Florestco Limited v The Hillview Group Limited & Ors

A fraud claim must be determined by reference to the pleaded case. The court will not infer dishonesty from unpleaded facts, absent exceptional circumstances. Fraud remains subject to the civil standard of proof, with inherent probabilities assessed as part of the evidential evaluation.

A disclaimer may prevent statements in an investment memorandum from constituting actionable representations where, objectively, sophisticated recipients were not intended or entitled to rely on them. A contractual term is implied only where necessary to give the contract business efficacy or because it is so obvious that it goes without saying. Unlawful means conspiracy requires proof of loss caused by unlawful acts pursuant to a combination.

Florestco invested £500,000 in a Guernsey property investment promoted and managed by companies in the Hillview group. The investment failed, and the property was sold without a return to third-party investors.

Florestco alleged fraudulent misrepresentation, breach of the share purchase agreement, unlawful means conspiracy and dishonest assistance. Its principal complaints concerned the basis of Hillview’s investment, undisclosed lending, inaccurate reporting and a payment made from the project company’s funds to discharge a group debt.

The court determined whether the representations were actionable and false, whether the contractual provisions were breached and causative of loss, whether an implied reporting term existed, and whether the conspiracy claim was supported by proof of loss.

1. Pleading and proof. The claim was determined on the parties’ statements of case. In a fraud claim the court would not permit proof of unpleaded primary facts or infer dishonesty from facts which had not been pleaded. Fraud remained subject to the balance of probabilities. The seriousness of an allegation affected the assessment of inherent probabilities and the cogency of evidence, not the standard of proof.
2. 2014 misrepresentation claim. The Loan Representation was made, but it was probably true. The contemporaneous internal records showed that Alfa invested equity in Crawley on the same basis as third-party investors, rather than lending the acquisition funds under the later Alfa Loan. The Investment Memorandum’s disclaimer also meant that its contents were not actionable representations on which sophisticated investors were intended or entitled to rely.
3. Contract. Clause 4.4.2 required Alfa to use its majority shareholding to prevent material deviations from the Investment Memorandum. The Pattern Payment was such a deviation and a breach, but Florestco proved no causative loss, so only nominal damages were available. Clause 4.4.3 required timely circulation of quarterly statements. It did not justify implying a term that the statements would be accurate and honest, because the contract worked without that term and Alfa was not responsible for checking the statements’ accuracy.
4. Later misrepresentation and conspiracy. The 2020 misrepresentation claim failed because Florestco did not plead or prove inducement. The conspiracy claim failed because loss is an essential element and no loss caused by the alleged unlawful acts was established. The court also found no sufficient basis for the necessary intention to injure.
5. Disposition. Judgment was entered for Florestco against Alfa for nominal damages of £1 for breach of contract. Otherwise, the claim was dismissed. A copy of the judgment was directed to be provided to the FCA.