Bonham- Carter & Ors v SITU Ventures Ltd

For fraudulent misrepresentation, the claimant must identify the representation, establish its objectively understood meaning, falsity, materiality, inducement, the representor’s intention and dishonesty, and resulting loss. A statement may be substantially correct where the difference between it and the truth would not have induced a reasonable purchaser to act differently. Inducement requires the representation to play a real and substantial causative part in entering the contract; it need not be the sole or decisive inducement. Mere carelessness is insufficient for fraud. Each alleged representor’s dishonest state of mind must be proved separately. On the facts, the alleged 95% market-share representation was not made. Alternatively, it was not false in its proper context, was not dishonest, and did not induce the purchase.

The claimants sold the shares in Harbour Estates Limited to SITU Ventures Limited under a share sale agreement dated 6 June 2003. Part of the purchase price remained unpaid. SITU Ventures and Jeremy Hammond counterclaimed, alleging that Jennifer Bonham-Carter and Antoinette Horn had fraudulently represented that Harbour Estates had a 95% share of property sales at Chelsea Harbour.

The alleged representation was said to have induced the purchase at an excessive price and, in Mr Hammond’s personal claim, caused loss of employment income. The central issues were whether the representation was made, its meaning and truth, the defendants’ state of mind, inducement, and recoverable loss.

1. The claimants succeeded on their claim for the outstanding purchase monies, and the fraudulent misrepresentation counterclaim failed.
2. The pleaded wider representation, namely that Harbour Estates was instructed on behalf of vendors in 95% of sales in each particular year and was the effective cause of those sales, could not be sustained on Mr Hammond’s evidence. The alleged representation was not made at the December 2002 meeting or subsequently. The contemporaneous documents, including Mr Hammond’s précis, discussion paper, due-diligence material and the agreement, contained no reference to it.
3. Had a representation been made, its meaning would have been assessed objectively in the context of the information memorandum. A reasonable commercial representee would have understood the figure as an estimate concerning combined sales and lettings over the ten-year trading period, based partly on estimates, and relating to agents’ activity rather than private sales.
4. On that construction the representation was not false. If it had been false, neither defendant knew it to be false or was reckless as to its truth. Mere carelessness or a general feel for the market would not establish fraud.
5. In any event, neither SITU Ventures nor Mr Hammond was induced by the representation. Mr Hammond had unrestricted access to the company’s records, carried out extensive due diligence, and the alleged representation played no real and substantial causative part in the transaction.
6. The judge stated obiter that it was legally possible for a representation to be made to, and relied upon by, both a company and an individual in different capacities. Separate losses would not necessarily constitute double recovery. The issue did not arise because inducement was not proved.