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Commercial Law – Fraudulent Misrepresentation – Advance Payment - Property Law - Commercial Litigation - Damages

The case of London Allied Holdings Ltd v Lee and Others [2007] concerned issues relating to fraudulent misrepresentation where an advance payment had been made in a real estate transaction. The claimant, a Nevis registered company, was the parent of a group of companies The group of companies was in the business of property investment and development.   There were two defendants in this case,   defendant one was a property trader and the second defendant was a contracts manager for a construction company. 

The claimant alleged that it had paid £1million to the first defendant, who was a property trader. The payment was allegedly made pursuant to negotiations that had taken place as part of an agreement between the claimant, on the one hand, and the first defendant and second defendant on the other. The agreement was for the sale of a London hotel for £250million.

The claimant wished to have the payment of £1million returned on the grounds that it had been tricked into a scam. It therefore brought proceedings for various heads of relief arising out of the payment. The claims included the repayment of the £1million:

§   On the ground of contractual obligation;

§   On the ground of a total failure of consideration;

§   In restitution; or

§   Under a constructive trust.

Further claims included damages against the first defendant for:

§   payment of £1million and its non-return;

§   breach of contract;

§   fraudulent or negligent misrepresentation pursuant to s.2 of the Misrepresentation Act 1967; and

§   conspiracy to defraud.

Both defendants denied liability on all claims. They argued that the £1million payment represented an introduction fee for the prospective purchase of a golf course in Yorkshire, which had planning permission for a 200-bedroom hotel. The case subsequently went to trial.

After an assessment of the evidence, the court held that the evidence in the claimant's favour was overwhelming. There was evidence to corroborate the fact that the purpose of the payment was as contended for by the claimant. The defence offered by the first and second defendants was deemed ‘unbelievable’ and ‘concocted’. The evidence pointed to the fact that representations had been made dishonestly, with knowledge that they were false, or without care.

Furthermore, there was evidence that an enforceable agreement had been formed on terms that if the papers and a contract for the purchase of the London hotel by the claimant were not forwarded within a reasonable time after the £1million was paid, and certainly by a particular date, the £1million would be repaid to the claimant.

The court felt that the agreement was not observed. The court believed that the defendants never had any intention of repaying the £1million, and on the evidence presented to them, had intentions to spend it. Given all the circumstances, the court granted the relief sought by the claimant.  An advance payment is refundable when a contract for the purchase of land is not tendered within a reasonable amount of time after the payment is issued.

Please contact us for more information on assessing damages due under termination of a contract at enquiries@rtcoopers.com

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© RT COOPERS, 2008. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.

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