Aurora Developments Ltd & Ors v Delta Holdings Ltd & Ors

Summary judgment may be given on distinct issues in a fraud claim where the contemporaneous documents establish that the defence has no real prospect of success. The court may examine documentary and witness evidence in detail without conducting an impermissible mini-trial.

Fraudulent misrepresentation may arise from a partial statement which makes the disclosed facts misleading. The tort requires falsity, knowledge or recklessness, an intention to induce reliance, actual reliance and loss, although individual issues may be determined summarily.

A written and signed declaration may create a trust over land. A transaction is a sham where the parties intend to create rights different from those appearing in the documents and intend to give that false appearance to third parties.

The claimants alleged that the defendants fraudulently induced investment in two development sites at Scrubs Lane. The alleged frauds included misrepresentations about the sites’ availability and prices, diversion of funds intended for one site to finance the other, and the use of a purported bridging loan.

The claimants applied for summary judgment, or alternatively strike out, on liability for the misrepresentations, the validity of a deed under which one company held the North Site as nominee for another, and the characterisation of the purported loan as a sham. The central issue was whether the documentary evidence showed that the defences had any real prospect of success.

1. Summary judgment. The court applied CPR r. 3.4 and CPR r. 24.2. The relevant question was whether the defences had any real prospect of success. Detailed examination of documents and evidence did not prevent summary determination where the defences were wholly without merit. Summary judgment could determine particular issues even though the claimants’ losses required separate assessment.
2. Misrepresentations. The documents established that the defendants represented that the North Site remained available for purchase, that its price was substantially higher than the contractual price, that investors’ funds would be used for its purchase, and that the South Site price was unconnected with the North Site transaction. The representations were false, known to be false, intended to induce investment and relied upon. The court applied the principles stated in ECO3 Capital v Ludsin [2013] EWCA Civ 413, IFE Fund v Goldman Sachs [2007] 1 Lloyd’s Rep 264, Peek v Gurney (1873) LR 6 HL 377 and Geest v Fyffes [1999] 1 All ER (Comm) 672. A partial or fragmentary statement could be fraudulent where the omission made what was said misleading.
3. Deed and trust. The deed was valid and binding. Section 53(1) of the Law of Property Act 1925 required signed writing for the declaration of trust, and that requirement was satisfied. The nominee provisions in the North Site contract reinforced the same conclusion. Execution in counterparts, lack of consideration, alleged forgery, alleged rescission and the later email proposing a different structure did not provide realistic defences.
4. Sham loan. Applying Snook v London and West Riding Investments [1967] 2 QB 276 and Hitch v Stone [2001] STC 214, the purported IPS loan was a sham. IPS had neither received nor advanced funds and had no bank account. It was interposed to conceal the recycling of the North Site investors’ money and to impose fees and charges not found in the supposed underlying loan.
5. The claimants were entitled to summary judgment on the three identified issues, declarations that the deed was valid and binding and that the IPS loan was void and ineffective, dismissal of the Tribunal proceedings, and correction of the register by discharging the IPS charge.