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The usual rule of law is that a fraudster is liable for all losses/restitution, due to their fraud, whether or not reasonably foreseeable.

Suppose a fraudster's deception causes a person to take a course of action they wouldn't have otherwise taken. As part of that, they suffer losses due to a second person's tort. Is that loss recoverable from the fraudster as well?

Specific situation:

A person (A) seeks to buy an asset but is greatly deceived by the owner (F) of the asset. (I'm assuming that deceit, reliance, litigation etc are clear, see assumptions at end of Q).

A attempts to be safe by asking a professional valuer (V) for an opinion on the asset before signing, but V was negligent and the valuation was defective. (I'm assuming blatant negligence, reliance, etc)

As a result, A suffers a loss.

If either (1) F had been honest, or (2) even with a dishonest seller had V not been negligent, A would not have bought the asset and therefore would not have suffered the loss.

Usually A would seek damages for their entire loss from V, because professionals often carry insurance against negligence claims.

But I am interested in whether, in law, F still remains liable for A's entire loss, despite any impact of V. Reasons for A wishing to hold F liable for the entirety of loss might be:

  • V is now living overseas and hard to litigate against;
  • V did not actually have insurance, or there would be no assets to pay the claim if successful;
  • V is a personal friend of A and A wants to avoid suing his friend and breaking a friendship;
  • A incurred various unrecoverable expenses in claiming against V, and he feels that F should be liable for all losses flowing from the deceit;
  • An associate or relation of A (called "B") has also suffered from the deceit and purchase of the asset but B lacked a contractual relationship with V and was not foreseeably reliant on V's defective valuation, and therefore B's only recourse is against F for the loss flowing from a deceit, not V.

Legal arguments

  • A argues that, but for the deceit, neither A or B would have been exposed to a defective valuation or defective asset in the first place, so their entire losses flow from F's deceit and the subsequent valuation error is irrelevant: without F's deceit they wouldn't have put themselves in a position of relying on V in the first place.

  • F argues that he isn't liable for any material amount of damages to A or B, or for any unrecovered outlay A incurred in suing V, because ultimately A and B only suffered loss in the end due to an unconnected third party's negligence (V). In the alternative, F argues that if found liable, he is only liable for part of the losses claimed by A and B, due to contributory negligence by V.

Is there clear precedent in case law that backs either of their positions?

Or, put another way, is there case law precedent for a deceiver being liable for loss due to a subsequent problem, on the legal ground that "but for the deceit the claimant would never have put themselves in a position where they would have been exposed to the risk of that subsequent problem, in the first place"?

NOTE: Assume for this question that UK law applies, and all criteria for the claims are met: the fact of any deceit or negligence is blatant and uncontested, the fact of reliance or mitigation is uncontested, and so on. So the question is only about how the subsequent matter affects F's liability.

  • I find this question difficult to follow - Are stating that (A) was induced by (F) to purchase an object through fraud, that a valuation was then done by a third party, and if (F) is liable for the cost of the valuation, even though the valuation was wrong? – davidgo May 12 '18 at 22:15
  • Yes, that's about it, except all costs/losses not just valuation costs. I've tried rewording it to be clearer, if that helps. – Stilez May 13 '18 at 6:38
  • Why do you think that A "usually would seek damages for their entire loss from V"? Whether V has insurance or not is irrelevant to the court, and IMHO, that would be a pretty dumb thing to do. The chances of prevailing before it has been proven by a court of law, in a case brought by A against F, that A had in fact been defrauded by F, is pretty close to zero. – Free Radical May 13 '18 at 6:47
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The underlying assumption in this question seems to be that because A received defective professional advice from V, F may be free of blame. I believe that assumption is wrong.

The gist of the question is this:

Suppose a fraudster's deception causes a person to take a course of action they wouldn't have otherwise taken. As part of that, they suffer losses due to a second person's tort. Is that loss recoverable from the fraudster as well?

In the scenario given, there are clearly two parties that are to blame for the loss:

  1. The fraudster, who perpetrated the fraud.
  2. The professional attorney, who gave defective advice.

The fact that there also exists a second party that may have contributed to the loss does not in any way absolve the first party from blame or from being liable for his actions.

In a tort case, it is always the person that caused the loss in the first place (the tortfeasor) the victim (A) should seek relief from first. So F is in no way “safe from litigaton”.

In the event that the tortfeasor is not being able make full restitution (e.g. he is already bankrupt), A may sue V for professional negligence to recover his loss. However, to prevail, A vould must be able to prove that V has made critical errors that no “reasonable attorney” would have made. That is sometimes pretty hard to prove (it obviously depends on how clever F's deception was, and whether the number of hours A allowed V to use for due diligence should have been sufficient to uncover the deception).

As for legal precedent, I am not aware of a single case where a fraudster has not been held liable because the victim of the fraud has sought professional advice (but it is of course not easy to locate precedent for something has not occured).

  • It's really about your final paragraph: can a fraudster be held liable for further losses where the initial loss is then compounded by defective professional advice (or unrecovered costs of a claim for the defective advice), on the grounds that, but for the deceit, the advice - and any consequence of the advice and/or cost of claiming against the advisor - would never have arisen? Is there a good UK precedent in case law that touches on this aspect? – Stilez May 13 '18 at 8:39
  • I am confused. Is your question if F is liable for A's further losses when A unsuccessfully litigates against V for professional negligence and loses the case? – Free Radical May 13 '18 at 9:12
  • Pretty much - that's a good way to cut to the chase. I had in mind more that A successfully sues V but doesn't recover his full losses, or A incurs further losses due to V but these extra losses can't or won't be fully recovered from V. So A is left out of pocket and wants to recover the unrecovered part of his further losses against F. Your scenario would be a good way to simplify them. Is there good case law or very clear settled law, supporting either side's view? – Stilez May 13 '18 at 10:35
  • If that is what you intended to ask, you need to revise the question to make that clear. It is not obvious the way it is written, and you say in a comment that question is about "all costs/losses not just valuation costs" (my emphasis - all costs includes the money paid to F). That comment makes it even more confusing. For the record: I am not aware of any case law, but I doubt that F can be made liable for any fees paid by A to V for (defective) advice. A need to sue F to recover his initial loss, and to sue V to have the fee charged for defective advice reimbursed. – Free Radical May 13 '18 at 10:41

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