03 September 2008

International fraud and asset tracing litigation news - summer: Fraudulent misrepresentation

Facts of the Case

This was an appeal from the High Court of Justice Queen's Bench Division, Cardiff District Registry Mercantile Court.  The claim related to a false representation made to Parallel Imports (Europe) Limited t/a Baglan Car Centre (“Baglan”).  In particular, Mr Maurice Radivan (“Mr Radivan”), one of the defendants, had falsely represented to Baglan that 36 specified Ford KA “Collection” cars were available for purchase from a Belgian dealer in Ford cars, Deprince NV (“Deprince”).  In fact they were not available to Baglan and were not delivered to them.  Relying on Mr Radivan's representation about the availability of the 36 cars, Baglan paid to Deprince the purchase price of ‚¬281,880.  Deprince subsequently supplied to Baglan 10 different cars, but retained the entire sum it had received from Baglan for the 36 cars.

After giving credit for the 10 different cars delivered, Baglan's damages claim against Mr Radivan for fraudulent misrepresentation amounted to ‚¬205,580, which, at the close of business on 7 May 2002, amounted to £124,172.  

At first instance, Mr Radivan was found to have fraudulently misrepresented the position.  Mr Radivan did not appeal against that decision but Baglan appealed, because, despite the finding of fraud in its favour, the Judge did not order any damages. 

The Decision 

Mr Radivan's Counsel submitted that the burden of proof rested with Baglan to prove that it had suffered loss and that there were two reasons why Baglan could not prove such loss.  First, Baglan obtained what they had paid for.  It had obtained an enforceable contractual right against Deprince for the delivery of 36 cars.  This contractual right was property.  Baglan had acquired the benefit which it intended to acquire when it made the payment.  Bagman suffered no loss in paying Deprince with the contractual right.  Secondly, Deprince was entitled to keep the money as payment for what Baglan owed to Deprince under a previous contract.  He argued that the “loss” suffered by Baglan was not the making of the payment for the 36 cars, but the assertion by Deprince of its pre-existing contractual rights against Baglan and the exercise of those rights over the payment received from Baglan.

The Court of Appeal held that Baglan paid Deprince for specified and identified property, the 36 cars, in consequence of the fraudulent misrepresentation of Mr Radivan that the cars were available for delivery.  The loss suffered by Baglan was that, in reliance on such representation, it had paid Deprince for cars which it never received. 

The Court of Appeal found that the judge at first instance had wrongly placed the burden on Baglan to show that Deprince was not entitled to keep the payment made in May 2002.  Baglan had proved all that it needed to prove in order to recover substantial damages from Mr Radivan for fraudulent misrepresentation.  It was for Mr Radivan to adduce evidence showing that Bagman had not suffered the loss claimed by it.  

Points of Interest

This case is useful in demonstrating that a defendant who argues that a claimant suffered no loss, has the burden of obtaining evidence to support such assertions. 

Category: Article