In a recent decision the English High Court, in Vald. Nielsen Holding A/S and another v Baldorino and others, a claim based upon deceit, considered the general approach to the assessment of damages for fraud and whether and to what extent principles concerning loss of chance might be applicable.

The case concerns the sale of a business in a management buyout. The company, Updata Infrastructure (UK) Ltd, majority owned by Updata Europe A/S, was purchased by the defendants, the executive management team of Updata UK, backed by a private equity firm. The claimants were assignees of Updata Europe. The claimants claimed Updata Europe were misled into selling its interest in Updata UK at an undervalue because of the defendants’ deception. The claimants alleged that the defendants made representations regarding Updata UK’s financial position which were false.

The Court held that:-

• A representation of opinion as to what would happen in the future must be honestly entertained at the time it was made; 

• Causation should be decided on the balance of probabilities. The question was what the claimants would have done had the misrepresentation not been made i.e. would they have sold their interest in any event. However, where a seller’s action depended upon the acts of third parties then loss of chance principles may potentially be applicable; 

• Loss should be quantified by considering the difference between the fair value of the assets at the time disposal took place less the amount actually received.

The case is important as it considers the principles applicable to causation, the general approach to assessment of damages for fraud and the extent to which ‘loss of chance’ principles are applicable in claims for deceit involving defrauded sellers.