Tactus Holdings Limited v Philip Mark Jordan & Ors
[2024] EWHC 399 (Comm)
Robert Lawrence & Anor v Jonathan Cowell & Ors
25 October 2023
[2023] EWHC 2644 (Ch)
High Court
Someone sold a business but lied about how much money it made. The buyer got their money back, and the seller lost. The buyer also tried to get extra money from the seller for bad management, but mostly lost that case, too, except for a few expenses.
Key Facts
- •Robert Lawrence sold 60% of his shares in Keyguard U.K. Limited to Armatus Risks Holdings Limited (owned by the defendants) for £315,000.
- •Armatus failed to pay the full purchase price.
- •Lawrence claimed the balance from the defendants as guarantors.
- •The defendants claimed the SPA was procured by fraudulent misrepresentations by Lawrence regarding Keyguard's financial position, specifically alleging 'ghosting' (falsely inflating revenue and profits).
- •Keyguard claimed damages from Cowell and Warren for breaches of their statutory duties as directors.
- •Keyguard was subsequently sold to Westminster Group for £18,000.
Legal Principles
A party cannot exclude liability for their own fraud in inducing a contract.
HIH Casualty Ltd v Chase Manhattan Bank [2003] UKHL 6
Fraud unravels all contracts and transactions.
Lazarus Estates Ltd v Beasley [1956] 1 QB 702
Entire agreement and non-reliance clauses are ineffective to exclude liability for fraudulent misrepresentation.
FoodCo LLP v Henry Boot Development Ltd [2010] EWHC 358 (Ch)
To establish fraudulent misrepresentation, the representee must prove a causal link between the misrepresentations and their decision to enter the contract.
Vald. Nielsen Holding A/S v Baldorino [2019] EWHC 1926 (Comm)
Directors owe a duty to act in what they honestly consider to be the best interests of the company.
Madoff Securities International Limited v Raven and Others [2013] EWHC 3147 (Comm)
Directors owe a duty to act for proper purposes.
section 171 of the 2006 Act
Directors owe a duty to declare an interest in a proposed transaction.
section 177 of the 2006 Act
Outcomes
Claim 1 (for the balance of the purchase price) dismissed.
The SPA was induced by fraudulent misrepresentations made by Lawrence, and the SPA was validly rescinded.
Most claims in Claim 2 (breaches of directorial duties) dismissed.
Keyguard failed to prove that the losses resulted from breaches of duty by Cowell and Warren. The evidence did not support the assertion that Cowell and Warren acted improperly in the management of Keyguard.
Cowell and Warren liable to repay £18,332.79 for car leases and £890.18 for Warren's expenses.
The car leases were for their personal benefit, not Keyguard's, and Warren's expenses were not justified.