Hurst & Ors v Hone & Ors

Representations are actionable in deceit where they are false, known to be false, intended to induce reliance and contribute substantially to the claimant’s decision. Contributory negligence is unavailable as a defence to deceit. An implied representation is actionable where both parties appreciated the implication conveyed by the express words or conduct.

Friendship alone does not create a fiduciary relationship. A fiduciary relationship requires circumstances in which one person undertakes to act for another in a matter, giving rise to a recognised expectation that the fiduciary will not act adversely to the principal’s interests. A claimant is not ordinarily required to pursue speculative foreign litigation to mitigate loss.

The claimants bought apartments off-plan in the Aloha Royal development in Spain after dealing with Mark Cordner, who marketed the development for Royal Marbella Group. They paid the purchase prices in full before construction was completed. The development was eventually built, but the claimants were unable to obtain title to or use their apartments.

The claims against Mr Cordner included deceit, negligent misstatement, breach of trust, breach of fiduciary duty, conspiracy, partnership liability and tracing. The trial principally concerned liability, together with whether credit should be given for the value of the apartments.

1. Deceit. The court found that Mr Cordner made several false representations knowingly, including that he was chairman of Royal Marbella Group, that apartments had been taken by members of his family, that only one apartment remained available, that purchasers’ money would be kept in a separate account, that lawyers would act for the purchasers, and that he would share the purchase cost equally with Mr Barkley. These representations were intended to induce investment and contributed substantially to the decisions of Sir Geoffrey Hurst, Mr Hopley, Mr and Mrs Roberts, Mr Barkley and Mr Kenyon. Their deceit claims succeeded. Mr Innocent’s deceit and negligent misstatement claims failed because the relevant representations were not shown to have contributed substantially to his decision.
2. The court held that the use of express statements may convey implied representations where both the representor and representee appreciated the relevant implication. Mr Cordner’s statements about paying the purchase price up front implied that the money would be handled in accordance with Spanish law. The intended safeguards were not provided.
3. Mr Innocent’s fiduciary-duty claim failed. Friendship and reliance did not suffice. He knew that Mr Cordner was acting in a commercial capacity and had his own financial interest in the transaction.
4. The partnership claim failed. Although the special commission arrangement was deliberately kept confidential, the evidence did not establish that Mr Hone and Mr Cordner were carrying on business together as partners.
5. Mr Kenyon’s tracing claim against Mr and Mrs Cordner succeeded because the proceeds of his cheque were used to fund the purchase of the Derings and Mr Cordner was not entitled to use them. Further issues concerning the extent of tracing were adjourned.
6. Contributory negligence could not be relied upon in answer to deceit. The claimants were not required to pursue speculative proceedings in Spain to establish title. Their apartments were treated as valueless for the purpose of assessing damages. Damages and outstanding tracing issues were left for a further hearing or agreement.

First-instance judgment. No earlier decision is stated in the judgment.