Nigel Mather & Ors v Lakbir Basran & Ors

A fraudulent misrepresentation claim succeeds where a defendant knowingly or recklessly makes a false representation of present fact, intending it to influence an investment, and the claimant in fact relies on it. The claimant need not prove that the representation was the sole cause of the transaction, or that reliance was reasonable. It is no defence that the claimant could have discovered the truth by ordinary care, where there was no reason to investigate. A de facto or shadow relationship does not cure a false representation that a person has been validly appointed a statutory director. On medical adjournments, the court must balance participation and fairness against proportionality, expedition and the interests of other parties. Medical evidence should address the applicant’s ability to participate remotely.

The claimants invested in Yagna Limited after Mr Rattan stated in an email that he had allowed their trusted associate, Mr Basran, to become a company director. Mr Basran was not formally appointed. The claimants alleged fraudulent misrepresentation and sought recovery of their investments. Mr Rattan denied sending the email and relied on limitation, causation, the absence of personal benefit and the possibility that Mr Basran acted as a de facto or shadow director.

During the trial Mr Rattan, who appeared in person, sought an adjournment on medical grounds because of Bell’s palsy. The court also had to determine whether the claims of the individual claimants were induced by the representation and whether discovery of the fraud could reasonably have occurred earlier.

1. Adjournment. The application to adjourn the trial on medical grounds was refused. The decision was a case-management decision governed by the overriding objective in CPR 1.1. Relevant considerations included equality of arms, effective participation, the ability to give evidence, proportionality, expedition, timing, previous conduct and the interests of the other parties. Medical evidence should identify the clinician, the condition, the specific features preventing participation, the ability to participate remotely, and the prognosis. The medical certificate did not address remote participation or explain why Mr Rattan could not listen, cross-examine and make submissions. Remote participation was available and was subsequently used.
2. Representation and fraud. The 5 December 2012 email was sent by Mr Rattan. Its natural meaning was that he had validly appointed Mr Basran as a statutory director. That statement was false and Mr Rattan knew it was false, alternatively was reckless as to its truth. The representation was intended to induce investment.
3. Reliance. Mr and Mrs Mather relied on the representation when investing £1 million. It was immaterial that Mr Basran might have acted as a de facto or shadow director, or that the loss might have been the same had he been formally appointed. Mr Rattan had represented a formal appointment and had not corrected the statement. The claimants were entitled to take him at his word and had no duty to search Companies House.
4. Limitation. Under section 32(1) of the Limitation Act 1980, the claimants could not with reasonable diligence have discovered the fraudulent nature of the representation before September 2015. The possibility of discovering the absence of a formal appointment by searching Companies House did not establish earlier discoverability where there was no reason to investigate.
5. Other claimants and disposal. Mr Ledigo and Mr Cleary invested before the email and did not rely on it or the draft shareholders agreements. The evidence did not establish that Mr Rattan was a knowing and active party to a fraudulent scheme involving them. Their claims were dismissed. Judgment was entered for Mr and Mrs Mather for £1 million, with interest at 2.5% per annum from the dates of investment until judgment. Mr Rattan was refused permission to appeal. He was allowed 28 days for payment.

First instance judgment. No earlier appellate decision is stated in the judgment.