Atul Kumar Sinha v Nicholas John Taylor & Anor

A director may incur personal liability in deceit for making fraudulent representations to induce an investment, even where the director acted for the company and has no personal contractual liability. A claim in deceit requires a false representation, knowledge of its falsity or recklessness, an intention that the claimant rely on it, reliance and loss. A failure to serve a witness statement prevents the witness giving oral evidence unless the court grants permission and relief from sanctions. Where defendants do not give evidence on matters plainly within their knowledge, the court may draw adverse inferences as a matter of ordinary rationality. Damages may include the whole investment lost where the fraudulent representations induced the transaction.

The claimant invested £200,000 in NP Simulations UK Ltd after receiving financial projections, business information and assurances from the first and third defendants, who were directors. He alleged that the defendants falsely represented the company’s financial position and the intended use of his investment.

The defendants ceased engaging with the proceedings, served no witness statements and appeared at trial without representation. The court therefore considered the admissibility of their factual evidence, the inferences available from their failure to testify, and whether the claimant had established deceit, unlawful means conspiracy, contractual liability and loss.

1. Evidence and sanctions. Under CPR 32.10, a witness for whom no witness statement or summary has been served may not give oral evidence unless permitted by the court. That prohibition is a sanction within CPR 3.9, so an application requires relief from sanctions. Applying the approach in Denton v TH White Ltd [2014] EWCA Civ 906, any application would have been unlikely to succeed because the breach was serious and significant, unexplained and unfair to the claimant.
2. Adverse inferences. The decision whether to draw an adverse inference is a matter of ordinary rationality and common sense, having regard to the witness’s availability, the evidence reasonably expected from that witness, other evidence and the significance of the issue: Royal Mail Group Ltd v Efobi [2021] UKSC 33. The defendants’ absence as witnesses justified an inference that they could not provide a credible response to the allegations. The scarcity of company documents did not justify a further inference because those documents were no longer within their control.
3. Deceit. The defendants made materially false representations about the company’s solvency, prospects, debts and intended use of the investment. They knew the representations were false, intended the claimant to rely on them, and thereby induced his investment. Their failure to disclose the true financial position did not become immaterial merely because the claimant also wished to satisfy visa requirements.
4. Personal liability. The defendants were personally party to the Share Subscription Agreement. In any event, a director who signs an agreement for a company, knowing that it contains fraudulent representations and intending reliance on them, may be personally liable in deceit: Standard Chartered Bank v Pakistan National Shipping Corp [2002] UKHL 43.
5. Other causes of action and remedy. The claim in unlawful means conspiracy also succeeded, but caused no additional loss. The court made no necessary findings on the remaining causes of action, observing that negligent misstatement might fail for lack of personal assumption of responsibility, comparing Williams v Natural Life Foods [1998] 1 WLR 830. Rescission was abandoned. The defendants were jointly and severally liable for £200,000 damages.

The judgment was a first-instance decision in the High Court’s London Circuit Commercial Court. The claim had been issued in the Commercial Court and was later transferred following a costs and case management conference.