Jinxin Inc v Aser Media PTE Limited & Ors.

A fraud claim should proceed beyond strike-out only where the pleaded primary facts could justify an inference that the defendant knew the representation was false or was recklessly indifferent to its truth. The court assumes pleaded facts to be true, but the facts must do more than remain equally consistent with innocent conduct. A generous approach to pleading may be appropriate where evidence is inaccessible, although it cannot replace adequate particulars. The significance of an unlawful business, a defendant’s senior or founding role, and general involvement in the business will not alone establish fraudulent knowledge. Summary judgment is ordinarily inappropriate where a properly pleaded fraud claim depends on disputed evidence and inferences, but may be granted where the allegation cannot be sustained in any circumstances.

Jinxin claimed in deceit and unlawful means conspiracy against several defendants arising from alleged fraudulent representations inducing its purchase of shares in the MPS Group under a share purchase agreement. The Second Defendant, MPS LLC, applied under CPR rule 3.4 to strike out the claims, alternatively for summary judgment under CPR rule 24.2.

The application concerned whether MPS LLC’s alleged knowledge, attributed through its majority shareholder Carlo Pozzali, was adequately pleaded. Jinxin relied on the alleged pervasive corruption underlying the Serie A and FIFA rights, Mr Pozzali’s role in the business, and several emails. A separate allegation concerned financial representations based on an email referring to materially reduced EBITDA forecasts.

1. Applicable pleading principles. Fraud must be distinctly alleged and supported by particulars of the primary facts relied upon to infer guilty knowledge. At the interlocutory stage, the pleaded facts are assumed to be true and the court does not determine whether the evidence will ultimately prove fraud.
2. The pleaded facts must be capable of justifying an inference of fraud. Where an innocent inference is also available, the court must compare the competing inferences. The fraud inference need not be the only possible inference, but the primary facts must tilt the balance sufficiently to justify the plea. A generous approach may be adopted where relevant evidence is unavailable, but it cannot cure inadequate particulars.
3. The importance of the Serie A and FIFA rights, the alleged pervasive nature of unlawful conduct, and Mr Pozzali’s pleaded roles as founder, shareholder and director of MPS Miami did not, without more, justify inferring that he knew how those rights had been acquired. The pleaded roles principally concerned selling rights in the Americas, and there was no pleaded involvement in their acquisition. The emails concerning rumours, due diligence and the Milan investigation likewise did not establish a proper basis for inferring knowledge of wrongdoing.
4. The email of 1 February 2016, however, provided a sufficient pleaded basis for inferring that Mr Pozzali knew, or was aware of the possible falsity of, the EBITDA representations. His explanation that the figures reflected only worst-case scenarios raised matters for trial.
5. Summary judgment requires no real prospect of success and no other compelling reason for trial. The court must avoid a mini-trial and should be cautious where fraud depends on disputed facts and inferences. The application was therefore inappropriate in respect of the EBITDA allegation.
6. MPS LLC’s application was allowed to the extent that the pleas concerning the Business Practices and Serie A Representations were struck out. It was dismissed in respect of the EBITDA Representations, including the alternative summary judgment application.