Khambay & Anor v Nijhar (t/a Gravitas Consulting)

Claims in deceit, negligent misrepresentation and collateral contract require proof of the representation relied upon and, where relevant, inducement. A claimant may rely on a representation even if other factors also influenced the decision. However, the court must determine whether the representation materially influenced the claimant; reasonableness of reliance is not itself an additional requirement in deceit.

A person who provides pre-contractual professional advice may owe a duty of care where the relationship and circumstances objectively demonstrate an assumption of responsibility. An individual acting as the agent of a company remains personally liable for his own fraud. The claims were dismissed because the alleged representations were not proved and, in any event, the claimants would have proceeded without them.

The claimants purchased a development site through Clubhire Limited after discussions with the defendant, who later acted through Gravitas Consultancy Limited. They alleged that, before purchase, he represented that planning permission for mixed retail and residential development would be obtained quickly, that housing associations and supermarkets were interested, and that a minimum profit of £500,000 was guaranteed.

They also alleged that, in August 2007, the defendant represented that there was a reasonable prospect of a supermarket deal with the Co-Op and that substantial retail development remained possible, inducing a further payment to Gravitas. The central issues were whether the representations were made, whether they were deceitful or negligent, whether they induced the transactions and payment, and whether the defendant owed a personal duty or was personally liable for any deceit.

1. Primary claim. The allegations concerning housing associations and supermarkets were not made out. The evidence established, at most, general discussions about possible interest. The defendant expressed an expectation that mixed-use planning permission could be obtained, but did not represent that planning officers had assured him that permission was guaranteed or merely a formality.
2. The alleged £500,000 guarantee was not given. The discussions conveyed an optimistic target or expectation, shared by an experienced property professional, rather than a contractual guarantee. The alternative deceit claim based on an honestly held opinion also failed because the defendant held the opinion and had reasonable grounds for it. The negligent misrepresentation claim failed for the same reason.
3. Although the court considered that the defendant owed a pre-contractual duty of care, that conclusion was academic. The pleaded representations were not proved, and the claimants would have proceeded with the purchase and consultancy arrangements in any event. Reliance must be proved, but it need not be the sole cause; the court applied the principles discussed in Edgington v Fitzmaurice (1885) 29 Ch D 459.
4. As to the August 2007 payment, the defendant’s statement that the Co-Op was a real prospect amounted, if deceitfully made, to the first pleaded representation. The evidence did not establish the separate representation that substantial retail planning permission was possible. In any event, inducement was not proved, particularly because the claimant authorised payment despite advice that no further payment should be made.
5. The defendant acted as Gravitas’s agent and remained personally liable for his own torts. The principle of separate corporate personality did not prevent a company acting through an individual agent. The claims, including the additional claim, were dismissed.