Category Archives: Tort of Deceit

Unfounded opposition to adjudicators invalidated decision

Where one party to an adjudication makes a fraudulent misrepresentation during the appointment process would that invalidate the process of appointment and make the appointment a nullity so that the adjudicator would not have had jurisdiction to act in the adjudication?

In the High Court case of Eurocom Ltd v Siemens Plc [2014] the application form sent to the Royal Institution of Chartered Surveyors (“RICS”) seeking the appointment of an adjudicator misrepresented to the RICS that a number of individuals had a conflict of interest.

Eurocom’s agent had admitted that he used the section of the application form allocated to name “adjudicators who would have a conflict of interest in this case” to refer to people without any conflicts of interest who he did not want to be appointed.

So there was a very strong prima facie case that the agent had made a clear misrepresentation and a deliberate and/or reckless false statement and that therefore he had made a fraudulent representation to the RICS as the adjudicator nominating body.

The High Court ruled that where a party applies to an adjudicator nominating body and makes a fraudulent representation then the fraud cancels the advantage which would otherwise have been got from the transaction by voiding the transaction completely.

The false statement had been material. It had been made during a process by which an adjudicator had to be nominated by an impartial adjudicator nominating body and, was improperly made to eliminate candidates based on them having a conflict of interest when actually they had none.

Where there had been a material fraudulent misrepresentation in the process of applying to an adjudication nominating body, the application for a nomination of an adjudicator would be invalid and it would be as if no application had been made.

It did not matter whether the RICS was deceived or not.

The fraudulent misrepresentation would have invalidated the process of appointment and made the actual adjudicator’s appointment a nullity so that the adjudicator would not have had jurisdiction to make the award Eurocom were now seeking to enforce through the courts.

So Siemens had an arguable defence to Eurocom’s claim. That claim must go to a full hearing and Eurocom were denied summary judgement on the claim to enforce the adjudicator’s award.

This case and it’s outcome is a clear warning to anyone who may be minded to use any parts of an application form for their own collateral purposes.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.

Property Deal: 4 out of 5 Alleged Misrepresentations Actionable

A recent decision underlines the importance of due diligence. If it sounds to good to be true it probably is.

In that case the past “unblemished” reputation of the “introducer” of the investment counted for little as the facts unfolded.

In Banwaitt v Dewji [2014] the claimant had lost a lot of money on a foreign property investment. He alleged at the trial that he had been victim of a number of non-disclosure and the following misrepresentations made at June meetings:

(1) that but for a narrow shortfall which Mr Banwaitt’s investment would fill, Dr Dewji had gathered investors to buy the land for $14m;

(2) that a French hotel chain had paid a 20% deposit to purchase for $21m and was locked in to the purchase;

(3) that the purchase and sale would be back-to-back;

(4) that the purchase monies were urgently needed, otherwise a deposit of $50,000 already paid in connection with the purchase would be forfeited; and

(5) that the land already had full planning permission

In making further payments the next month, Mr Banwaitt relied on the continuing effect of those uncorrected representations and a further representation from Dr Dewji’s that he still needed another $3m to complete the purchase.

The trial judge found that each of those representations had been made; was materially false when made and had induced Mr Banwaitt to put $1.75m into the Scheme. When the initial meetings occured, Dr Dewji had not assembled a syndicate of investors to buy the land for $14m (one of them had withdrawn); no hotel chain had put down a deposit of 20% of the $21m sale price or had even agreed to purchase the hotel land for that amount; so there was no back-to-back transaction in place; no deposit $50,000 had yet been paid on the main transaction; and no planning permission was in place for the development of the land.

The judge also said that it was unclear to what extent Mr Banwaitt relied on the information contained in a later e-mail. However that email did not correct the false representations already made to him verbally.

The only reservation the judge had about the allegations of misrepresentation concerned the second allegation of representation i.e a French hotel chain had paid a 20% deposit and was locked in. The judge thought Mr Banwaitt had misremembered the nationality of the hotel chain in question!

In relation to the July payments amounting to $750,000, the judge found that the gap in funding was much greater than the $2m/$3m he was told about. By that stage Dr Dewji had only received the initial $1m from Mr Banwaitt and put in $506,816 of his own. A further $3m was received from Jardines, another investor, in August.

The judge concluded by saying that Dr Dewji materially misrepresented the investments which he was inviting Mr Banwaitt to make intentionally with the aim of making the investments seem safe when they were far from safe. Those representations had induced Mr Banwaitt to pay over his moneys by reason of them. Had he known the truth in late June – the first payments, or in the latter part of July – the second payments, he would not have paid.

In summary the Court of Appeal upheld the trial judge as follows:

(1) $14m of investors

The judge had been entitled to find that Dr Dewji did not then (or at any time) have investors to the tune of $14m; that the funding gap had not been caused by people dropping out; and that Dr Dewji had not himself invested $1m in the Scheme.

(2) The hotel chain disposal

It had been open to the judge on the evidence to find that the payment of a deposit of 20% was discussed in June as having been paid prior to any purchase by the Scheme.

(3) Back-to-Back Deal

Dr Dewji had conceded in cross-examination that the availability of a back to back transaction depended upon their being planning permission for a development. Therefore he had misrepresented that the back to back transaction would be in place prior to the (completed) purchase

(4) The purchase moneys were needed urgently or the deposit paid by the purchasers would be forfeited.

The history of Dr Dewji’s cheque account made it improbable it would have had sufficient liquidity to meet the deposit cheque even if it had been written.

There had been sufficient reason for the trial judge to find it had never been paid.

(5) Full Planning Permission had been Granted

It was likely that what Dr Dewji said fell short of saying that there was full planning permission. But Mr Banwaitt had been deliberately given the impression that all that was required for the development of the land had been obtained. Whether or not it was objectively made clear by the 2nd July e-mail that no planning consent as such had yet been granted the other June misrepresentations, afforded sufficient to conclude that Mr Banwaitt may have a right to cancel and a right to damages for the tort of deceit.