NGM Sustainable Developments Ltd v Wallis & Ors

A statement of future intention may amount to a representation of present fact where it implies that the maker presently intends to perform it. Fraudulent misrepresentation must, however, be proved on the pleaded case. A claimant cannot reformulate the fraud during trial by relying on undisclosed or unpleaded terms allegedly withheld in negotiations. Hard bargaining and exploitation of unequal bargaining power are not, without more, actionable.

Where fraud is alleged by inference, the court must assess the contemporaneous evidence and the explanations advanced by the defendant. Partial rescission of an interdependent suite of agreements is unavailable where the transactions cannot be restored substantially to their original position. Loss-of-chance damages remain subject to proof, and the claimant must establish a real prospect of the lost benefit.

NGM Sustainable Developments Ltd claimed rescission and damages against Phillip Wallis and five corporate defendants. It alleged that the defendants fraudulently represented, when interim loan and security documents were executed on 15 January 2010, that they genuinely intended to provide long-term funding for the acquisition and development of a property at Surbiton.

The pleaded case was that the Side Letter was a sham and that the defendants never intended to negotiate or provide the proposed funding. During the trial, NGM also sought to rely on the alleged withholding of proposed equity participation and other terms. The court considered whether the pleaded fraudulent misrepresentation was established and, alternatively, whether rescission or damages would be available.

1. The claim was dismissed. The court rejected the allegation that the defendants had entered the interim arrangements without any genuine intention to negotiate long-term funding. The contemporaneous documents showed continuing interest in the project and later attempts to preserve NGM’s involvement.
2. A representation of intention concerns the maker’s present state of mind. A future statement may carry an implied representation that the maker is not aware of facts making performance impossible. The Side Letter was expressly subject to contract, non-contractual and provisional. It recorded only a broad intention to negotiate future arrangements and imposed no fixed limits on those negotiations.
3. NGM was bound by its pleaded fraud. The proposed case that equity participation and other terms had been deliberately withheld was materially different and was not open on the pleadings. The defendants were entitled to negotiate for equity, control and enhanced security. Their pressure and exploitation of NGM’s financial weakness did not itself constitute actionable conduct, particularly as duress and undue influence were not pleaded.
4. The alternative remedies would also fail. The documents formed an interdependent suite, so NGM could not rescind only selected security documents and retain the benefit of the advance. Restitutio in integrum was unavailable without repayment of the sums advanced and expenditure incurred. Delay and the defendants’ substantial expenditure were further obstacles.
5. Any damages claim was assessed as a loss of chance. NGM bore the legal burden of proving loss, even though the court could give it a fair wind in evaluating uncertainty. Its insolvency, lack of finance and absence of evidence of alternative funding meant that the chance of acquiring and profitably developing Surbiton was nil. Damages would therefore have been nil even if liability had been established.