export lost title to the oil.
The High Court found that Lasytsya’s assurance that Nerida could pay for the oil amounted to misrepresentation, and that the later-forged banking documents were evidence of continued misrepresentation. The High Court awarded Inter Export damages to reflect the market value of the oil (ie USD 1.2m). This put Inter Export in the position it would have been in had the misrepresentation not been paid.
Lasytsya argued on appeal that the market value of the oil was the correct basis to compensate Inter Export because, at the date the misrepresentation was made, Inter Export had not then acquired the oil. Lasytsya argued that the measure of damages should be limited to Inter Export’s costs for the sunflower seeds and pressing the oil (not quantified but presumably much less than USD 1.2m).
The Court of Appeal disagreed. Lasytsya’s misrepresentation was a continuing deceit and the loss should be assessed at the point Inter Export failed to prevent the oil from shipment. Had Lasytsya corrected the representation at any point, Inter Export would have had to mitigate its loss in the normal way. However, as the misrepresentation was continuing, damages were awarded to put Inter Export in the position it would have been in but-for Lasytsya’s dishonesty.