Candy Ventures SARL v Aaqua BV & Anor

Fraudulent misrepresentations inducing an investment were established on the balance of probabilities. The seriousness of fraud affects the cogency required of the evidence, but does not create a separate standard of proof. A representee may rely on a fraudulent misrepresentation even where reasonable diligence could have exposed it. Contractual entire-agreement, non-reliance and due-diligence provisions do not exclude liability for fraud without sufficiently clear wording, and fraud cannot ordinarily be neutralised by estoppel. Damages in deceit are assessed to restore the claimant to the position it would have occupied had the representation not been made. A defendant relying on failure to mitigate must plead and prove that case.

Candy Ventures SARL invested in Aaqua BV under three agreements involving the subscription for Aaqua shares and the transfer of Audioboom shares. It alleged that Robert Bonnier, Aaqua’s directing mind, falsely represented that Apple and LVMH were engaged in advanced negotiations and were committed, or conditionally committed, to invest in Aaqua.

The defendants were debarred from defending the claim after failing to comply with case-management orders. The trial proceeded on the evidence adduced by CVS, with the defendants permitted to make limited submissions on law and evidence. The issues were whether the representations were false, known to be false, intended to induce the transaction, relied on by CVS, and what damages followed.

1. Debarring order. The order prevented the defendants from advancing a factual case, adducing evidence or cross-examining witnesses. The court retained a narrow trial-management discretion to permit limited participation, but the claimant still had to prove its entitlement to relief. The sanction was compatible with Article 6: the defendants had opportunities to comply with the orders and seek relief from sanctions.
2. Fraud. The three representations concerning Apple and LVMH were false. Mr Bonnier knew they were false and made them to induce CVS to enter the agreements. The seriousness of fraud required particularly cogent evidence, assessed on the balance of probabilities, with careful attention to objective documents and overall probabilities. The court applied the rebuttable presumption that a person making a fraudulent representation intended the representee to act on it.
3. CVS relied on the representations. Reliance was not defeated by the availability of reasonable investigation, and the representations only needed to play a real and substantial part in inducing the transaction.
4. Contractual provisions and estoppel. The entire-agreement, due-diligence and non-reliance clauses did not exclude liability for fraudulent misrepresentation. An entire-agreement clause does not by itself alter the status of a statement as a misrepresentation. The proposed estoppel argument failed because the authority relied on concerned contractual terms correcting an earlier representation, not fraud.
5. Damages and mitigation. Damages in deceit were assessed by comparing the value of the Audioboom shares transferred with the value of the AAA shares received in consequence of the investment. The defendants failed to prove that an alleged third-party offer was genuine and therefore failed to establish any failure to mitigate.
6. The claim succeeded. CVS was awarded £4,623,919 plus interest.