PCP Capital Partners LLP & Anor v Barclays Bank PLC

A fraudulent misrepresentation claim may succeed on liability yet fail for want of causation and loss. A representation that investors will receive the “same deal” is ordinarily understood commercially to include the whole package of benefits provided in return for subscribing, whether recorded in the subscription instruments or separate agreements.

For sham transactions, the parties must share an intention that the apparent rights and obligations should not operate as such. Artificiality, concealment, an ulterior motive or poor commercial value do not alone establish a sham.

Hypothetical conduct by a defendant is determined on the balance of probabilities. Loss of chance principles apply to contingencies dependent on third parties.

PCP claimed that Barclays made fraudulent representations during the 2008 capital raising. The alleged representations concerned parity with Qatar’s investment terms, the nature of a £66m fee, and whether Barclays had lent money to facilitate Qatar’s investment.

The claim alleged that the representations induced PCP, through special purpose vehicles, to subscribe for Barclays instruments. PCP sought damages based on the additional fees, time, financing and remuneration it said it would have obtained had the truth been disclosed.

The court determined liability, causation, loss of chance, financing availability and quantum.

1. Liability. The court found that Barclays, through Mr Jenkins, made the same-deal representations on 23 and 24 October 2008 and intended PCP to rely on them. Their objective meaning covered the whole package of benefits provided in return for the subscription, not merely the internal terms of the instruments.
2. ASA 2 was not a sham. Although artificial, commercially connected to the subscription and substantially unsupported by evidence of services, the parties intended Barclays to pay the £280m and intended the agreement to operate. The £280m nevertheless formed part of Qatar’s consideration for subscribing and therefore rendered the same-deal representations false.
3. The £66m fee was also part of the price paid to Qatar for its subscription, rather than a genuine fee for arranging other subscriptions. It therefore made the same-deal representations false. The June Representation was made and was knowingly false.
4. The Investor Representation was confined to Barclays’ intention not to invest its own money or knowingly facilitate unlawful financial assistance. PCP failed to prove that the loan was used, or intended by Barclays to be used, to fund Qatar’s subscription. The Investor Representation was therefore not false.
5. The court applied the balance of probabilities to hypothetical conduct by Barclays. Loss of chance principles applied to contingencies dependent on third parties. The court accepted that PCP would have discovered the true Qatari deal and would have obtained an agreement for additional value of about £615m, but found no real and substantial chance of obtaining sufficient non-recourse debt finance or filling the resulting funding shortfall.
6. PCP therefore had no real chance of retaining control of the investment or obtaining the claimed remuneration. The claim failed on causation and loss. The court nevertheless assessed the hypothetical quantum at £500m before applying the appropriate credit for the £30m fee received.