Claim in fraudulent misrepresentation against Ingenious VCTs dismissed as unarguable

03/12/19

The High Court (Adrian Beltrami QC sitting as a judge of the High Court) today granted summary judgment in favour of Event Spaces Ltd in respect of a claim brought under a contractual indemnity against Mr Paul Gregg, a former director and shareholder.  Mr Gregg alleged that he was not liable under the indemnity because he had been induced to enter into the relevant contract by a series of fraudulent misrepresentations made on behalf of ESL and two Ingenious Entertainment Venture Capital Trusts (Ingenious Entertainment VCT 1 Plc and Ingenious Entertainment VCT 2 Plc). In the alternative Mr Gregg alleged that the misrepresentations were made negligently.

Seven different representations were pleaded, all of which related to whether the investment in ESL and the VCTs themselves complied with the relevant VCT rules and the provisions of the Income Tax Act 2007 or to the alleged risk that they might not comply.  Each was said to have been made by implication during the course of negotiations between Mr Gregg, ESL and the VCTs.  The misrepresentations were said to give rise to a defence to the claim by ESL, to a counterclaim in deceit against ESL and to Additional Claims against the VCTs.

After two days of argument, the Judge dismissed the misrepresentation defence and counterclaim and the Additional Claims. He held that the allegations of implied representation were fanciful, however they were construed.  The Judge found that the alleged representations were not properly to be considered representations of fact capable of giving rise to a cause of action at all, save if put at their highest, in which case they amounted to allegations of extra-contractual warranties as to the qualifying tax status of ESL and the VCTs for which there was no plausible basis in the evidence. If, however, they were to be considered representations as to opinion or belief, there was no basis on which any such representations could be said to be false or made without reasonable basis.  The Judge also rejected allegations that HMRC had been misled as being completely unfounded.

Ultimately, it was held that the case in fraud should never have been pleaded. ESL was granted judgment on its claim against Mr Gregg and it and the VCTs were awarded their costs of the action on the indemnity basis.

The judgment is here.