Summary

An investor could not argue that he had been induced into entering a contract to make an investment by a misrepresentation as to the nature of that investment when the true nature of the transaction had been communicated to him in the final terms and conditions of the contract, which he had signed without actually reading.

Facts

The appellant bank (B) appealed against a decision giving judgment for the first respondent company (P) on P's claim for damages for misrepresentation. P was a company used as an investment vehicle by its shareholders, who included the second respondent (X). X regularly invested on P's behalf in emerging market instruments by liaising with one of B's regional managers (R). R had informed X of an opportunity to invest in bonds, known as GKOs, issued by the Russian government. X, on behalf of P, agreed to invest $250,000 in the product. R did not tell X that the product was a financial derivative in the form of a structured deposit linked to a GKO or that in the event of default by the Russian government investors would have no control over the manner in which the investment was liquidated. However, X was subsequently sent a document containing final terms and conditions, which explained the true nature of the investment. X did not read the terms and conditions, but signed and returned that document, along with a risk disclosure statement which he had signed. The Russian government subsequently defaulted and P lost virtually the whole of its investment. It was X's case that he had been led to believe that P would obtain an interest in the GKO itself, and that he would not have made the investment on P's behalf if he had realised that it would obtain no interest in the underlying GKO. The judge below had found that R had misrepresented the nature of the investment by giving X the impression that P would obtain a proprietary interest of some kind in a GKO and that he had been induced by that misrepresentation to make the investment. B submitted that whatever R had said to X about the investment in the course of earlier conversations, any misrepresentation was dispelled by the final terms and conditions of which X must have been taken to be aware, whether he had actually read them or not. Accordingly, P could not argue that it had been induced to enter into the contract by any representations made in previous conversations. B argued, in the alternative, that in the light of X's signature of the risk disclosure statement P was precluded as a matter of contract from contending that it did not understand the true nature of the investment.

Held

(1) The judge's conclusion that X had understood from what R had said that P would be acquiring an interest in a GKO was one with which the instant court would be very slow to interfere. However, X was an experienced investor, and the terms in which R had described the investment to him were not such as to enable him to obtain a very clear understanding of the precise nature of the investment. However, if X had read the final terms and conditions he would have been alerted to the fact that the documents related to an investment in a derivative, which was something fundamentally different from what he had been expecting. Whether a person had been induced by any misrepresentation to enter into a contract was a question of fact. It was open to the defendant to show that the claimant was aware of the true facts and therefore was not induced by the misrepresentation to act as he did. However, it was not enough to show that the claimant could have discovered the truth, but that he did in fact discover the truth, Redgrave v Hurd (1881-82) LR 20 Ch D 1, Assicurazioni Generali SpA v Arab Insurance Group (BSC) (2002) EWCA Civ 1642 , (2003) 1 WLR 577 and Spencer Flack v (1) Jeffrey Pattinson (2) Queensgate Industries Ltd (2002) EWCA Civ 1820 applied. However, in the instant case the true position appeared clearly on the face of the documents containing the terms of the contract. The judge's finding that X was induced to enter into the contract by the statements previously made by R could not be sustained. The only conclusion open to the judge was that X was induced to sign the documents not by what R had told him, but by his own assumption that the investment product to which they related corresponded to the description he had previously been given. (2) (Obiter) X had confirmed, by signing the risk disclosure statement, that he had understood it. It was not open to P to say that it did not understand the nature of the transaction described in the final terms and conditions, therefore it could not assert that it was induced to enter into the contract by a misunderstanding of the nature of the investment derived from what R had said about the product previously.

Appeal allowed.