Commercial property – Loans – Valuation report alleging false and material representations – Claimant acting in reliance upon statements to its detriment – Claimant seeking summary judgment – Whether claimant’s own carelessness material – Whether defendants vicariously liable for actions of employees – Whether employees being careless victims of fraud – Whether case appropriate for summary judgment – Application granted
The claimant brought proceedings seeking £27m in damages for deceit against the defendants in relation to three valuation reports of commercial properties. The claimant alleged that the statements were false and were either known to be untrue or were made with recklessness as to their truth. It was further contended that the claimant was intended to act on those statements to its detriment, which it did, by making extensive loans on the properties involved, and thereby suffering loss.
The claimant alleged that the defendants had issued false valuations based on wholly inadequate inspections and had given assurances on the condition and/or refurbishment of the properties. It also accused tem of stating that there were existing or potential tenancies that had the benefit of full repairing and insuring leases. In fact, the purported tenants knew nothing about the alleged fraudulent leases. One of the defendants’ directors (M), who assisted in providing the valuations upon which the loans were based, was on the advice of his lawyer, unavailable as a witness for the defence.
The claimant applied for summary judgment, pursuant to CPR 24.2. The defendants accepted that a fraud had been practised on the claimant (although it had been facilitated, at least in part, by the carelessness of the claimant’s own employees and professional advisers). However, they argued that issues remained as to whether: (i) those for whose acts the defendants were liable (M and his subordinate) were parties to the frauds, as distinct from being careless victims of the frauds practised on the claimant; and (ii) the granting of summary judgment was appropriate where serious allegations of deceit were made, and the person alleged to have made the fraudulent representations (M) was unwilling to assist the defence. The defendants argued that if they were given an opportunity to defend the action, M might be available to give evidence at trial. Accordingly, the case should go to trial for a proper investigation of the facts.
Held: The application was granted.
Summary judgment in cases where fraud or deceit was alleged had to be considered in the light of what would be in the best interests of justice. It was no defence to a claim in deceit that a claimant could have discovered the truth but had failed to do so by reason of its carelessness.
The court was satisfied, on the issue of whether the defendants were a vicarious party to the inflated valuations based on fictitious leases, that M had made the statements in question, being reckless as to whether or not they were true. Although the court could not be certain that he had acted dishonestly, the law did not require certainty. The false and material representations upon which the claimant had relied, and had suffered significant loss as a consequence, were made at least recklessly in terms of the truth.
The fact that important witnesses were not available to assist a defendant was not a reason for relieving that defendant from the obligation to defend itself against a legitimate civil claim. It was not a reason to give leave to defend. A defendant’s hope or even expectation that something favourable might happen in the future was not a reason for refusing to enter summary judgment.
On the material laid before the court, and taking all the factors in to account, it was satisfied that the claimant had proved its action in deceit and there was nothing to gain by allowing the case to proceed further.
Justin Fenwick QC and Ben Hubble (instructed by Mayer, Brown, Rowe & Mawe LLP) appeared for the claimant; Roger Stewart QC and Ben Patten (instructed by Berrymans Lace Mawer) appeared for the defendants.
Eileen O’Grady, barrister
