Ras Al Khaimah Investment Authority v Azima

A fraudulent misrepresentation claim succeeds where a false statement materially contributes to the decision to contract, even if it is not the sole or predominant cause. Reliance may be established through an agent whose recommendation influences the decision-making principal.

A contractual provision may also constitute a representation where its wording confirms past facts or present intention and records that payment is made in reliance on it. Fraudulent misrepresentation damages generally restore the claimant to the position it would have occupied had the representation not been made.

Where evidence is alleged to have been unlawfully obtained, the court must distinguish admissibility from the merits. The relevant public interests must be balanced in the circumstances of the particular case.

RAKIA brought claims against Farhad Azima for fraudulent misrepresentation concerning the amount invested by HeavyLift in a failed training-academy joint venture, fraudulent misrepresentation concerning a good-faith warranty in a settlement agreement, and unlawful means conspiracy concerning payments connected with a proposed hotel sale. Azima countered that RAKIA’s claims relied on emails obtained by hacking his accounts and sought exclusion or strike-out of the claims.

The court determined whether the alleged investment and good-faith statements were actionable representations, whether they were false and relied upon, the resulting loss, whether the hotel payments formed an unlawful means conspiracy, and whether RAKIA was responsible for the hacking.

1. Investment misrepresentation. The communications concerning HeavyLift’s “investment”, “costs” and “amounts spent” represented the money actually expended, rather than the wider value of HeavyLift’s contribution. The representation was made on Azima’s behalf, notwithstanding that some communications were sent by HeavyLift’s associates. It was false, fraudulent and relied upon by RAKIA through Mr Buchanan’s recommendation to the Ruler.
2. Reliance need not be the sole or predominant cause of entry into the transaction. It is sufficient that the representation contributed to the decision to contract. The principal may rely through an agent who receives the representation and uses it in making a recommendation.
3. Fraudulent misrepresentation damages are assessed by restoring the claimant to the position it would have occupied absent the misrepresentation. RAKIA’s recoverable loss was assessed at $1,733,000 after giving credit for sums it accepted would have been payable.
4. Good-faith representation. Clause 3.2 of the Settlement Agreement was both a contractual warranty and a representation. The words “warrants and confirms”, together with the express reference to reliance, supported that conclusion. Four instances of wrongful conduct falsified the representation, including the sham Referral Agreement, the bribe, the undisclosed intended hotel interest if the agreement had been genuine, and the fraudulent investment representation. RAKIA relied on the representation and recovered $2.6 million.
5. Unlawful means conspiracy. The evidence supported the inference that Azima agreed with Dr Massaad, and probably Mr Al Sadeq, that illicit payments would be made and concealed. Azima was liable for $1,562,500.
6. Hacking and evidence. The evidence did not establish on the balance of probabilities that RAKIA was responsible for hacking Azima’s emails. The court therefore did not decide whether the evidence should be excluded or the proceedings struck out. Had that issue arisen, the court would have balanced the public interest in deciding the case on the best available evidence against the public interest in deterring unlawful evidence-gathering, considering all the circumstances.
7. Disposition. Azima was held liable for a total of $4,162,500. Directions were to be given for submissions on interest and costs.