Factual and Procedural Background
The matters remaining for determination concern claims in the torts of deceit and conspiracy. The first to third claimants are successors in title to lenders under a Facility Agreement providing approximately USD 45 million to Company A, the first defendant. Company A was incorporated as a borrower and was a wholly-owned subsidiary of Company B, owned by Defendant and his two sons, Appellant and another Defendant, each holding 50% shares with Appellant as a director.
The lending was secured by guarantees including a personal guarantee by Defendant ("the Defendant Guarantee"). During negotiations, Defendant provided a Statement of Net Worth purportedly showing personal assets exceeding USD 46 million, which was later acknowledged as overstated. Company B and its subsidiaries are involved in ship recycling, and the Facility Agreement limited use of funds to financing permitted ship transactions, requiring compliance with conditions precedent including delivery of Approved Borrower Statements signed by the CFO of Company A.
From March 2019 to February 2020, Defendant gave false excuses for delays in repayment of funds, admitted by Defendant and Appellant in amended defence. Company A delivered Approved Borrower Statements signed electronically by Appellant, which falsely confirmed no defaults and that transactions were permitted.
The claimants allege that Defendant and Appellant knowingly made false and fraudulent representations regarding Defendant's assets, delay excuses, and the Approved Borrower Statements, intending to deceive the claimants. Defendant denies making or intending to deceive with the asset representations but admits making false delay representations. Appellant denies involvement or knowledge of falsity regarding the asset and borrower statements.
Procedurally, after defaults and appointment of liquidators to Company B, the claimants accelerated the facility and sought enforcement under the Defendant Guarantee. Worldwide freezing orders were granted against Defendant and Appellant. Company A was annulled and removed from the proceedings. Both Defendant and Appellant acted in person for much of the proceedings, with recent legal representation for Appellant. Trial occurred in March 2024, with claimants represented by counsel.
Legal Issues Presented
- Whether Defendant made fraudulent misrepresentations in the Statement of Net Worth.
- Whether Appellant is liable as a primary or accessory party to Defendant's fraudulent misrepresentations.
- Whether Defendant made fraudulent delay representations inducing claimants to continue lending.
- Whether Appellant made fraudulent Approved Borrower Statements by authorising their signature.
- Whether Defendant and Appellant conspired to injure claimants by unlawful means.
Arguments of the Parties
Claimants' Arguments
- Defendant knowingly made false representations about his personal assets in the Statement of Net Worth to induce lending.
- Defendant and Appellant made false delay representations to conceal defaults and induce continued lending.
- Appellant authorised his electronic signature on false Approved Borrower Statements, knowing their falsity or recklessly disregarding the truth.
- Appellant was an active participant and assisted Defendant in preparing false statements, making him liable as an accessory to the tort of deceit.
- Defendant and Appellant conspired to use unlawful means (deceit) to cause loss to the claimants.
Defendant's and Appellant's Arguments
- Defendant denies making or intending to deceive with the Asset Representations and challenges claimants' reliance and loss.
- Defendant admits making false Delay Representations but denies claimants suffered loss due to reliance.
- Appellant denies involvement in making the Asset Representations and claims his signature on Approved Borrower Statements was appended without his knowledge or authority.
- Appellant denies knowledge of falsity of the statements and disputes reliance, causation, and loss.
- Both deny conspiracy claims.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Libyan Investment Authority & others v King & others |
Liability for manifestly approving and adopting third-party fraudulent representations; accessory liability |
Applied to assess whether Appellant was liable as a primary tortfeasor by adopting Defendant's misrepresentations. |
| Erlson Precision Holdings Ltd v Hampson Industries Plc |
Attribution of dishonest state of mind for directors; knowledge of falsity without separate duty to correct |
Considered but distinguished; court held no general principle imposing personal liability on directors for silence alone. |
| Fish & Fish Ltd v Sea Shepherd UK |
Accessory liability requires common design and active participation in tortious acts |
Applied to establish conditions for accessory liability of Appellant as a knowing and active party to Defendant's deceit. |
| Lifestyle Equities CV v Ahmed |
Accessory liability elements restated: tort committed by another, assistance more than trivial, common design |
Applied to confirm accessory liability requires knowledge and common design; held Appellant liable as accessory. |
| FM Capital Partners Ltd v Marino |
Elements of unlawful means conspiracy: combination, intention to injure, use of unlawful means, loss caused |
Applied to find Defendant and Appellant conspired using deceit to cause loss to claimants. |
| OBG Ltd v Allan |
Intent to cause loss in unlawful means conspiracy can be inferred from inseparable gain and loss |
Applied to assess intention element of conspiracy; loss to claimants was inevitable consequence of borrowing. |
| Three Rivers DC v Bank of England (No 3) |
Requirement for particularity in pleading fraud; need for pleaded facts to justify inference of dishonesty |
Applied to evaluate adequacy of pleadings against Appellant; deficiencies noted but no prejudice found. |
Court's Reasoning and Analysis
The court carefully analysed the evidence and applied established principles of deceit, accessory liability, and conspiracy. It found that Defendant authorised and knowingly made false representations in the Statement of Net Worth, overstating his assets and including assets not personally owned. The court rejected Defendant's evidence as evasive and untruthful on key points, concluding he did not honestly believe the representations.
Regarding Appellant, the court found that although he denied involvement, the evidence established he actively participated in preparing the Statement of Net Worth, was aware of its falsity or recklessly disregarded the truth, and knowingly allowed his electronic signature on false Approved Borrower Statements. The court rejected Appellant's claims of ignorance as untruthful and held him liable as an accessory to Defendant's deceit on the basis of common design and active assistance.
The court accepted that Defendant admitted making false Delay Representations and intended reliance thereon, but found that claimants' loss should be measured from a later date when patience would have been exhausted absent the false excuses.
Concerning conspiracy, the court found sufficient combination, concerted action, use of unlawful means, loss, and intention to injure (or at least to obtain funds by deceit causing loss) by Defendant and Appellant.
The court considered the adequacy of pleadings against Appellant, noting some deficiencies in particularity but found no prejudice affecting trial fairness, permitting the wider accessory liability case to proceed.
Holding and Implications
The court entered judgment in favour of the claimants against both Defendant and Appellant on the claims of deceit concerning the Asset Representations and Delay Representations (Defendant), the Asset Representations and Approved Borrower Statements (Appellant), and the tort of unlawful means conspiracy against both.
The judgment invites parties to agree or submit further submissions on the precise damages to be awarded. The decision directly affects the parties by holding Defendant and Appellant liable for substantial losses due to fraudulent misrepresentations and conspiracy, but does not establish new legal precedent beyond the application of existing principles.