Parish & Anor v The Danwood Group Ltd

Alleged misrepresentations must be construed objectively, having regard to the words used, the complete document, surrounding documents, the parties’ known circumstances and their relative knowledge. A statement about the future value of shares is ordinarily an opinion or forecast, rather than a representation of existing value. It is actionable only if the applicable requirements for misrepresentation or deceit are established, including dishonest belief where fraud is alleged. Where negotiations refer to a number of shares in substitution for a disputed cash balance, the surrounding circumstances may show that any monetary value was calculated by the recipient rather than represented by the offeror. No representation arises without sufficient evidence of an express or implied assertion.

The claimants sold the shares in Phoenix Office Supplies Ltd to the defendant. Part of the consideration involved an employee share scheme under which the first claimant was to receive C shares in the defendant’s holding company. The claimants alleged that representatives of the defendant represented that 58,000 C shares would be worth approximately £2 million, and later that 7,500 or 8,000 C shares represented £225,000 or £280,000 respectively.

The claims were brought in deceit and misrepresentation, alternatively under the Misrepresentation Act 1967. The central issues were whether the alleged statements were made, their objective meaning, whether they concerned present or future value, and whether any statement was dishonest, reckless or actionable.

1. Claim dismissed. The court found that none of the alleged representations was made in the actionable form pleaded.

2. The meaning of an alleged representation is assessed objectively. The court considers what a reasonable person with the relevant characteristics of the representee would have understood, having regard to the nature and content of the statement, its context, the characteristics of the maker and recipient, their relationship, and their relative knowledge. For a written statement, the whole document and surrounding documents must be considered, not an isolated sentence (paras [76], [191]-[192]).

3. The statements made by Mr Daniels were understood as an honestly held opinion about the future value of the C shares after four years. The use of future language and the four-year vesting period supported that construction. Mr Coles made no representation about value at his meeting with Mr Parish. His letter of 31 October 2008 was a forecast of the indicative value on final vesting in 2013, not a representation of present value. The opinions were honestly held, so there was no misrepresentation (paras [183]-[186], [187]-[203]).

4. The August and September 2009 negotiations concerned a disputed amount payable for Phoenix’s net assets. The evidence did not establish any express representation by Mr Ward about the value of the C shares. The references to monetary amounts resulted from calculations by the claimants. No implied representation arose because the parties were negotiating a disputed cash balance and the shares were not offered at any objectively identifiable value (paras [204]-[209]).

5. The court also indicated, obiter, that Mr Parish was not acting as Mr Ogden’s agent when the relevant representations were allegedly made. It expressed no concluded view on the contractual exclusion clauses or the application of section 3 of the Misrepresentation Act 1967 because the claim failed on the primary issue (paras [211]-[220]).