Decisive Capital Management SA v Les Geonnais Limited & Ors

A representation that a refinancing is a “done deal”, or that enforcement of a guarantee presents little or no risk, will ordinarily be a prediction, opinion or statement of present belief about future events. It is not actionable as a misrepresentation merely because the prediction proves wrong.

An opinion may support a misrepresentation claim where it carries an implied representation that it has a reasonable basis. That implication requires a material imbalance of knowledge between the parties. A representation may continue until the transaction is completed, abandoned or ceases to operate, but material changes to the transaction and known changes in risk prevent reliance on the original representation.

The claimant had advanced loans to two corporate borrowers and obtained personal guarantees from the third defendant. The borrowers defaulted, and the claimant pursued the guarantor after obtaining judgment against the borrowers.

The guarantor alleged that he had entered both guarantees following representations that the refinancing was certain or low risk, that the guarantees would not be enforced, and that funding was available. He relied on the Misrepresentation Act 1967 and common-law misrepresentation. The central issues were whether the alleged representations were made, whether they were actionable statements of fact, whether they had a reasonable basis, and whether they induced the guarantees.

1. The claim succeeded. The guarantees were valid and enforceable obligations. The guarantor was liable to honour them because the borrowers had not repaid the amended loan.
2. The court applied the agreed elements of misrepresentation: a statement of fact by the defendant, falsity, reasonable reliance, and actual reliance in entering the relevant guarantee.
3. The alleged “done deal”, “no risk” and “low risk” representations were predictions, opinions or statements of present belief about future events. They were not actionable merely because the anticipated refinancing failed. A statement of intention may in principle be actionable if the stated intention is not genuinely held, or if an unqualified statement fails negligently to disclose a contemplated change of intention.
4. An opinion may imply that it has a reasonable basis where there is an imbalance of knowledge. That requirement was not satisfied. The guarantor knew the relevant conditions precedent, the uncertainties concerning valuation and funding, and the difficulties affecting the proposed refinancing. The low-risk representation therefore had a reasonable basis and was not independently actionable.
5. The court found that the low-risk representation had been made and relied upon in entering the original guarantee. The separate funding statement concerning Yunak was not relied upon independently. The court rejected the alleged no-risk, done-deal and mere-formality representations.
6. The original representations were not continuing representations in relation to the amended guarantee. By July, the proposed transaction had materially changed: the original proposed lender had withdrawn, the refinancing was smaller and shorter-term, and alternative security was being considered. The guarantor knew of those changes and could not reasonably rely on the March position. No actionable July representation was made.