Vegesentials Limited & Anor v The Shanghai Commercial & Savings Bank Limited

In a deceit claim, the applicable law under Article 4 of the Rome II Regulation is determined by the place where the damage occurs, unless the tort is manifestly more closely connected with another country. A claimant may rely on a fraudulent representation despite suspicions about its truth, provided the representation induced the relevant acts. Causation is assessed factually and, where appropriate, by asking whether there is a sufficient causal connection in common sense terms. Loss dependent on a third party requires a real and substantial, rather than speculative, chance of the benefit being obtained. Subsequent conduct breaks the causal chain only where it is overwhelming. Damages for lost profits may be assessed broadly where precise quantification is inherently impossible.

The claimants sought damages from a Taiwanese bank for fraudulent representations in a bank letter stating that prospective investors had £20 million available for investment in a new beverage business. The bank conceded that its employee knowingly made the false representations, but disputed applicable law, authority, reliance, causation and quantum.

The court determined whether English law applied, whether the bank was vicariously liable, whether the claimants relied on the letter, whether the loss was caused by that reliance, and whether there was a real chance of alternative investment. It also assessed the resulting loss of profits and a potential sponsorship liability.

1. Applicable law. Under Article 4(1) of the Rome II Regulation, the relevant damage occurred in England. The fraud was not manifestly more closely connected with Taiwan under Article 4(3). English law therefore applied.
2. Vicarious liability. The employee lacked actual authority to sign and email the letter. Applying Armagas Ltd v Mundogas SA, the bank nevertheless held him out as having ostensible authority. His position as customer relations manager, and his use of the bank’s letterhead and official stamp, were sufficient. The bank was liable for the fraudulent misrepresentation.
3. Reliance. The claimant was not required to prove that it had no suspicions about the letter. Applying the principle identified in Hayward v Zurich Insurance Co plc, suspicion did not prevent inducement. On the evidence, the letter induced the claimant to enter the share purchase and sponsorship arrangements and to cease actively pursuing alternative funding.
4. Causation and loss of chance. The court adopted a common-sense inquiry into whether there was a sufficient causal connection between the letter and the claimed losses. The letter was the substantial cause of the loss. Applying 4 Eng Limited v Roger Harper, the claimant showed a real, non-speculative chance that Alpha Imtiyaz would have invested. That chance was assessed at 20 per cent. The claimant’s later decisions did not break the chain because they were consequences of reliance; an intervening cause would have had to be overwhelming.
5. Quantum. The court assessed the complex financial evidence using the broad-axe approach described in One Step (Support) Ltd v Morris-Garner. It accepted some, but not all, of the experts’ assumptions and awarded damages to be calculated and then reduced to reflect the 20 per cent chance. An indemnity for a potential sponsorship claim was appropriate in principle. The parties were invited to agree the consequential order and any remaining figures.