Peekay Intermark Ltd. & Anor v Australia and New Zealand Banking Group Ltd.

Factual and Procedural Background

This appeal concerns a judgment given by a Deputy Judge of the Commercial Court in favour of the first claimant, Company A, against the defendant, Company B, on a claim for damages for misrepresentation under section 2(1) of the Misrepresentation Act 1967.

Company A is incorporated in the Isle of Man with branches in the United Arab Emirates and trades in various investment instruments. Investment decisions were made by one of its directors, an experienced investor of substantial means. Company B is the ultimate parent of a banking group, operating an investment banking division in London and a private banking business including a branch in Dubai.

The dispute arose from an investment made by Company A in a financial product linked to Russian government bonds known as GKOs, which were short-term, non-interest-bearing bonds denominated in roubles. The product was structured as a US dollar deposit with repayment linked to the performance of a GKO, with currency risk hedged by Company B.

Company A was introduced to the product by a regional manager of Company B’s private banking branch in Dubai, who described the investment as giving beneficial interest in the GKO with a US dollar hedge. Company A agreed to invest US$250,000 but did not receive or review detailed terms before instructing the investment. The final terms and conditions ("FTCs") and a Risk Disclosure Statement were sent to Company A, which signed and returned them, but the FTCs described a structured deposit giving no proprietary interest in the GKO and no control over liquidation in the event of default.

When the Russian government defaulted on its debt in 1998, the investment became virtually worthless, and Company A recovered only a small fraction of its investment. Company A claimed damages for misrepresentation, alleging it was induced to invest by false statements that it would acquire an interest in the GKO itself.

Legal Issues Presented

1. Whether the regional manager of Company B made a misrepresentation about the nature of the investment product.
2. Whether Company A was induced by any such misrepresentation to enter into the contract.
3. Whether the detailed terms and conditions and Risk Disclosure Statement, signed by Company A, corrected any earlier misrepresentation and precluded reliance on it.
4. Whether Company A’s signature on the Risk Disclosure Statement estopped it from claiming it was induced by misrepresentation.

Arguments of the Parties

Appellant's Arguments (Company B)

• The regional manager did not make a misrepresentation as to the nature of the investment product.
• Any earlier misrepresentation was corrected by the terms of the FTCs and Risk Disclosure Statement, which Company A must be taken to have known by signing.
• Company A, as an experienced investor, was under a duty to read the FTCs and Risk Disclosure Statement and cannot rely on earlier informal descriptions.
• Company A’s signature on the Risk Disclosure Statement constitutes a contractual estoppel preventing it from denying understanding of the investment’s nature.

Respondent's Arguments (Company A)

• The regional manager misrepresented the investment as giving a proprietary interest in the GKO, which induced Company A to invest.
• Company A relied on the informal descriptions and did not understand the FTCs and Risk Disclosure Statement fully because they were not explained.
• Company A was induced by the misrepresentation despite signing the documents, as the misrepresentation was not effectively corrected by the contract terms.
• Company A was not estopped from claiming misrepresentation despite signing the Risk Disclosure Statement.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Redgrave v Hurd (1881) 20 Ch. D. 1	Misrepresentation inducement: A person induced by misrepresentation is not barred from relief simply because they had the means to discover the truth but failed to do so.	The court applied this principle to reject the argument that Company A’s failure to read the FTCs and Risk Disclosure Statement precluded reliance on the earlier misrepresentation.
Assicurazioni Generali v Arab Insurance Group [2002] EWCA Civ 1642	Correction of misrepresentation: A misrepresentation must be effectively corrected and brought to the claimant’s attention before contract formation to negate inducement.	The court considered whether the contractual documents effectively corrected the earlier misrepresentation; it found they did not because the claimant was not aware of the true position.
Flack v Pattinson [2002] EWCA Civ 1762 (unreported)	Inducement and reliance: Whether a claimant was induced by misrepresentation is a question of fact, and reliance can persist despite warnings.	The court recognized that inducement is a factual issue and supported the view that actual knowledge of the truth is required to negate inducement.
L'Estrange v Graucob [1934] 2 K.B. 394	Contractual terms binding on signatories: A person who signs a document is bound by its terms even if they have not read it.	The court acknowledged this principle but distinguished it from cases where misrepresentation vitiates consent.
Curtis v The Chemical Cleaning and Dyeing Co Ltd [1951] 1 K.B. 805	Misrepresentation can prevent enforcement of contract terms despite signature.	Referenced as an example where a misrepresentation prevented enforcement of an exemption clause despite signature.
Lloyds Bank Plc v Waterhouse [1993] 2 F.L.R. 97	Misrepresentation affecting guarantee contracts: A misrepresentation can prevent enforcement of contract terms.	Applied as precedent that misrepresentation can vitiate enforceability of signed contracts.
Colchester Borough Council v Smith [1991] Ch. 448	Contractual estoppel: Parties may be estopped from denying agreed facts forming the basis of the contract.	The court considered whether Company A was estopped by its signature on the Risk Disclosure Statement from denying understanding of the investment.
Phelps v White (1881) 7 L.R.Ir. 160	Damages for misrepresentation despite availability of documents disclosing truth.	The court found this case did not add significant assistance as the misrepresentation was regarded as fraudulent despite inadvertence.

Court's Reasoning and Analysis

The court began by assessing whether the regional manager had made a misrepresentation about the investment product. It found that she had given a "rough and ready" description implying that Company A would acquire a proprietary interest in the GKO, which was inaccurate since the product was a structured deposit derivative with no such interest or control.

The court noted that Company A’s director was an experienced investor and had received the Indicative Term Sheet describing the product as a note linked to GKO bonds rather than an interest in the bonds themselves. This should have alerted him to the derivative nature of the investment.

Company A received detailed FTCs and a Risk Disclosure Statement before contract formation, which clearly described the investment as a structured deposit with no proprietary interest in the GKO and detailed settlement procedures in case of default. Company A signed and returned these documents but did not read them carefully, relying instead on the earlier informal description.

The court emphasized the principle that a person who signs a contract is generally bound by its terms, even if they have not read them (L'Estrange v Graucob), but recognized that a contract can be rescinded if induced by misrepresentation.

Crucially, the court found that the inducement to enter into the contract was not the earlier misrepresentation but the assumption by Company A’s director that the signed documents reflected the earlier description. The court held that the director was not entitled to rely on the informal description once he had received the formal contractual documents.

Regarding the argument that Company A was estopped by its signature on the Risk Disclosure Statement from denying understanding of the investment, the court found this argument valid. By signing the statement confirming understanding and suitability of the transaction, Company A was contractually bound to the terms and could not claim misrepresentation based on a misunderstanding of the FTCs.

Thus, the court concluded that Company A was not induced to enter the contract by misrepresentation, but by its own failure to read and understand the formal contractual documents.

Holding and Implications

The court ALLOWED THE APPEAL, overturning the judgment in favour of Company A.

The direct effect is that Company A’s claim for damages for misrepresentation against Company B was dismissed. The court held that Company A was bound by the terms of the signed FTCs and Risk Disclosure Statement and could not rely on informal representations made prior to contract formation. No new precedent was established; the decision reaffirmed established principles regarding contractual estoppel and the obligations of parties to read and understand contractual documents before signing.