Abbar & Anor v Saudi Economic & Development Company (Sedco) Real Estate Ltd & Ors

A statement in an investment memorandum that an investment was intended or anticipated to last 12 to 18 months did not, in its context, create a contractual obligation to sell the underlying property or provide investors with an exit. Contractual intention depends on construction of the documents as a whole, including the distinction between binding terms and descriptive statements of business plans.

Corporate control does not of itself establish agency or make a parent company liable for its subsidiary’s contracts. Agency requires consent, express or implied. Liability for inducing breach requires actual knowledge of the contractual obligation and its breach. Statements of present intention may constitute representations, but a negligent misrepresentation claim requires an evidential basis that the stated intention was false or misleading.

The claimants invested in shares in Pinnacle Holdings Limited after receiving an Information Memorandum describing a proposed short-term investment in a London development site. The site was acquired and cleared, but it was retained for the construction and letting of a tower. Most investors, including the first claimant, were not bought out.

The claim alleged breach of contract against the investment and property companies, liability of other defendants as undisclosed principals, inducing breach of contract, and negligent misrepresentation under section 2(1) of the Misrepresentation Act 1967. The central issues were whether the memorandum created a binding obligation to provide an exit within 12 to 18 months, which entities were parties or principals, and whether the statements of intention were actionable.

1. The action was dismissed. The Information Memorandum, application form and related documents created an investment agreement between each applicant and SEDCO Anguilla, under which it agreed to procure the issue of shares by PHL. A separate collateral agreement could arise between investors and PHL concerning obligations applicable to PHL.
2. The documents did not create a contractual obligation to sell the site, distribute sale proceeds, or provide an alternative exit within 12 to 18 months. The repeated references to an “anticipated” or “intended” holding period, and the descriptive nature of the exit-strategy section, were inconsistent with a binding promise. The proposed unanimous-consent mechanism was also commercially impractical and lacked supporting machinery in the articles or other agreements.
3. SEDCO and AIL were not liable as undisclosed principals. Control over a company, nominee directors and participation in major decisions did not establish agency. The necessary element was consent to the relationship of principal and agent, express or implied.
4. The claim for inducing breach failed because no contractual obligation existed. Alternatively, the defendants lacked the necessary actual knowledge that the relevant conduct would breach a contract. AIL had not procured the relevant decisions.
5. The negligent misrepresentation claim failed on the evidence. SEDCO was committed to a short-term investment when the memorandum was issued and had not contemplated a change to a long-term strategy. Statements of intention can be actionable if a material contemplated change is negligently omitted, but that situation was not established here.
6. Had liability been established, conventional compensatory damages would have been the primary measure. Negotiating damages require inability to prove identifiable financial loss and were inappropriate on the facts. Exemplary damages were unavailable for breach of contract. An award against PHL would also have involved an impermissible return of capital outside the statutory mechanisms.