In a telling example of commercial dishonesty leading to ruin, a businessman who failed to reveal his chequered history when raising funds for the purchase of a well-known football club is facing an £18 million damages bill.
A fund management company had agreed to advance millions of pounds through the pre-purchase of match season tickets at discounted prices which would then be sold on to the public at their face value. Following the businessman’s purchase of the troubled club for £1, the money was paid to the club.
The businessman was required to give a personal guarantee to underwrite the deal and had filled in a questionnaire which stated that he had never been disqualified as a director and that he had never been involved with a company which had been investigated or inspected by financial regulatory bodies.
That statement was untrue in that he had some years previously been accused by liquidators of misfeasance in his management of a company. That claim had been settled for £150,000. Two years later, the businessman had also been disqualified from acting as a director for seven years.
Less than a year after the deal went through, the club went into administration, followed by liquidation, and the company launched proceedings to recover its money. Summary judgment was subsequently entered against the businessman for over £18 million. He had admitted fraudulent misrepresentation but nevertheless appealed to the High Court on the basis that the matter should have been sent for a full trial.
His lawyers argued, amongst other things, that the questionnaire was unsigned and had been filled in in connection with a different financial transaction which was later modified. It was submitted that the company had not been induced to enter into the deal by misrepresentation and that the complexity and financial value of the matter merited a full hearing.
In dismissing the businessman’s appeal, however, the Court found that the company had expressed real reservations before entering into the transaction and had relied upon his representations to allay its concerns and when carrying out due diligence tests. In those circumstances, the businessman had no viable defence to the claim and had suffered no injustice.