Banwaitt v Dewji

An appellate court reviews findings of primary fact; it does not retry the evidence. It may intervene only where there was no evidential basis, the evidence was misunderstood, or the finding was not reasonably open to the judge. A trial judge may permit a non-material reformulation of an alleged misrepresentation where the opposing party has had a fair opportunity to meet it.

An uncorrected fraudulent misrepresentation may remain operative and induce a later investment. On equitable rescission, restitutio in integrum requires the fraudulent defendant to restore every benefit received under the rescinded transaction, including the benefit of a currency conversion made before payment.

Mr Banwaitt invested US$1.75 million in a Cambodian property scheme introduced by Dr Dewji. The scheme failed after the local partner was discovered to have committed fraud.

The High Court found that Dr Dewji had fraudulently misrepresented the scheme’s funding, the proposed hotel-chain purchase, the supposed back-to-back nature of the transaction, and the urgency of payment. It rescinded the investment agreement and ordered repayment in US dollars. Dr Dewji appealed, challenging the factual findings, the treatment of the pleaded representations, and the currency in which the July payments had to be restored.

1. Appeal dismissed. Patten LJ, with whom Sharp and Maurice Kay LJJ agreed, held that the trial judge’s findings of fraudulent inducement were properly open to him. The judge was entitled to assess credibility, prefer Mr Banwaitt’s evidence where appropriate, and rely on the documentary record. An appellate court was not required to revisit every evidential inconsistency or item of criticism that the trial judgment had not expressly addressed.

2. The trial judge was entitled to find that Dr Dewji had falsely represented that the scheme was substantially funded, that a hotel-chain purchaser had paid a 20% deposit and was committed, that the transaction was back-to-back, and that an urgent deposit had been paid. Those assurances were material and induced the initial investment. Although the pleaded case that full planning permission had been granted was not made out on the judge’s actual finding, that point could not affect the result.

3. The judge also had discretion to permit the allegation about the hotel-chain purchaser to be formulated without identifying it as French. Its identity was immaterial to the substance of the representation, and Dr Dewji had a proper opportunity to meet the point. The original false assurances remained operative when Mr Banwaitt made the later payments. The further false statement that only US$2–3 million was needed therefore induced those payments on a false basis.

4. Rescission required restoration of the benefits received by Dr Dewji, not merely restoration of the sterling balance debited from Mr Banwaitt’s account. The July payment was converted into US$750,000 before entering Dr Dewji’s dollar account. Ordering repayment of that sum prevented Dr Dewji from retaining the benefit of the later exchange-rate movement, which would have resulted from his fraud.

• Court of Appeal (Civil Division)—dismissed Dr Dewji’s appeal and upheld rescission and the order for repayment in US dollars: [2014] EWCA Civ 67.
• High Court of Justice, Queen’s Bench Division—Sir Raymond Jack found that the investment had been induced by fraudulent misrepresentations, rescinded the agreement, and ordered repayment with interest. The citation of that judgment was not stated in the judgment.