Capital Trust Investments Ltd v Radio Design TJ AB

JurisdictionEngland & Wales
JudgeLord Justice Clarke
Judgment Date15 February 2002
Neutral Citation[2002] EWCA Civ 135
Docket NumberCase No: A3/2001/0542
CourtCourt of Appeal (Civil Division)
Date15 February 2002
Capital Trust Investment Limited
Radio Design AB and Others

[2002] EWCA Civ 135


Lord Justice Schiemann

Lord Justice Clarke and

Lady Justice Arden

Case No: A3/2001/0542





The Hon Mr Justice Jacob

Royal Courts of Justice


London, WC2A 2LL

Mr Stephen Smith QC (instructed by Gouldens for the Appellant)

Mr Alan Steinfeld QC (instructed by Reynolds Porter Chamberlain for the First Respondent)

Lord Justice Clarke

This is the judgment of the court.



This is an appeal brought by permission of Chadwick LJ against an order of Jacob J dated 16 th February 2001 dismissing the appeal of the claimant ("CTIL") against an order of Master Bowman dated 27 th June 2000 ordering a stay of the proceedings against the first respondent ("Radio Design") under section 9(4) of the Arbitration Act 1996 ("the 1996 Act"). The stay was granted on the ground that the parties had agreed that Radio Design's claim should be submitted to arbitration in Sweden.


Three issues arise for determination on this appeal. The first is whether Radio Design was a party to an agreement with CTIL containing an arbitration clause. This issue was determined in favour of Radio Design by both the master and the judge. Chadwick LJ said that, if it had stood alone, he would not have granted permission for a second appeal. The second issue is whether, if the answer to the first question is yes, the parties agreed, on the true construction of the agreement, to submit all or some of the claims in this action to arbitration in Sweden. This point was not taken before the master or the judge, but has been advanced because of the terms in which Chadwick LJ granted permission to appeal. The third point is whether, if the parties agreed to submit some or all of these claims to arbitration, CTIL has taken a step in the proceedings such as to deprive it of its right to seek a stay by reason of section 9(3) of the 1996 Act. This point was taken before the judge, but not before the master. Chadwick LJ expressed the view that it was a point of principle of sufficient general importance to merit the consideration of this court on a second appeal.


The action is brought in order to advance claims for damages for deceit and/or negligent misrepresentation in connection with an allotment of 33,333 B3 preference shares in Radio Design for which CTIL paid SEK 1200 a share, and thus a total of SEK 40 million (about £2.6 million), in August 1998. CTIL says that the shares were worth no more than about SEK 200 per share. The alleged misrepresentations related essentially to the state of readiness of Radio Design's mobile telecommunications product for commercial production and to the use to which the proceeds of the allotment of the shares would be put. As the judge colourfully put it, CTIL's case is that the picture painted to it was knowingly and deliberately false since the system was "no more than an inchoate heap of junk and the company and its directors knew that".


This appeal is concerned only with CTIL's claim against Radio Design, but CTIL also sues a number of other defendants, namely four individual directors and two corporate investors. As far as we are aware, none of those defendants seeks a stay of the proceedings. None of them could do so under the agreement relied upon by Radio Design.

The Amended Particulars of Claim


In the amended particulars of claim CTIL relies upon a number of oral representations made at various meetings in London in February to July 1998 and upon written representations contained in various financial projections, but in particular upon written representations contained in a document entitled Confidential Information Memorandum. The representations are said to have been made fraudulently and/or negligently and to have induced CTIL to buy the shares.

Confidential Information Memorandum


The memorandum ("CIM") is dated 27 th May 1998 and is in effect a prospectus. It is a substantial document of some 83 pages in length. It was sent to individual potential named investors including CTIL. On the first page, under the headings "Radio Design AB Excellence in Radio System Concepts" and "Private Placement of Series B3 Preferred Shares" the placement agent is named as Enskilda Securities, which is or was a division of a Swedish bank and which we shall call "Enskilda". The CIM begins by saying that it does not constitute an offer to sell, or a solicitation of an offer to buy, any securities or any of the businesses or assets described in it.


Thereafter, the first section of the CIM is entitled "Notices to Investors". It begins by stating that Radio Design is furnishing the CIM solely for the consideration of institutional and sophisticated investors who have sufficient knowledge and experience to evaluate the merits and risks of such an investment and who have no need of liquidity in their investment and can afford to lose the whole investment. It makes clear that it is not intended that there should be a public placing and includes the following:

"Radio Design and its directors (being ….) accept responsibility for the information contained in this Memorandum, including the information contained in this Memorandum that relates to Radio Design. To the best of the knowledge, information and belief of Radio Design and its directors (who have taken reasonable care to ensure that such is the case), the information contained in this Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. No person has been authorised to provide any information or to make any representation with respect to the company or the Placing Shares which is not contained in this Memorandum and, if given or made, such information or representation may not be relied upon as having been authorised by the company. Prospective investors may not rely on any information not contained in this Memorandum.


Radio Design has engaged the Placement Agent to act as placement agent and financial advisor with respect to the Placing Shares. The Placement Agent is not advising any person other than Radio Design with respect to the Placing, and will not be responsible to any subscriber of the Placing Shares for the protections afforded to customers of the Placement Agent or otherwise. The Placement Agent holds warrants to subscribe for 10,000 new common B shares at SEK 650 per share before 31 December 2000.

Any prospective investor will be required to acknowledge in the purchase contract that it has itself been and continues to be solely responsible for making its own independent investigation and appraisal of the business, operations, financial conditions, prospects, creditworthiness and affairs of the Company and the Placing Shares, and has not relied on and is not relying on any person to provide it with any information relating to such matters or to check or enquire into the adequacy, accuracy or reasonableness of any representation, warranty or statement, projection, assumption or information provided by or on behalf of the Company, including any contained in this Memorandum. No representation or warranty, express or implied, is made by the Placement Agent or any of its affiliates or any of its or their directors, officers or employees as to the accuracy or completeness of the information contained herein …."


The "Notices to Investors" part of the CIM also makes it clear that Radio Design and Enskilda as placement agent reserved the right to reject any offer to subscribe for the shares for any reason. The body of the CIM sets out what it describes as risk factors and specifies the use which Radio Design intended to make of the proceeds of the subscription. It then sets out a considerable amount of detail about Radio Design. The CIM was signed by the directors of Radio Design.


It is we think plain (and not in dispute) that both parties will wish to rely upon the contents of the CIM at any trial of the merits. CTIL will rely upon the representations contained in it, whereas Radio Design (and the directors) will rely upon the qualifications or exemptions. Examples both of the kind of representation likely to be relied upon by CTIL and of the kind of qualification and exemption likely to be relied upon by Radio Design can be seen in the extracts from the CIM quoted above.


It is clear from the terms of the CIM, and indeed from other documents which were put before the court, that as placing agent Enskilda was acting as the agent for Radio Design in connection with the placement or proposed placement of the shares. In that capacity it prepared an application form and sent it to interested investors including CTIL. We now turn to the application form because, for present purposes, it is the most important document in the case.

The Application Form


The copy of the application form which we have was signed by CTIL on 29 th July 1998. It is described as an application form for subscription of shares in Radio Design, to be submitted by 22 nd July to Enskilda. It then states:

"With reference to the CIM …. we hereby subscribe for 33,333 Shares, issued at a price of SEK 1,200 per share."

On its face that is a curious statement because it is plain that the form is itself an application form and not (without more) a contractual document as between CTIL and Radio Design.


The form continues, so far as relevant:

"CTIL acknowledges and accepts that:

— This application for shares is binding and irrevocable;

— By submitting this application for shares we...

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