Summary

A court had erred in granting summary judgment on a former shareholder's claim for fraudulent misrepresentation in the valuation and sale of his shares, as it was open to him to rely upon post-sale transactions to infer that at some earlier point in time, the other shareholders had planned those transactions and therefore had misled the expert valuer.

Facts

The claimant appealed against an order striking out and summarily dismissing his claim against the defendant company and its director-shareholders for breach of contract, misrepresentation and conspiracy.

The claimant was a shareholder of the company, which provided travel insurance services to a trade association. The agreement with the trade association provided that the company would be entitled to the entire revenues from the insurance services provided. The trade association received commission payments from suppliers on the business they transacted. In 2005, in a compromise agreement with the director-shareholders, the claimant agreed to sell his shares back to the company. Under the compromise agreement, the parties had to supply an expert valuer, who was to determine the share purchase price, with "comprehensive, accurate and current financial information" for the company. In 2006, the director-shareholders confirmed to the valuer that the commission belonged to the trade association and there was no real possibility of it being paid to the company. The claimant applied for a determination of the construction of the agreement but the court held that it was precluded from a determination by the agreement for expert valuation. In April 2007, the valuer determined the share price and the sale was completed. From July 2007 to November 2007, the trade association paid the company sufficient income to declare a profit of £1.96 million on a turnover of £740,000. The claimant claimed breach of the compromise agreement, misrepresentation and conspiracy to injure in respect of the company's entitlement to commission which he argued had compromised the share valuation. The company and director-shareholders successfully applied for strike out, alternatively, summary judgment on the claim with the court finding that the claims were not properly pleaded and the claimant could not rely on the 2007 payments to demonstrate misrepresentation in 2005-2006. The issues were whether the court had erred in (i) striking out the claim under CPR 3.4(2)(a); (ii) giving summary judgment against the claimant.

Held

HELD: (1) The conspiracy claim was not satisfactorily pleaded as it was too broad and it had been properly struck out. The breach of contract claim was, however, sufficiently pleaded. It was clear that the claimant asserted that on the true construction of the agreement, the claimant was entitled to commission payments and therefore the omission of that entitlement from the prepared accounts was a failure to supply comprehensive, accurate and current financial information under the terms of the compromise agreement. If the claimant proved that construction and that the valuation would have been higher had the valuer known the true position, he would succeed. In addition, if the claimant proved the facts he had pleaded for the misrepresentation claim he had reasonable grounds for bringing the claim. Whilst the representations about commission were made to the independent valuer, who principally relied upon them as opposed to the claimant, it was not beyond reasonable argument that if she was fraudulently misled, a liability to the claimant would have arisen. Further, it was not incapable of serious argument that the representations were also directed to the claimant and intended to influence his acceptance of the valuation. Accordingly, the case was not suitable for summary disposal under CPR 3.4(2)(a) (see paras 19-24 of judgment). (2) Although the allegation of breach of contract had a real prospect of success, a prior court had determined that the construction of the agreement was a matter within the valuation and was not therefore justiciable by the court. The claimant did not appeal that decision and was not entitled to raise the construction issue for the purpose of a breach of contract claim connected with the valuation. Accordingly, summary judgment against the claimant on breach of contract was appropriate. A case of fraudulent misrepresentation was bound to be heavily dependent upon inferences from primary fact. The fact that an event happened post-sale might properly found the inference that at some earlier point in time, the party intended it to happen. The period of time between the occurrence of the event and the possible planning of the event went to the potency of the inference. In the instant case, the statements about income were made up to April 2007 and the payments followed from July 2007. That was not so long a period that drawing an inference was fanciful. It was inappropriate to summarily dispose of the misrepresentation claim which ought to proceed to trial (paras 41-43).

Appeal allowed in part