European Real Estate Debt Fund (Cayman) Ltd ((in Liquidation)) v Anoup Treon

JurisdictionEngland & Wales
JudgeMr Justice Miles
Judgment Date27 October 2021
Neutral Citation[2021] EWHC 2866 (Ch)
Docket NumberCase No: BL-2017-000097
CourtChancery Division
European Real Estate Debt Fund (Cayman) Limited (In Liquidation)
(1) Anoup Treon
(2) Arundel Group Limited
(3) Dr Doraiswamy Srinivas

[2021] EWHC 2866 (Ch)


Mr Justice Miles

Case No: BL-2017-000097




Royal Courts of Justice

Rolls Building, Fetter Lane, London, EC4A 1NL

Christopher Parker QC and Edward Meuli (instructed by Gateley Plc) for the Claimant

Bridget Lucas QC and Daniel Kessler (instructed by DMH Stallard LLP) for the First Defendant

Saul Lemer (instructed by Taylor Wessing LLP) for the Second and Third Defendants

Hearing dates: 11, 14, 15, 16, 17, 18, 21, 22 and 23 June and 5, 6, 7 and 8 July 2021


Mr Justice Miles

(a) Introduction


This case concerns an investment in the European Care Group (“ECG”) business by a property debt fund called the European Real Estate Debt Fund (“the Fund”). The claimant, as the Fund's assignee, claims that the defendants fraudulently mispresented the financial position and prospects of the business and induced the Fund to subscribe for £11m of loan notes in June 2011. It also claims that the Fund made a follow-on investment of £4.25m in the group in 2012 to seek to mitigate its losses.


The first defendant, Mr Anoup Treon, founded ECG in 2000. The business grew rapidly, largely through acquisitions, and by 2009 it was the fifth largest care home business in the UK. ECG was advised for many years by the second defendant firm of financial advisers, then known as RP&C International Limited (“RP&C”), particularly Dr Doraiswamy Srinivas, the third defendant. Mr Treon and Dr Srinivas were long standing colleagues and friends.


By 2009/2010 ECG had substantial secured bank debt and had issued unsecured mezzanine notes. It was experiencing a liquidity crunch and needed to raise new capital. It had attempted unsuccessfully to attract equity. It therefore decided in 2010 to issue a new series of loan notes, hoping to raise some $50m odd (by a mixture of conversion of existing mezzanine notes and fresh capital). It appointed RP&C as placement agents for the note issue. Dr Srinivas (the main contact at RP&C) had the task of seeking and liaising with potential new investors. By the end of 2010 some of the existing mezzanine note holders had converted into notes of the new series and a limited amount of fresh money had been raised through the issue.


The Fund had spoken to Mr Treon and Dr Srinivas about a potential lending transaction in October 2010 but that came to nothing. Mr Treon suggested in January 2011 that it might be interested in an investment in the notes. The Fund's investment adviser was Duet Private Equity Limited (“Duet”). Duet's team exploring possible investments in ECG was led by Mr Cyrus Korat. Mr Korat had a series of meetings and other communications with Mr Treon and Dr Srinivas about the investment from January 2011 onwards and was provided with financial information about ECG's business and prospects. The Fund made its principal investment of £11m on 24 June 2011.


The claimant says that the information it was given was false and misleading. It says that Duet discovered this by early March 2012 and confronted Mr Treon at a meeting. Mr Treon was removed as a director in March 2012. Later in 2012, ECG's new management sought to restructure its debts. It invited the Fund to make a further investment and the Fund invested another £4.25m in July 2012.


ECG continued to struggle financially and ultimately went into administration in 2014. The Fund lost the entire value of its investment.


The claimant alleges that the defendants misled Duet about the recent financial performance and future prospects of ECG. Its principal allegations are that the defendants presented it with tailor-made trading numbers for 2010 which deliberately excluded a material amount of trading costs (mainly wages) without flagging this; second that the trading numbers for 2010 were already out of date when they were repeated in February 2011; and third that the defendants presented projections for 2011–2013 which had already been superseded when given by more pessimistic ones. The claimant says that Duet and the Fund relied on the 2010 trading numbers and projections as accurate and current. The claimant contends that the defendants conspired to mislead the Fund. It also claims that Mr Treon is responsible in law for various representations made by the issuer of the notes in a loan note agreement of 24 June 2011 (“the LNA”). The claimant seeks damages for the Fund's full investment, including that made in 2012, which they say was by way of mitigation.


The defendants contest all the elements of the claims. They deny that the information was misleading. Mr Treon's case is that he told Mr Korat that the trading figures for 2010 had been “normalised”. The second and third defendants say that Mr Treon told Dr Srinivas that Mr Korat knew the figures were normalised. They also deny that they made any representation to Duet about the accuracy of the 2010 figures. Mr Treon denies that the projections for 2011–13 had been superseded; and the second and third defendants deny that they were aware that outdated projections were provided to Duet. Both sets of defendants say that they gave Duet accurate and reliable information. They deny that they conspired to mislead Duet. They say that Duet carried out its own due diligence and deny that Duet or the Fund relied on any representations about the accuracy of the 2010 trading figures or the projections. Mr Treon denies any liability under the LNA.


The defendants accept, if they are liable, that the claimant is entitled to damages of £11m (with adjustments for interest received before the administration). But they deny any liability for the follow-on investment of £4.25m, saying that this was an independently motivated commercial decision of the Fund and was not made in reasonable mitigation of its loss.


The defendants also say that the action is statute-barred, having been commenced more than 6 years after the investment. The claimant relies on section 32 of the Limitation Act 1980 to seek to postpone the start of the limitation period.


This judgment is arranged as follows: (a) Introduction; (b) The parties and other players; (c) The admitted or uncontentious facts; (d) Approach to the evidence and the witnesses; (e) Principles of the law of deceit and conspiracy; (f) Analysis of the various claims, being: (i) the normalisation claims, (ii) the outdated 2010 figures claims, (iii) the revised projections claims, (iv) the bank covenant compliance claims, (v) the loan note agreement claims, and (vi) the conspiracy claims; (g) Damages; (h) Limitation; and (i) Conclusions.


I have concluded that the claim is statute-barred. I would otherwise have found for the claimant on most of the claims. Given the punchline a reader might have expected a shorter judgment. However I have made full findings on each element of the claims and, in any case, determining the limitation defence depends on a detailed scrutiny of the history.


I have been greatly assisted by the written and oral submissions of counsel for the parties. As well as being of a high calibre, they were detailed and extensive. In this judgment, I shall set out my conclusions on the essential issues and my reasons for reaching them and will not attempt to address every facet of the parties' submissions. But in preparing this judgment I have carefully reread them.


The trial took place physically in court with one witness, who was in the US, giving evidence by video link.

(b) Parties and other players

ERED and Duet


The claimant, European Real Estate Debt Fund (Cayman) Ltd (in liquidation), is part of the structure of the Fund, a debt fund established in 2008 seeking to pursue opportunities created by the scarcity of capital and liquidity in the commercial real estate banking system following the financial markets crash. The Fund's rationale was to generate income for investors from interest on debt investments, which were targeted at 15 per cent or more per annum.


The Fund structure included European Real Estate Debt S.a.r.l. (“ERED”), a wholly owned Luxembourg registered subsidiary of the claimant. ERED is the company that invested in the loan note issue. It assigned its claims to the claimant under a deed of assignment dated 13 October 2017.


Duet was one of the two co-sponsors of ERED. It was also appointed as the Asset Manager and Investment Advisor to ERED. It considered opportunities, carried out due diligence, and made investment recommendations to the Fund's investment committee (“the IC”) which then decided whether to invest.


DRC Capital LLP (“DRC”) replaced Duet in those roles in 2012.


The other co-sponsor of ERED was Forum Partners Investment Management LLC (“Forum”).


The people at Duet who mainly worked on the investment in the loan notes were Mr Korat, a senior investment manager; Philip Moore, a senior investment manager; Rob Clayton, a senior investment manager; and Priti Shah, a junior investment adviser. Dale Lattanzio was managing director of Duet's Real Estate Development team and a member of ERED's IC. Mr Korat, Ms Shah and Mr Lattanzio all joined DRC in March 2012.


Forum's representative on the IC was Andrew Walker.

The European Care Group


The term “ECG” was used by the parties at the trial and is adopted here to describe the European Care group of companies.


ECG was established in 2000. As already explained, between 2001 and 2009 it grew rapidly as a result primarily of acquisitions to become the fifth largest private long term care provider in the UK.


ECG had two operating divisions: European Care Homes, its elderly care division comprising 90 care homes; and European...

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