Daisystar Ltd and another v Woolwich plc

Respondent awarded damages in fraud action against appellant – Appellant seeking to appeal judgment – Respondent recovering sum from its solicitors in concurrent negligence claim – Whether amount of judgment sum in fraud proceedings should be reduced accordingly – Appeal allowed The appellant property developer operated a company known as Daisystar Ltd during the late 1970s and 1980s. Between 1983 and 1986 the company entered into 85 mortgage transactions in which it obtained advances from the respondent’s predecessor, Town & Country Building Society (T&C). The mortgages gave rise to extensive litigation between the appellant and T&C. When the respondent took over from T&C in 1992, it pursued T&C’s claims, including an allegation of fraud on the part of the appellant. The respondent’s case was that the appellant and his company were parties to fraudulent representations made for the purpose of obtaining advances totalling £2.55m from T&C. In June 1995 judgment was given in favour of the respondent and damages were assessed at £1,052,749. The appellant sought to appeal against that judgment contending, inter alia, that a sum of £300,000 recovered by T&C in settlement of a concurrent professional negligence claim against its solicitors should have been deducted in the calculation of the overall damages in the fraud action. Although the appellant was out of time for appealing the order of June 1995, the court extended the time for appealing on the issue of the £300,000. Held: The amount of damages was reduced by £300,000. Had the judge been made aware of the fact that the respondent had already recovered £300,000 from joint tortfeasors, he would have given credit for that sum and reduced the amount of damages awarded in the fraud action accordingly. Applying the principle in Townsend v Stone Toms & Partners (1984) 27 BLR 26, the appellant had discharged the initial burden upon him to show that part of the claim against him had already been satisfied by a payment from T&C’s solicitors as compensation for the loss suffered in the same matter. The respondent was wrong in its contention that Townsend did not apply because the £300,000 was recovered under an insurance policy and should, therefore, be left out of account in the fraud calculation. The sum of £300,000 was not a payment to the respondent under an insurance policy purchased by it, but was made by the solicitors’ insurers under a policy purchased by that firm. The present case therefore fell outside the principle in Parry v Cleaver [1970] AC 1. Ajmalul Hossain QC and Robert Duddridge (instructed by Ormerod Heap & Marshall, of Croydon) appeared for the appellant; Kim Lewison QC and Mark Blackett-Ord (instructed by Slaughter & May) appeared for the respondent. Sarah Addenbrooke, barrister