The damages awarded by the Court of Appeal in that case were calculated (admittedly on a rough and ready basis as to the figures) as follows, at pp. 169-170. The plaintiff was treated as having lost £9,500, the price paid for the business and stock. Against this, he had to give credit for £3,500, i.e. not for the value of the business at the transaction date but for the amount he actually received on the resale of the business three years later. To this £3,500 there were added other benefits which he had received so as to give a total of £7,000 benefits received to be set against the sum lost of £9,500, i.e. a balance of loss of £2,500. In addition, the plaintiff was awarded by way of consequential damages the sum of £3,000 in respect of liabilities incurred by him in running the business. Thus the total award for direct and consequential damages was £5,500.

    Doyle v. Olby (Ironmongers) Ltd. establishes four points. First, that the measure of damages where a contract has been induced by fraudulent misrepresentation is reparation for all the actual damage directly flowing from (i.e. caused by) entering into the transaction. Second, that in assessing such damages it is not an inflexible rule that the plaintiff must bring into account the value as at the transaction date of the asset acquired: although the point is not adverted to in the judgments, the basis on which the damages were computed shows that there can be circumstances in which it is proper to require a defendant only to bring into account the actual proceeds of the asset provided that he has acted reasonably in retaining it. Third, damages for deceit are not limited to those which were reasonably foreseeable. Fourth, the damages recoverable can include consequential loss suffered by reason of having acquired the asset.

    In my judgment Doyle v. Olby (Ironmongers) Ltd. was rightly decided on all these points. It is true, as to the second point, that there were not apparently cited to the Court of Appeal the 19th century cases which established the "inflexible rule" that the asset acquired has to be valued as at the transaction date: the successful appellant was not legally represented. But in my judgment the decision on this second point is correct. The old "inflexible rule" is both wrong in principle and capable of producing manifest injustice. The defendant's fraud may have an effect continuing after the transaction is completed, e.g. if a sale of gold shares was induced by a misrepresentation that a new find had been made which was to be announced later it would plainly be wrong to assume that the plaintiff should have sold the shares before the announcement should have been made. Again, the acquisition of the asset may, as in Doyle v. Olby (Ironmongers) Ltd. itself, lock the purchaser into continuing to hold the asset until he can effect a resale. To say that in such a case the plaintiff has obtained the value of the asset as at the transaction date and must therefore bring it into account flies in the face of common sense: how can he be said to have received such a value if, despite his efforts, he has been unable to sell.

    Doyle v. Olby (Ironmongers) Ltd. has subsequently been approved and followed by the Court of Appeal in East v. Maurer [1991] 1 W.L.R. 461 and Downs v. Chappell [1996] 3 All E.R. 344. In both cases the plaintiffs had purchased a business as a going concern in reliance on the defendant's fraudulent misrepresentation. In each case after discovery of the fraud they sold the business at a loss and recovered by way of damages the difference between the original purchase price and the price eventually realised on a resale, i.e. the old date of transaction rule was not applied. In Banque Bruxelles Lambert S.A. v. Eagle Star Insurance Co. Ltd. [1996] 3 W.L.R. 87 your Lordships treated the measure of damages for fraud as being in a special category regulated by the principles of Doyle v. Olby (Ironmongers) Ltd.

    Turning for a moment away from damages for deceit, the general rule in other areas of the law has been that damages are to be assessed as at the date the wrong was committed. But recent decisions have emphasised that this is only a general rule: where it is necessary in order adequately to compensate the plaintiff for the damage suffered by reason of the defendant's wrong a different date of assessment can be selected. Thus in the law of contract, the date of breach rule "is not an absolute rule: if to follow it would give rise to injustice, the court has power to fix such other date as may be appropriate in the circumstances:" per Lord Wilberforce in Johnson v. Agnew [1980] A.C. 367, at 401A. Similar flexibility applies in assessing damages for conversion (I.B.L. Ltd. v. Coussens [1991] 2 All E.R. 133) or for negligence (Dodd Properties Ltd. v. Canterbury City Council [1980] 1 W.L.R. 433). As Bingham L.J. (as he then was) said in County Personnel (Employment Agency) Ltd. v. Alan R. Pulver & Co. [1987] 1 W.L.R. 916, 925-926:

 "While the general rule undoubtedly is that damages for tort or breach of contract are assessed at the date of the breach . . . this rule also should not be mechanistically applied in circumstances where assessment at another date may more accurately reflect the overriding compensatory rule."

    In the light of these authorities the old 19th century cases can no longer be treated as laying down a strict and inflexible rule. In many cases, even in deceit, it will be appropriate to value the asset acquired as at the transaction date if that truly reflects the value of what the plaintiff has obtained. Thus, if the asset acquired is a readily marketable asset and there is no special feature (such as a continuing misrepresentation or the purchaser being locked into a business that he has acquired) the transaction date rule may well produce a fair result. The plaintiff has acquired the asset and what he does with it thereafter is entirely up to him, freed from any continuing adverse impact of the defendant's wrongful act. The transaction date rule has one manifest advantage, namely that it avoids any question of causation. One of the difficulties of either valuing the asset at a later date or treating the actual receipt on realisation as being the value obtained is that difficult questions of causation are bound to arise. In the period between the transaction date and the date of valuation or resale other factors will have influenced the value or resale price of the asset. It was the desire to avoid these difficulties of causation which led to the adoption of the transaction date rule. But in cases where property has been acquired in reliance on a fraudulent misrepresentation there are likely to be many cases where the general rule has to be departed from in order to give adequate compensation for the wrong done to the plaintiff, in particular where the fraud continues to influence the conduct of the plaintiff after the transaction is complete or where the result of the transaction induced by fraud is to lock the plaintiff into continuing to hold the asset acquired.

    Finally, it must be emphasised that the principle in Doyle v. Olby (Ironmongers) Ltd. [1969] 2 Q.B. 158, strict though it is, still requires the plaintiff to mitigate his loss once he is aware of the fraud. So long as he is not aware of the fraud, no question of a duty to mitigate can arise. But once the fraud has been discovered, if the plaintiff is not locked into the asset and the fraud has ceased to operate on his mind, a failure to take reasonable steps to sell the property may constitute a failure to mitigate his loss requiring him to bring the value of the property into account as at the date when he discovered the fraud or shortly thereafter.

    In sum, in my judgment the following principles apply in assessing the damages payable where the plaintiff has been induced by a fraudulent misrepresentation to buy property:

 1. The defendant is bound to make reparation for all the damage directly flowing from the transaction;

 2. Although such damage need not have been foreseeable, it must have been directly caused by the transaction;

 3. In assessing such damage, the plaintiff is entitled to recover by way of damages the full price paid by him, but he must give credit for any benefits which he has received as a result of the transaction;

 4. As a general rule, the benefits received by him include the market value of the property acquired as at the date of acquisition; but such general rule is not to be inflexibly applied where to do so would prevent him obtaining full compensation for the wrong suffered;

 5. Although the circumstances in which the general rule should not apply cannot be comprehensively stated, it will normally not apply where either (a) the misrepresentation has continued to operate after the date of the acquisition of the asset so as to induce the plaintiff to retain the asset or (b) the circumstances of the case are such that the plaintiff is, by reason of the fraud, locked into the property.

 6. In addition, the plaintiff is entitled to recover consequential losses caused by the transaction;

 7. The plaintiff must take all reasonable steps to mitigate his loss once he has discovered the fraud.

    Before seeking to apply those principles to the present case, there are two points I must make. First, in Downs v. Chappell [1996] 3 All E.R. 344, 361, Hobhouse L.J. having quantified the recoverable damage very much along the lines that I have suggested, sought to cross-check his result by looking to see what the value of the business would have been if the misrepresentations had been true and then comparing that value to the contract price. Whilst Hobhouse L.J. accepted that this was not the correct measure of damages, he was seeking to check that the plaintiff was not being compensated for a general fall in market prices (for which the defendant was not accountable) rather than for the wrong done to him by the defendant. In my view, such a cross-check is not likely to be helpful and is conducive to over-elaboration both in the evidence and in argument. Second, in Royscot Trust Ltd. v. Rogerson [1991] 2 Q.B. 297 the Doyle v. Olby (Ironmongers) Ltd. measure of damages was adopted in assessing damages for innocent misrepresentation under the Misrepresentation Act, 1967. I express no view on the correctness of that decision.

    How then do those principles apply in the present case? First, there is no doubt that the total loss incurred by Smith was caused by the Roberts fraud, unless it can be said that Smith's own decision to retain the shares until after the revelation of the Guerin fraud was a causative factor. The Guerin fraud had been committed before Smith acquired the shares on 21 July 1989. Unknown to everybody, on that date the shares were already pregnant with disaster. Accordingly when, pursuant to the Roberts fraud, Smith acquired the Ferranti shares they were induced to purchase a flawed asset. This is not a case of the difficult kind that can arise where the depreciation in the asset acquired between the date of acquisition and the date of realisation may be due to factors affecting the market which have occurred after the date of the defendant's fraud. In the present case the loss was incurred by reason of the purchasing of the shares which were pregnant with the loss and that purchase was caused by the Roberts fraud.

    Can it then be said that the loss flowed not from Smith's acquisition but from Smith's decision to retain the shares? In my judgment it cannot. The judge found that the shares were acquired as a market-making risk and at a price which Smith would only have paid for an acquisition as a market-making risk. As such, Smith could not dispose of them on 21 July otherwise than at a loss. Smith were in a special sense locked into the shares having bought them for a purpose and at a price which precluded them from sensibly disposing of them. It was not alleged or found that Smith acted unreasonably in retaining the shares for as long as they did or in realising them in the manner in which they did.

    In the circumstances, it would not in my judgment compensate Smith for the actual loss they have suffered (i.e. the difference between the contract price and the resale price eventually realized) if Smith were required to give credit for the shares having a value of 78p on 21 July 1989. Having acquired the shares at 82¼p for stock Smith could not commercially have sold on that date at 78p. It is not realistic to treat Smith as having received shares worth 78p each when in fact, in real life, they could not commercially have sold or realised the shares at that price on that date. In my judgment, this is one of those cases where to give full reparation to Smith, the benefit which Smith ought to bring into account to be set against its loss for the total purchase price paid should be the actual resale price achieved by Smith when eventually the shares were sold.

    Finally I must mention a point raised by Mr. Sumption, namely, that it is not open to Smith to argue before your Lordships that the damages should be assessed in the manner which I have proposed. On the pleadings, the damages claimed were the difference between the contract price and either the "true" value on 21 July 1989 or their value when the fraud was discovered. Mr. Sumption urged, in addition to the point on the pleadings, that it would be unfair to Citibank to entertain the new argument since, if the point had been pleaded Citibank would itself have pleaded and led evidence of a failure by Smith to mitigate its loss and as to the reasonableness of Smith's conduct.

    Although the pleading point is technically correct (and could be cured by amendment) I am not satisfied that Citibank is prejudiced by allowing this point to be argued before your Lordships. In opening his case before the judge, Mr. Grabiner conceded that, in any event, he could not recover more than Smith's actual realised loss. It could therefore have been an issue at the trial, if Citibank had chosen to make it one, whether Smith should have sold earlier or at a better price. Indeed, as I understand it, those matters were investigated in that context at the trial and the judge found that Smith had acted reasonably. In the circumstances, I can see no injustice to Citibank in deciding this case on the new point raised before your Lordships.

    For these reasons I would hold that the damages recoverable amount to £11,352,220 being the difference between the contract price and the amount actually realised by Smith on the resale of the shares. However, as there was no appeal by Smith against the judge's assessment of the damages at £10,764,005, Smith's claim must be limited to that latter amount. I would therefore allow the appeal and restore the judge's order.