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Damages for potential lost future trading profits

The recent decision of Mr. Justice Flaux in Parabola Investments Limited and Others v. Browallia Cal Limited and Others extended the range of damages available for Claimants for loss of profits. In this case damages were granted for loss of profits on unspecified transactions of a kind that, in theory, may have resulted in a loss.

The facts of the case are that a company trading in securities used two brokerages. One of the brokerages fraudulently misrepresented to the trader on a daily basis that the trading being conducted by the trader was profitable and also made a series of fraudulent misrepresentations as to the amount of funds in the account which gave the impression in the trader’s mind that the trading was being conducted profitably. 

The High Court held amongst other things, that:

• The trader was induced by numerous fraudulent misrepresentations into continuing to trade in unprofitable securities
• Had it not been for the trader being misled in a web of deceit the trader would have made profits
• The trader was entitled to recover all losses flowing directly from that fraud consisting not only of the depletion of the trader’s fund and the loss of profits that would otherwise have been made on the fund in the period of the fraud but also the loss of profits on those profits he had suffered until the Trial

The fact that the trader could not (because of the nature of the business that had been damaged) identify a specific alternative transaction in which he could have made profits was irrelevant and it did not affect the recoverability of damages for loss of profits.

This is an exceptional case; future claimants should consider whether to include a claim for loss of profits using the funds that were tied up in a particular transaction resulting in losses.  However it should be noted that this particular trader had an exceptional track record of profitable trading and it may well be that the Court was influenced in reaching its decision by the trader’s history.

Pearson Hinchliffe Commercial Law can provide specialist advice in matters relating to the contents of this article. Click here to contact to a specialist commercial lawyer.

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