Background
The claimant (Invertec) and the first defendant (De Mol Holding BV (DMH)) entered into a sale and purchase agreement for the sale by DMH to Invertec of all of the issued shares in Volante Public Transportation Interior Systems Limited (Volante).
After the sale, Invertec had to inject cash into Volante to pay outstanding debts (including debts owed to suppliers and HM Revenue & Customs). Invertec claimed that it had been induced to purchase Volante by a number of representations made by DMH and its director as regards Volante’s solvency, management accounts, corporation tax liabilities and a customer contract. These representations had been given both during the course of negotiations and as warranties in the sale and purchase agreement. Invertec alleged that DMH had given the representations fraudulently and breached the warranties in the agreement.
As is normal in private company sales, DMH had provided Invertec with a disclosure letter setting out details of matters which were inconsistent with the terms of the warranties so as to protect DMH from being sued by Invertec as regards any such disclosed matters.
Decision
The High Court found that DMH had given the representations fraudulently and breached the warranties in the sale and purchase agreement. However, Invertec did not succeed with its claim that a fraudulent misrepresentation was made as regards the customer contract because DMH had disclosed that the contract was loss-making in the disclosure letter.
The High Court also found that the fraudulent misrepresentations had largely been made by DMH’s director on behalf of DMH. The director was therefore personally liable for the fraudulent misrepresentations.
Comment
The case is a reminder of the importance of a seller making detailed and accurate disclosures in its disclosure letter.
It also shows that if a claimant purchaser can discharge the burden of proving that a defendant had no honest belief in representations it made, any director who made such representations can be found personally liable.
Invertec Ltd v De Mol Holding BV & Anor [2009] EWHC 2471 (Ch)