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

In the context of a claim by a fraud victim seeking damages for consequential loss of investment opportunity, the Court of Appeal has rejected an argument by the fraudster that the victim was obliged to give credit not only for the cash they received as part of the relevant fraudulent transactions, but also for the “time value” of that money in the period between the transactions and the trial: Tuke v Hood [2022] EWCA Civ 23.

The Court of Appeal referred to the classic modern statement of the applicable principles when assessing damages for deceit in Smith New Court Ltd v Scrimgeour Vickers [1997] AC 254. Smith New Court confirmed that the time at which credit is to be given for the benefits received by the innocent party is normally the date of the fraudulently induced transaction (although this is not an inflexible rule and a different date may be adopted if taking the date of the transaction would under-compensate the victim). The Court of Appeal noted that Smith New Court did not say anything about the innocent party having to give credit for benefits received against claims for consequential losses.

The suggestion in the present case that the victim would be overcompensated unless they gave credit for the time value of the money received was a novel one. The Court of Appeal found it to be fundamentally misconceived and contrary to principle. In the court’s view, a claimant would not be fully compensated if they were required to give any credit for the time value of the money received.

For more detail see this post on our Banking Litigation Notes blog.