VICTOR PISANTE v GEORGE LOGOTHETIS

A statement made to induce investment may constitute deceit where it conveys a materially false fact and the representor knows it to be false, lacks belief in its truth, or is reckless as to its truth. Statements about a proposed transaction can be representations of present fact where they describe the terms or effect of the transaction being negotiated. A contractual non-reliance clause may defeat non-fraudulent misrepresentation claims if its language clearly covers all information or representations relied upon in deciding to contract. The clause does not shield fraud. Relief for deceit may include rescission, monetary relief consequent upon rescission, and damages, subject to avoiding double recovery.

Victor Pisante invested in shipping ventures associated with George Logothetis through corporate vehicles. Swindon Holdings & Finance Ltd later entered into an equity tracker fee agreement with Libra Holdings Ltd concerning a joint venture between Lomar and KKR.

The claimants alleged that Mr Logothetis had represented that Lomar would contribute approximately US$40 million in shareholder equity, comprising cash and ships, and that Mr Pisante’s investment would be treated equally. They alleged that the representations induced Swindon to enter into the agreement. The defendants denied deceit and relied on a contractual non-reliance clause for the non-fraudulent misrepresentation claims. The central issues were whether actionable representations had been made, whether they were fraudulent and causative, and what relief followed.

1. Fraudulent misrepresentation. The court applied the orthodox principles of deceit. A representation must be false, intended to induce reliance, relied upon, and made knowingly, without belief in its truth, or recklessly as to truth or falsity. The representor’s subjective understanding of the representation is relevant.
2. Representations about a proposed transaction. The statement that Lomar would contribute approximately US$40 million in equity by way of “cash and ships” described the proposed terms and effect of the KKR transaction and was therefore a representation of present fact, including Lomar’s present intention. In reality, Lomar contributed ships only, recorded as shareholder equity of approximately US$9.375 million, and received US$5 million in cash.
3. The statement was fraudulent. Mr Logothetis appreciated that he was representing that Lomar would contribute cash as well as ships and approximately US$40 million in shareholder equity. The representation induced Swindon to roll over US$6.25 million under ETFA 3. It did not induce the transfer of the K Ships or the restructuring of their ownership, which would have occurred in any event.
4. The alleged representation that the ICBC cash itself would be invested in the joint venture was not made as a distinct representation of fact. Nor was a separate implied representation of equal treatment established.
5. Non-reliance clause. Clause 11.2(a) of ETFA 3 clearly covered information and representations relied upon in deciding whether to enter the arrangements. It therefore defeated the claims for non-fraudulent misrepresentation and relief under section 2(1) of the Misrepresentation Act 1967. It did not affect the deceit claim.
6. Relief. ETFA 3 was rescinded. Swindon obtained judgment against Libra for US$6.25 million, plus equitable interest, and against Mr Logothetis for damages to be assessed, with US$6.25 million paid on account. The orders were to prevent double recovery. Further relief concerning ETFA 2 required additional consideration. Swindon also obtained judgment against Libra for €500,000 concerning the Piraeus Bank investment.

not stated in the judgment.