Roberts v Egan

In a misrepresentation claim concerning a proposed property investment, pre-contract communications must be read objectively, as a whole and in their commercial context. Outline investment summaries do not necessarily represent the detailed security arrangements governing the transaction. A statement that developers will arrange bank finance does not, without more, represent that the investment vehicle will provide no security for that finance. A stated interest rate may be a mechanism for calculating remuneration rather than a guaranteed return. Where detailed contractual documentation is provided, the issue remains whether any representation was made and whether it induced the investment. A non-reliance clause is effective only if its wording clearly covers the alleged misrepresentation.

The claimant, David Tudor Roberts, invested £408,000 in Albemarle 5 LLP, an investment vehicle associated with the defendant, Geoffrey Robert Egan. He alleged that statements about development funding and a 6.5 per cent return were misrepresentations which induced his investment.

The defendant denied any misrepresentation and disputed personal responsibility for the statements. He also relied on a non-reliance provision in the LLP membership agreement. The court determined whether the statements carried the meanings alleged, whether there had been material reliance, and, if necessary, whether the defendant acted personally and whether the contractual clause excluded liability.

1. Claim dismissed. The court found that neither alleged representation was made in the form relied upon and, alternatively, that there was no material reliance.
2. Pre-contract communications had to be considered together and objectively, in a common-sense and realistic way. The one-page summary was an outline proposal and said nothing about security over the development sites. Its statement that the developers would arrange their own bank finance, with balancing profit payments on completion, did not represent that the LLP would provide no third-party security. Even if the claimant had received the broader three-page report, its wording did not carry that meaning.
3. The statement that interest would be rolled up and deducted from the price at 6.5 per cent per annum did not guarantee a return. The rate was a nominal or deemed rate used to reduce the developer’s remuneration. Any return depended on successful completion of the developments and the developer’s ability to perform.
4. The claimant had received the detailed funding agreement. His evidence showed that he relied on the defendant to have negotiated suitable documentation, rather than materially relying on the outline statements. The court therefore rejected the misrepresentation claim.
5. Had it been necessary to decide capacity, the defendant would have been held personally responsible. Applying the approach in Williams v Natural Life Health Food Ltd [1998] 1 WLR 830, the court considered that the objective assumption of responsibility, reliance on that assumption, and reasonable reliance were established.
6. Had it been necessary to decide the contractual issue, clause 9.4 was confined to representations concerning the LLP membership agreement and its constitution and operation. It did not cover representations about a separate development funding agreement. The court expressed no view on contractual estoppel or the application of the Unfair Contract Terms Act 1977, those issues being unnecessary to the result.