Summary

A claimant was entitled to rescission of an agreement to invest in a project to buy land in Cambodia because he had been induced to enter into the agreement by fraudulent misrepresentations including representations that other investors had contributed funds and that there was a binding agreement to sell the land to a property developer at a profit.

Facts

The claimant (B) alleged that the defendant (D) had induced him to enter into an agreement by fraudulent misrepresentations and sought rescission of the agreement.

B said that in June 2008, D had told him that he had gathered a group of investors to purchase land in Cambodia for US $14 million, that he himself had invested $1 million and that they needed further investment because one investor had dropped out. B indicated that D claimed that a French hotel chain had given a non-refundable deposit to buy the land for some $21 million and that it was locked in. He also claimed that B indicated that the sale and purchase were to be back-to-back. Because foreigners were not permitted to hold land in Cambodia, a Cambodian national (N) was to implement the purchase. In July 2008, D went to Cambodia and authorised N to sign the purchase contract, using B's money to make a payment against the purchase price. When he returned to the United Kingdom, he obtained a further investment of $750,000 from B, claiming that the group was still short of $3 million. Although other investors later became involved, at that point the only funds D had received were those paid by B and $506,816 from himself. In February 2009, D was alerted to the possibility of fraud by N. He flew to Cambodia and went to the police. N was arrested and, in due course, convicted. However, in March and May 2009, D emailed the investors, giving other reasons for the delay in completion. B asked to be bought out of the group. Between August 2009 and March 2011, B asked on several occasions to see the banking trail, company documents, title deeds for the land purchased and various pieces of correspondence, but none were provided. The issues were whether (i) D had fraudulently misrepresented to B that subject to the shortfall leading to B's investment, he had investors to provide some $14 million; a French hotel chain had made a deposit of 20 per cent and was locked in; the sale and purchase would be back-to-back; the purchase moneys were needed urgently to avoid the deposit paid by the purchasers being forfeited; and full planning permission had been granted; (ii) B was entitled to rescission of the contract.

Held

(1) D had given a false picture that B was being brought in to plug a gap. It did not appear that any investors had dropped out, or that D had had contributors totalling $14 million at any time. Nor had D invested $1 million. B had been wrongly told that a hotel chain had agreed to buy the land and that it was locked in because a deposit of 20 per cent had been paid. D had represented that the deal was a back-to-back deal, but there was no way that it was going to be. The potential purchaser had not paid a deposit or entered a memorandum of understanding and was not about to. The investors would be buying without any kind of certainty as to a purchaser. D had told B that the purchase moneys were needed urgently, or the deposit paid by the purchasers would be forfeited in order to provide a sense of urgency. In fact, no deposit had been paid. It was likely that D had not referred to full planning permission. However, he had given and had intended to give the impression to B that nothing further was required with regard to planning permission. Full planning permission was a hurdle that the investors would have to jump and knowledge of that would have discouraged B. When D returned from Cambodia in July 2008, he did not tell B that a contract had been signed and that B's money had been paid to N against the price. B thought that his money was safe in D's bank account and D intentionally gave B a false picture. At that point, D had only received money from B and himself. It was not until August or September that he tried to find more investment. Overall, D materially misrepresented the investments which he was inviting B to make. He did so intentionally with the aim of making the investments seem safe when they were not. Those misrepresentations induced B to pay his money (see paras 57-66, 68-71 of judgment). (2) B had not rescinded the agreements until his amended particulars of claim were filed. Lapse of time was capable of indicating affirmation, but B had not discovered the truth until the trial. The claim for rescission of the agreement therefore succeeded and B was entitled to the return of the sums he had paid (paras 73-74).

Judgment for claimant